Monday, December 14, 2009

Cocaine Blues

Via Naked Capitalism comes this story alleging that many banks were pulled from the brink of insolvency by large cash infusions - of drug money. If there was a "flake factor" scale, this story would reach at least ... a 6 out of 10: Drug Money Saved Banks In Global Crisis, Claims UN Advisor

Drugs money worth billions of dollars kept the financial system afloat at the height of the global crisis, the United Nations' drugs and crime tsar has told the Observer.

Antonio Maria Costa, head of the UN Office on Drugs and Crime, said he has seen evidence that the proceeds of organised crime were "the only liquid investment capital" available to some banks on the brink of collapse last year. He said that a majority of the $352bn (£216bn) of drugs profits was absorbed into the economic system as a result.


"Inter-bank loans were funded by money that originated from the drugs trade and other illegal activities... There were signs that some banks were rescued that way." Costa declined to identify countries or banks that may have received any drugs money, saying that would be inappropriate because his office is supposed to address the problem, not apportion blame. But he said the money is now a part of the official system and had been effectively laundered.

"That was the moment [last year] when the system was basically paralysed because of the unwillingness of banks to lend money to one another. The progressive liquidisation to the system and the progressive improvement by some banks of their share values [has meant that] the problem [of illegal money] has become much less serious than it was," he said.

$352 billion?! At the very least, this is evidence that the War on Drugs has been an absolute failure, which shouldn't be a surprise since the west has millions of "party hard" fifth columnists ready to supply the drug lords with stacks of money in exchange for a moment of chemical bliss.

But, did drug money really "save" the System? I don't know because the system is filled with questionable characters with a lot of money to spread around with drug dealers being just one part. You've got terrorists. You've got third world potentates stealing aid money. You've got tax avoiders. You've got the sovereign wealth funds of charming countries like Russia, Saudi Arabia, and China. You've got George Soros. There are a lot of people out there with absolutely no stake in the stability of the west, but who can move immense amounts of cash around the globe with the click of a mouse. David Smick referred to the oceans of money flowing unpredictably around the world in The World Is Curved. An ocean is an apt metaphor, as we often only see the surface without knowing who is lurking in the deep.

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