What Can Pot Teach Us About Economics and Government?

By: Barry_M_Ferguson

Whether for it or against it, we can all learn something from marijuana, or pot.

Specifically, we can see how government interferes with and impedes both the will of the citizens and the heart of economics - capitalism.

Point number one. In the US, we have seen a terrorist arm of the US government named ‘DEA’ attack state legal businesses that took a risk of capitalism to start a marijuana dispensary. The DEA has shown up at numerous dispensaries, decked out in full military gear, pointed military weapons at un-armed croc-wearing t-shirted employees, and then proceeded to ransack the dispensary and steal money and valuables. In almost all cases, no charges were filed. The US has something called a ‘Constitution’ that used to serve as a basis for the law of the land. The Fourth Amendment to the Constitution specifically prohibits ‘search and seizure’ of assets without cause, charge, or fair trial. Yet, this happens all too frequently and the pathetic nation employees an attorney general, who is supposed to be the leading law enforcement person of the land, who thinks search and seizure is just wonderful. Well, it is if one professes a Nazi mentality. Thus, pot legalization has shown us that law enforcement ignores laws it does not like (the DEA confiscates assets to buy more military gear and give themselves raises much like any professional thief), despises liberty, and abhors state rights.

Point number two. Citizens have now voted in 29 US states to legalize marijuana either medically or recreationally. Hypocritically, pot is legal in the nation’s capital, DC. State legislatures draw the responsibility for implementation. That’s where everything goes bad.

In many cases, as in the case of Nevada voting to legalize, there was an immediate shortage of the product. Canada, voted in legalization beginning July, 2018, is already acknowledging that they will likely not meet demand. California is supposed to be recreationally legal beginning in 2018 and they too fear a shortage.

Now, I try to do my homework. I checked a few, what I would consider to be,  reliable sources on the ‘black market’ to try and confirm a marijuana shortage. There isn’t one. There appears to be more than ample supply of marijuana. Look, I said a checked some resources that I would think to be very reliable. There is no shortage. The problem is when governments get involved.

Aside from the legal aspect, a black market in anything is pure capitalism at work. If there is demand there will be people and businesses ready to step in and supply the demand. Capitalism seems to work.

Why does this happen?

First, government’s first reaction to anything that moves or breathes is to tax it. Since this is marijuana we are talking about, governments tax the ever-loving Obama out of the product. With the exception of Uruguay, every government legislature has taxed the product so high that it creates a black market. Given that New York state has tried to tax cigarettes out of existence by instituting a minimum price per pack of $13 dollars, it seems totally stupid that other government types would tax marijuana so aggressively. Are they trying to prohibit the product by over-taxing it? It is not uncommon to see tax rates over 25% on the end sale of the product. All that does is make the street value more economical and therefore the supply goes to the street and not the ‘legalized’ market. Thus, supply is short only for the highly taxed legal sellers regulated by government.

Second, governments’ second reaction is to regulate everything like a rear-naked choke hold. Regulations make the business of selling marijuana nearly impossible for most entrepreneurs. (For you college imbeciles majoring in communism and gay rights, entrepreneurs are those people that start businesses that generate the money to pay workers to make the signs you hold up professing your disdain for capitalism and its entrepreneurs.) For instance, in California I have counted 12 different licenses needed for different jobs in the business. If one grows pot they need a specific license for that. If one transports the product, that’s another license. Selling it at a retail level requires another license. None of these licenses or requirements necessary for a license are cheap. In Massachusetts a prospective business owner must have liquid assets of $500k and pay $30k for a license. In Nevada a prospective business owner must have liquid assets of $250k, spend $5k for an application, and pay $30k for a license (non-refundable). No wonder there is a ‘shortage’. And, beyond the money, there is a litany of regulations that must be followed to even stay in business.

Third point. Governments lie about everything. For instance, the US government maintains cannabis as a Schedule One drug as it is supposedly dangerous and void of medical application. Yet, the very same government maintains a patent on the plant’s medical chemical, cannabinoid. Perpetual presidential candidate Dr. Jill Stein once said, “Marijuana is dangerous because it is illegal. It is not illegal because it is dangerous.” Well said! Marijuana has never killed anyone and is not addictive in a physical sense. The chemicals in the plant, THC and CBDs, have proven to be medically useful. Yet, governments choose to keep it illegal for two reasons.

