How NATO Is Meeting New Threats

Our new Spearhead Force is up and running, and a 30,000-man Response Force is next.

By Jens Stoltenberg And Philip M. Breedlove

Soldiers in Babimost, Poland, prepare to take part in NATO Noble Jump exercises as part of testing NATO Spearhead.Soldiers in Babimost, Poland, prepare to take part in NATO Noble Jump exercises as part of testing NATO Spearhead. Photo: lech muszynski/European Pressphoto Agency

This month more than 15,000 troops from 22 nations are taking part in Allied Shield, a series of exercises designed to test the strength and readiness of NATO and allied armed forces.

In the Baltic Sea, 50 ships and submarines and more than 50 aircraft from 17 countries are taking part in our 43rd Baltic Operations exercise. On land in Poland, Lithuania, Latvia and Estonia, a further 6,000 troops from 10 nations are taking part in Exercise Saber Strike. In Romania, Exercise Trident Joust is testing our ability to command our forces in the field.

We are in Poland this week to meet and see allied forces take part in Exercise Noble Jump, the first deployment of NATO’s new Very High Readiness “Spearhead Force.” This exercise brings together more than 2,000 troops from nine NATO countries, including Czech and Dutch paratroopers, German and Norwegian infantry, Polish and Lithuanian special forces, Belgian artillery, U.S. helicopters and a Hungarian civil-military cooperation unit.

Allied Shield will demonstrate that NATO is able to deploy combat forces anywhere within NATO’s territory within days should a crisis break out or if allies are threatened. It will show the world that this alliance is ready, willing and able to deal with whatever challenges it faces.

These exercises are necessary because the world is changing. After the Cold War, we entered a new era of freedom and democracy based on internationally recognized rules. This era experienced unprecedented levels of international cooperation and brought prosperity to billions of people around the globe. This order is now being challenged.

To our south, Islamic State and other extremist groups are spreading chaos and inspiring terrorist attacks from Paris to Texas. To the east, Russia is imposing its will on its neighbors with scant regard for their sovereignty.

In this new and rapidly evolving environment, NATO must be ready to make and implement decisions quickly. It means countering cyberattacks with cyberdefense, disinformation with information, and strengthening and demonstrating our capabilities through exercises. It means investing today in the things we would need to protect ourselves in the event of a real threat.

We hope that day never comes, but it is our job to always be prepared to defend the people, territory and the values of this alliance.

We have already done a great deal. It is four months since we agreed on the composition of NATO’s new Spearhead Force, and already the troops are up and running. The fact that we have been able to pull together a powerful and flexible force so quickly speaks volumes for the solidarity within the alliance.

Allies will take turns leading the Spearhead Force. Already, France, Germany, Italy, Poland, Spain, Turkey and the United Kingdom have all confirmed that they are willing to assume the role of lead nation.
Moreover, the Spearhead Force is exactly that: the tip of the spear. Behind it lies the NATO Response Force, which allies have agreed to more than double in size over the coming months. It will consist of more than 30,000 soldiers, sailors, marines and aircrew, ready to reinforce allies or defend our security interests wherever needed.

We are also creating a network of small headquarters in Estonia, Latvia, Lithuania, Poland, Romania and Bulgaria. These units will aid the rapid deployment of NATO reinforcement forces in case of a threat, support collective defense planning, and assist in the coordination of multinational training and exercises.

We have entered a period of greater uncertainty, but the countries of the NATO alliance are united in its commitment to collective defense—where an attack on one is an attack on all—and to the protection of liberty, democracy, human rights and the rule of law.

By working together, as we are this month in the exercises of Allied Shield, and by investing more in our defense, as the leaders of all member nations have pledged to do, NATO can stand strong against any threat, from wherever it may come.

Mr. Stoltenberg, a former prime minister of Norway, is secretary-general of NATO. Gen. Breedlove, a four-star general in the U.S. Air Force, is the head of U.S. European Command and NATO’s supreme allied commander in Europe.

Why the Fed Is Afraid To Raise Interest Rates

By: Michael Pento

Tuesday, June 16, 2015

Even though the major stock market averages are flat for the first six months of the year, by nearly every measure the stock market is still extremely overvalued. This point is not lost on Ms. Yellen and company, as the Fed Chair herself has recently assented that the current value of stocks are "quite high". Given this, the Fed must privately be afraid that even a small change in the Fed Funds Rate could serve as the needle that pops the massive bubble in the stock market.

Exactly How Overvalued Is This Market?

First, the median Price to Earnings (PE) multiple on New York Stock Exchange (NYSE) equities is currently off the charts. Using this measure, the 2,800 NYSE stocks are at the highest level since records began since 1945.

Adding to this, the cyclically adjusted PE ratio (CAPE) for the S&P 500, which uses real per-share earnings over a 10-year period, is at a current level of 27.17. This is far higher than the long term average of 16.61, and only slightly below the 32.56 level achieved at the start of the Great Depression in 1929.

And then we have the Q ratio: the total price of the market divided by the replacement cost of company's assets. Historically this measure averages around .68. Today this ratio sits at 1.14, the highest level recorded since the dotcom bubble, and an increase of 100% from its value in 2009.

