Comment by ChuckMcM
13 years ago
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).
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