Basement Medical Marijuana Growers are Depressing the Street Value of Illegal Marijuana

Posted by PITHOCRATES - June 15th, 2013

Week in Review

A common perception is that Canada cares more for her people than America cares for her people.  The Americans put profits before people.  While the Canadians put people before profits.  Which is why Canada has legalized medical marijuana while only a few states in America have.  Because it was something sick Canadians needed.  So because Canada cares for her people (unlike the United States) they made the enlightened decision to legalize medical marijuana.  And it’s worked out swimmingly (see Medical marijuana lets B.C. growers earn thousands on streets posted 6/14/2013 on CBC News).

A B.C. pot grower [Jack] says he and many others are making thousands of dollars every month growing licensed medical marijuana and selling it for illegal distribution on the streets, and there is little police can do to stop it…

Jack says he used to grow his pot illegally and sell it on the Prairies, but that was too risky, so he applied to Health Canada for a Personal Use Production licence.

He filled out a few forms and got a doctor to sign off on a medical condition. The whole process took a half hour he recalls…

But while he’s growing the pot legally, Jack still sells his marijuana to the same middle men he always has and that’s how large amounts of medicinal marijuana end up being sold illegally on the streets, police say…

“Serious organized crime has found a venue that buffers them from law enforcement. They are actively recruiting people to make applications for marijuana licences…

Meanwhile back in his basement, Jack says he actually misses the days when operations like his were illegal because lately so much so-called “legal weed” has spilled onto the street it’s driven down prices.

He used to get almost $3,000 a pound for his bud when he was growing illegally. Now it’s $1,700 pound and falling. Sometimes there’s so much medical marijuana out there he says some growers can’t unload their product.

“It’s going down the tubes because of all these licences. Three years ago you couldn’t have enough of this. Now I know people who have ten pounds from their last crop because they couldn’t sell it. ”

And so Jack pines for the good old days – when what he did was illegal but he made a lot more money doing it.

Imagine that.  Drug dealers lied to their government.  So they could grow marijuana legally in their basement.  So they could sell it illegally on the street.  Even organized crime has taken to recruiting people to become home-growers to feed their criminal networks.  Bet the Canadians didn’t see that coming.

Note the economic lesson here.  Illegal substances are typically low in supply.  Because people can get arrested for supplying them.  Because few people want to risk getting arrested this low supply creates a high demand.  As there are more drug users than the current growers and traffickers of marijuana can supply.  Which would normally bring more suppliers into the marijuana economy.  But not when it’s illegal.  But make it legal and look what happens.  There is an explosion in supply.  Great for the drug user as prices fall.  But bad for the drug dealer as their drugs are worth less and bring in les revenue.

This is what happened during the Roaring Twenties in the United States.  As European farmers left the farm to fight in World War I American farmers stepped in to meet that unfilled demand.  And mechanized their farms to increase their output.  To cash in on that high demand.  But after the war soldiers became farmers again.  And those export markets for American farmers disappeared.  Just as their farms were never producing more with less thanks to their costly mechanization.  As crop prices fell it was good for hungry people as it prevented famine.  But it was bad for farmers.  Who couldn’t service their debt for all of that mechanization they financed.  And began to default en masse.  Causing bank failures in farming communities.  That spread to city banks.  Leading to the great bank runs of the Great Depression.

Interesting what growing pot can teach you.

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