What Percentage of Our Economy Is Fake?

It's a question that I had not put too much thought into until recently, but in light of the revelations over the past year from DOGE, the current fraud investigations in Minnesota, Oregon, Maine, and California (and I hope that will soon expand to all 50 states), it really has struck me that a huge proportion of our economy is probably just money laudering.

Of course, we all understood at some vague level that there had to be a large amount of money laundering going on. The illegal drug trade alone is worth hundreds of billions of dollars, and that is just one portion of a large black market.

Most of that money has to be washed somehow, so it stood to reason that a lot of cash businesses were used to wash it.

But now that we are learning that hundreds of billions—at least—of government expenditures go to fake nonprofits and businesses, and that likely a similar amount is sent out in inflated costs attached to legitimate government contracts, it has been dawning on me and others that some significant fraction of our apparent economy amounts to storefronts that provide little to no actual goods and services.

I've written about this before, but I often wonder how much of our "economy" is fake.

Back in the day in Los Angeles there was a prevalence of "Cell Phone Accessory" stores. Sometimes several per block.

We'd film on these dumpy commercial streets, and be working in front of these shops for days. But we wouldn't see a single customer enter or exit.

The off duty cops we hired for traffic control explained that it's all money laundering. Same with the bodegas, the vape shops, and most of the restaurants.

In Los Angeles, and many other cities, there are miles and miles of streets full of businesses with no customers. And yes, most of them are owned by immigrants.

A new asian hotdog place opened in my neighborhood. It looked cute from the outside. Thought it might have good food (sometimes these places do). So I went in and ordered a hotdog....

The cute asian girl disappeared into the kitchen. Doesn't come out for a long time. After 15 minutes I walk to the counter and ask "How's it going in there?" but I got no answer.

So I peeked into the "kitchen". And to my surprise there was no kitchen--it was just an empty room. No fridge, no stove, no food.

She had my money so I stuck around to see what the ---- was going on. A few minutes later she returned with a hotdog. I have no idea where she got it from. (I asked but she pretended not to understand English👍)......SNIP

What percentage of our economy is fake?

That portion of the economy that depends on extra-Constitutional government and government spending.

At a minimum that is the 30% of GDP made up of extra-Constitutional government spending and the minimum of 18% of ~~Consumer spending~~ FRAUD it funds. A minimum of 48% of our GDP, or $14.15 Trillion of our $31.16 Trillion GDP.

Collapse is much closer than we realize, and while there are no impulse functions in nature, mathematically it is going to be an extremely discontinuous event. Second order differential equations (“the trend is your friend”) will be of limited, if any value, in predicting the collapse. We’ve received all the warnings we can reasonably expect. All of the necessary pre-conditions are in place.

YMMV.

MtnClimber: "What Percentage of Our Economy Is Fake?”

BobL: "90% or more in my book.
Otherwise the math would have worked and Russia would be on their knees begging for mercy, due to our ‘killer sanctions’."

Here's what we know for sure:

% share of World's GDP (PPP) 2025: China 20%, US 16%, EU 16%,
Indo-Pac allies (Japan, etc.) 9%, India 8%, Middle East 5%, Russia 3%, all others 23%

In 1952 about 1/3 of American workers (~19 million) worked in manufacturing producing 1/3 of US GDP = virtually all US needs plus a 10% trade surplus.
By 1979 US manufacturing peaked at 21 million workers, now 20% of US GDP & workforce but already a 15% trade deficit.
Today US manufacturing employs only 10% of workers (13 million) producing 10% of US GDP and a 33% trade deficit.

Is the US non-manufacturing economy "real"?
Yes, for sure most of it is.
Also, blatant money laundering is illegal and so won't be included in official statistics.

But there's something else to remember here -- virtually every country on earth cooks its own economic books to make themselves look less prosperous than they actually are.
The reason is to reduce the value of their currency and thus increase their exports to the US while reducing their imports from the US.
This is what Purchasing Power Parity (PPP) tries to adjust for and the results show countries like China and the EU with GDP's equal to, or greater than, the US, especially when you compare their manufacturing outputs.

Regardless, in hard economic numbers -- not $ equivalents but pounds, units and Terawatts of electricity production, China's economy dwarfs the US and EU combined.
Compared to the USA, China produces:

13 X more steel (1 billion tons vs US 80 million tons)
3 X more vehicles (31 million vs US 11 million)
1,000 X more commercial ship tonnage (51 million tons vs US 51,000 tons)
2.5 X more electric power (10,000 Terawatts vs US 4,000 Terawatts)
2 X more in overall goods production

Such numbers suggest that China's economy dominates the world in basic manufacturing, in much the way the US economy dominated from the 1940s through 1980s.

But GDP numbers, especially nominal GDP numbers, don't reflect such Chinese dominance.
That's because GDP counts all economic activity as equal according to nominal dollar values -- GDP doesn't distinguish between, for examples, a $billion worth of steel and a $billion worth of entertainment.
Those are equally valuable in terms of GDP.

The US economy is 10% manufacturing and 20% all goods production, including construction, mining, oil, gas & utilities.
China's economy is 27% manufacturing and 40% all goods production.

US technological advancements are not insignificant, but they are also highly temporary and amount to only a few years ahead at best.

So, what's real and not real?
That all depends on how you count it and what you are most interested in.

Bottom line: the US is no longer the dominant manufacturing power we were after 1945.

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