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Generational Dynamics Web Log for 8-Apr-07
California indoor pot farming soaring, thanks to housing bubble

Web Log - April, 2007

California indoor pot farming soaring, thanks to housing bubble

Marijuana seizures in upscale homes have quadrupled in just three years.

Indoor pot operating using sophisticated irrigation, ventilation and lighting (Source: LA Times)

Indoor pot operating using sophisticated irrigation, ventilation and lighting (Source: LA Times)

Authorities have confiscated more than $100 million worth of pot in the last year alone, according to officials with the U.S. Drug Enforcement Administration. In just three years, the number of plants confiscated has grown from 54,000 to nearly 200,000 in 2006.

"They have cropped up in neighborhoods like never before," said Gordon Taylor, who heads the DEA office in Sacramento. "I am not talking about the Cheech and Chong marijuana cultivation of two plants in someone's closet. I am talking about organized crime groups who are purchasing homes in our communities and creating marijuana factories."

In recent busts near Los Angeles, marijuana plants valued at tens of millions of dollars were found in ordinary middle class homes purchased for $500,000 to $1 million.

The purchasers took advantage of widely available subprime mortgage loans with 100% financing, so that they didn't even have to pay anything for them.

Publicity shot of TV series Weeds, about a single mother selling marijuana from her home. (Source: Showtime)

Publicity shot of TV series Weeds, about a single mother selling marijuana from her home. (Source: Showtime)

In other words, it's the housing bubble, the credit debauchery, and the general investor mania -- the things that I keep talking about -- that explain why in-home marijuana gardening has quadrupled in three years.

Last week, I described in great detail how this mania worked in the case of the Tulipomania bubble:

"By the later stages of the mania [at the end of 1636] the fusion of the windhandel with paper credit created a perfect symmetry of insubstantiality: most transactions were for tulip bulbs that could never be delivered because they didn't exist and were paid for with credit notes that could never be honoured because the money wasn't there."

And I recently described how criminal activities were exposed in the Panic of 1857:

"Yet even large, incorporated banks were sometimes grossly misconducted. ... [The] bank had contributed to political parties out of a secret drawer, ... and it had permitted other shocking laxities in expenditure and bookkeeping. ... As the nation's load of debt from railway construction, the expansion of mills, factories, and stores, town promotion, and speculation in commodities rose, the sums owed to banks, brokerage houses, and private lenders became more and more disproportionate to the supporting assets."

And this is how John Kenneth Galbraith described what happened in the Wall Street crash of 1929:

"[Before the crash], to the normal needs for money, for home, family and dissipation, was added, during the boom, the new and overwhelming requirement for funds to play the market or to meet margin calls. Money was exceptionally plentiful. People were also exceptionally trusting. A bank president [was] unlikely to suspect his lifelong friend the cashier. ...

Just as the boom accelerated the rate of growth, so the crash enormously advanced the rate of discovery. Within a few days, something close to universal trust turned into something akin to universal suspicion. Audits were ordered. Strained or preoccupied behavior was noticed. Most important, the collapse in stock values made irredeemable the position of the employee who had embezzled to play the market. He now confessed."

The point, as always, is when a financial bubble is in progress, as it has been since 1995, money is plentiful. When money is plentiful, people spend freely, people borrow freely, everyone is happy, people trust other people. Since 1995, we've had several huge bubbles: the dot-com bubble, the credit bubble, the commodities bubble, the stock market bubble, and the real estate bubble.

This story of mushrooming (so to speak) in-home pot gardens in California is just one small example. The real estate bubble and the associated credit debauchery not only made it financially possible, but also made it attractive to people who might otherwise simply have gotten a burger-flipping job. And now that these bubbles are deflating, spending will turn to saving, borrowing will turn to bankruptcy, happiness will turn to desperation, and trust will turn to accusations and incriminations. (8-Apr-07) Permanent Link
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Generational Dynamics Web Log for 8-Apr-07 California indoor pot farming soaring, thanks to housing bubble

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Generational Dynamics Web Log for 8-Apr-07
California indoor pot farming soaring, thanks to housing bubble