Using this metric, the value of U.S. equities is more than 10% higher than the cost to replace all of the underlying assets.

Finally we have the Total Market Cap to GDP Ratio, which represents the value of all stocks in the Wilshire 5000 divided by total U.S. output. This value indicator, at 125% of GDP, is higher than any other time in history outside of the era. And is about 75 percentage points greater than it was throughout the period 1975-1995.

As you would expect, Wall Street commentariats argue the current PE ratios are justified given the level of low interest rates. After all, they will find any excuse to keep pushing products to their clients.

However, what they so conveniently overlook is the growth rate associated with these lofty valuations. According to Case-Shiller, the average historical year over year growth rate of S&P 500 earnings is 3.8%. With earnings currently growing at just 0.7%, the PE ratio in relation to earnings growth, known as the (PEG) ratio, is now off the charts. And that paltry 0.7% earnings growth rate is even more suspect given the huge increase in financial engineering. 

Likewise, the overall economy is struggling to deliver any growth at all, even while interest rates are at zero percent. Therefore, the salient question to ask is: are these low rates sustainable?

Low interest rates should be the product of hard money policies from central bankers, balanced government budget deficits, and plummeting debt to GDP ratios. However, the current states of global economies and central banks are the complete opposite conditions.

For example, the Fed's balance sheet has ballooned from $800 billion before the Great Recession, to $4.5 trillion today. In the same vein, U.S. budget deficits have ballooned from less than $200 billion during 2007, to more than half a trillion dollars today. What's more, these deficits are guaranteed to explode with the ageing population and the eventual mean reversion of interest rates. And, of course, our national debt has doubled from $9 trillion, to over $18 trillion. However, what's so incredible is these factors should have--if subject to free market forces--sent Treasury yields soaring.

Nevertheless, bond yields have inexorably plunged over the past 7 years.

With global interest rates artificially manipulated to record lows by central banks, the search for higher-yielding investments has encouraged humongous risk taking in real estate, sovereign debt and equities. But what will happen to these assets when rates mean revert--or even surge to much higher levels?

Mean reversion is guaranteed to occur when central banks eventually become successful in creating runaway inflation and finally awaken the slumbering bond vigilantes; who will take rates much higher with or without the Fed. Or, rates must rise even if the Fed is unsuccessful in creating growth and inflation. This is because the protracted economic malaise will eventually cause the private sector to arouse to the fact we are an insolvent nation that cannot pay back, or even easily service, that $18 trillion of debt without a sustained period of above trend GDP growth. And the same can be said for other nations who's Central Banks have artificially manipulated rates into the basement; such as Europe and Japan.

What Happens When The Bond Bubble Bursts?

Household debt service payments are now just 9.9% of disposable income. This is the lowest level since 1980. But this isn't because households have paid off their debt; it's just because interest rates are at record lows. In fact, household debt now stands at $13.5 trillion; over $8 trillion higher than it was back in 1980. As a percentage of GDP, it rose from 45% then, to 76% today. Therefore, when interest rates rise and the true burden of debt service is revealed, consumer defaults and bankruptcies will reemerge just as they did during the Credit Crisis.

And then we have the renewed game of flipping real estate courtesy of the Fed. This latest incarnation of the bubble provides us with anecdotes of turning over NYC apartments for, in one recently documented case, a $20 million dollar profit in a matter of months. But what happens to the flippers who once again get stuck with that $70 million penthouse when interest rates rise? We saw this movie already back in 2008; banks stop lending and consumers stop borrowing when the economy crashes due to rising rates. And flippers will be trying to dump penthouses, if not jumping from them.

Turning back to the stock market, ZIRP has led markets to unsustainable levels, and has turned executives into gamblers. According to my friend, David Stockman, using data supplied from Alhambra Investments, $550 billion in junk-bond debt was issued between the years 1996 thru 2002.

However, nearly double that amount ($975 billion) has been issued in the last three years alone. The primary purpose of this money was to engage in financial engineering, not to purchase capital goods and to grow the economy.

Once interest rates rise it will become a complete disaster for the bond, real estate and equity bubbles.

The Fed's entire fatuous strategy was to inflate asset prices to generate consumption and boost GDP.

But what its free money policy really created was unsustainable asset bubbles that engendered artificial and ephemeral growth.

Therefore, investors should not take any solace from believing the current PE ratio on stocks is merely, "just a little rich." In truth they are at or near near record valuations; and these levels are even more unjustified and unsustainable given the lack of robust growth and the tenuous condition of low interest rates.

So if you are still wondering why the so called "great employment data" or "improving economy" mantras from the MSM haven't yet moved the Fed to raise, interest rates it is because 7 years of ZIRP has caused asset prices, and the economy as a whole, to become completely addicted to free money.