One, it gives the law enforcement complex a job. If marijuana was federally legal, crime would drop, jails would empty, Mexican cartels would collapse, court rooms would sit idle, and fewer lives would be ruined. On the other side, jobs would be created, businesses would flourish, medical treatments would be more productive, opioid and alcohol abuse would wane (proven where legalization has occurred) and economies would grow.

Two, the other reason why marijuana is illegal is because the US legislature is bought and bribed by big pharma and big tobacco. Elected congresstitutes do what they are bribed to do. Where cannabis has been legalized, alcohol use and opioid use have declined and in some cases, dramatically. Legislatures in Ireland argued for legalization in their country in part because cannabis has been shown to reduce alcohol consumption.

Fourth point. Government never creates a productive job. Government kills jobs. Legal marijuana in Colorado created over 16k new jobs for the state according to estimates. The state has also raked in over a billion dollars in marijuana tax revenue since legalization. California expects to generate a cool billion dollars in tax revenue once the plant is legalized there. Jobs and businesses are waiting for the government to get out of the way. It seems to me to be even more idiotic when one considers that government supports big pharma who make most of their products outside of the US. Legal cannabis would be grown and processed almost entirely in the US.

When legitimate businesses try to operate in legal products (at least legal by state laws), why does the government try to impede them? Is it by design or just stupidity? Maybe pot is an example of how government is bad for business?

To confirm my thesis of a marijuana shortage, I ‘googled’ up the phrase ‘legal marijuana shortage’ and was greeted with over 22 million results. What could cause a shortage of pot? Since I confirmed through reliable sources that there is absolutely not a shortage of marijuana, I ‘googled’ up the phrase ‘idiotic legal marijuana regulation’ and received over 84 million results. I googled up the phrase ‘idiotic high fructose corn syrup regulation’ and received 23 million results. I ‘googled’ up ‘alcohol regulation’ and received not quite 3 million results. Clearly regulations have strangled the american economy and stymied economic growth without regard to the health or will of the people.

Let’s look at reality. According to the National Institute on Alcohol and Alcoholism, the US experiences 88,000 alcohol related deaths per year costing the economy some $250 billion dollars. Alcohol is the third leading preventable cause of death. Tobacco is number one and poor dietary habits is number two. Poor diets can be due to sugar and a poison in the american diet known as high fructose corn syrup. Government legal products are killing hundreds of thousands of americans every year. Marijuana deaths? Zero.

So, to summarize we must understand that pot teaches us that:
A. Governments are stupid, evil, deceitful, and owned by big business
B. Government does not create jobs but rather government destroys jobs
C. Government is neither interested in the will of the citizenry nor the health of the citizenry
D. Government is about control and domination.
E. The black market for pot is more efficient than the legal market due to capitalism.

Let me close with this thought. Recollecting my years in Junior High School, I knew kids who were entrepreneurs in the illegal drug trade. They put forth capital, bought product in demand (pot), marked up the price to make a profit, and sold the product to those willing to pay for such product. These young kids figured out the capitalism of logistics, capital, distribution, and marketing. Their businesses flourished. Yet, when folks try to become entrepreneurs in legalized marijuana areas, they are thwarted by government regulations. In other words, young kids can make a business work but adults with advanced degrees have great difficulty making the same business work due to government regulation.

Pot teaches us that government is simply bad for business. Those so-called ‘progressives’ and those so-called ‘conservatives’ who all like big government should take a lesson from pot.

Barry M. Ferguson, RFC
President, BMF Investments, Inc.
Primary Tel: 704.563.2960
Other Tel: 866.264.4980
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barry@bmfinvest.com
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www.bmfinvest.blogspot.com

Barry M. Ferguson, RFC is President and founder of BMF Investments, Inc. - a fee-based Investment Advisor in Charlotte, NC. He manages several different portfolios that are designed to be market driven and actively managed. Barry shares his unique perspective through his irreverent and very popular newsletter, Barry’s Bulls, authored the book, Navigating the Mind Fields of Investing Money, lectures on investing, and contributes investment articles to various professional publications. He is a member of the International Association of Registered Financial Consultants, the International Speakers Network, and was presented with the prestigious Cato Award for Distinguished Journalism in the Field of Financial Services in 2009.

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