Key is that assets of these countries are held by wealthy elites. Ordinary people bear the burden of debts.
In the 1980s, an unnamed Fed official said:
"The problem is not that these countries don't have any assets. The problem is they're all in Miami" and other global cities. They're home to private financial institutions.
Hidden offshore wealth correlates positively with loan amounts to indebted countries. Large amounts of borrowed capital were secreted lawlessly in global tax havens.
Local elites continue "vot(ing) with financial feet." At the same time, their public sectors borrow heavily and ordinary people go begging.
Although First World countries borrow most, they and elites in them remain global financiers.
Wealth is concentrated in select private hands "in a handful of source countries." Many are regarded as debtors.
Through 2010, 50 top private banks managed over $12 trillion in cross-border assets from individual clients, trusts and foundations.
Smaller banks, investment firms, insurers, and non-bank intermediaries like hedge funds and independent money managers handle additional amounts up to an overall $32 trillion estimate.
TJN calls these enablers part of a global "tax injustice system." Complicit governments let them operate at the expense of their own people.
"Since the late 1970s, investigative journalists, tax authorities, drug enforcement officials, terrorist trackers, national security experts," and others became aware about vast amounts of money stashed in "offshore" tax havens.
Private banking "professional enablers" manage it. They make fortunes doing it. The term "offshore" refers less to physical locations than virtual ones anywhere. They're often "networks of legal and quasi-legal entities and arrangements." They operate in the interests of money managers.
Physical locations can be anywhere. Legal structures typically are assets owned by anonymous offshore companies in one jurisdiction. Trusts are in another. Trustees are in multiple places globally.
Clients are rich elites, companies, and criminals. They include real estate speculators, technology tycoons, oil sheiks, underworld millionaires, heads of state, despots, and drug lords, among others. Their common needs include:
(1) Anonymity and confidentiality.
(2) Minimizing or avoiding taxes.