$2 Trillion Underground Economy May Be Recovery's Savior

CNBC ^ | April 24, 2013 | Mark Koba, Senior editor

[2ndDivisionVet]

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 — especially with an uneven job picture.

"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."

"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."

Estimates are that underground activity last year totaled as much as $2 trillion, according to a study by Edgar Feige, an economist at the University of Wisconsin-Madison.

That's double the amount in 2009, according to a study by Friedrich Schneider, a professor at Johannes Kepler University in Linz, Austria. The study said 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."(continued)

[SVTCobra03]

You can’t buy a loaf of bread with a double eagle. Or a gallon of milk.

An American Gold Eagle is not a double eagle. And when the fiat money and the economy collapses you can buy a loaf of bread with a mercury dime.

[Graybeard58]

I've not met a contractor in over two years who isn't willing to barter or work for cash.

I saved a bucket of money having about 400 sq. ft. of ceramic tile laid by paying cash and am about to save another bucket by paying cash to have a double wide drive way and a patio paved. All by reputable contractors. Some may disagree about the "reputable" part, since they have no intention of paying taxes on what they receive from me for the work but I'm way past the point of caring.

I save a lot of money, the contractors save a lot of money and all that money is kept out of the hands of big spending and wasteful government. To me, that's a triple win!

[castlegreyskull]

It starves the beast.

[E. Pluribus Unum]

An American Gold Eagle is not a double eagle.

It's no more fungible.