Bailout

Drug money and the financial crisis

By Felix Salmon

How much money does the international drugs trade make, and how much of that money helped out the global banking system when liquidity dried up last year? According to the UN, the answer to both questions is “a lot”:

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.

I’ve spent a chunk of this morning rooting around the UNODC’s website to see if I could find a source for that suspiciously-precise $352 billion number, but I couldn’t: if someone can point me to the report which generated it, I’d be much obliged. I did however find a press release in which Costa said that corruption was “the cause and consequence” of the financial crisis, which does make me suspect that he’s prone to talking his own book here. (The financial crisis had many causes, but corruption wasn’t even in the top ten.)

So I’m filing this one under “empirically-dubious publicity-seeking” for the time being, if only because Costa is prone to statements like this:

Mr. Costa said: “Nicolas Cage’s characters have exposed us to some of the darkest aspects of human nature. Now he is championing one of the most noble – the quest for justice. The Lord of War has become a messenger for peace, the Bad Lieutenant has turned into a good cop, and the inmate from Con Air has become a champion of prison reform. His star status and strong conviction on these issues will help us achieve security and justice for all.”

Or, to put it another way, the forces of evil and corruption were responsible for causing the financial crisis. But don’t worry, we’ve got Nicolas Cage on our side, so the good guys are bound to win.

(Via Yves)

Full post as published by Macroprudential on December 13, 2009 (boomark / email).