Monday, July 23, 2012

The Wealth Concentration Iceberg

The Guardian looks at the amount of money hidden in tax havens around the world:
Using the BIS's measure of "offshore deposits" – cash held outside the depositor's home country – and scaling it up according to the proportion of their portfolio large investors usually hold in cash, he estimates that between $21tn (£13tn) and $32tn (£20tn) in financial assets has been hidden from the world's tax authorities.

"These estimates reveal a staggering failure," says John Christensen of the Tax Justice Network. "Inequality is much, much worse than official statistics show, but politicians are still relying on trickle-down to transfer wealth to poorer people.

"This new data shows the exact opposite has happened: for three decades extraordinary wealth has been cascading into the offshore accounts of a tiny number of super-rich."

In total, 10 million individuals around the world hold assets offshore, according to Henry's analysis; but almost half of the minimum estimate of $21tn – $9.8tn – is owned by just 92,000 people. And that does not include the non-financial assets – art, yachts, mansions in Kensington – that many of the world's movers and shakers like to use as homes for their immense riches.
To put the last paragraph in perspective, Sioux Falls, South Dakota has about 150,000 people according to the 2010 Census. The 2011 US GDP was about $15 trillion; China's was about $7 trillion.

In short, a relatively small group of people equivalent to half the population of Sioux Falls hides assets that are larger than the GDP on a country of 1 billion people or 60% of the American economy.

If one wishes to be ironic, Mitt Romney can take comfort in these numbers.  Whatever he's hiding in the Caymens and Swiss accounts is only the tip of the tip of an iceberg capable of slowing down every economy in the world.

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