regulatory distortions

Guess what? Harsh regulations have throttled the legal marijuana market in California. Surprise!

Image courtesy of Adobe Stock.

In what is an absolute lack of surprise to anyone who’s thought about the issue, the severe regulations imposed by the state of California on legal marijuana shops means the majority of marijuana sales take place in the black market.

After five years of legal recreational marijuana, sales in the illegal market are estimated to be twice the volume in legal stores.

This is the 32nd article I have written covering the legalized recreational marijuana market. You can see my other articles by clicking on the regulation experiment tag.

(Cross-post from my other blog Outrun Change. A bit of background – I’ve had a long running series of posts there describing the California efforts to legalize recreational use of marijuana as a natural experiment. In other words, let’s sit back and watch what happens in a brand new industry when the government implements severe, extensive regulations on a new industry and imposes harsh taxation on the industry’s product. Also, there is an existing illegal industry that provides a rough frame of reference of what the industry kinda’, sorta’ looks like. My prediction all along has been growth in the new industry would be artificially restricted from what would otherwise happen without the severe regulations. Looks like my predictions is correct. I will continue to watch this natural experiment.)

Politico explains on 10/23/21: California’s legal weed industry can’t compete with illicit market.

One way to measure how severely the legal marijuana business has been restricted is to look at the number of licensed marijuana shops per 100,000 residents. For six Western states that allow recreational sales, here is the number of legal dispensaries per 100,000 people:

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By Jim Ulvog, ago

Why, oh why, did production of oil and food collapse in Venezuela? What could have caused this amount of human suffering?

Shipwreck standing on the beach with the sea in the background. Margarita Island. Venezuela. Photo courtesy of DollarPhotoClub.com

Devastation in the oil industry and food supply chain in Venezuela is due to intentional government policies.

One article sees how the government caused the damage to the oil industry while another article sees the devastation in the food supply but cannot see any direct cause.

(Cross-post from my other blog, Outrun Change.)

5/7/17 – Forbes – How Venezuela Ruined Its Oil Industry – Here is a primer on how to destroy your oil industry when you have the world’s largest proven reserves of oil and are in the top 10 of world oil producers.

If you want to destroy your country, the article provides a how-to-guide, using Venezuela as the road map.

The high point of oil production in Venezuela was 3.5M bopd back in 1998, which not by coincidence was the year Hugo Chavez became president. Production then began to slip. How could that be?

After civil unrest in 2002 and 2003, Chavez fired much of the staff of the national oil company, letting go 19,000 experienced staff.

Let me translate that: 19,000 staff who knew how to produce extra-heavy oil were fired and replaced by people whose primary job skill was loyalty to the president.

Extra heavy oil takes specialized knowledge and is very expensive to produce on top of oil production already being capital-intensive.

To generate more revenue, Venezuela invited five of the oil majors to develop more oil production. The form of investment was a partnership. The five majors invested many billions of dollars in oil production.

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By Jim Ulvog, ago

Now gasoline shortages in the country with the world’s largest amount of proven oil reserves. What economic system could possibly create this mess?

In Venezuela, that sign is needed at hospital pharmacies, bakeries, and now  at gasoline stations. Image Courtesy of Adobe Stock.

The shortages and suffering in Venezuela continues. Your homework for the day: what economic system provides this level of suffering?

  • Foreign reserves are shrinking
  • Bakeries threatened if they bake too many sweets and not enough price-controlled bread
  • Pregnant women are leaving the country to deliver their babies
  • Gasoline shortages appear

(Cross-posted from my other blog, Outrun Change.)

3/1/17 – CNN Money – Venezuela is down to its last $10 billion – The country’s foreign reserves are down to $10.5B, from $20B in 2015, and $30B in 2011. That info in sourced to the Central Bank of Venezuela.

Article says inflation is expected to hit 1660% this year and 2880% in 2018.

3/13 – PanamPost – Venezuelan Regime Threatens to Expropriate bBakeries, Jeopardizing Bread – In addition to price controls and currency controls, the government is going to impose output requirements on bakeries. If they don’t produce bread all day at the government limited price, they are subject to take over by the government. Left out of their miscalculation is that the government has stopped importing wheat flour.

If bakeries don’t bake enough bread, the government will close the shops.

3/16/17 – Yahoo News – Venezuela arrests brownie and croissant bakers in ‘bread war’ – Well, that didn’t take long.

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By Jim Ulvog, ago

Largest denomination Venezuelan currency in circulation voided without any larger bills to replace them. #18

The poor living in those houses in Caracas are suffering greatly as a result of intentional government policies. Photo courtesy of Adobe Stock.

The poor living in those houses in Caracas are suffering greatly as a result of intentional government policies. Photo courtesy of Adobe Stock.

The devastation in Venezuela would be funny if this was a make-believe movie or some hair brained dystopian novel. Sadly, we are watching live as millions of real people suffer from deliberate government policies.

The current 100 Bolivar note has been voided while the higher denomination bills have not been put into circulation. Sounds like a good plan to make hungry people hungrier.

