City Research Online

The invisible leverage of the rich. Absentee debtors and their hedge funds

Sgambati, S. ORCID: 0000-0001-7324-0724 (2024). The invisible leverage of the rich. Absentee debtors and their hedge funds. Competition and Change, doi: 10.1177/10245294241265819


The existing literature on finance, debt and inequality depicts economic elites as a creditor class. According to a popular thesis, over the past four decades, the rich and ultra-rich households have experienced a saving glut (excess income), which they have invested in the debts of the poor and their governments. While it is undeniable that the rich have expanded their income share at the expenses of the poor, to refer to them as ‘creditors’ or ‘lenders’ is a misrepresentation of how they actually expand their wealth and income shares by financial means. For it conceals the fact that a great deal of their investments is leveraged, that is, carried out with borrowed money. This article shows that the debts generated for the sake of affluent households easily surpass those of all other households. However, these debts are not accounted for in statistics on household debt. This is because affluent households, particularly multi-millionaires and billionaires inside the top 1 percent do not simply borrow from banks, like normal households do, but they are instead absentee debtors who borrow through corporate structures of which they are dominant shareholders and ultimate beneficiaries. To gain an insight into their invisible leverage, the article looks at how much hedge funds borrow, and why their leverage matters.

Publication Type: Article
Additional Information: Reuse is restricted to non-commercial and no derivative uses.
Publisher Keywords: Elites, Finance, Inequality, Leverage, Hedge Funds
Subjects: H Social Sciences > HG Finance
Departments: School of Policy & Global Affairs
School of Policy & Global Affairs > International Politics
SWORD Depositor:
[thumbnail of Journal article - Absentee debtors [de-anonymised].pdf]
Text - Accepted Version
Download (504kB) | Preview


Add to AnyAdd to TwitterAdd to FacebookAdd to LinkedinAdd to PinterestAdd to Email


Downloads per month over past year

View more statistics

Actions (login required)

Admin Login Admin Login