This is why our central bank is not only petrified to commence the interest rate liftoff; but is more than likely resigned itself into being stuck with some form of ZIRP and QE...forever.

sábado, junio 20, 2015



Approaching An Endpoint

By: Bob Loukas

Monday, June 15, 2015

Apart from two mini-peaks at recent Daily Cycle (DC) tops, Gold's current Investor Cycle has traded in a narrow, horizontal range. The Investor Cycle (IC) began with 10 good trading days back in March, but has since moved sideways. If the bulls were back in control of the gold market, they would driven Gold to make much more significant gains during the early favorable IC periods (first 8 weeks). Despite being in the most favorable (early) part of the Investor Cycle, Gold failed to catch the bid necessary to move it higher, and has now entered the IC's normal period of decline. (Note: A Daily Cycle is measured in trading Days. Investor Cycle measured in weeks. See Glossary of Cycle terms)

During the past 4 years, each Investor Cycle within this bear market decline was already well into decline by week 13 - where the current IC rests. On the daily chart, Gold is sporting a new series of lower lows, and it's likely it will soon have a series of lower highs as well. In short, the daily chart shows the arc (green line) of an Investor Cycle that has moved into decline. After a $30 run that peaked at $1,191, Gold will start the week on day 6 of the current DC and has begun to turn lower. Although a top after only 3 days may seem aggressive, it's important to remember that the last eight 3rd Daily Cycles did not make it past day 8.

A significant component of Cycle study focuses on identifying the type of Cycle an asset is following, and correlating that Cycle type's typical performance to the asset. When a strong identification is possible, as with Gold today, the predictability of future performance is generally very high. So for the moment, we can only conclude that the bears remain in control, and that Gold is showing a setup only a bear could love. Based on these charts and longer term Cycle counts, we should prepare for a new down-leg. If another rally were to materialize this week, I'd expect it to be modest and to fizzle very quickly.

$GOLD Chart
Larger Image

Shifting to the precious metals Miners, a look at recent performance shows that they have actually held up relatively well. But they, too, are no longer rising and have begun to languish. And history shows that the Miners don't perform well when they trade in a low volatility, slow motion decline as at present. Very often, when a Gold Cycle ages, the Miners are the first asset to give way in a waterfall decline into an Investor Cycle Low (ICL).

In addition, the percentage of mining stocks showing bullish P&F charts (the BPGDM index) is declining, and this typically means that the Gold Investor Cycle is in decline too. That makes sense, as Gold is showing a failed Daily Cycle. Even though the BPGDM at current levels has, in the past, been accompanied by a Gold ICL, Gold's current weekly IC count is far too early (Week 13 of 20-24 week Cycle) to expect that we are seeing an ICL. So the Gold Cycle and precious metal Miners are likely to see more downside in the coming weeks.

$BPGDM Chart
Larger Image

Amidst all of the negative signs for Gold, it's worth mentioning one bright spot - the sudden and powerful change in the COT reports. Again, it's far too early for an ICL, but the COT report reflects that Gold has moved lower and is not all that far away from ICL levels. Though it's not my primary expectation, this could be a harbinger of a short Investor Cycle, one that could end when the current Daily Cycle finds a Daily Cycle Low (DCL) over the next 3 to 5 weeks. The primary point is that Gold is well into the declining portion of its Investor Cycle.

Gold Hedgers Position Chart
Larger Image

Earlier, we discussed Gold's current sideways price action. The weekly chart (below) highlights the anemic nature of Gold's rise during the current IC, which is largely attributable to poor 1st and 2nd Daily Cycles. Gold didn't see the significant rise early in the IC that it normally does.

In this case, I would have expected Gold to approach the large, declining trend-line, but that didn't happen. Gold now appears ready to resume its long term downward trajectory.

The Daily Cycle failure last week encouraged me to conclude that current IC topped on week 9. With 4 years of similar Cycle action as a reference, it would be extremely unusual at this point to see Gold move anywhere near the week 9 high ($1,227). It's impossible to rule out one more attempt to rally next week, but in general, pressure should come from above, and will likely attempt to force a Gold Investor Cycle failure (below $1,136).

The question today is not whether Gold can recover and surprise to the upside. Rather, it's whether Gold can manage to hold the $1,130-40 area during the coming ICL. For 2 years, through the last 4 Investor Cycles, Gold has held above that level, so many believe that it will do so again. But the general rule in technical analysis is that repeated attempts to break a support line will eventually succeed. Just as, during the 2012-13 period, multiple attempts to break the $1,520 area period eventually succeeded and led to major capitulation, there is a real possibility that Gold could punch through support and cascade lower.

$GOLD Gold Spot Price (EOD) CME
Larger Image

Taking the BRICS Seriously

Shashi Tharoor

JUN 19, 2015

brics leaders 
BEIJING – Sailing down the Moscow River on a cool evening earlier this month, I found myself in intense conversation with the chair of the Foreign Affairs Committee of the Chinese National People’s Congress (NPC). Meanwhile, South African and Brazilian parliamentarians were swaying to Russian music and a guide pointed out the sights. The first parliamentary forum of the BRICS countries – Brazil, Russia, India, China, and South Africa – had come to a convivial conclusion.

