The envious in our midst routinely spill a lot of ink and angst about “hidden wealth.” Their view is that global tax havens and other so-called “tax loopholes” make it possible for the rich to “hide” their wealth. Nothing could be further from the truth.
Short of the rich literally stuffing their dollars, pounds, euros, yen, or Swiss francs in coffee cans, wealth created is exposed to the world in blindingly bright fashion. That is so simply because the wealth the rich hold onto is immediately transferred to those who need it. By definition.
Seriously, stop and think about what happens when individuals put money in the bank, or in a brokerage account, or both? Neither banks nor brokerages pay for the privilege of holding onto wealth so that they can sit and stare at the dollars in awe. If they did, they would be insolvent near instantaneously.
Instead, banks and brokerages pay for the right to house wealth so that they can put it to work right away in the form of loans, investments in public companies, investments in private companies, along with investments in companies that realistically don’t yet exist yet, except for as an idea. The main thing is that wealth created never, ever sits idle. Even when in cash, it’s still being directed to those who need it.
Which is a reminder of a truth that can be found in the title of this write-up: there’s no “hidden wealth.” Wealth created is shifted immediately. Always and everywhere.
This truth is important to contemplate in light of the class warrior types clamoring for governments to clamp down on “hidden wealth” through global tax minimums, and other efforts to reduce the benefit of holding money in “tax havens.” Those who believe this line of thinking truly believe that wealth deposited in so-called “tax havens” is hidden once there, but yet again there’s no such thing. Financial institutions in tax havens pay interest on wealth deposited with them and collect fees on wealth deposited with them precisely because the wealth deposited with them is rapidly directed to its highest use around the world.
Which means the wealth isn’t hidden when it avoids the clutches of governments, rather it rather noisily finds its way to the best businesses of today, and crucially the best businesses of tomorrow that will replace the leading lights of today so long as the best of tomorrow’s best can be matched with capital. For the class warriors to suggest wealth is hidden is for them to say that Amazon, Facebook, Google, Apple, Microsoft and Nvidia are quiet and largely unknown. No, quite the opposite. What succeeds thanks to being matched with capital frequently does so in high-profile fashion.
Compare and contrast the above with government accession of precious wealth. Talk about hiding it. Precisely because governments can’t invest, and precisely because they’re constrained by the known, wealth taxed away by them is by the very description of taxation an act of hiding wealth. More realistically, it’s an act of wealth suffocation for precious resources not finding their way to businesses bent on improving and/or expanding, or entrepreneurs bent on creating an all-new future.
Which is just a reminder that governments are the principal entities hiding wealth precisely due to their politicized allocation of precious resources. Banks and brokerages, including banks and brokerages in “tax havens,” do exactly the opposite. Which is why it should be said over and over again that with the exception of government, there’s no such thing as “hidden wealth,” but there is wealth preservation and expansion when the long fingers of government don’t find their way into our pockets.
