Archive for September, 2008

Why the rest of the world isn’t helping with the bailout

September 27, 2008


Why the rest of the world isn’t helping with the bailout

By: Ian Welsh

You may have noticed the rather frigid response to requests that the rest of the world help with the bailout. European leaders coldly said no, so did Chinese, so did, well, pretty much everyone. And China instructed its banks to not lend to American banks.

You might be wondering why. Let’s start with the history: basically the US spent the last seven and a half years borrowing money from the rest of the world and spent it on tax cuts for your rich, a war that most of the world didn’t agree with (that’s Iraq) and on consumption. The money inflow was extreme, at one point in 2005 one survey showed it as being more than the total interest on all the money in the world (ie. all the legal money, plus drug money). Everyone warned the US, including the IMF, but the US just went on its merry way with a war no one wanted and policies clearly aimed at making its rich even richer and impoverishing its middle class.

Since, however, it was buying Chinese goods and since that meant that China was industrializing by giving the US money in exchange for manufacturing jobs, the Chinese were willing to keep the subsidies going. To a lesser extent, so were the Japanese and Koreans. And while most everyone else wasn’t that thrilled, the idea of the US having an economic collapse and taking the rest of the world down with them didn’t seem too hot (although Stirling was arguing at the time that the Europeans should pull the plug anyway, because the costs were larger than they appeared, and well, if they didn’t, what’s happening now would happen.)

But anyway, no one pulled the plug and enough nations indulged America’s nasty credit habit that it was able to keep on keeping on, to the point where the US savings rate spent a fair bit of time actually negative. The metaphor I like to use is a junkie and his fixers. Except that in this case the junkie was the most powerful nation in the world with the most important currency. Any other customer (like say Argentina) would have been cut off long ago. “Sorry bud, no cash, no crack. Unless you’d like to sell us your wife strategic industries? No?”
So, long story short, the rest of the world doesn’t feel much if any sympathy for the US about all this. You borrowed the money, you promised to pay it back, and now it looks like the stuff you gave everyone in exchange for all that money is mostly garbage, worth cents on the dollar. Your IOUs, in other words, are no good. Everyone knows they’re getting stiffed, they’re just trying to figure out how much they’re getting stiffed for. Even if you’re holding greenbacks, everyone knows that the currency is going to crash even further and also get eaten up by inflation.

That’s why when the bailout came around it included a provisions for bailing out foreign banks holding toxic American waste that Americans sold so they could keep having their splendid little war, giving money to the rich, and running up a housing bubble while consuming cheap and lousy Chinese consumer goods. Those countries were, well, pissed. Now, in truth, I don’t think they have a lot of cause to be pissed, they had to know that they were going to get stiffed – you really shouldn’t lend money to people you know can’t pay it back, even if they do promise that they’ll crash the world economy if you don’t. But even if you expect you aren’t getting paid back, when the day comes that you’ve got to write off hundreds of billions of dollars, you’re still not pleased. I’m sure ordinary Americans can understand that, given that they’re being asked to eat that loss for Wall Street.

Further to this, from a foreigners point of view, the US response is still crazy. You obviously can’t afford the war in Iraq, for example. Why aren’t you ending it? Now. Not “sometime”, but NOW. Forget the BS about how long it would take to pull out, if you want to do it fast, you can do it fast. And you’re spending more money on your military than the rest of the world combined. Back when you used to do things with that military that the rest of the world sort of liked, like say dealing with Bosnia, people were willing to help you keep it. But now that you’ve proved you can’t be trusted with it, everyone’s wondering why they should help pay for it. You don’t need that big a military to defend yourself, you only need it if you want to run around and knock over some more countries.

Plus, of course, outsiders are noticing that the “bailout” bill is really just a huge transfer from taxpayers to the rich, and that even your own economists are saying it won’t actually fix the problem. So why should they pour more money down the drain when it won’t do any good?

Especially when it’ll do harm. Every dollar spent on a fake bailout will go to oil prices. Give it to ordinary people and they’ll buy gasoline and heating oil; give it to rich people and they’ll drive the market back up. Also, printing 700 billion (0r 2 trillion, or whatever number Paulson decides is enough cash for his buddies) will cause generalized inflation and push down the value of the dollar even more, thus reducing the value of foreign dollar holdings even more.

