Month: January 2018

 

California can still screw up legalization so that the black market still survives, so criminals  will continue to get the money to buy weapons and wage war over market share.  The firs way California can screw this up is through taxation.

No one likes the high taxes on Tobacco cigarettes more than I do.  These high taxes mean taxes can be decreased in other areas (income tax, sales tax etc.), or we can pay more for needed government institutions like education and health care.  High cigarette taxes are a great way for the government to obtain income without reducing a worker’s paycheck, or taxing needed products like nutritious food.

But tax policy is another opportunity where the government can screw up a great source of income.  If the taxes are too high, like it is on cigarettes you create a black market for untaxed cigarettes.  The taxes on cigarettes are so onerous that when organized crime buys them whole sale and sells them on the black market and (thereby avoiding excise as sales taxes), they can sell them for a 100% markup.  They can do that because even when they sell them at a 100% markup the cigarettes are still significantly cheaper that cigarettes are sold including all the taxes.  So the various government institutions in this country taxes are so high, they leave an opening for organized crime to make money.  And when organized crime gets a solid and high cash flow the result is the corruption of government officials and violent fights over market share where innocent civilians eventually get caught in the cross fire.

The other way the government can screw up legalization is by limiting supply.  If the legal supply of a product is restricted, the price of that product will increase and thereby creating an opening for organized crime.  This has happened with marijuana in Colorado.  Because of the national laws outlawing the sale of Cannabis, no one wants to transport marijuana over state lines.   Thereby limiting the supply of cannabis in Colorado, driving up the prices of legalized marijuana that organized crime can grow illegal cannabis and sell in at a cheaper price.

The State of California’s regulations on the amount of Marijuana one can grow will create the same sort of problem.  These one acre farmers will simply not be able to provide enough weed to satisfy the demand for recreational marijuana in California.  And the obvious result will be illegal grows and sales by organized criminal organizations.  And, as stated once organized crime coffers are filled the inevitable result is violence and the corruption of governmental officials.

I appreciate the State of California’s attempt to create a market place where small family farms can thrive.  But this noble intention is going limit the supply of legal Marijuana, which will increase the price of legal Marijuana to a point where a black market ensue putting a large swath of cash into the hand of criminals; which will lead to the obvious violence.

The Legalization of recreational marijuana on June 1, 2018 will put a huge dent into the income of marijuana cartels.  But this dent will be reduced if the government restricts the supply or taxes the product too much.  The ironic thing is that the more the supply, the cheaper the product and therefore the higher you can raise the taxes without creating a black market.  So the government in California should do everything in its power to increase the supply, because increase in supply will allow higher taxes and make a black market untenable.  Therefore, the restrictions on the size of marijuana growth will only facilitate the growth of a black market, with the ensuing corruption and violence, and reduce the amount of taxes that can be charged so one can avoid creating a black market because the taxed legalized product is too expensive.

One of the main reasons for legalizing marijuana, was so that the income earned from marijuana would stop flowing into criminal hands, and flow into the hands of honest hardworking entrepreneurs.   The restrictions on growth are well intentioned but in the end such laws will only help to make this state more corrupt and more violent.  If you ignore the basic economic laws of supply and demand, the result is almost always disastrous.

 

After reading part one you may ask yourself why is the government trying to restrict the amount of Marijuana one can grow?  Why aren’t type 5 licenses being issued until 2023?  The answer is the government is trying to protect “family farms”.   The government of California is trying to give the “family farms” a chance to thrive before the competition from the large growers enters the market.

California’s new marijuana regulations will hurt small farmers, two lawmakers say

I believe this policy is well intentioned but it will have disastrous results.

Many people like me, who strongly believe in the legalization of marijuana, have a libertarian streak.  Libertarians think it is my body and if I want to smoke marijuana why shouldn’t I be able to?  Most of the time when the government tries to legislate morality it just creates an opportunity for criminals to make money.  And when criminals are able to make a lot of money violence and corruption almost always ensues.  In legal markets the battle over market share is fought in the consumer market.  He who makes the best product at the cheapest price gains the most market share.  Consumers benefit from the competition by being able to buy high quality goods at a cheaper price.  But when a product is illegal, like marijuana in a large swath of this country, or alcohol during prohibition, the fight over market share becomes a violent war.

When the product in question is illegal trying to beat your competitor in the market place by providing a cheaper and greater quality product gives way to the laws of the black market where you gain market share by killing off your enemies.  Gaining market share by killing the competition does not make the product cheaper or better quality.  The quality and price is determined by the organization that wins these black market wars and they will charge a higher price for lower quality products because that is how they maximize their profits.  In these black market scenarios the consumer loses on many fronts because they have to pay more money for a lower quality product and the society they live in becomes more corrupt and violent.

Right now because Marijuana is still illegal in much of the United States Mexican marijuana cartels are ripping Mexico apart.  These cartels are fighting for market share with each other, and because they have so much money brought in by illegal marijuana sales in the United States, they are able to buy the firepower to fight a very serious and deadly war.  And this serious and deadly cartel war is killing countless innocent Mexican citizens.  And these civilian deaths are a direct result for our demand for illegal marijuana.

The ignorant rationalizations that are causing the cartels wars are the same rationalizations that created Prohibition in our country; the idea that you can legislate morality and tell people what they can and can’t do with their bodies.

When alcohol was made illegal, the demand for alcohol didn’t decrease, the market for alcohol just switched from the legal market to the black market.  The result was the golden age of organized crime in America.  Gangsters made so much money from selling “bath tub gin” in local “speak easys” that they were pretty much able to buy most of the cops, judges and elected officials in many cities; just like Al Capone did in Chicago.  And of course higher market share was not achieved through cheaper and better quality products, but by killing the competition i.e. The Saint Valentine’s Day Massacre.  The citizens in the United States realized the only way to prevent organized crime from completely corrupting our government institutions, and pretty much taking control of this country; was the legalization of Alcohol.

A complete legalization of Marijuana across the United States would end these cartel wars in Mexico because it would cut off their money supply to buy soldiers, weapons, law enforcement and politicians.  If Marijuana is sold freely and cheaply there would be no black market for the Mexican cartels to exploit, and hence their easy money supply would be shut off.  There would be no black market share to fight over and in addition, without the ridiculous income they get from selling illegal marijuana, they would not have the money to buy all the sophisticated weaponry that is costing many innocent Mexican citizens their life.

The legalization of the fifth largest economy in the world is going to put a serious dent in the cash flowing into criminal coffers.