Cannabis Recession 2023 – Cannabis | weed | marijuana

Is a cannabis recession inevitable in 2023? While an economic downturn is inevitable, it remains to be seen how the cannabis industry will weather the storm.

Saturated retail markets are sure to be impacted as consumers limit their purchases or make more sophisticated purchases. And large-scale industrial grows that have been more about selling stocks than weed will feel the effects.

But why? Why was cannabis stock value removed from fundamentals? Why are small cannabis entrepreneurs, through no fault of their own, at the mercy of global economic forces beyond their control?

And what role can cannabis play in reviving the economy?

Cannabis recession 2023

A cannabis recession in 2023 may be inevitable, but understanding why is a challenge in itself. For example, look at the massive money printing that took place during COVID.

It even sparked a new meme – money printer go brrrr

So when the new money came into the economy, the value of the currency fell and everything went up in price. That’s inflation.

But thanks to propaganda from politicians and the corporate press, the real cause of inflation is “corporate greed.” And, of course, the solution to “corporate greed” is to increase the scope and power of the centralized state.

Likewise, Larry Summers, an economist who has worked in both the Clinton and Obama administrations, recently – rightly – tweeted about the collapse of the Silicon Valley Bank (SVB).

The SVB has committed one of the most fundamental banking mistakes: borrow money in the short term and invest in the long term. As interest rates rose, the assets lost their value, putting the institution in a difficult situation.

Sounds reasonable and logical, right? Like a physicist tweeting that the speed of light is 300,000 kilometers per second.

But the reaction against Summers was quick. In the comments, he “clarified” what he meant by the original tweet. Prompt others, like George Selgin, for an answer:

I am pleased to see Prof. Summers explaining himself in the comments as I read on. Still, I was surprised when I first saw this tweet where he blamed SVB’s troubles on doing what all banks always do!

What have banks always done?

I’m not a fan of Larry Summers, but it’s clear his original tweet was solid economics. Of course, he backed down and bowed to the will of the mob, as is usual on Twitter.

But consider what banks do on a daily basis would land you or me in jail. The trouble with Silicon Valley Bank (SVB) stems from a practice called fractional reserve banking.

We used to divide banking into two categories: warehouse banking and investment banking.

With Warehouse Banking, the bank offers warehousing services and seamless payment transactions. The customer pays a monthly service fee for this.

Investment banking means that the bank raises capital by underwriting and selling securities.

Modern banking does not distinguish between the two. Modern banks fund investment banking with money stored in inventory accounts.

Instead of paying a small fee, the bank pays the depositor a small return. Of course, the bank’s depositors may want access to all of their money at once. This used to lead to bank runs and was a powerful tool of the masses.

Nowadays, banks create new money out of thin air.

This is how you can imagine a storage garage. You give away things like furniture thinking it’s a warehouse, but behind the scenes the owner rents out your stuff to others. In return, instead of a monthly fee, you get a small nominal fee.

Superficially, there is nothing wrong with this business model. The main thing is that the customer knows that the storage garage is not a warehouse, but an investment opportunity. But that is not the case with modern banking.

Most depositors are unaware that they are not depositing anything. You lend money to the bank.

Fractional reserve banking has a scattered history, with the Bank of Sweden (founded 1668) and the Bank of England (founded 1694) employing such practices. The first large-scale practice was at the Bank of Amsterdam, established in 1609.

But fractional reserve banking did not become widespread until the 19th century. Not all banks have always done this.

Banking for the elite

Canada’s cannabis legalization is perhaps the clearest example of who governments and banks are working for. And it’s not your average family.

Members of British Columbia’s cannabis community have been cultivating and perfecting cannabis for decades. Without their civil disobedience, the Liberal Party would never have considered legalizing cannabis.

But have they been rewarded with licenses and welcomed into the mainstream economy? No, they were “organized crime” until further notice.

Ottawa established a centralized system in which federal bureaucrats determined who would grow cannabis in Canada. Unsurprisingly, well-connected former politicians and cops were granted licenses to build industrial-size warehouses while BC Bud fought for “micro-grow” licenses.

