Comment by samstave
13 years ago
I have no idea how to reconcile this scenario.
Can you explain it in more detail?
If alice is buying $100 worth of Tide, how much $drugs does she get for her $Tide?
How much $cash does Bob get for his $Tide when he sells it back to the store?
How much $Profit does the store get from the $Tide bought from Bob?
I like Dan's explanation too but perhaps more directly.
Lets say that Tide is $20/bottle so $100 is 5 bottles. She then exchanges that for 5 tide bottles worth of drugs.
The value of the drugs is, by definition, 5 tide bottles.
The article discussed the value of buying stolen tide at a discount against retail in order to get better margins on their sales. The article claimed that the margins were roughly 150% better ($5 vs $2) although that number may have been made up by the author.
Bob prices his drugs in units of Tide bottles, the Store buying stolen tide establishes the exchange rate for Tide to Dollars. There is a 'posted' exchange rate of dollars to tide bottles, although the argument talks about people stealing Tide. This becomes low cost because apparently the store staff is unwilling to call the police, and the police apparently have issues because the monetary numbers are low enough that the crime is a misdemeanor rather than a felony.
So in our scenario Alice is risking getting arrested for shoplifting by stealing Tide bottles, Bob is risking being arrested for drug dealing or trafficking in stolen goods, the store is risking sanctions for buying stolen goods.
The entire point of the article was that because there is so little risk, this process of stealing Tide to buy drugs flourishes as actors in the system arbitrage the risk for cash (or drugs).
Alice steals $100 worth of Tide.
Alice doesn't care how much drugs she gets for that, because shop lifting is easier than prostitution and has lighter sentencing than robbing houses.
Bob sells his bottles for $5 each. That means the store can either sell at a big discount for friends, or can make more profit. The margins are not good on Tide.
This is in the article on page 3.
>Alice doesn't care how much drugs she gets for that
I think your explanation is wrong.
Alice would certainly care how much she got for $Tide, else she wouldn't see it as ($).
Bob is the lowest common denomiator here in that Bob must know that he can get $xY for $Tide from the store... whereas he is going to give minimal value for $Tide to Alice.
This is not only how Bob $Profits, but also how Bob lays low from the Law.
You think a crack addict is a rational actor?
From the article:
>While the driver kept the car idling, a heavily tattooed, spiky-haired detective named Alexander Mallari jumped out holding a laundry bag filled with a few bottles of Tide and lots of bonus items—a dozen pairs of Philips earphones, a dozen or so bottles of Victoria’s Secret perfume. Mallari’s mission was simple: He’d enter the shop, disclose that the items were stolen, and try to unload them.
>Ten minutes later, Mallari emerged with an empty bag and a small wad of money in his pocket. He was offered just $30—a pittance by the standards of the Tide trade. “That’s a true crackhead price right there,” Thompson said.
This is the drug that brought us "smurfing" - addicts would earn drugs by taking very many blister packs of OTC medication and popping the pills out of the blister packs to be used in making drugs.
Bob fences stolen goods from drug addicts because the margins are so good - and the margins are good because drug addicts just want enough money to get more drugs.
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