And the one thing the US really needs to do, which is break the back of the oil market, with the help of other nations, it isn’t even considering doing. No one is saying “let’s spend 20 billion buying up all the old cars on the market and junking them.” No one is saying “lets get businesses to have their workers work nine 9 hour days every two weeks and save a huge amount of commuting”. No one is saying “let’s enforce a 55 mile an hour speed limit on every street that has a faster one.” No one is saying “lets take a hundred billion and start refitting as many buildings in America so they don’t use heating oil, and in fact use almost no oil.”

Without doing those things at the same time as a bailout, the bailout will go to oil prices. And that kills everyone, not just Americans, but every nation that consumes oil.

And all of this is before you get to the fact that bailing yourself out with imaginary money means that the trillions of dollars sitting out there, held by foreigners, means they can’t walk in and buy up the best parts of America. What, you don’t want them to? Well what are they supposed to do with all that money you gave them in exchange for your war, rich people and a housing bubble? What does America have that they can spend that money on get something for it?

The answer, actually, is that they might as well just dump it all into the oil market, since they aren’t going to be allowed to buy anything else with it. What will that do? I’m sure you know the answer by now.

So no, foreigners aren’t real pleased right now, and they aren’t buying into Paulson’s money grab (or anyone else’s.) For them to do so, they need to know that the US is going to fix problems that bother everyone. They might be willing to swallow hard and admit that those trillions are essentially very expensive wallpaper, but if they’re going to do that then they also want to know that something is really being fixed. Since none of the solutions Congress is considering will do more than push the problem back a bit, while denying foreigners the ability to spend their money on the American assets they want, there’s no reason for them to sign on.

So the US is on its own until it convinces other countries that it has a real plan, that hopefully will actually do something to take their interests into account.


Medical Marijuana’s Eco Boomtown

September 5, 2008



Long-time local activist Martha Devine, also known as “Granny Green Genes,” says that the economy of Humboldt County “would have ceased to exist a long time ago without it. This county was built on marijuana.”

(Mary Spicuzza/ABC)

Humbolt Country’s High: How One Community Thrives on Legal Pot


ARCATA, Calif., Sept. 5, 2008—


When Stephen Gasparas arrived in Humboldt County in late 2004, he was driving a VW Westfalia pop-top camper on the verge of breaking down and had only $100 in his pocket.

Gasparas, who ran a flooring business in Chicago before heading west, seems to have found far greener pastures in Humboldt County’s medical marijuana industry.

Less than four years later, the owner of the Arcata iCenter, a collective marijuana dispensary, is now driving a new hybrid Toyota Highlander and bringing in about $100,000 a year. (And judging by the foot traffic in and out of the iCenter, that figure is a modest estimate.)

But Gasparas, 38, is just one of many in Humboldt County and throughout California benefiting from the booming medical marijuana industry.

Exactly how much the Golden State has made in pot profits is a hazy figure, mostly because California doesn’t keep exact numbers on the sales tax on medical marijuana.

It’s estimated that $143 million in medical marijuana sales have netted $11.4 million in state and local taxes annually, based on registered businesses, California State Board of Equalization spokeswoman Anita Gore said. And those estimates are small compared with those in a 2006 report co-written by California NORML state coordinator Dale Gieringer, which said that Californians consumed between $870 million and $2 billion worth of medical marijuana per year.

Of course, marijuana is nothing new to Humboldt County.

Humboldt, part of Northern California’s Emerald Triangle, has long been known for its high-grade marijuana crop, which has been immortalized on merchandise, including “Got Humboldt?” T-shirts, skateboards that feature weed and the words “Humboldt Gold,” and an upcoming movie named — what else? — “Humboldt County.” One recent study by Steven Hackett, an economics professor at Humboldt State University, estimated marijuana brings in as much as a half billion dollars to the county’s economy.

Those who believe Hackett’s number is much too high probably have not wandered through the streets of cities like Arcata, enjoying the sights — and scents — of Humboldt.

At the recent I-Block Party, a fundraiser for Arcata’s sister city, Camoapa, Nicaragu, the heavy scent of pot hung in the warm air as the crowd grooved to a reggae band.

