Those always on the lookout for alternative indicators of economic activity may be in luck.
Earlier this week, the Office of the National Drug Control Policy released its annual survey of Cocaine production in the Andean region, or the three main Latin American countries where the powdery substance is sourced – Colombia, Peru and Bolivia. The results were disappointing, if only for wannabe drug lords. At a total of 620 metric tons of total potential pure cocaine production, 2012 blow production dropped 10% from 2011 and 41% from the 1055 metric ton record hit in 2001. However, the drop was mostly a function of Colombian production: the one time cocaine capital of the world has seen its potential output plunge from 700 tons a decade ago to just 175 estimated tons in 2012.
Which brings up some interesting questions. According to the White House, the drop in production was due to the usual politically palatable reasons:
These overall reductions in the Andean region can be traced to a variety of factors, including the strengthened U.S.-Colombia partnership forged over the past decade and the increased commitment to counternarcotics cooperation and citizen security from President Ollanta Humala and the Government of Peru. This includes strengthened democratic institutions, greater presence by the governments of Colombia and Peru throughout their territories, focused and persistent eradication, law enforcement efforts targeting drug trafficking organizations, improvements in the judicial system, alternative development, and increased foreign investment as a result of a significantly improved security environment.
The above is merely spin. Peru cocaine production has been not only constant but has been increasing over the years, while one can be certain that Bolivia’s Evo Morales, who was grossly humiliated in the aftermath of the Snowden affair when US-influenced Western Europe blocked his air passage, is about to crank up coca plant planting to the max. Or is he?
To assume that Colombia will voluntarily eliminate billions in “current account-boosting” drug money just to be in Obama’s good graces is ridiculous. So what is the reason for the drop in production?
One likely possibility is a parallel drop in demand, but not due to a surge in former drug users kicking the habit, but due to a drop in disposable cash for cocaine purchases. Which most certainly also includes Wall Street. And why not: with bankers getting their comp increasingly paid out in future vesting stock, which is hardly a drug dealer accepted currency, or simply paid less, and hedge funds everywhere underperforming Ben Bernanke Capital LP, it stands to reason that there is simply less cash for premium drugs, not only among the 99% but the “1%” as well.
An interest study would be to see if there is a matching “uninspirational consumer” effect, where former cocaine users have to make do with cheaper substitutes. If indeed there is less money available for a hit of the white powder, then it is likely that cheaper drugs are gaining on cocaine, leading to a surge of meth RVs in New Mexico and other.
Until then, and in an environment where increasingly more economic data is cut, pardon the pun, by abnormal political adjustments or is outright manipulated, one may have to resort to such abnormal indicators as cocaine production to get a sense of just how wealthy the global, drug-addicted consumer, truly is.