Can money laundering be economically interesting?

on December 13, 2022

Link to watch the Vlog

Is it in our interest to have a shadow economy or money laundering? Can it be of interest to us that drug trafficking exists? Can all mafias be economically interesting?

In this video I would like to talk about the relevance of illegal activities in the economy of a country.

But first we need to clarify what I mean by money laundering.

When we talk about money laundering, we are referring to the ability of a criminal to carry out illegal economic activities to put that money into the system, to make that money legal.

We must be clear that this is not ethical at all. Dirty money is being let into the system, money based on crime, drugs, violence, coercion. Maybe it can bring us positive things at an economic level, but it is not ethical.

The shadow economy is considered a burden for our economy since it prevents the state from collecting as much funds as it could. The administration does what it can (or so it says) to tackle tax fraud once it occurs.

I want to talk about the possibility that the system might be interested in the existence of a shadow economy, based on the fact that this shadow economy often generates fast money and money in large quantities. It must be taken into account that the mafias and the shadow economy are very strong. It has a lot of influence to the point that the shadow economy is included in the GDP of all countries. For example, in the case of Russia, the Russian mafia represents an important part of the GDP, in other words, the Russian mafia is contributing to the GDP of Russia with all the criminal activities it carries out, despite being illegal activities, they are also economic activities. Economic activities that must be taken into account because after all, they move money in the country.

As we have said before, these types of businesses, such as drug trafficking, generate money very quickly and in large amounts. Any other legal activity is not capable of doing this in such magnitude. Many times, the state or the economy may be interested in laundering this money by establishing an amnesty or making it easier for this to happen, since this brings into the economy a lot of liquidity. In terms of liquidity, according to the IS-LM model which purpose is to find a macroeconomic balance between the market of goods and services and the money market: laundering money, such as drug trafficking money, causes brutal liquidity to enter the economy and shifts the LM line (liquidity preference-money supply). Thus, lowering interest rates, increasing investment, and bringing very positive things to the economy.

In this way we have an expansive monetary policy without the participation of the European central bank, but we have put liquidity into the system, laundering money from the mafias and from many other illegal activities that may be of interest.

Why are tax amnesties promoted? In some countries, tax amnesties are offered, this is a measure by which the fulfilment of tax obligations is forgiven to those who did not fulfil them at the time, the state does this because they are interested in identifying other people who are related to this type of activities. However, the person who is given amnesty does not have any type of reprisals for having done these things.

Not pursuing these illegal activities enough is in a way legitimizing all these deaths associated with drug trafficking or anything that has happened to obtain that money, clearly things that are not ethical at all and we are allowing it.

With this we can see that the world is often not as beautiful as it is presented to us, nor as moral or as ethical as it really seems. Many times, it can be in our interest that these things exist, that the shadow economy exists, that these mafias exist, to facilitate or not to pursue this money laundering so much because it helps us at an economic level. Do you think that many times governments do not pursue hard enough all this shadow economy, all this money laundering, because many times it is not in their interest that this money disappears?

Do you think that this could really happen?  This is a bit of a broken theory. To me personally it seems a very interesting theory, very conspiratorial, but it is a theory to consider. What do you think about it?

Leave me know your opinion in the comments. Thank you very much for staying until the end.

written by Catherine Pena

Filed under  Blog • Business Advice 

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