How to Bend, Stretch, and Break the Law for Fun and Profit

Credit — unlimited by real money, real savings, real output… or real demand — leaks into all the corners of commerce. As time goes by, everything it touches begins to bend, warp, or rot.

In a healthy economy, with a limited amount of money, everyone is careful about wasting it.

Government deficits are limited, so as to avoid driving up interest rates; programs financed on credit are funded reluctantly… and spending is controlled. Private borrowers, too, clutch their wallets tightly; they know their purchasing power is limited.

Lenders watch their steps; they don’t have unlimited funds to lend out. They study balance sheets and ask questions. Their eyes narrow when a potential borrower walks in the door. They sweat when he walks out with their money. Borrowers and lenders alike fret and worry.

Unlimited credit, which nobody earned, nobody saved, and nobody really ever expects to be paid back, is nobody’s problem. It creates unlimited opportunities for chicanery.

Here, I describe a few. This is meant to entertain and inform, by the way, not to encourage criminality or recklessness.

Get Free Food

“Numerous times, I’ve been offered a deal that’s tough to refuse,” my chief researcher, EB Tucker, tells me.

Many people receiving food stamps would like to buy something they can’t get at the grocery store… And they’re ready to bargain.

These days, “food stamps” are actually preloaded plastic cards. You use them with a code, like you would a debit card.

“Say the card is loaded with $400 in funds for ‘food assistance,’” EB explains… “They offer me use of the card for $0.50 on the dollar of benefit used. I could take the card to Whole Foods and buy grass-fed beef tenderloin filet for $50 a pound. I can also buy sustainably harvested Maine lobster tails and a bevy of side dishes. Total cost $400. Swipe the card, enter the pin, and I’m out the door.

“The card holder just wants $200.” That’s not the only story EB shared…

“Yesterday I was at the CVS in Venice Beach…

“The guy in front of me appeared moderately homeless… meaning he’s not afraid to spend several nights outside sleeping on the beach but probably has a dysfunctional relationship somewhere that yields sporadic indoor sleeping benefits. He was telling the other guy in line, ‘Yeah, man, I just got to this town yesterday… I’m starving man.’

“He bought four candy bars, a bag of M&Ms, a bag of gummy bears, and a glass-bottled Pepsi. He used a benefit card with a picture of mountains on it that said, in bold, ‘Nevada.’”

The food assistance program is “needs dependent.” The top benefit level is $1,200 a month. That’s for a household of eight people. It’s not a lot of money, but enough to keep you from starving.

But surely all of the 46 million food stamp recipients aren’t in danger of starving… We’re feeding 75% more people today than we were in 2007. You can qualify for food assistance if you own a $1 million home and drive a Mercedes Benz (39 states have no limit to vehicle value in their needs assessment).

The trick is you can’t have gross annual income of more than $14,940. But….you can be using a retirement or pension plan to pay for your home and car expenses. Or you set up a business. You drive the company car. You live in the company-owned house. You use a company credit card for your business expenses. Your business may never make much money and never pay you very much. But so what? The needs assessment only addresses income and cash in the bank.

Go on Disability

I have a younger cousin who is either on disability… or angling to get on it. What is wrong with him? He claims he has a “bad back”… but I think he is just lazy and shiftless. He is strong as an ox.

One day he helped me carry a heavy stove up a flight of stairs. But maybe that’s what happened to his back!

When the crisis came in ’08-’09, the number of people with bad backs suddenly shot up. At one point, twice as many people were added to the disabled list as to the employment rolls. Exact numbers are hard to get, but the total number of people receiving disability benefits rose 45% since the crisis began. It’s around 20 million today.

Most of the increase comes from people with psychological or musculoskeletal problems, both very hard to prove or refute. In one county, Hale County, Alabama, one out of four working-age people is apparently either a cripple or a mental defective.

Benefit levels vary. If you’re a construction worker over 50, and you hurt your back, you don’t have to undergo “retraining.” You’ll be considered 100% disabled for the rest of your career, such as it is.

The typical Social Security Disability Insurance (SSDI) benefit is about $1,200 per month. But your spouse will get another $300 or so… and you get about another $300 for each minor child. It adds up… get disability with a spouse and four children, and you’ve locked down $2,600 per month… with no taxes withheld! In Baltimore, that’s about equal to a job that pays $4,000 a month – well above the national average.

And you can still get food aid and rent assistance (Section 8), too.

EB, ever vigilant on the low-life side of town, has some insight into the rent assistance programs:

“One of my rental houses has been occupied by the same tenant for four years. She’s fantastic and appreciates how we take care of her. Her rent is $1,119 a month, including water. She pays $83 a month and Section 8 pays $1,036.

“Every nine months, we get a letter stating that her needs have been assessed and her payment has changed by $2 or $3 either direction. She gets food stamps, SSDI, and Section 8 rental assistance. She has a job, though…

“How do I know? Because three years ago I was on a double date with my girlfriend at the time and another couple. We were out in Ybor city. It’s a seedy part of Tampa that’s rich in Cuban history. I personally like it and have bought property on the northern boundary.

“The four of us were walking down the street and I see my tenant with an older gentleman… They just don’t look right together. She looked different, though: huge stilettos and a wig.

“She saw me and jumped up and came running down the street to hug me. She began assuring my girlfriend that she knew me as her landlord and I was the best landlord she’d ever had.

“I don’t know what she makes moonlighting… but I’m certain it’s not included on the income line of her need assessment.”

So, let’s see, a former breadwinner with a bad back, a spouse and four children might tap into the following benefits:

• Food Assistance: $700 per month
• Rent Assistance: $1,500 per month
• Disability Income: $2,600 per month
• Total: $4,800 per month = $57,600

… with no withholding for taxes. It’s nice work if you can get it.

Regards,

Bill Bonner
for The Daily Reckoning

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