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Expected Growth of the Black Market

Posted by Larry Doyle on December 14, 2012 7:46 AM |

In the course of a recent discussion with an associate involved in a business that “follows the money”, I asked him what he projected for the US economy. In very short order he told me that he strongly believes that the US economy will experience very real growth. That’s good right? Not so fast.

Growth where, though? What sectors and what markets? His response? The black market.

What is the black market and why would our economy experience growth in this fashion? 

The folks at Economy Watch: Follow the Money tell us more in writing,

A black market is one where the buying and selling of products and services take place in an illegal manner. A black economy is a highly organized and vast market where the regular taxation rules and norms of trade are not adhered to.

The variety of goods traded in this market is enormous and the most commonly traded black market items are: weapons, currency, electronics and watches, fashion goods (perfumes, jewelry and bags), clothes and accessories, pirated media (CDs and DVDs for music, films and software), drugs, alcohol, tobacco.

How about labor as well? With increased costs of hiring, do you think businesses are hiring more and more people ‘under the table’? The businesses benefit and the workers double dip as they continue to accrue unemployment benefits.

Factors that Support Black Markets: The stricter the government regulations are in a country, the great the impetus is for a parallel economy. Corruption, shortages and monopolies also act as catalysts for the black market.

Parallel economies are further encouraged by periods of war or any other crisis. During harsh political conditions or natural disasters, scarce goods are rationed by the government. People have the tendency to violate restrictions or rationing laws to secure the products they desire.

The price of certain goods sold in a black market could be lower than the legal market price. This is because the good may be stolen. Moreover, black marketers do not pay any taxes and can offer a price advantage to customers. Goods such as pirated DVDs and fashion accessories are sold at a lower price in the black market.

On the other hand, the price of certain products sold in the black market can be higher than the normal prices. This is usually the case when there are shortages or there is high risk involved in getting the goods to the customer. Goods such as weapons and illegal drugs are good examples.

There has certainly always been an underground economy here in the US and elsewhere but given developments since the economic crisis emanating in 2007-08 there would certainly seem to be increasingly more reasons for the growth of the black market.

The issues with this growth of the black market center on how and if appropriate government policies and programs can be implemented to counter this growth. Are regulators properly positioned and qualified to address this expected growth?

I would welcome hearing from readers on this topic. Have you had personal experiences that might shed light on the black market? Thanks in advance for sharing any and all information.

Navigate accordingly.

Larry Doyle

Isn’t it time or overtime to subscribe to all my work via e-mail, an RSS feed, on Twitter or Facebook.

I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.


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