Jumping on a waterbed with the king of Silk Road by Jarad Henry

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For those living on the moon for the past two years, here’s a newsflash: the alleged mastermind of Silk Road has been busted.

The deep network of encrypted communication on the internet using hidden currency known as “bitcoins” that enabled people to order and sell all manner of drugs (and make countless people super rich) is now closed forever… or is it?

After an operation that began in early 2011, the FBI finally arrested 29 year old Ross Ulbricht of San Francisco in October this year, who now currently awaits trial in New York for a string of Federal offences ranging from mass scale drug trafficking to conspiracy to murder.

So how did it all go down and what happens now?

Will the users of the now defunct Silk Road simply give up and surrender? Will the demand that provided Ulbricht with so much money (and now fame) just accept that ‘the Road’ is closed and their supply line cut off, or will new and more innovative masters take it and his place?

In the game of cat and mouse that is drug trafficking, there is an understanding that many old hands will openly admit; the law of the land will never conquer the law of supply and demand.

Basic economics 101; where there is a demand for something, even when the commodity is illegal, somebody or something will ultimately find a way to supply it.

In crime fiction we use metaphors and analogies, along with similes to propel our stories forward and create a clear picture of what we’re trying to say. The same technique applies in public policy and political debate. When it comes to drugs, the same old hands who know that demand will always be met by a supplier also use a metaphor known as the “waterbed effect”.

Picture a water bed pumped full of something those in positions of authority wish to control, be it supply or demand, and now stand on that bed. Your foot sinks deep into the matress, squashing it wherever you put your foot. Good, you squashed that part, but what about the rest of the bed?

Look around and the water isn’t squashed at all; it is simply displaced. So you take your foot off and stand on another area and guess what, the same thing happens. No matter where you stand, the bulk of water (supply and / or demand) hasn’t changed. And so it goes on and on, and it has been going on this way since the 1960′s when the-then US President Richard Nixon learned that many of his troops in Vietnam were becoming addicted to heroin.

His solution to fix one war already doomed to fail… to start another one, a war that continues to this day, almost 50 years on.

In declaring this war, Nixon announced that drugs were the number one threat to the national security of the United States, so he set up a plethora of supply reduction attacks and threw them all on the water bed. In different forms, right across the world, those agencies, organisations, investigators, strategies and legislation has grown and the water bed now resembles a huge multi billion dollar jumping castle, with lawmen madly bouncing up and down, claiming victory each time they land on another part of the castle, only to bounced off and land somewhere else.

It’s a simple analogy that helps explain a complex problem, but like anything complex, there is always a simple solution, which is always wrong. The old hands of the drug war know this too.

So what lurks inside the castle or water bed? What is going on?

Instigators of public policy and legislation use words like ‘displacement’ and phrases such as ‘concerted effort’, a ‘multi pronged approach to achieve meaningful outcomes’. In short, they won’t give up or accept that the water in the bed (or the air the castle) only shifts, moves around, reforms, mutates and grows with every attempt to squash it.

History has proven this repeatedly for almost half a century.

This is not unique to the US. Heroin found it’s way into Australia during the war in Vietnam also, as the iconic band Cold Chisel capture in many of their songs that form a small subplot in one of my books, Blood Sunset.

So let’s take a little walk down memory lane and see if we can learn at least a little something from history and the attempts to squash the waterbed, and the inevitable aftermath.

The 1980’s saw the US attempt to eliminate – yes, eliminate – all drugs, especially cocaine. Although being the greatest consumer or generator of demand for cocaine in the world, attempts to jump on the water bed focused primarily on supply nations in South America, including military invasions, partnerships with counter insurgents and independent hit squads, and aerial bombing of cocoa plantations that resulted in the poisoning of thousands of farmers and further destruction of rainforests in and around the Amazon.

A victim of Ariel Spraying Plantations

These were the days of the Cocaine Cowboys, Miami drug wars, Tony Montana personified, aeroplane smugglers flying literally under the customs radar, shipping boats painted up to look like cruise ships, even submarines dropping cargo off to scuba divers in the Caribbean.

