Cash is king in an economic crisis, we all know that. What’s the corollary? Everything starts to go underground. Unrecorded cash is untaxed cash, baby! Here’s some anecdotal proof.
Jim Rawles once mused that Orofino, the little hamlet that hosts Boomershoot, would have a fairly resilient economy during an extended financial crisis, because of the high percentage of residents receiving Federal paychecks. Unless the FedGov goes away, there’d be a continuous stream of money flowing into town keeping businesses alive.
Well, California’s impoverished Central Valley —Victor Davis Hanson country — is just like that, but worse because the money doesn’t come from jobs but from benefit payments. It’s definitely in Depression territory, (20-40% unemployment) but it’s still awash with cash from all the unemployment and welfare and disability checks. Over the holidays, I saw lots of evidence of this as we made our annual visit. There were new restaurants thriving — low-priced pizza joints, etc., but they were new, which means someone projected a good P&L.
(Why’s Dr. Hanson seeing increased crime? Because of all the folks who are unemployed but are not scrambling for a job, any job — and who therefore have nothing to do. Idle hands make the Devil’s work….)
Restaurants are also great places to launder cash that you don’t want taxed.
What brought that to mind is that I had a chance to catch up with the California Disability King, and if you don’t remember him you really want to go ahead and click that link. I’ll wait.
You’re back. Blood pressure through the roof? Teeth being gnashed? Good. There’s more.
So he spent his lump-sum amount already, as Rivrdog had foreseen in the comments to that earlier post. Bought brand new cars for his immediate family, and loaned some money to relatives. He is a genuinely kind fellow, and he was very generous with his new-found largesse. And now that’s all gone, he’s still getting his nearly $3k in monthly payments for doing nothing. Life’s good, right?
Well, as you might expect from someone the State of California considers permanently disabled due to chronic meth use, he was going-stir-crazy just sitting around the house. As he explained to me, he wanted to be “productive.” Boy is he.
See, he became a suburban farmer.
That’s right, he’s running a marijuana grow house, cultivating five separate exotic strains of the green leafy stuff, and he’s set up with the local medical-marijuana outfit so he’s got a buyer.
Now since I’m not exactly hooked in to the underworld, I found this a fascinating opportunity to grill him on how this all works. It was a bit difficult to follow at times — methheads aren’t the clearest conversationalists, you see — but I gave it my best shot. Let’s follow the money, shall we?
He said he gets a salary of $1000/month, cash under the table of course. Presumably this is for managing the grow house. I’m not sure if it’s rented in his name or not. He mentioned that the electric bill is $1,300/month due to the grow lights. He implied that he had to pay it — but I think what’s going on is that the medical-marijuana operation is fronting him the rent and utilities, and then deducting it from his crop yield.
(Typical farm-bank operation, just like in the old Grange days, right? The bank loans the farmer money to buy seed and equipment for the season, then when the crop comes in, the farmer sells it through the bank, or the bank’s broker, and they deduct the farmer’s debit balance before paying him the proceeds.)
Now, the medical-marijuana folks pay street price for their stock, which is $900/lb. He’s expecting to produce sixty pounds for them this quarter. After expenses (as I said, I think they deduct the grow-house rent, utilities, etc. from his cut), he’s expecting to net between $28,000 and $38,000. Cash. That’s in one quarter.
It gets better.
They’re paying him another $300-$500/week to ferry cash out to some location on the coast. See, the medical-marijuana place pays $900/lb. but turns around and resells it for $2700/lb. to folks with the handy-dandy medical-marijuana cards. They, of course, pay cash. You can’t swipe your EBT for medical pot, but transmuting Federal and State welfare payments into cash is old hat in the Valley, folks. My wife learned about it growing up there, like learning to tie your shoes. Overhead has got to be pretty minimal, so there’s many, many thousands of dollars in profit being made here.
How much? Enough that he’s transporting $50-$75k per week for them in what I presume is unreported, off-the-books, untaxed cash out to the coast. I don’t know why it’s going to the coast; presumably there’s some sort of money-laundry op there. Probably a restaurant.
Medical marijuana’s legal in Cali, right? Tax-evasion’s not, but I expect most of the Central Valley’s inhabitants don’t consider that a real crime. (Growing marijuana in bulk violates the law, of course, not to mention the zoning violations for doing so in a suburban residential neighborhood home, but that’s why the medical marijuana place outsources its supply to cutouts like him, I’m sure. Besides, he’s unobtrusive — that’s the point — and law enforcement’s not his worry. He had a local cop install his security system, for crying out loud.)
Nor is he particularly worried about getting caught and prosecuted. He was acceptable for this job because of his background as a felon. I’m sure if caught again, he’d just deal with it.
(I’ll note that for twenty-nine years, he was able to work as a highly-skilled tradesman in various businesses because none of them bothered to run criminal background checks. Now they do. As a result, he can’t get a legitimate job anywhere. Not that he needs one, with his disability payments, but he still feels the ostracism. Oh the pity. Aaargh!)
No, law enforcement’s not his fear. It’s criminals.
Thirty years ago, he ran a string of eleven grow houses in LA. (He undercut his competition by keeping his costs low. Where they rented houses, he just rented the garage — paying a small cut to the residents.) He quit when he opened the garage one day to find his plants stolen and the residents bludgeoned to death.
He’s got his security system, and a couple Dobermans protecting the yard, and he’s always armed when he goes by every day or so, and is careful to clear each room with the Dobies preceding him.
He says the chain of people who know about his house or his cash-transport is very small — but he’s very worried that if one person blabs, he’s a very big target for robbery.
He’s other worry is what to do with all his cash. He can’t bank it, for obvious reasons. He wants to do this for no more than three years to build up enough savings to pay for his daughter’s college, and build a retirement nest egg. I have my doubts he’ll be able to last that long without making a mistake — he’s a methhead, right? — but we’ll see.
All in all, I found this a fascinating conversation with a fellow on the fringe of California’s underworld — an underworld I’ve long suspected is close to being a majority of Californians, but that’s a subject for another post.
Of course, if pot was legal at the federal & state level, they could be taxing the shit out of it.
Part of me actually thinks this is good; meth labs have a tendency to explode, and pot… well, doesn’t.
The other half of me is still beating my head on the desk.