Editor's Note: Half the World's Heroin Supply Has Gone Missing; Why This is the One of the Biggest Stories of the Year and What it Portends

Editors' Note: for those who are new to LATOC, in order to understand the weight of the news story we're about to discuss, you need to know a few things. If you're a longtime LATOC reader and/or a former FTW reader, you can probably skip past points #1-#8 below. If not, then the only way to understand why this story is such a bombshell - maybe as important as any article I've posted here in the last 2 months  - is to read through the following:



#1) narcotics are the world's third biggest industry behind only energy and weapons;



#2) Money from narcotics is more "potent" force multiplier in the global financial system than money from energy and weapons industries as profits from the narcotics trade:



(A) usually manage to evade taxes - which creates a massive compounding

     effect over time for whoever controls/invests the profits



and



(B) are more liquid which means they can move faster. In financial warfare,  

    as in martial warfare or sports, speed kills. So whichever faction has the

     fastest moving capital can then outmaneuver the other factions in the

     battle for global financial supremacy.



#3) about 85% of the capital from the international narcotics trade ends up in Western banks. The overwhelming majority of the time, it's the big brand name national chain banks whose names we're all familiar with where the money ends up. After all, you don't think global drug lords are depositing their money at the small, family-owned credit union down the street from you, do you? Nope, they're putting their money in the exact same places where all the other Fortune 500 operations are putting their money which is the big national chain banks, big name investment houses, and international wealth funds.



#4) the most profitable narcotics are (by far) heroin and cocaine;



#5) Afghanistan produces 90% of the world's opium;



#6) Opium production in Afghanistan has smashed all previous records since the U.S. invaded just in time for planting season in 2001;



#7) the profits are typically deposited in off-shore banks and then laundered into the western banking system via low-interest loans for massive construction projects such as the massive condo-tower developments that sprung up in parts of the Middle East and the massive exurban home developments in the American Sunbelt from 2002-2007,



It's also worth noting, since this is a peak oil site after all, that many of the big energy infrastructure projects are almost certainly being financed with laundered drug money from off-shore money laundering banks as these banks offer very competitive interest rates (in hopes of quickly laundering the dirty money into clean capital.) If you're a big energy company are you going to finance your pipeline, off-shore well or utility sized solar installation with a 20 year loan at 7% from a clean bank or with one at 5% from a dirty bank?



You might be tempted to say "Well maybe the other guys will do that but I'm going to be ethical and go with the loan financed with clean money because I want to 'be the change I want to see'." At least that's what you'll say until you sit down with the company's accounting department to actually run the numbers: A $100 million oil pipeline or solar installation financed at 5% equates out to monthly payments of $66,000. If the project is financed at 7%, the monthly payments will be $77,500. Over the course of a year, that's a savings of $138,000. If your company's stock is trading at a price-to-earnings ratio of 30/1 then the difference between the dirty loan at 5% and the clean loan at 7% is $4,140,000 per year to your shareholders.



Bottom line is if you want to satisfy your shareholders, and/or keep your job, you're going to go with the loan at 5%, even if the bank is a suspected money laundering outfit. The way the laws are currently set up, if you're a publicly traded company you're not going to get in trouble for taking the lower cost loan financed with the dirty money even if the truth becomes known.



#8)  As a result of numbers 1-7, capital influx from the narcotics trade is now as important to the global financial system as oil imports are to the transportation and agriculture systems.



If you think this is simply too "conspiratorial" or sinister to be true, then just read the 1999 Reuters article about Dick Grasso (the head of the NYSE at the time) visiting the FARC guerillas in Columbia to ask them to invest their cocaine profits in Wall Street. That's as explicit a cold call as they come. Then go watch this clip and this clip from the docuмentary Cocaine Cowboys about how drug lords invested in Florida real estate while buying their way into the inner circle of the Republican party which, of course, then implemented policies favorable to Florida real estate investors. Then go watch this clip from the docuмentary American Drug War about where the money from Afghanistan's post 2001 heroin trade is going. If you want to flesh out your understanding of these matters then by all means read Chapter Three of "Crossing the Rubicon" by Mike Ruppert and NarcoDollars for Beginners by Catherine Austin Fitts.



My point in relaying all this is that if you want to understand financial warfare,  you are going to miss the entire boat if you don't include the role of laundered money and narcodollars in your analysis. So this story about half the world's heroin supply simply going missing with no explanation is absolutely huge.



Please note that while I appreciate Mike giving me credit for digging up the BBC News article linked below, I only happened to come across it while perusing the forums at Illuminist.org which is run by Dennis from Oregon who moderated the LATOC Forum for 2 years. The article was, unfortunately, more or less buried at the BBC site and I probably would not have found it on my own.



Mike writes, emphasis mine:
Over the last few months I have tracked major seizures of cocaine bothin the Pacific and the Gulf. Three separate seizures involved semi-submersibles of small submarines that don't go under the water but sink flush with it to eliminate radar signatures. (Doesn't work well for satellite surveilance.) Each of those seizures was 3,000 metric tons or more. Then I found that the DEA had recorded earlier seizures this year totaling more than 4,000 tons. The last time I checked (2000), the U.S. was consuming only 6,000 metric tons of cocaine a year. What gives? There is no evidence I know of to suggest that consumption has grown. It's counterintuitive. I don't have the contacts I used to but I can tell you that in L.A. there is virtually no powdered cocaine to be found and it's been that way for months. There is a litle crack out there but I suspect that may be crystal meth -- "crank". Meantime Mexico has errupted into a virtual drug-defined cινιℓ ωαr with hundreds, if not thousands, murdered.



Then today Matt Savinar sends me this BBC News story about how the world's heroin supply is disappearing. Someone is stockpiling heroin. Heroin is the base drug of morphine. The opium poppy, papaver somniferum, is the source of opium, the most commonly used, and most effective natural pain killer in man's history. Heroin is made from opium. I fear that opium and heroin have become new hot commodities and there is no way that that much opium/heroin could be intended for "recreational" use -- or even to supply addicts. It seems that someone is banking heavily on a lot of people being in a lot of physical pain. -- Good job Matt, as usual. I can't explain what's happening wth cocaine. Is it being hoarded until the price goes up? Not likely, because no one will have money tobuy it in just a few short months. But then again, if it's dirt cheap,say $75 a gram . . .



I repeat that by itself, all the cash from the global drug trade is not relevant to the current economic crisis. I last estimated all cash generated by illegal drugs at aruound $600 billion a year. By itself, the Lehman bankruptcy was $750 billion or so. Then came the bailouts and the trillions in equity that has been destroyed.



I don't have time to do the research but I'm sure we'll find out what it means soon enough I suspect. This all smells so... , so... BUSH.



Maybe we'll see all the drugs turn up right after the markets bottom. That could squeeze a few final dollars out of the corpse. Source
My best guess - and it is only that, a guess - is that somebody is expecting massive wars and/or disease to break out on a global scale inside the next 6-18 months. Whoever it is, they plan on being the ones to control and profit from what will  be the single commodity in highest demand, even higher demand than oil or food, which will be extremely potent pain relief. So they're stockpiling it.



Best-of-luck,



Matt