Humboldt Glassblowers, a local shop featuring work by local artists, offers a seemingly endless supply of gorgeous swirled glass pipes — not to mention hookahs, Frisbees and magazines like “High Times” and “420 Magazine.” There, it seemed hard to go anywhere without smelling ganga, or at least spotting some reference to it.

For years, Humboldt County has enjoyed the benefits of a booming underground economy. But changes to state laws — such as the passage of Proposition 215 in 1996, when voters approved the medical use of marijuana — mean that many engaged in cultivation and sales are trying to follow state medical marijuana laws. Or at least some of them are making an effort, and in doing so are pouring money into local and state tax coffers.

The City of Arcata declined to disclose specific taxes paid on medical marijuana sales by local businesses, calling that “proprietary information.” But the city’s finance director, Janet Luzzi, said one dispensary in town is among Arcata’s top 25 producers of sales tax, and has been for several quarters.

“It’s not always there,” Luzzi said. “But it’s often there.”

Other medical marijuana dispensaries, however, recently received written reminders from Luzzi.

“Not all of them were paying taxes,” she said.

And taxes aside, most here acknowledge marijuana sales have for years contributed to county finances.

Vocal medical marijuana advocate Martha Devine was sitting on a park bench in the flower-lined Arcata Plaza, near a large circle of people kicking around a hacky sack and dozens of dancers. A steel drum band was playing for an enthusiastic crowd, and shoppers were wandering in and out of stores.

“The economy of Humboldt County would have ceased to exist a long time ago without it,” said Devine, glancing around the plaza. “This county was built on marijuana.”

Devine, who’s known to some here as “Granny Green Genes,” said this place was a ghost town when she arrived in Humboldt 32 years ago. She’s witnessed the decline of the county’s other traditional industries, like timber and fisheries, and believes marijuana is largely responsible for Humboldt’s progressive culture and thriving businesses.

“I think it’s really kept our economy going,” Devine said.

While Devine acknowledged that Humboldt’s cannabis cash crop has brought in the bad with the good — things like harder drugs and guns — she said she hopes medical marijuana will help the industry fight the negative aspects associated with black (or even gray) market economies.

She said she does not have a medical marijuana ID card “at the present time” but believes many ill members of the community have benefited tremendously from their “medicine.”

Despite widespread support for medical marijuana, tensions seem especially high in towns like Arcata, where people are struggling to agree on the details of medical marijuana, such as rules for growing and limits for medical marijuana possession.

It’s a debate that’s playing out in counties around California, from historically pot-friendly places like Mendocino County to Los Angeles.

The City of Arcata was recently reviewing the standards of its own marijuana guidelines when the new guidelines by the California Attorney General’s Office were issued late last month.

City staff members are currently reviewing the new statewide guidelines, which set clearer policies on medical marijuana identification cards, plant limits and mandate that dispensaries operate as collectives or cooperatives. Arcata hopes to soon send guidelines to the City Council for its approval.

But whether the new state and local guidelines can help bring peace to Humboldt remains to be seen. In the meantime, many local residents seem uncomfortable in their current position, caught between conflicting and confusing state and federal laws, where medical marijuana dispensaries that pay their state and local taxes may be raided at any time by the Drug Enforcement Administration or other federal agencies.

Some residents complain that a few grow houses have grown out of control, causing problems ranging from skunk-like odors to house fires.

So, even as California’s attorney general seems comfortable delving into the medical marijuana debate, stores like Humboldt Hydroponics refuse to even discuss the topic.

When asked about the issue of medical marijuana and the economy, a man behind the counter of Humboldt Hydroponics shop in Arcata seemed on edge as he immediately insisted he had nothing to say because his shop had “no affiliation” with medical marijuana.


But while standing outside his Arcata iCenter dispensary, Stephen Gasparas seemed to be making a sincere effort to bring medical marijuana out of the shadows and celebrate its contributions to California’s economy. He warmly greeted many of the patients — many of them 20- or 30-something guys — who stopped in the business.

Gasparas, who had battled over permit issues at previous business he ran a few doors down from his medical marijuana dispensary, talked about his efforts to pay sales taxes and give back to the community. He talked about his new fire relief fund. And when an employee came outside to ask him about a patient’s form, Gasparas insisted that personal contact must be made with each doctor who’s suggested a patient try medical marijuana.

“I’m here seven days a week,” he said. “I wouldn’t screw around.”