Why Fraud Is Exposed in Recessions

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Why does “widespread” fraud get exposed during recessions? Before we answer that, we need to quickly be clear about what I mean. I don’t mean that some instances of fraud aren’t exposed during times of economic prosperity — obviously, that does happen. Instead, the issue is why fraud gets more exposed during times of economic peril.

Also, someone might deny that there is an increase in the exposure of fraud during recessions. I’m not going to address that here. So, yes, I am “assuming” that it is a fact (or plausible) that the exposure (of) fraud increases during economic downturns. By “assumption” I don’t mean that I blindly believe it without evidence: I mean that for the sake of space, it will not be addressed here.

I think there are simple answers to this issue of fraud. They are simple to understand, but perhaps these answers aren’t established facts. And what are some of these answers?

One hypothesis why fraud is exposed in recessions is that fraud itself actually increases during recessions. Why? Because when people get desperate, they resort to desperate measures. If fraud is my only plausible option, then it’s easier to make such a decision. This answer doesn’t seem to require many assumptions; what you see is what you get! On the other hand, the more interesting issue is if there isn’t actually an increase in fraud (or if…