In Australia, in the 1990′s the focus shifted to heroin, where more people were dying of drug overdoses than car accidents. With 60% of legitimate trade between Australia and it’s partner nations throughout Asia, it came as no real to surprise to those working in the policy arena that the emergence of powerful triad syndicates would see members living and operating out of casino penthouses, bringing in tonnes of ‘Number 4 China White’ heroin in via commercial shipping, land and private boat.

Street crime and public decay forced authorities to jump on the water bed and squash the heroin supply, leaving health professionals to focus on demand.

The result?  Heroin dried up for a while and users started robbing pharmacies for benzodiazepines, standing over doctors, forging scripts and shooting up anything they could get their hands on. Many even contracted gangrene and had to limps amputated.

In the late 90′s and into the 21st century, a new breed of drug users continued to swim inside the water bed undetected and in most cases, causing no harm; the social party, rave and night clubber.

With as many as 1 million ecstasy tablets sold every week across every major city in Australia, again authorities jumped on the water bed and in 2005 made a seizure of 5 million pills. That’s more than enough to get all of Sydney high in one night. At the time it was the world’s largest seizure, but price, purity and availability indicators suggested those inside the water bed hardly felt the sting at all.

A 2009 NYD After party in Melbourne

Fast forward a few years and authorities wanted another shot, so again they jumped on the water bed and this time squashed a large syndicate of old school Italian mafia, seizing 15 million pills on their way to Melbourne. That more than tripled the previous world record and this time by late 2009 the ecstasy market bottomed out completely.

For the users, a few alternatives surfaced. First, a cheap and dangerous anaesthetic marketed as liquid ecstasy, known as Gamma-Hydroxy-Butyrate, or GHB.

For those with cash, cocaine resurfaced and meant the average cost of a night out for a punter skyrocketed from around $150 to well in excess of $600. That meant more money in the hands of suppliers and less for the punters to buy basics like food, bills, car repayments, petrol, utilities, clothing, etc.

So gone with heroin and gone with pills, those behind the supply restructured their business model and shifted towards less overt forms of trafficking, particularly cannabis, the most popular drug in the world, with approximately 30% of all Australians having smoked the drug at least once in their lives and almost 20% smoking it at least once a month.

To meet that demand, it is now estimated that as many as 10,000 ‘grow houses’ are now owned (yes, owned; not rented) by criminal entities in Melbourne alone. The houses are bought through corrupt mortgage brokers and financed by offshore banks, the interiors remodelled, electricity bypassed and the profits sent back to the Golden Triangle to purchase crystal methamphetamines, or ‘ice’, which is then smuggled back into the country using the same methods and routes once used for heroin.

As for the US, the water bed has shifted supply of its previous problematic drug (cocaine) north from production counties like Bolivia, Peru and Colombia to Mexico, where over 4,000 people a year are murdered as the cartel fight to control the trade in cocaine and what in many parts of the country has become the number one problem:  crystal meth.

Tony Montana morphs in to Breaking Bad’s Walter White.

This transition is well covered in a new documentary narrated by Morgan Freeman, called Breaking the Taboo, in which several former US presidents admit that sending dozens of law enforcement agencies onto the same waterbed was never going to work and only served to make things worse.

“You can’t have a war on drugs, without a war on your own people…”

And so now, in the age of super hi-grade technology, those inside the waterbed continue to slip and slide towards new marketing methods. The deep network of encrypted communication on the internet using hidden currency known as bitcoins that enabled people to order and sell all manner of drugs (and make countless people rich) is now closed forever… or is it?

The trial of 29 year old Ross Ulbricht in the New York federal court will no doubt be a media sensation. Prosecutors and politicians, district attorneys and policy makers will hail it as another victory.

But do they really think the users of the now defunct Silk Road will simply give up and surrender?

Will the demand that provided Ulbricht with so much money (and now fame and a likely heavy stretch in prison) just accept that ‘the Road’ is closed and their supply line cut off, or will new and more innovative masters take it and his place?

Those who read between the lines will know the water bed never pops or tears open; it just wobbles around and produces new and more cunning, often more dangerous, outcomes.

It is basic economics. Where there is demand there will be supply. Always.

Already there is a new and improved version of Silk Road, known as (yes, you guessed it) Silk Road 2.0. People are using this and other TOR (hidden internet services) to send Ulbricht messages of support, wishing him well. And no doubt they are also using these new platforms to fuel both supply and demand.