Before the meeting opened, many wondered whether the five parliaments could possibly find common ground. What on earth could India’s fractious and rumbustious Lok Sabha, with its impassioned debates and disruptions, have in common with China’s decorous NPC, a rigorously controlled echo chamber for Communist Party decisions? Membership in the new BRICS grouping, many believed, did not provide a strong enough basis for cooperation.
Such skepticism has been leveled at the BRICS grouping itself from its inception, with some dismissing it as the only international organization invented by an investment bank. Specifically, the term BRIC was coined more than a decade ago by then-Goldman Sachs analyst Jim O’Neill, who did not initially count South Africa among the ranks of the major emerging economies.
But Russian President Vladimir Putin liked the idea from the start, and suggested in 2006 that the four countries should meet regularly. The grouping was soon formalized, with annual summits planned. South Africa joined in 2011, solidifying the BRICS’ presence across the global South, with only Russia in the North.
In fact, this is why Russia’s centrality to the enterprise is so intriguing. Given that Russia was, until recently, a member of the G-8 – the northern hemisphere’s most important economic grouping – it would seem to have little affinity with the other four BRICS members, which have traditionally been viewed as the leading developing-country voices in global forums. But, by seizing on the idea of the BRICS, Putin revealed his desire to build an alternative global platform – and advance an alternative worldview.
The continual deepening of the BRICS enterprise has caught many international observers by surprise. In addition to their annual summits – which have produced joint declarations covering every major global issue, from questions of peace and security to United Nations reform – the BRICS have conducted foreign ministers’ meetings and engaged in think-tank consultations. Moreover, the BRICS have created the New Development Bank, headquartered in Shanghai and headed by one of India’s most respected private-sector bankers.
Seen against this background, the recent parliamentary forum is just the newest in an expanding array of institutions and mechanisms that are establishing the BRICS as an international grouping that cannot be ignored.
The BRICS are emerging at a time when the future of the international system that arose in the immediate aftermath of World War II is increasingly being called into question. After two world wars, numerous civil wars, colonial oppression, and the horrors of the Holocaust and Hiroshima, the far-sighted statesmen of the time decided that liberal internationalism, based on the UN charter and allied institutions, was the only way to prevent more carnage.
And, indeed, for seven decades, that system has largely achieved its goals. It has broadly ensured global peace, although at the cost of shifting many conflicts to the periphery. And it did not benefit only the developed world; it also ensured decolonization, promoted development, and found ways to accommodate the voices of newly emerging countries.
But it seems that existing arrangements are no longer adequate. China and India are seeking global influence commensurate with their economic weight; Brazil and South Africa are emerging as continental powerhouses, and hydrocarbon-fueled Russia is chafing at its status on the margins of the Western system. Not surprisingly, many think that the current system is ready for a makeover.
The existing world powers, however, will not cede their influence so easily. It is absurd that China’s voting power in the World Bank and the International Monetary Fund is the same as Belgium’s. But the G-20’s effort to create parity in these institutions between the advanced economies and the emerging and transition countries has ground to a halt. Indeed, although US leaders technically agreed to IMF voting reforms, the US Congress has so far refused to ratify them.
It is important to note that countries like India and Brazil – unlike, say, Germany and Japan a century ago – are not seeking to overturn the world order. All they want is a place at the high table. Barring that, they have little choice but to build their own – though India, Brazil, and South Africa have reason to wonder if a Chinese-led world order would be an improvement on the current one.
The BRICS’ response is both understandable and disquieting. As countries acquire economic and military power, they start exercising their geopolitical muscle, too. The challenge for advocates of world order is to accommodate emerging powers within a framework of universal, predictable rules and global structures that ensure everyone a fair deal, appropriate for their size, capabilities, and contributions to the international system.
Today’s world leaders appear to lack the statesmanship, the breadth of vision, and the generosity of spirit of those who created the post-1945 world order. By clinging stubbornly to the system they dominate and barring the door to new entrants, they have left those outside little choice.
What the BRICS countries have in common is their exclusion from the places they believe they deserve in the current world order. That may not look like enough of a basis for a credible new international system. But, with their economies on course to overtake those of the G-7 before 2050, looks can be deceiving.
The fact is that, if the BRICS are not allowed to help lead within the existing global system, they will inevitably create their own. What that might mean for the world order established in 1945 is anybody’s guess.

06/15/2015 06:01 PM

Legal Highs

Welcome to the Cannabis Revolution

By Marco Evers and Laura Höflinger

Photo Gallery: High Hopes
A new consensus is emerging that bans on cannabis are counterproductive. Across the world, countries are legalizing its use for pleasure and medical treatment -- but Germany still lags behind.

Ms. Zeng speaks quietly, almost in a whisper, with a strong Chinese accent. How long have you been having trouble sleeping, she asks her customer.

Maybe a few weeks, he replies. Ms. Zeng asks if he feels that cannabis helps him fall asleep.

"Definitely," he replies. The non-medical practitioner then gives him what she gives all her patients, regardless of their symptoms: a prescription for medical marijuana.

