Mish's Global Economic Trend Analysis

America's First Marijuana Stores Open in Colorado; Record Opium Crop in Afghanistan; Six Beneficiaries of "War on Drugs"

Posted: 01 Jan 2014 09:52 PM PST

Colorado ushers in the new year as the first US state to allow retail cannabis sales.

Marijuana users celebrated as Colorado became the first US state to allow retail cannabis sales, putting it in the vanguard of efforts across the country to legalize the drug.

The western state famous for its ski resorts and breathtaking mountain vistas has issued 348 retail licenses -- including for small pot shops -- that can sell up to 28 grams of pot to people aged 21 or older, starting Wednesday.

Washington state on the Pacific Coast will follow Colorado several months from now, when it also allows stores to begin selling cannabis.

Iraq war veteran Sean Azzariti was the first person to legally purchase cannabis for recreational use in the United States.

State officials here anticipate that marijuana sales will generate some $67 million in annual tax revenue.

Colorado and Washington are creating a recreational market in which local authorities will oversee growing, distribution and marketing -- all of it legal -- for people to get high just for the fun of it.

The market is huge: from $1.4 billion in medical marijuana in 2013, it will grow by 64 percent to $2.34 billion in 2014 with recreational pot added in Colorado and Washington, according to ArcView Market Research, which tracks and publishes data on the cannabis industry.

Washington state is expected to open more than 300 pot shops in June.

Record Opium Crop in Afghanistan

In Afghanistan, despite US presence for 13 years, Record opium output boosts Afghan warlords' power base.

Afghanistan, long the world's main heroin supplier, has seen its total area of poppy seed plantations explode to 516,000 acres - a 36 percent increase from 2012, according to the report, released on Wednesday.

Last year, the war-torn Central Asian country accounted for 75 percent of the world's opium supplies; Jean-Luc Lemahieu, head of the UN Office on Drugs and Crime (UNODC) in Afghanistan, has said in the past that supplies may reach 90 percent of the global total this year.

The new data surpasses the previous record set in 2007, when 477,000 acres were cultivated, according to the UN drug watchdog. Total opium output is estimated at 5,500 tons, up 49 percent from 3,700 tons in 2012.

At the same time, efforts to eradicate poppy fields have waned, with the total area targeted down 24 percent from last year.

With profits from opium cultivation nearing $1 billion, or 4 percent of gross domestic product, insurgency groups like the Taliban will only benefit from the cash crop.

The US-led coalition has rejected any crop eradication operations by its soldiers for fear of bankrupting farmers and forcing them to join the insurgency.

Time to End War on Drugs

It's time to admit the war on drugs was a miserable failure. The move in Colorado and Washington is a welcome start.

Prices would collapse overnight all drugs were legal. And by taking out all of the profit, all of the drug addicts who steal to get their fix would no longer need to do so.

Moreover, there would be no pushers attempting to get people hooked for the sole purpose of gaining customers.

Finally, states could save massive amounts of money by freeing all the people sitting in prison for drug-related crimes. States would also get tax revenues whereas profits now go to smugglers.

Beneficiaries of War on Drugs

Smugglers who benefit from high prices
Cops on the take
Those employed fighting the war on drugs
Prison guards and unions who benefit from every person incarcerated
Warlords in Afghanistan
Du Pont

Background on Hemp Ban

Here is a section on "hemp and the environment" from my post on The Politics of Ethanol. It will explain point number 6 above on Du Pont.

Unfortunately, the link below no longer works. It was to an MIT article.

Inquiring minds are asking about Hemp and the Environment.

An acre of hemp produces four times as much paper as an acre of trees. Every pot-smoking hippy in the country knows that. The problem is, why doesn't anyone else? In this short article, I will attempt to educate you, the reader, of the many ways in which hemp can Save The Planet. No kidding.

Herbicides are also virtually unnecessary as the plants grow 6 to 16 feet tall in only 110 days. The complex root structure prevents erosion and decays quickly after harvest.

That's all well and good, but what do you do with the hemp? Well, as I mentioned above, it's great for making paper. That's most of the reason that industrial hemp is illegal in the U.S. See, in the mid-1930's, there were two industries that had just made breakthrough machines that would make paper productions much more cost-effective. One was the hemp industry, the other was DuPont. Coincidentally, the 1937 Marijuana Tax Act was passed, effectively making hemp illegal by charging transfers $1/ounce or, for unregistered dealers, $100/ounce, even for industrial grade hemp.

So, with hemp out of the way, DuPont was free to become the giant corporation that it is today, and to produce the great majority of the toxic sludge that contaminates our Northwestern and Southeastern rivers. Had hemp become our primary paper source, this pollution would have been vastly reduced, and here is why: Hemp means no deforestation, which results in less topsoil erosion, more oxygen, less carbon dioxide, less destruction of natural habitats, etc. Hemp paper is much easier to bleach, and does not require chlorine, which means no more thousands of tons of toxic sludge pouring into the water. Scientists in Sweden have developed a hemp-bleaching process that uses only natural enzymes and some pounding of the pulp.

