Investing in Cannabis The Next Great Investment Opportunity by Dan Ahrens

Chapter 1
Like Investing in Alcohol at the End of
Prohibition
“Prohibition has made nothing but trouble.”
—Al Capone
On December 5, 1933, at 3:32 p.m. local time, Utah became the 36th state
(the required three-quarters of the 48 states) to ratify the Twenty-First
Amendment to the United States Constitution. Prohibition ended. Only 16
years earlier in 1917, the Eighteenth Amendment had been proposed in
Congress to establish a ban on the manufacture, transportation, and sale of
“intoxication liquors” in the United States. Circumstances made Prohibition
a failure, and the Eighteenth Amendment was the first Constitutional
amendment in the history of the United States of America to be repealed.
The primary reason – money.
The 1920s (the roaring twenties) were a boom time for the US economy.
Life was good. Following victory in World War I, the United States was
becoming a true world power. New consumer goods spread into households
with the advent of mass production, and the modern automobile and airline
industries were born. The US financial system was thriving without the
legal sale of alcohol. But the Eighteenth Amendment had actually done
little to curb the sale and consumption of liquor. It was simply transported
and sold illegally. It was done with a wink and a nod among many
Americans. The Volstead Act (formally named the National Prohibition
Act) was a law that became effective on January 17, 1920, to provide
enforcement for the Eighteenth Amendment. It created a special
enforcement unit of the Treasury Department (Bureau of Prohibition), and
formally began Prohibition. For the wealthier, more powerful, or simply
“connected” individuals among American society, drinking came easy. It
almost turned into a game of enjoying smuggled alcohol and visiting
speakeasies. In another interesting side effect of Prohibition, increasingly
strong distilled spirits surged in popularity. The appeal of beer and wine

was diminished. Distilled spirits were more profitable to produce, cheaper
to transport, and easier to smuggle into the country.
Despite policing efforts of the Treasury Department and other lawenforcement

agencies, organized crime reaped the real benefits of the illegal
alcohol trade. Organized crime flourished. Organized crime became more
organized. With America enjoying good fortune in the twenties, many
people weren't concerned with crime – especially crime involving alcohol.
Gangsters often became glorified celebrities. Everything was fine until the
economy suddenly and violently came crashing down. America's Great
Depression began with the Black Thursday stock market crash of October
24, 1929. The Great Depression happened for a host of reasons. The stock
market crash followed a period of gross overconfidence and overproduction
of goods. A panic in the stock market sparked a panic at the banks. A weak
banking system allowed banks to fail and close. Bankruptcies and job losses
snowballed.
While the United States was navigating through the Depression, the federal
government desperately needed revenue if it were to help set the economy
on a correct path and put jobless Americans back to work. Federal income
taxes had only been created a few years earlier with the Sixteenth
Amendment of 1913. It was a major shift in the federal government's
revenue system. Prior to creation of the income tax, alcohol taxes had
generated as much as 40% of the federal government budget. With
Prohibition, the government had quickly become incredibly dependent on
income tax as its primary revenue source. The Depression changed that.
Incomes suffered and income taxes suffered. Income tax revenue dropped
60% from 1930 to 1933. The legalization and taxation of alcoholic
beverages was an easy target. In the 1932 presidential election, the
Governor of New York, Democrat Franklin D. Roosevelt (FDR)
campaigned against the financial failures of President Herbert Hoover's
administration. The repeal of Prohibition was an important part of
Roosevelt's Democratic Party platform. He easily defeated the incumbent
Hoover in a landslide victory on Tuesday, November 8, 1932. Just three
months later in February of 1933, Congress would propose the Twenty-First
Amendment to repeal Prohibition.
The end of Prohibition was a major financial victory for the federal
government. Millions of dollars collected in alcohol taxes helped to finance

Investing in Cannabis The Next Great Investment Opportunity by Dan Ahrens