A prescription issued by Ms. Zeng allows a patient to obtain medical cannabis in any form at the Canna Clinic. Behind the counter are jars filled with dark-green bundles of various strains of marijuana, from "B52" to "Afghan Kush" and "BC Bud." Cannabis cookies are also on display, along with cannabis-infused honey. Today's special is pre-rolled joints and cannabis chocolates for $2 (€1.8) apiece.

Here in Vancouver, British Columbia, anyone who submits to a pseudo-medical examination can buy as much cannabis as they like. The city is home to a population of some 600,000 and at least 80 specialized stores for cannabis, despite it being illegal in Canada.

So long as the stores don't sell the drug to anyone under-age, they have no need to fear police recrimination. The police answer to the city council, which in a spirit of rebellion decided that Vancouver's finest had better things to do than crack down on cannabis users -- such as tackling heroin or crystal meth.

The border to the US lies to the south of the city. Anyone driving from Vancouver to Seattle, a distance of 230 kilometers, will soon realize that they are witnessing historic change. The era of global prohibition of cannabis is drawing to a close. The road to Seattle is strewn with stores such as the Healthy Living Center and Green Theory (nominated "Best Cannabis Store" by Dope Magazine).

These days, Seattle itself boasts more marijuana stores than McDonalds. In Uncle Ike's Pot Shop, located next door to a church, over a dozen friendly sales assistants jostle to service the customers.

The store sells a range of cannabis products to smoke, eat and imbibe, as well as highly intoxicating leaves to mild ones, cannabis ointments and massage oils.

The police only intervene if someone lights a joint in public. As of July 8, 2014, adults over 21 in the US state of Washington are legally permitted to use cannabis in private. The same is true in Colorado, Alaska and Washington, D.C. A similar law is set to come into effect in Oregon soon and another will likely be introduced in California next year.

These developments seem surprising given that the US once declared a "war on drugs." It is now at the forefront of liberalizing cannabis -- its third most popular addictive substance, after alcohol and tobacco. For the first time ever, the majority of the population now believes that it should be made legal. Many expect that this is where the whole country is headed over the next five years.

To enlarge graph click here

The Situation in Germany

What's happening is nothing less than a revolution, and one that will likely have repercussions around the world. Including in Germany, where debate about reconsidering drugs policy is still very much in its infancy.

A SPIEGEL survey shows that for the time being, a majority of Germans (59 percent) want to see cannabis remain illegal. Nevertheless, support for continued prohibition is dwindling, especially among young people and the highly-educated.

The Green Party, the Left Party and the pro-business Free Democratic Party (FDP) have already come out in favor of legalization. City governments in Hamburg, Cologne, Berlin and Frankfurt are pushing for controlled legalization in a bid to shrink black markets in troubled neighborhoods. A growing number of doctors, police officers and lawyers also support lifting the cannabis ban. Not because they deem it harmless -- but because legalizing it would make it easy to contain the harm it can do.

Hubert Wimber recently retired after serving for nearly 18 years as chief of police in Münster, a student town where cannabis use is widespread. He is all too familiar with the vagaries of the German Narcotic Drugs Act. "We have had no success with it whatsoever," he says.

Although the daily drudgery of fighting drugs was relieved by the occasional coup -- cleaning out a basement cannabis plantation or arresting a dealer -- their impact was always neutralized almost immediately. A new basement plantation would be grown, a new dealer would go into business.

Now that he's retired and no longer needs to abide by the rules, Wimber wants to help start a drugs revolution in Germany. He's planning to open a German chapter of Law Enforcement Against Prohibition (LEAP), which he hopes will attract similar-minded police, lawyers and judges just as it did in the US, where it originates.

Its "professionality," Wimber hopes, will ideally spur debate on how to proceed against drugs in Germany. "The billions wasted on tackling and penalizing drugs use would be better spent on education and prevention," says Wimbers. For now, there is by no means majority support for his approach among German police chiefs. "Being rational doesn't get you far with this issue," he says.
The pro-legalization camp's main argument is this: Given that the cannabis ban has failed completely to eliminate the drug, damage-limitation is the second-best solution for governments. The state should regulate the drugs market much like any other, tax it, decriminalize its users and focus on public health and consumer protection.

A Global Shift

Countries all over the world are in the process of revising their policy on cannabis. So far, Uruguay is the only country to have introduced wholesale legalization of the growing and selling of cannabis. Spain and Portugal, the Netherlands and the Czech Republic have introduced such sweeping legalization measures that an outright lifting of the ban is only a step away.

The UN General Assembly Special Session on Drugs (UNGASS) is set to convene in April next year. A major breakthrough could be in the cards. One thing is clear: that a global consensus on a cannabis ban no longer exists.

Former UN secretary general Kofi Annan is a member of a distinguished panel, which is paving the way for a radical rethinking of drug policy. The Global Commission on Drug Policy is keen to end the war on drugs -- which it believes cannot ever be won, and which has claimed even more lives than drugs ever have. The Commission also wants to stop criminalizing drug users, regardless of whether they're using cannabis, ecstasy or heroin.

Annan and his fellow panelists -- who include over half a dozen former presidents -- are calling for a drug policy based on rationality. Value-based judgements -- eg. "drugs are evil" -- should be taken out of the equation and replaced with scientifically-sound facts. The panel's priority is to limit the damage done by drugs and this, they argue, involves governments boosting investment in education, prevention and constructive therapy.