12/13 – Fusion – Venezuelans fight to protect their savings as government pulls bills from circulation – After the government gave short notice that the largest bill, the 100 Bolivar note, will be pulled from circulation, people across the country have gone into panic mode to get their currency deposited in a bank.

Anyone who can’t get their money deposited by today, Wednesday, has 10 days to exchange the bills at a government location.

Only problem with that concept?

The government hasn’t announced any authorized exchange locations.

12/16 – Bloomberg – Venezuelan Odyssey for Cash Endures With Delay of New Bills – Surprise, surprise! The new bills, up to a 20,000 Bolivar note, weren’t available on Thursday.

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By Jim Ulvog, ago

Another round of intentionally caused suffering in Venezuela as government makes largest denomination bill illegal- #17

One graph illustrates the inflation rate in Venezuela and the other represents economic performance. Image courtesy of Adobe stock.

One graph illustrates the inflation rate in Venezuela and the other represents economic performance. Image courtesy of Adobe stock.

Government will withdraw all 100 Bolivar notes from circulation after Wednesday, tomorrow. The level of suffering will increase even further.

(Cross-post from my other blog, Outrun Change.)

12/4 – AP – Venezuela to issue larger bill as currency continues to melt – Article says the central bank has announced they will issue bills in the 500 to 20,000 Bolivar range. This follows up on previous reports saying they were planning to do so.

The exchange rate is now 4,587 Bolivars to the dollar.

Article says that is a deterioration by a factor of five in the last year.

The official exchange rates are 10 and 663 to the dollar.

12/10 – BBC News – Venezuela seizes Christmas toys to distribute to poor – (more…)

By Jim Ulvog, ago

Continued deterioration in the Venezuelan economy

Image courtesy of DollarPhotoClub.com

Image courtesy of DollarPhotoClub.com

The citizens of Venezuela continue to suffer at the hands of their elected officials.

Question for you to ponder: Is there a particular economic system that is causing all the suffering?

(Cross-post from my other blog, Outrun Change.)

2/29 – AP at Fox News – Inflation-hit Venezuela to print bigger bills – Central Bank president says Venezuela will start printing 500 and 1,000 bolivar notes sometime. No date mentioned.

Largest bill in circulation is currently the 100 note. At exchange rates in effect a month ago or so, that would be worth about US$0.10. Largest bill in circulation is equal to about one American dime.

How can an economy function in such circumstances? Not very well.

3/4 – According to dolartoday.com, the exchange rate is 1,105 bolivars to the dollar. That means 100 bolivars is 9.05 cents.

3/18 – Exchange rate is 1,211, or 100 bolivars is 8.25 cents.

3/18 – Foundation for Economic Education – What Did Venezuela Use Before Candles? Electricity.

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By Jim Ulvog, ago

Suffering increases in Venezuela, all as a result of official government policies

Shipwreck standing on the beach with the sea in the background. Margarita Island. Venezuela. Photo courtesy of DollarPhotoClub.com

Shipwreck standing on the beach with the sea in the background. Margarita Island. Venezuela. Photo courtesy of DollarPhotoClub.com

The level of suffering in Venezuela is increasing. All of the blame for the current and future suffering can be laid at the feet of the socialist government.

Previously mentioned Venezuela is in the early stages of hyperinflation:  Instead of reading about hyperinflation and economic collapse in history, you can watch it play out live. Tune in to Venezuela.

(Cross-post from my other blog, Outrun Change.)

Some more discussion on the increased suffering:

2/6 – The Economist – The endgame in Venezuela – A few stats from the article:

Government acknowledges that for the 12 months ending 9/2015, inflation was 141% and the economy shrank 7.1%.

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By Jim Ulvog, ago

Intentional federal policies extended Great Depression by seven years

Hunger sculpture at FRR Memorial in Washington DC. How much earlier could hunger have ended with different policies? Photo courtesy of DollarPhotoClub.com.

Hunger sculpture at FDR Memorial in Washington DC. A monument to the man whose policies added extra years to the Depression yet who rarely gets credit for the unnecessary suffering. Photo courtesy of DollarPhotoClub.com.

An extra seven years.

That is the conclusion two economists published back in 2004: intentional policies from FDR added seven years of suffering for the country.

Yes, that analysis was published back in 2004. Sometimes it takes me a while to catch up on the news.

On 8/10/04 the UCLA Newsroom published FDR’s policies prolonged Depression by seven years, UCLA economists calculate.  Update: The analysis is from Professors Harold L. Cole and Lee E. Ohanian

Cause

The cause of extending the Great Depression, according to the economists, was the National Industrial Recovery Act (NIRA) which protected industries from antitrust prosecution in return for adopting collective bargaining agreements. The result was unions drove up wages beyond where the market would have set them, companies were intentionally not prosecuted for collusion, thus companies cooperated in setting prices, which in turn drove up prices to consumers. As a result consumers had much more difficulty affording stuff and therefore actually bought less stuff, which further contracted the economy.

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By Jim Ulvog, ago