Monday, June 02, 2014

New Hamsterdam, CO

Oscar Wilde said "Life imitates Art far more than Art imitates Life." Obviously he was a fan of The Wire. I say this because aspects of Season 3's Hamsterdam plotline are playing out in Colorado.

If you haven't seen The Wire, here's the premise of Hamsterdam in a nutshell. In an effort to reduce violent crime in his territory, Major Bunny Colvin tells all the drug dealers and junkies that they can do whatever they want within a particular part of town that is completely abandoned. He tells them something like "It's just like Amsterdam" and the crackheads think he said Hamsterdam. Hilarity ensues.



In January 2014, Colorado became the first state to legalize recreational marijuana. The results are a bit like Hamsterdam--a comedy of unintended consequences. For example, banks won't offer services to marijuana stores because they are illegal enterprises under federal law, and no one wants to be a party to money laundering. As a result, marijuana is a cash only business in Colorado and the stores have nowhere to put the cash other than safes and lockboxes. Almost instantly, they became prime robbery targets. Sort of like this.



In response, marijuana security firms cropped up. Apparently they're all staffed with Russian hitmen.



This drives up the cost of business, so an ounce of weed in Colorado is $400!



In response, the Colorado legislature made like Stringer Bell and set up a co-op.



Well, not exactly. They passed the Marijuana Financial Services Cooperative Act which permits the creation of cooperative banks to serve marijuana businesses. It'll never work.

First, it requires that each co-op receive approval from the Federal Reserve, and that ain't happening. Even if it does, operating such a co-op would be a compliance nightmare. For example, the co-ops would be required to comply with the Bank Secrecy Act, meaning that they would have to report any suspicious activities they see. Every marijuana-related transaction is a suspicious activity under the Act so that's a lot of paperwork. And the co-ops would also have to comply with various DOJ mandates, requiring insanely in-depth due diligence on all firms who bank with the co-op beginning when the open an account and continuing throughout their participation in the co-op.

Second, the Marijuana Co-op Act says that deposits in the co-ops will not be insured. I have to imagine that these co-ops will be massive targets for theft--instead of picking off pot shops one by one, enterprising robbers will hit the co-op because that's where all the cash is aggregated. These endeavors aren't going to be big operations like BOA or Citi, they'll be mom-and-pop shops operated for and probably by potheads. So I doubt they will have state-of-the-art security systems. Add in the usual risk of fire or natural disaster and it's tough to hand over all your money to an uninsured bank.

Finally, who the hell wants to open a bank to provide services to companies that openly flout federal drug laws? If we elect some fire-and-brimstone conservative in 2016, he or she could put the kibosh on all this in a hurry simply by deciding to enforce federal laws in Colorado, shutting down the pot shops and the co-ops, and then seize all the money! Oh, and they'd send the bankers to jail for money laundering. At which point the bankers would react like this:



Thus it appears that the legal sale of marijuana as currently constituted in Colorado is unsustainable. Cash keeps rolling in but there's only a finite amount of space under mattresses and inside safes to put it all. Until someone comes up with a safe, secure, reliable, and legal way to store marijuana-related proceeds, Colorado's pot shops may put themselves out of business because they are so successful. That's some crazy macroeconomics for you.

26 comments:

rob said...

quite sure jerry's gutted by jersey's own joe rossi's omission from the italian world cup side. and by gutted, i mean 'cackling gleefully'.

Greg said...

Can't several PayPal accounts get around this?

Shlara said...

bitcoin

Squeaky said...

Paypal is notorious for freezing accounts with any kind of risky business or high volume, pun intended.

Shlara is on to something with bitcoins.

Mark said...

Vice did a piece on the marijuana security firms in Colorado. These weren't Russian guys but rather former US military guys. A shady, dangerous gig but one that pays quite well.

Geoff said...

This is extremely well done:

http://happynicetimepeople.com/john-oliver-net-neutrality-video/

Clarence said...

Rootsy, thought of Rootstone with this

rootsminer said...

Thanks for the heads up Clarence. Don't think we qualify, but I do like-a the grant money.

TR said...

John Oliver's new show is pretty funny, based on one episode I watched over the weekend.

Dave said...

barter system! stoned barter system! wacky trades will ensue.

Dave said...

i just made an evite for pub night.

Danimal said...

So is anyone else a bit perplexed about this Bergdahl deal or just me?

rob said...

i confess that i haven't paid close enough attention to have an informed opinion. that won't stop me from stating an opinion, mind you. i'll kinda just wing it like everything else i do.

rob said...

something called kennesaw state beat alabama to advance to the college baseball super regionals. the caa's college of charleston swept through its regional and advance to the final 16, as well.

TR said...

I will respond to Danimal and Rob with one of the more random things I will ever type: I'm attending a dinner with Leon Panetta in Pittsburgh tomorrow and will ask him about Bergdahl.

rootsminer said...

I'm sure Leon will be excited to discuss it TR.

And in case you missed it, new Camper Van Beethoven album is out tomorrow and streaming here now: http://consequenceofsound.net/2014/05/stream-camper-van-beethovens-new-album-el-camino-real/

Danimal said...

Hi G's. Power outage in the hood. Translation=I am in my 5 year old's bed and my 3 year old is in my bed. Why did they wake up you ask? Sound machines, night lights and the lack thereof.
Good times.
Tr....tell ole LP I said hello. The guy's a stitch...loves himself some T&T's (Tangueray and tonics).
On what's his face....the only thing I can come up with that makes sense would be if he's a double agent. Which....I doubt is the case.Rob, I'm looking forward to your informed opinion on this one.

Dave said...

camper is my favorite! i'm sure it will be disappointing.

also, rob, i am working on my usual definitive world cup preview, should be ready before it kicks off.

rootsminer said...

I don't know Dave, I think it's solid. Not their finest work, but it's definitely a Camper record. I think they're to the point where they're going to do what they do and not take it too seriously. I think the prog rock opera (which I really like) cured them of spending inordinate amounts of time making something that only a handful of people will shell out money to buy.

rob said...

excellent, dave. we've only got 9 days to fill before that. who's up?

rob said...

after more reading on the bergdahl thing, i'm reasonably ambivalent. on the one hand, prisoner swaps are a normal practice that goes back in our history as far as george washington, and it says something good about us that we do not leave our men behind. bergdahl's alleged desertion complicates things a bit, but doesn't bear on the overall point that we recover americans whenever we can. i hope general dempsey is being truthful when he says that we'll investigate that charge fully.

obviously, the five guys we released in exchange for bergdahl are some nasty motherfuckers, and that's worrisome. at the same time, we're getting out of afghanistan, so i'm not sure what threat they pose to our interests and people there. my biggest concern is the fact that it looks like the administration went around congress on this, but after the last 15 years, that seems to be par for the course - i don't think the obama administration is breaking new ground here.

so i guess my opinion is, meh.

rob said...

i should add that, as a general rule, if john mccain is sounding the alarm about something, i tend to reflexively discount the potential danger. i'm afraid i don't have much respect for the man's credibility on security issues at this point. just so you're clear on my biases. shame, really - i actually voted for him in the gop virginia presidential primary in 2000.

T.J. said...

People stealing GTB's shizz, again:

http://www.cnet.com/news/artist-trademarks-pi-geeks-despair/

rob said...

fuck you, caillou. grow some hair and actually leave the house.

Dave said...

ok, i will give the new camper a listen.

beloved revolutionary sweetheart is one of the few things from my youth that i can still listen to without irony (unlike the cult electric).

T.J. said...

some very GTB filler posted