First, Dubai reminds us that Black Swans can hatch anywhere in the world, in the desert for example. As a result, the very popular dollar carry trade might just get a little less popular going forward.
Then Paul Krugman, in his New York Times column, decides that ruining traders would be a good thing for the global economy. His idea of a "Tobin tax" applied to all financial transactions strikes me as a misguided "hammer in search of a nail" type of solution to the global financial crisis.
It is also inconsistent with Krugman's other recent writings (of which I am an enthusiastic and assiduous reader). He is a proponent of monetary and fiscal easing (here and here) for as long as the economy has not recovered and, by his own reckoning, we are still a very long way from recovery. How does an across-the-board tax that will (and that is its stated goal) severely shrink the entire financial sector help the economy to recover? How can one rail against the very mention of deficit restraint or anything that might be a tiny bit contractionary (here, here, here, and here) and at the same time advocate a tax that will suffocate an entire activity?
Having said all that, I might be persuaded, despite my obvious bias (Full disclosure: I trade for a living), that shrinking the financial sector might be one among several long-term solutions to the global financial imbalances and that some sort of tax might be a good way to de-incentivize excessive and "socially useless" risk-taking. But a sudden and immediate across-the-board financial transactions tax is more akin to self-mutilation than to therapy.
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