How do the rich use loan gimmicks and market turmoil to create wealth?

In recent months, US bank data has revealed increasing demand by major investors and businessmen to obtain bank loans to take advantage of the current interest rate on the dollar before it is raised again by the Federal Reserve, the US Central Bank.

According to data published by Morgan Stanley and Bank of America, the richest people in the United States increased their loan volume during the second quarter of this year to hundreds of billions of dollars.
According to Bank of America data, its private wealth management unit recorded a significant increase in loans to the wealthy, reaching $222 billion in the second quarter of this year.
Morgan Stanley Bank, for its part, said its wealth management unit recorded a 30% increase in real estate loans to owners of money during the second quarter to rise to $50 billion, while loans taken by owners of money in exchange for collateral assets rose by 23% to 93 billion dollars.
Mike Kosnezki, a lawyer at the American law firm “Pilsbury Winthrop Shaw Pittman” in New York, believes that the rich benefit from times of turmoil and decline in financial markets.
He says in comments recently reported by the “Wall Street Journal” that “the turmoil in the markets is the right time for the rich to make more profit because it is the right time to buy for those who have money. “
Billionaires usually pay a very low interest rate on the money they borrow from the banks. For example, Merrill Lynch, a wealth management investment bank affiliated with Bank of America, gives wealthy individuals with a wealth of more than $100 million financial loans greater than 50% of their encumbered assets at an interest rate of 0.87%.
The Federal Reserve will hold a meeting on July 27 to raise the interest rate on the dollar by up to 0.75%, in an effort to combat inflation, which has reached record rates, the highest in 41 years.

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There are many Swiss banks specializing in wealth management that offer much lower interest than this, although bank interest is currently over 3% and 4%. Banks are tightening the terms of mortgage loans for families and individuals.
According to data from Moody’s Analytica, the wealth of Americans increased by around 2.7 trillion dollars between January 2020 and the end of December last year 2021. More than 50% of it went to the pockets of top billionaires.
According to American financial market insiders, the rich in the capitalist world borrow greedily, not because they need cash, but to make more money and seize cheap investment opportunities. Borrowing is one of the tricks billionaires use to avoid capital gains tax.
Typically, the volume of loans from the rich increases in cheap interest rate cycles, and this precedes the central banks by creating large “cash accounts” in banks that allow them to profit the most from moments of turbulence in financial markets and emerging countries , which usually needs dollars in times of high interest rates and a strong dollar, and may need to sell some of its assets in stocks or bonds to obtain dollar liquidity.
For the rich, loans are an accumulation of wealth and an increase in profits, while for the middle classes and the poor they can land in prisons.
During the two years of the Corona pandemic, in which bank interest rates fell to near zero in America and Britain, and below zero in Europe and Japan, the wealth of the rich accumulated at prodigious rates.
In terms of how billionaires can take advantage of the high interest rate cycle, University of Southern California financial expert Edward McCaffrey says: “High net worth individuals do not need to sell their holdings when they want to get cash, but simply invest their assets in bonds or shares and get in exchange for the money they want.
Professor McCaffrey points out, in comments reported by Market Watch, that in this way the wealthy avoid paying state taxes on their encumbered assets, and also take advantage of loopholes in the US tax law for the capital gains tax, which is currently 37%. .
US tax law states that a citizen does not pay tax on assets unless the assets pay cash dividends. Since they do not sell these assets, but instead mortgage them, they do not pay taxes on them. As for the borrowed money, it remains as loans to the banks that do not generate profits until you pay tax on the “capital gain” on it.
With this ploy, the wealthy in the United States are able to use loan systems to acquire and grow money and to circumvent capital gains tax laws. Besides avoiding taxes, they also get money from banks at very high interest rates.

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In Europe, the rich use many ways to avoid tax on their money, including deducting business expenses, hiring family members, manipulating losses, borrowing between companies and their overseas branches and counting them in the income register, and transferring corporate income from high-tax countries to bank accounts in tax countries. Very low or you negotiate a lump sum with the owner of wealth, as is the case in the Swiss provinces.
Some wealthy people also open accounts in a country such as the Principality of Monaco, which levies tax on personal income. Monaco, although a member of the European bloc, does not have full membership. In a country like Bulgaria, the tax rate on profits is no more than 10%. Multinational companies used so-called “Dutch sandwich” tricks to transfer profits from their sales in Europe through the Netherlands to foreign banks without paying income tax.

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