The panel takes its cues from the anti-tobacco campaign. In the wealthy nations, the number of smokers is on the decline -- not because they are penalized by legislation but because they are more aware of the health risks. For their part, governments have raised taxes on tobacco and introduced public smoking bans.

The international movement to liberalize drug policy is driven by a dramatic shift in attitudes. There is now much greater social acceptance that cannabis is not just used for recreational purposes but has legitimate therapeutic and medical benefits that have been known about for millennia. Scientists have proven what healers have long understood: hemp reduces pain, relaxes muscles, boosts the appetite and has anti-inflammatory and mood-lifting properties.

Medical Breakthrough

In therapeutic quantities, cannabis does not neccessarily induce a high. It can help reduce nausea in cancer patients undergoing chemotherapy; reduce the dependency of patients suffering acute pain on opiates if not replace them altogether; cannabis-based oromucosal spray can reduce spasms in multiple sclerosis sufferers, while clinical studies are currently underway to see if cannabis extract can help reduce the risk of attacks in children suffering from severe epilepsy. Side-effects can include a racing heart, dry mouth and drowsiness, but are no worse than those of many other licensed medicines.

Even though cannabis can be a useful if not indispensable medical aid for a surprising number of people suffering from chronic conditions, patients in Germany who could benefit from medical marijuana continue to be prosecuted with relentless zeal. Cannabis remains illegal, no matter how helpful it might be to many individuals. A SPIEGEL survey shows that 90 percent of the population would like to see the ban lifted and medical cannabis made freely available to patients. But to no avail.

Diagnosed with a brain tumor, Robert Strauss from Augsburg found he could only alleviate the pain in his spine with cannabis. In February 2014, the German Federal Opium Agency granted him a highly unusual special dispensation for medical cannabis. But when he presented it to police in Augsburg, they made his life "hell," as he told the daily Süddeutsche Zeitung.

He was repeatedly stopped on the street and told to empty his pockets. One evening in September, the police raided his apartment and seized the cannabis he was legally allowed to possess along with a cannabis plant in his kitchen. A criminal investigation into illegal possession and suspected drug dealing was launched against him.

Denied cannabis, Strauss was forced to resort to prescription painkillers but unlike cannabis, these left him drowsy. As a result, he had a bad fall which he never recovered from. He died in January at the age of 50 -- a victim of German drug policy.

Other countries, meanwhile, are leading the way in terms of compassionate care. In Israel over 20,000 people with chronic conditions have been permitted to use medical cannabis. In Canada over 50,000 people are authorized. Health authorities expect a ten-fold increase in this figure within the next decade.

In California, where medical cannabis has been legal since 1996, it's used by hundreds of thousands of patients suffering from cancer and depression, by people with HIV, arthritis, Crohn's Disease and multiple sclerosis. Reliable proof that it is effective is rare, and based usually on nothing more than the testimonies of doctors and patients, all of whom arefree to experiment with dosage.

California is currently home to over 1,000 dispensaries. Delivery services even drop medical marijuana off at private homes. In the US, 23 states have introduced laws making it simpler for patients to come by cannabis easily and legally. Over 2 million people in the US use pot for medicinal purposes.

The Simplest Solution

And Germany? So far, the Federal Opium Agency has only authorized 449 patients to use medical cannabis -- a figure that suggests a shocking number of people are being denied help.

Franjo Grotenhermen, doctor and chairman of the International Association for Cannabinoid Medicines (IACM) has done the math and calculated that up to 1.6 million people in Germany could benefit from the use of medical cannabis. The government's continued refusal to relax the rules amounts to what he calls "massive, long-term failure to render assistance."

What's worse is that the fortunate few permitted to use cannabis are faced with a Kafkaesque situation. The only supplier of medical cannabis is a state-licensed Dutch company which has been struggling with delivery problems for over a year. "Deliveries rarely arrive," says 62-year-old Axel Junker, deputy spokesman with the German chapter of the IACM.

Even when deliveries do arrive, health insurers generally refuse to pay the costs of medical cannabis, which can be as high as several hundred euros a month.

Many patients are left with a paradox: They can't afford to buy what their doctor has prescribed, nor can they always buy the medical cannabis they need even when they authorized to do so. They are therefore left with no chance but to grow it themselves or to buy it on the street. Both options make them criminals in the eyes of the government.

There is a straightforward solution -- one which Austria, the Netherlands and Canada have already implemented. These countries are home to state-approved medical marijuana companies that make the drug available to people with chronic conditions. Germany has so far refused to follow their lead. According to a spokesperson with the Health Ministry, the topic is currently "in discussion."

But it's no longer just a ray of hope: German Health Minister Hermann Gröhe (CDU) has announced plans to improve access to cannabis at least for people who are seriously ill. Starting in 2016, health insurance companies will be forced to cover the costs. More patients should be eligible for cannabis medication than before -- though it still won't be up to doctors and patients to decide who gets what, but the state.