To be part of Canada’s legal cannabis regime, you need cash. You need tens of thousands in seed capital and a willingness to place all your hopes, dreams and aspirations in the hands of Health Canada.

The game was rigged from the start.

Who Will Survive Canada’s Cannabis Regime Long-Term? Big corporate players or small business owners?

Both groups deal with excessive excise taxes, thousands of pages of legal-jargon regulations, sometimes halting production to await the decisions of a Health Canada bureaucrat, rules against marketing and government monopolies.

But some have the capital, some don’t.

Anyone over the age of 19 can buy cannabis in Canada just as easily as alcohol or cigarettes. But to produce and sell cannabis? You need deep pockets.

The whole industry is fighting. But who is likely to survive the cannabis recession of 2023? Those who have capital. Who has capital? Your local corner shop or the company associated with the Laurentian elite?

Cannabis recession 2023

These “microeconomic” policies that allow fractional reserve banking have “macroeconomic” consequences. If you’ve ever wondered how cannabis producers like Aurora or Canopy made so much money before they started producing cannabis, or why their stock value was higher than you could ever get from their weed, look no further.

New money is being shoveled into projects and investments that otherwise would not have been made. Resources are misdirected. During the downtime required to move these resources into new, more solid capital structures, the economy goes into recession.

Of course, governments and banks intervene in this restructuring process, rather than liquidating bad debts and allowing the market to set interest rates.

Banks should provide capital for companies through investment banking. They also offer a payment and exchange system through warehouse banking.

When a bank like Silicon Valley Bank fails, it is in a “liquidity crisis.” SVB did not have 100 percent of their storage accounts available to their customers.

The United States has not had a market rate for nearly 100 years. The US Federal Reserve (the Fed) has dictated interest rates as if they were just another government policy.

After two decades of extremely low interest rates, the Fed has started raising rates. The SVB has large holdings of older US Treasuries, which fell in value as the Fed hiked interest rates.

As losses mounted and SVB could not raise funds to cover the shortfall, customers realized what was happening and rushed to withdraw their deposits.

This situation is not unique to SVB. You’re just the canary in the coal mine.

Cannabis Recession 2023: The Solution

The SVB is liquidating assets to cover deposits, so that might not mean a nationwide bank failure like in 2008. But if not now, then later. And if not the SVB, then another bank.

Banks have heavily leveraged the global economy. No one has solved the problems that caused the 09/08 financial crisis. In fact, the fundamentals are even worse than before.

So what’s the solution? Raise interest rates, bankrupt everyone and start over? Or lower interest rates and hope this party goes on forever?

Of course, a third option, however unlikely, remains the best long-term decision. And that means stop using fiat currencies.

Money backed by a commodity—gold, silver, or rare shells—is superior to paper money printed by governments and banks.

And that’s not an opinion – that’s a historical fact.

Avoid a recession with hashcoin?

Commodity-backed money offers greater stability and predictability in its value. It protects against inflation by limiting the money supply and preserving purchasing power over time.

Commodity-backed money inspires greater confidence in the banking system, as people know the banks cannot destroy its value by creating more out of nothing.

Commodity-backed money is harder for governments, banks and Wall Street to manipulate. You can’t print more money at will, so you can’t just repackage bad assets into quality investments.

Alongside a blockchain, commodity-backed money is becoming an effective tool to prevent counterfeiting, including official forgery by the banks. Commodity-backed money protects against encroachment and misuse of money by corporations and governments.

Overall, commodity-backed money limits the power of governments and banks. It creates investment potential for small to medium-sized investors that Wall Street has locked out of their casino.

Commodity-backed money — like hashcoin — is restoring the wealth and prosperity of the middle class.

Any politician who claims to want to help the middle class (as Justin Trudeau does) but doesn’t deal with monetary policy (Justin says he doesn’t think about it) is an imposter and stooge of the elites.

Cannabis has the potential to create a green, sustainable world. But first we need to get politicians and corporate bankers out of the way.