Welcome to the 222nd insertion of DEMUR®, an analytical series highlighting the intricacies of the artistic world and the minutiae lying within. In this episode, we explain how cartels and $352 billion in illicit drug money allegedly saved the US economy from total collapse.
The story of the 2008 global recession is a tale built upon fraud, illegitimate banking and drugs. Not only did this worldwide phenomenon change the way currency is used, but it also opened civilian eyes to the unspoken, yet critical finances of the black market. Telling of a system built upon crime and addiction, we can examine how cartels and other narcotics kingpins may have assisted in keeping the economy afloat amidst utter crisis.
While fragmented, in essence, the 2008 financial disaster unfolded through greed. Mortgage brokers came up with a new scheme to capitalize on those who were seeking unachievable loans. Known as ‘subprime mortgages’, these contracts allowed low-credit customers to borrow large sums of cash, which they were unlikely to pay off.
At the time, these mortgages were being sold in bundles to external investors as mortgage-backed securities. However, shady brokers bundled these low-quality mortgages with otherwise great ones, selling them without any mention of their flaws. Inevitably, as interest prices rose, it became apparent that 20% of these securities were tied to subprime mortgages, meaning houses were repossessed and investors lost billions.\
As riches turned to rags, banks closed and a shortage of liquid investment capital appeared. Halting inter-bank loans, free cash was needed. Spending was at a low in nearly every industry, aside from that of the illegal trades, causing speculation from economists like the United Nations’s head of drugs and crime, Antonio Costa. Controversially stating “Interbank loans were funded by money that originated from the drugs trade and other illegal activities”, it’s said that dirty cash was the only available funds to free banks of financial grid-lock. While difficult to assume drug money was the only saviour in a time of disaster, it certainly played a major role in the righting of international trade.
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