Recent Posts

Friday, April 26, 2013

$2 Trillion US Underground Economy Is the Free Market Striking Back?

A first reaction might be one of fear for the future
, but really you also can view this economic development as an encouraging catalyst to replenish our depleted culture of neighborliness and individual liberty. Less will go to the government and more for the people. Our native history is one of self-sufficiency, an attribute we must reclaim to remain free. Afterall, aren't we better off to rely on our neighbors and family than Washington? God will be there for you if you take the initiative to help yourself.


By Staff Report

$2 Trillion Underground Economy May Be Recovery's Savior ... Estimates are that underground activity last year totaled as much as $2 trillion. The growing underground economy may be helping to prevent the real economy from sinking further, according to analysts. 

The shadow economy is a system composed of those who can't find a full-time or regular job. Workers turn to anything that pays them under the table, with no income reported and no taxes paid. "I think the underground economy is quite big in the U.S.," said Alexandre Padilla, associate professor of economics at Metropolitan State University of Denver. "Whether it's using undocumented workers or those here legally, it's pretty large." − CNBC

Dominant Social Theme: The US is recovering nicely and doesn't need an underground economy.

Free-Market Analysis: The United States is usually portrayed as a place where – unlike corrupt countries like the former Soviet Union – laws are obeyed, taxes are paid and a grateful nation takes its lead from Congress, the White House and even the military-industrial complex.

But now we see in this mainstream report from CNBC that there is an underground economy after all. Some would call it a black market economy. Others would call a "shadow economy."
What's wrong with calling it a free-market economy? It is composed of transactions between consenting adults regarding a variety of products and services, including sex and drugs, that would also find a place in the so-called normal economy but can be classified as "underground" because taxes are avoided.

Two trillion is, of course, a lot of money, perhaps 15 percent of the entire US economy and is one reason that this economic situation receives little if no reporting. Another may be because it could be much larger than two trillion. Most every estimate made in mainstream and academic circles seems to favor the prevailing, statist narrative.

That is, any news or information that discomfits the state or its authority is under-reported or minimized. We figure that unemployment is twice as high as stated, tax avoidance is twice as high, criminality is twice as high, etc. We would therefore be tempted to double the figures on the underground from two to four trillion.

Now, this may seem like a lot but if you live in the US, think back a week and try to total up your off-the-books transactions. For many people there may be a lot of them, starting with visits to the local store and including payments to electricians, plumbers, etc.

The US – like most "advanced" countries, is chock full of transactions that avoid official standards and taxes. It has to be this way, as those advancing the bureaucratic/nationalistic narrative continue to raise taxes, add to the regulatory state and generally make it impossible for people to survive without breaking at least some laws.

Here's more from the article:

"You normally see underground economies in places like Brazil or in southern Europe," said Laura Gonzalez, professor of personal finance at Fordham University. "But with the job situation and the uncertainty in the economy, it's not all that surprising to have it growing here in the United States." ...

According to a study by Friedrich Schneider, a professor at Johannes Kepler University in Linz, Austria ... the shadow economy amounts to nearly 8 percent of U.S. gross domestic product. Much of that money goes into cash registers, said Gonzalez, as personal consumption has risen since the recession.

"There is consumer spending in the short term, with people having money even if it's not reported, and that's boosting the economy," she said. "But in the long run, an underground economy is telling us that things have to change."

Shadow economies are usually associated with illegal activity, such as drug dealing. But anecdotal evidence indicates that off-the-books work in today's job market includes personal and domestic workers, such as housekeepers and nannies.

"The jobs are in service industries from small food establishments to landscaping." said David Fiorenza, an economy professor at Villanova University. "Even the arts and culture industry is not immune to working off the books in areas of music and entertainment."

It also includes firms that hire hourly or day construction labor, information technology specialists and Web designers. Many who have a job that doesn't pay enough take another one that pays under the table.

"We've always had people who make income without recording it, so it's not really new," said Peter McHenry, an assistant professor of economics at William & Mary College. "But the fact that more and more people are doing it shows how bad the job picture is," he added.

The most important point above, so far as we are concerned, has to do with the expanding nature of the shadow economy. The financial crisis of 2008 that is so often proclaimed to be "over" is in fact not over at all, as can be seen by the evident and obvious advancement of the underground economy.

The powers-that-be have not only noticed this expansion; they are probably desperate to stop it, as we can see from this statement in the article: "The dangers of a shadow economy go beyond dollars and cents, analysts said. Workers who aren't on the books don't get Social Security or health benefits, and worse."

Now, the real danger to Social Security recipients in the US is that they will probably NOT get out of the system nearly what they put it into it. But for those few who run the increasingly globalized state, the idea that many are not participating in – and therefore not counting on – government mandated financial support mechanisms is alarming, indeed.

"People who do these types of jobs run the risk of getting exploited with lower pay or not being paid at all," Gonzalez said. "There could be more exploitation if more people are forced into this type of economy."

What could be more exploitative than the current taxation trend in the West, which is seeing up to 70 to 80 percent of a person's wages confiscated by the state – especially in "progressive" Scandinavian countries?

What is actually going on here is yet another confrontation between what we call the Internet Reformation and globalist dominant social themes.

The meme is simple: Government is good and looks out for people. The reality is much different, as the Internet has increasingly revealed. As more and more people participate in the underground economy, as governments make it increasingly difficult to survive, the number of people throughout the West "dropping out" no doubt increases.

Not only do they drop out but they also withdraw their allegiance from the state as it is and the philosophy that it enunciates. Money is power, and if people can generate their funds by circumventing modern government, they may well do so, especially if they are increasingly desperate due to lack of employment, etc.

This expanding underground economy presents an existential threat to the powers-that-be and to business as usual. It is not remarked upon a great deal but it is no doubt beginning to provide a significant alternative to Leviathan.

Conclusion: That's got to be worrisome on a variety of levels.

The Daily Bell