Cotton, the other big evil, is grown on 3% of the world's arable land and uses 26% (wow!) of the world's pesticides and 7% of the world's fertilizer annually. It requires heavy irrigation, depleting the water supply even as it poisons it. Many developing countries grow cotton as a cash crop, trying desperately to pay off foreign debt. While the country's land and water is being destroyed, food crops are neglected, so the people go hungry.

Hemp can be used to make clothing that is, if treated properly, soft like cotton and far more durable, thus rendering cotton unnecessary. Adidas and Ralph Lauren already have hemp products, and Calvin Klein insists that hemp will hit the fashion industry full-force in the years to come.

While an acre of trees is about 60% cellulose, and acre of hemp is nearly 75%. How much hemp is necessary to meet current US energy needs? Somewhere between 10 million and 90 million acres, depending on how efficient the production is. Every year, the US government pays farmers (in cash or "kind") to *not* farm what they call the "soil bank", which happens to be about 90 million acres of farmland. The math is pretty simple.

Hemp seed oil is very similar to petroleum diesel fuel, and produces full engine power with reduced carbon monoxide and 75% less soot and particulates. Hemp stalk (different than the part that can make paper and textiles) can be converted into 500 gallons of methanol/acre.

It seems so simple, you must be saying. If this is true, why are we still using petroleum and paper and cotton? Well, there are corporations who sponsor politicians that have a reason to keep hemp down, like, the oil industry, etc.

"War on Drugs" or "War for Drugs"

Our policy is so stupid one has to wonder if it's a "war on drugs" or a "war for drugs" and against the environment, specifically for the benefit of the above groups.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

China's Bill for Cleaning Air Pollution Mounts; State TV Promotes Benefits of Smog

Posted: 01 Jan 2014 04:31 PM PST

As China enters 2014 reeling from one of the worst polluted winters in recent years, experts from two major research institutes have openly disagreed over what is the main culprit behind the capital city's dismal air pollution.

Please consider Cars or coal? Scientists split over main culprit of Beijing's air pollution

The Chinese capital has for many years suffered from serious air pollution. Primary sources of pollutants include exhaust emission from Beijing's more than five million motor vehicles, coal burning in neighbouring regions, dust storms from the north and local construction dust. A particularly severe smog engulfed the city for weeks in early 2013, elevating public awareness to unprecedented levels and prompting the government to roll out emergency measures.

A Chinese couple wears protective masks while going around the Tiananmen Square on December 7, 2013. Photo: EPA

The Chinese Academy of Sciences (CAS), the country's top research body, released a study on December 30 saying motor vehicle emissions were only responsible for less than 4 per cent of Beijing's PM2.5, the most health-threatening fine air pollutants. Instead, the study identified fossil fuel burning as the largest contributor of PM2.5, contrary to popular beliefs that the nearly 5.5 million cars clogging the capital's streets were chiefly to blame for its air pollution.

However, barely 24 hours later, Pan Tao, president of the Beijing Municipal Research Institute of Environmental Protection, openly challenged the findings, telling People's Daily online that motor vehicle emissions were "undoubtedly" the major source of Beijing's air pollution.

The CAS study analysed air samples in the capital on a seasonal basis, and found that pollutants generated from industrial production and coal-burning the source of Beijing's PM2.5 pollutants. According to the study, coal burning, industrial pollution and secondary inorganic aerosol, a catch-all term for inorganic particulates formed as a product of complex chemical reactions among pollutants, account respectively for 18 per cent, 25 per cent and 26 per cent of the air pollution at large.

Combined waste incineration and motor vehicle emissions are responsible for 4 per cent of the hazardous PM2.5 fine particles in Beijing's air, it says.

But the academy's conclusion appears self-contradictory as motor vehicle emissions are themselves a major contributor to secondary inorganic aerosol, argued Pan Tao from the Beijing institute. Moreover, Pan asserted, it was simply impossible that car exhaust could account for as little as 4 per cent of Beijing's main air pollutants.

Chinese Hospital Opens Smog Clinic

The Huffington Post reports Chinese Hospital Opens Smog Clinic To Combat Worsening Air Quality

A hospital in southwest China has opened a clinic for patients who are suffering symptoms related to smog, a doctor said Wednesday, highlighting how big a concern pollution has become for Chinese.

One public health expert suggested hospitals may follow suit to cash in on China's notorious smog.

The rising middle class in China has become increasingly fed up with air pollution that has accompanied the country's spectacular economic growth. The term PM2.5, which refers to tiny particles in the air that can penetrate deep into the lungs, has become a common part of the vocabulary.

On Wednesday afternoon, the U.S. Consulate in Chengdu, which measures air quality, gave it an index reading of 160 — or "unhealthy" — based on a PM2.5 reading of 73 micrograms per cubic meter. A safe level under WHO guidelines is 25 micrograms per cubic meter.