So after almost 50 years fighting the war on drugs, jumping on and off the water bed, what have we learnt?

Not all that much it would seem. For just one month after Silk Road is shut down, new versions of the same deep web arise to absorb the impact of those who busted Ross Ulbricht, a 29 year old former engineer who studied solar cells and published academic papers on the subject, but who is now a permanent poster boy for online drug dealers and consumers.

He is, if you like, the very definition of the water bed effect. Perhaps they will make a movie or a TV series out of him. Or will Jessie Pinkman, Mr White’s protégé in Breaking Bad go online?

So what then is the solution?

Unlike those who jump on and off the water bed, thinking they’re making a positive difference without consequences, I don’t have one. Sure, I can point out what is wrong and where things have gone off track or worsened, but as for solving all this… I honestly don’t think there is a solution. The water bed will always exist. You can’t tear it open or pop it no matter how hard you jump.

All you can do accept it and tread lightly, knowing that each step will result in something new and unknown. What about legalisation and regulation? Who knows what that would mean even if it were possible. It’s still the same water bed.

So perhaps the most suitable line to end with is one that all in public policy know to be self evident; that when it comes to solving complex problems, what works is never popular and what is popular never works.

Pink Tide is now available on Amazon as an eBook…

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Jarad Henry
3 comments on “Jumping on a waterbed with the king of Silk Road by Jarad Henry
  1. Jarad, Thanks for admitting you have no solution. Time and time again I read articles and essays about problems and they often offer no solution(s). They also lack an admission like yours. Not that solutions are a requirement. Let me offer an opposing viewpoint, limited to California and its residents – legal and illegal. For all the hysteria out there, in California if you get busted with an illegal substance of a limited amount you are pretty much guaranteed one free, Get Out of Jail card for your first offense. It is called, “First Time Offenders Drug Diversion Program.” It’s an old program that still exists. I know, because over 20 years ago I got busted with a small amount of a controlled substance. Looking back on it, it was a great thing, getting caught by law enforcement. A blessing, actually. I did no time. I paid a big fine. I did drug offender counseling. I liked it. It worked. I never did illegal drugs again. The War on Drugs is flawed. Agreed. But I am glad there are combatants out there. Your waterbed analogy is a good one. I had a waterbed in my University days. Did you know some of the water evaporates through the plastic mattress over time? You need to re-fill the mattress periodically. My desire for illegal drugs evaporated after I got caught. There was just a little less demand in your economic model after my arrest. Granted I was probably soon replaced. But replaced is better than being added too, in my opinion. My solution? Keep making arrests. They do some good. Until a better solution comes along. I continue to like the middle path. But with extremists on both sides of the wingnut, it seems I often walk it alone. Cheers, Kevin

  2. Did prohibition teach the world nothing? If you ban something you make it far more desirable. If it’s legal at a reasonable cost – not only is it less desirable, the profit motive for suppliers is gone, and the desperate need for cash of users is gone.
    OK many drugs are addictive and have nasty consequences, especially if over used – but so do alcohol and nicotine, but we live with them. Some people get so badly hooked they die rather than stop, others after trying can get free of the addiction, others never get addicted – but the problem is on an individual level, not the massive problems drug related crime now give us – or the problems alcohol caused in Prohibition America.
    I suspect if any one who wants drugs could get a cheap, safe(r)version from a legal supplier, the current suppliers would find business dried up very quickly, being a supplier would no longer be worth fighting over.
    Of course what the drug runners would turn to next I have no idea – I’m sure they would think of something – but hopefully we’d have a break while the manufacture a new need.

  3. You both raise good points. As always, I thin the answer lies in the middle.

    Drug Diversion programs are compulsory here and act as a tap on the shoulder for many early users. The process takes about 20 minutes and the user is required to attend counselling. Most never get caught again, so in rality all drugs are ‘decrimnalised’ in Australia.

    The issue I have is when major seizures occur (a requirment for continued funding) it shifts the market so much that people often resort to more dangerous drugs.

    I think better to focus on the drugs that cause the most harm rather than chasing glory busts.

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