June 3, 2012

Drugs, Dollars and Banks

Drug is a precious commodity but also a powerful social disruptor able to wreak havoc in a society and weaken it; it was used in the past in China during the Opium Wars to weaken the Qing Dinasty and accumulate huge profits for Britain or today in Afghanistan and many other Latin and African countries to fragment and destroy the social fabric and control its production and profits.


Political use of drugs

Drugs are a powerful weapon when deployed on a population, its many advantages include:
  • docility of addicted population
  • increase of economic indebtedness
  • increased stress on health services and social services
  • social fabric fracture and degradation
  • massive outflow of capitals to foreign banking systems and suppliers
  • increased corruption and illegality
  • creation of an indentured service system
Drugs have the same effect of war mines on a population, their purpose at war is not to kill in many cases but simply cripple people in order to create a taxing burden for the society.

Drugs have many similarities with oil as well; the reserve currency for drug smuggling and transactions is the dollar, every drug transaction is practically paying a fee to the US Federal Reserve, not surprising that such a trade is protected by concerned governments all over the world.
If the Iraqi wars were fought for oil; Afghanistan was in part fought for opium and it started shortly after the Talibans started to destroy opium fields and banned drugs trade.

This is past history and it can explain why war to drugs is and will always be a lost war, no one is really interested to fight such a profitable business regardless of occasional moral proclamations broadcasted on TV.

New Drugs economy

The future of drugs is the new synthetic trade growing rapidly and evolving technologically to become independent from natural sources.

If the new Canadian producers of synthetic drugs will succeed the economical landscape of drugs could change rapidly in the following years, removing the difference between producers and consumers countries and allowing for mass production of drugs without need of natural resources and reducing the time to market and cross-border illegal trade.

Still now though who is profiting the most from drugs is the banking system who launder the profits and reap the hidden tax of the dollar as a reference currency in the case of USA.
Let us not forget that when the Euro was introduced a 500 Euro bill was created specifically for the necessities of smugglers, cartels and bankers, at that time the major aspiration for the Euro was to replace the dollar as preferred currency of choice for drug barons, arm dealers and robber barons.

The Guardian today added an interesting outlook (brief excerpt below) on where and how profits from this trade are done.
It will not raise any parliamentary discussion or moral debate on the war to drugs, the issue has disappeared slowly and silently from public debates while drugs have been more and more popularized by the media as socially acceptable if not socially cool, after all banks are drowning in debt, economies are collapsing then what better way to fill the empty coffers with an increased number of addicts and stupor their futures and fortunes away.

From The Guardian:
 
The vast profits made from drug production and trafficking are overwhelmingly reaped in rich "consuming" countries – principally across Europe and in the US – rather than war-torn "producing" nations such as Colombia and Mexico, new research has revealed.
The most far-reaching and detailed analysis to date of the drug economy in any country – in this case, Colombia – shows that 2.6% of the total street value of cocaine produced remains within the country, while a staggering 97.4% of profits are reaped by criminal syndicates, and laundered by banks, in first-world consuming countries.

Gaviria and Mejía estimate that the lowest possible street value (at $100 per gram, about £65) of "net cocaine, after interdiction" produced in Colombia during the year studied (2008) amounts to $300bn. But of that only $7.8bn remained in the country.
"It is a minuscule proportion of GDP," said Mejía, "which can impact disastrously on society and political life, but not on the Colombian economy. The economy for Colombian cocaine is outside Colombia."

The mechanisms of laundering drug money were highlighted in the Observer last year after a rare settlement in Miami between US federal authorities and the Wachovia bank, which admitted to transferring $110m of drug money into the US, but failing to properly monitor a staggering $376bn brought into the bank through small exchange houses in Mexico over four years. (Wachovia has since been taken over by Wells Fargo, which has co-operated with the investigation.)
But no one went to jail, and the bank is now in the clear. "Overall, there's great reluctance to go after the big money," said Mejía. "They don't target those parts of the chain where there's a large value added. In Europe and America the money is dispersed – once it reaches the consuming country it goes into the system, in every city and state. They'd rather go after the petty economy, the small people and coca crops in Colombia, even though the economy is tiny."

With Britain having overtaken the US and Spain as the world's biggest consumer of cocaine per capita, the Wachovia investigation showed much of the drug money is also laundered through the City of London, where the principal Wachovia whistleblower, Martin Woods, was based in the bank's anti-laundering office. He was wrongfully dismissed after sounding the alarm.
Gaviria said: "We know that authorities in the US and UK know far more than they act upon. The authorities realise things about certain people they think are moving money for the drug trade – but the DEA [US Drugs Enforcement Administration] only acts on a fraction of what it knows."
"It's taboo to go after the big banks," added Mejía. "It's political suicide in this economic climate, because the amounts of money recycled are so high."
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