The Chinese reading, which also takes into account other pollutants and has a different classification system, came out as "lightly polluted."

Pollution in China's Heilongjiang Province

Local residents travel on a tricycle in the smog in Harbin, northeast China's Heilongjiang province, on October 21, 2013. (STR/AFP/Getty Images) | AFP via Getty Images

Worries in the Path of China's Air

It's not just China suffering from China's pollution. Please consider Worries in the Path of China's Air

When China's skies darken with pollution, it is not the only nation to suffer.

Soot, ozone-forming compounds and other pollutants from China can blow east to Korea and Japan. Ultimately, some even reach the west coast of the United States, scientists say.

Other nations generate pollution too, of course, so the wafting of bad air from China adds to local problems. China's emissions worry countries in the path of the plumes, but in a region where political tensions often run high, international solutions are largely elusive.

Recent research in Japan suggests that China's contribution to average annual fine-particle pollution ranges from 40 percent in the Tokyo area to 60 percent in Kyushu, which is closer to China, according to Hiroshi Tanimoto, who heads the global atmospheric chemistry section at Japan's National Institute for Environmental Studies. On average, about 10 percent to 20 percent of Japan's springtime ozone comes from Chinese emissions, he said.

"Transport of air pollutants from China enhances the background level entering into Japan," Dr. Tanimoto said in an email. The impact to effect on Korea is even greater, he added.

China's main effect on pollution in the United States, however, involves ozone, scientists say.

China, which accounts for more than half of the world's coal consumption, is trying to reduce its pollution for the sake of its worried citizens. It has cut its emissions of sulfur dioxide, which can lead to acid rain and fine-particle creation; it is rapidly building clean- energy plants and setting some limits on coal; and it orders reduced car travel on days of bad smog. But its fast-growing economy makes the pollution problem hard to solve.

Whereas Europe had success in working to reduce cross-border air pollution in the 1970s and '80s, "there's really been no history of that regional cooperation in Asia," said Loren Cass, an associate professor of political science at the College of the Holy Cross in Massachusetts.

China to Invest in Air Pollution Treatment

XinhuaNet reports China to invest heavily in air pollution treatment

China needs to invest 1.75 trillion yuan (290 billion U.S. dollars) for its air pollution treatment plan from 2013 to 2017, an environment expert has estimated.

Wang Jinnan, deputy head of the Chinese Academy for Environmental Planning, said at the 4th Caixin Summit in Beijing that the investment would drive up GDP by nearly 2 trillion yuan and create over 2 million jobs.

According to Wang, 36.7 percent of the investment, or 640 billion yuan should go on cleaning up industry, followed by 490 billion yuan (28.2 percent) on cleaner energy sources. Cleaning up motor vehicles will absorb 210 billion yuan.

The State Council issued the Air Pollution Prevention and Control Action Plan in September to control PM2.5 (airborne particles of less than 2.5 microns diameter).

The action plan requires PM2.5 in populated regions and metropolises to be reduced significantly by 2017. The annual average of PM2.5 in Beijing would be expected to drop to 60 micrograms per cubic meter.

Broken Window Fallacy Yet Again

Did you catch the huge flaw in the above article?

Pollution cleanup does not contribute to GDP. At best, it shows prior GDP was overstated by the amount of cleanup necessary. The GDP improvement thesis is just another version of the broken window fallacy.

Simply put, broken windows, hurricanes, tsunamis, and pollution do not add to GDP.

Benefits To China's Smog?!

Even more preposterous than the broken window fallacy is the notion there are Benefits of a Smoggy China.

Northeast China was struck by the most severe smog attack this past week, sending air quality index in more than 40 cities above the 300 hazardous level and forcing schools in Nanjing, Jiangsu Province to shut down. But instead of halting their outdoor modeling show, organizers of a jewelry exhibition in Shenzhen, Guangdong Province had all the models wear face masks on the runway.

an expert from China's Ministry of Environmental Protection just claimed that the smog is there to stay for ten to twenty years. Amid the gloomy outlook, however, there's some silver-lining—CCTV, China's national broadcaster, has identified five benefits of the smog: first, it has made people more united, because smog is a common enemy everywhere in China. Second, it has made people more equal, because both the rich and the poor have to inhale the same polluted air. Third, it has made the Chinese more clear-headed as to the price that the nation has to pay for becoming the "world's factory." Fourth, it has made the Chinese more humorous. Sarcasm abounds when it comes to the topic of smog, and "that sense of humor is the source of strength for defeating the smog." Fifth, it has made the Chinese more knowledgeable, as people become educated on concepts like PM 2.5, important historical events like the London Great Smog of 1952, and even English words like "haze" and "smog."

The Party's mouth piece, The Global Times, has suggested that smog may be also beneficiary to military defense.

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