But Gröhe isn't striving for true liberalization -- he's more concerned about preventing abuse than helping those who are suffering.
The Science of Cannabis

When someone sucks cannabis smoke into his or her lungs, their brain is flooded in seconds with at least 60 substances, called cannabinoids. The most important ones are the sedative CBD (cannabidiol) and, above all, THC (tetrahydrocannabinol) -- the substance that, at high doses, intoxicates users.

Cannabinoids are effective because humans themselves produce similar molecules, so-called endocannabinoids. These messenger substances are essential for the healthy functioning of the mind, playing a key role in the parts of the brain responsible for alertness, thinking and feeling.
Cannabinoid receptors also exist in other places -- including in the immune system, heart, skin, blood vessels and pancreas. The wide spread of these receptors might explain why so many therapists and patients describe such a broad range of effects.

When these links were discovered years ago, they caused a sensation: Cannabinoids are not foreign bodies, not poison, but something that the body actually needs.

Some diseases are caused when certain messenger substances suddenly go missing in the brain. Parkinson's disease, for example, is caused by a shortage of the neurotransmitter dopamine. The discovery of the endocannabinoid system has substantiated the hypothesis that some neurological or psychiatric disorders result from an underproduction of endocannabinoids -- and that, as a result, cannabis products are the best way to treat them.

Which conditions, exactly? "That is not yet known," says Kirsten Müller-Vahl, a professor of psychiatry at the Hanover Medical School. But she has her suspicions about specific forms of schizophrenia, for example, as well as the attention disorder ADHD or Tourette Syndrome, a disease that leads to agonizing tics.

For years, Müller-Vahl has successfully treated the most severe Tourette cases -- those who have no other treatment options left -- with cannabis-based medication. Many of her patients consider them to be more effective than the neuroleptic drugs they usually get prescribed. And they also report fewer side effects.

A Safe Drug

Müller-Vahl doesn't understand why Germany still demonizes the drug. At least for adults, she claims, "the danger of self-harm through cannabis is small." In many ways, the substance is very safe, safer than many legal substances.

Paracetamol, the painkiller taken by millions of people, can be extremely dangerous; a single overdose of the over-the-counter medication can destroy a person's liver. An overdose of opioids like morphine can be equally deadly. And then there's alcohol. If you drink a bottle of korn, a type of German cereal-based liquor, in one go, you can poison your brainstem to the point that you can no longer control your breathing and heartbeat. As a result, people regularly drink themselves to death.

So far, however, nobody has managed to die from smoking pot.

The global number of deaths from cannabis overdoses stands at exactly zero, and the reason for it is this: In the brainstem, the oldest part of the brain from a development standpoint, there are barely any receptors for cannabinoids, making it immune against the drug. But it can do damage in the rest of the body. People who have smoked pot for years have a higher risk of cancer of the mouth and throat area. People who smoke hash mixed with tobacco -- a practice that is common in Germany, unlike in the US -- are also exposing themselves to the considerably larger range of dangers associated with tobacco.

Back in the day, experts claimed hash was a gateway drug -- that people who begin using it would invariably end up using heroin. Despite having been scientifically refuted, this thesis refuses to die in politics. The Netherlands have had an extremely liberal cannabis policy for decades, while simultaneously having an extremely low rate of recurring heroin use among junkies.

Now doctors are discussing whether cannabis could be used as an "exit drug": alcoholics as well as pill, heroin and cocaine addicts can better endure withdrawal if they smoke marijuana in the process.

Danger for Youth?

Cannabis, of course, has a risk of addiction, but it is smaller than many people think. Nine percent of users become addicted, according to a study by the National Academy of Sciences in the US. The potential for addiction is thus far below that of alcohol (15 percent), cocaine (17 percent), heroin (23 percent) and tobacco (32 percent). The degree of addiction is also apparently comparatively milder -- at least among adults.

There are considerably greater health and addiction risks among youth. During the teenager years, the brain undergoes a delicate restructuring. Many studies show that cannabis -- just like alcohol -- intervenes in this process and can impede it. This means that consumption of pot during this period can have permanent consequences for young people, because it can change their brain structure.
Researchers have identified several cognitive deficits among young people who smoke even just one joint per week. Many are worse at learning and are less attentive. The regular smoking of marijuana tends to lead to worse grades among adolescents. The question of whether their abilities return to normal after a longer period of abstinence is still being debated.
Consumption can have a particularly strong effect on adolescents with psychological instabilities. Smoking marijuana raises the likelihood of later psychosis many times over, and those who are predisposed to it can also become sick earlier.

The most important question in the legalization debate should thus be this: How can adolescents better be kept from consuming cannabis -- through a general, widely circumvented ban on the substance? Or through controlled availability to adults with simultaneous youth-protection measures?
Neither option is ideal. Adolescents tend to be curious. But clearly, prohibition has failed, spectacularly, to keep teenagers from using -- on average, Germans smoke their first joint at 16.

If cannabis possession weren't a criminal offence, it may become easier for young people to speak about it openly with teachers, parents or drug counsellors. Thus, reformers believe, a more trustworthy atmosphere would emerge, in which education about the dangers of consumptions could be more effective.

A Crime Without a Victim

Even US President Barack Obama was an enthusiastic pot smoker in his youth -- and he apparently still managed to do pretty well as an adult. When he declared last year that he doesn't believe marijuana "is more dangerous than alcohol," he set off a firestorm. Parents accused him of playing down the harmful effects of cannabis.

In fact, the opposite was true: Obama was playing down the harmful effects of alcohol. "It is completely indisputable that comparatively, alcohol is much more dangerous. Its bodily and psychological consequences are more serious, its social costs are much higher," says psychiatrist Müller-Vahl.

Alcohol ruins livers, brain cells and marriages. Drunk men tend to become more violent. A few vodkas too many and peaceful people turn into violent abusers, rapists and even murderers. A third of all violent crimes in Germany are committed by people who have lost inhibitions through alcohol.

Pot-related crime tends to be restricted to pot-possession (and to driving under the influence).

The drug's high makes people euphoric but relaxed. Lots of things become more intense: Feelings become stronger, jokes become funnier, landscapes more impressive, music better, thoughts freer. And time goes by slower. Why should this high be banned?

What is so reprehensible about cannabis smoking that it rises to the level of a criminal offense? People who smoke a joint or even just own a pot plant have committed a special kind of crime -- a victimless one.

Its perpetrator damages at worst him or herself. But it is rare in German law to turn potential self-harm into a crime. "One cannot massively criminalize a behavior that does not harm others," says Bremen penologist Lorenz Böllinger, who has launched a petition against the banning of cannabis.

Half of all German criminal law professors signed the petition in the past year.

Free citizens must have the option to decide how to ruin their own health -- with cigarettes, too much or too little sport, or by eating five sausages a day. Why should it be any different with cannabis? The fact that pot carries risks doesn't make a ban any more understandable -- after all, many things in life are both risky and legal, like driving a car, or riding a horse, or sex.

Germany's federal drug commissioner was recently asked why alcohol is legal and hemp is not.

Marlene Mortier (CSU), a trained farmer, grumpily answered: "because cannabis is an illegal drug, period."

The answer sounds naïve, but it happens to sum up the problem perfectly. On March 30, 1961, dozens of countries, under the umbrella of the United Nations, signed the so-called Single Convention on Narcotic Drugs, in which they committed themselves to fighting illegal drugs, including cannabis, on a wide scale.

At the time, the substance was not widely available in Europe or the United States, and little was known about it. And yet, the experts of the time agreed that the plant is an especially bad one, with no advantages for humanity.

Since then, cannabis has been damned globally. This demonization has, among other things, put hundreds of thousands of people into jail. It has also massively hampered medical research on the substance. And first and foremost, it failed to contain the drug. According to the World Health Organization (WHO), about 150 million people around the world smoke marijuana.

Colorado's Experiment

John Hickenlooper was opposed to legalization, but he didn't have an option. As a governor of Colorado, he had to respect the referendum that made his state into a pioneer, and now for the past 18 months, he has been in charge of what he calls "one of the great social experiments of the 21st century."

So far it's been going surprisingly well. "Canna-business" is now the fastest growing industry in America, and Colorado is right in the middle of it. Tens of thousands of new jobs and over one thousand new companies have been created as part of this "green rush."

Drug tourists are streaming into Colorado. Bus tours bring people to Denver's best joint factories. There are cannabis cooking courses and there is cannabis yoga. The Denver Post launched a cannabis desk to cover the "social experiment."

The University of Denver is training lawyers who specialize in serving the needs of hemp farmers. People who were formerly traditional dealers -- experts in camouflage and obfuscation -- are now taking classes in tax law and accounting. Professional labs test the plant products for active-ingredient content and purity. Those that don't meet their strict quality standards are not allowed to be sold.

As before, only a minority of Coloradans smokes pot. Before it was legalized, 16.1 percent of the population used cannabis. One year later, the number stands at 18.9 percent.

More Money for the State

People who favor prohibition tended to argue that when cannabis would be legalized, stoned drivers would cause catastrophic accidents. There have been individual crashes of the sort -- but overall, the number of car crashes has gone down, along with the crime rate.

Despite legalization, the pot business isn't like any other. People who sell weed have trouble getting a bank account, because they are restricted by federal US laws against money laundering. As a result, weed can only be purchased with cash in the stores. When marijuana companies pay their taxes every month, they take bags of money with them to the tax office.

Colorado took in over $ 76 million from taxes on cannabis last year-- less than expected. As citizens had decided in the referendum, a large part of the money is ploughed into the construction of new schools. In the future, it will also fund prevention programs for adolescents.

So far, nobody knows if that latter part of the social experiment will work. The effect of the liberalization on young people will only become apparent in a few years. But none of the specialized companies seem to be selling their product to teenagers. If they do, they run the danger of losing their license.

In a recent interview, Governor Hickenlooper had to admit that some of his concerns about legalization were unfounded. He is now happy that they are "keeping" the millions of dollars from the cannabis economy in Colorado instead of "supporting a corrupt system of gangsters."