Cannabis Inflation: Corporate Greed? – Cannabis | Weed | Marijuana



If cannabis prices rose significantly, would you blame inflation or corporate greed? Or are those two sides of the same coin?

If inflation and corporate greed are two sides of the same coin, then it must be a pretty big coin. It’s as if you’re saying the United States is located in the Milky Way Galaxy.

Technically, you’re not wrong. But there’s obviously more to it.

Nearly every problem society faces is either a product of (or exacerbated by) the greed of the corporate-state. Their bloodlust, their desire for power, their sociopathy.

And nowhere is this greed more apparent than in the monetary system.

Since barter gave way to exchange, people have wanted to control the means. To control money is to control people.

Is cannabis inflation a product of fractional-reserve banking or corporate greed?

Is the United States located on Earth or in the Milky Way Galaxy?

What Cannabis Inflation? Corporate Greed, Really?

Cannabis Inflation: Corporate Greed?

Cannabis prices don’t appear to be rising. If anything, a pandemic-generated boom is in self-correction mode. Cannabis prices have dropped or remained flat.

But the question of “what cannabis inflation?” gets into the crux of what inflation is.

Left-wing political leaders denounce “corporate greed” for rising prices. By this, they mean: “Rich people rise prices to make more profit. Rich people bad.”

In their minds, the market is a zero-sum game. The only way to profit is by taking away from someone else. And this is typically phrased as wealthy employers “stealing” surplus value from poor workers.

It’s the economic equivalent of believing the Earth is flat because the horizon doesn’t appear to curve.

So, if or when cannabis prices start to rise. Will you blame systemic theft courtesy of the corporate-state banking system? Or the owners and farmers of cannabis companies?

How Profit & Loss Work 

A cannabis business, like all businesses, sets its prices to earn a profit beyond the cost of its labour and materials.

Technically, this isn’t profit but a return on investment. Owners of capital take home more than the workers because owners must upfront the costs. The workers are still paid for their time if a cannabis business loses money or goes bankrupt.

In a free, competitive market, this return on investment is more-or-less uniform across the board, sector depending.

Profit, in the true sense of the word, is an arbitrage opportunity presented by discrepancies in the market. If you can spot them, you can make a lot of money.

That is until competitors take notice and adapt.

As an example, imagine a free market for cannabis edibles. Across the board, edible manufacturers tend to make the same return on investment.

But say, perhaps through data research or a genuine hunch, you predict a watermelon-flavoured sugar-free gummy will be very popular next summer.

So you, as the entrepreneur, act on this prediction, and when summer comes, the results speak for themselves.

You sell a lot, make plenty of profit, and by the time other edible competitors can get their production of watermelon-flavoured gummies up to your level, summer is already half over, and the trend is starting to dwindle.

The money you make at the beginning of the summer goes beyond your typical return on investment. It’s actual profit.

You can see what happens if the market isn’t competitive. Rules and restrictions that benefit a corporate elite at the expense of small businesses will result in profitable opportunities for some but not others.

The problem isn’t “corporate greed” insomuch as it’s an unfair market.

It’s as if you’re playing Monopoly with a bunch of friends. But one player is tight with the banker and isn’t playing by the rules.

“Greedflation” Is Not Real

Cannabis Inflation: Corporate Greed?

Could corporate greed infect the cannabis industry? Hasn’t it already? Connecting inflation to corporate greed comes down to a poor understanding of economics.

Left-wing demagogues using “greedflation” as a soundbite see your friend colluding with the banker in this game of Monopoly. But instead of calling them out, they get jealous that they’re not part of the pact.

Thanks to corporate lobbying, the market rewards further concentration and reduced competition. Government laws reward businesses that pocket more income and pay workers less.

This trend has nothing to do with inflation.

Inflation in the cannabis industry or any other sector results from too much money chasing too few goods.

Consider Canada’s grocery store chain Metro.

This Montreal-based company reported net earnings of $207.7 million in the fourth quarter of 2021. Sales are up 7.1 percent.

To Canada’s left-wing demagogues, Metro has unnecessarily raised their prices and is pocketing the difference. In their simplistic analysis, that money rightfully belongs to the consumer.

But a company’s success results from sales, margins, and expenses.

Expenses are higher because energy prices are higher. But Metro’s margins have remained the same. The average grocery store has a profit margin of 2.2 percent.

But this is already too complicated. Easier to point at the horizon and say, “I don’t see a curve.”

Cannabis Inflation: Corporate Greed?

Cannabis Inflation: Corporate Greed?

So what causes inflation? If cannabis inflation is caused by corporate greed, how would that work?

Consider Canada’s large licensed producers can influence the price of cannabis. But they can’t raise cannabis prices in general.

Perhaps, if Canopy, for example, succeeds at outlasting every small LP and buys up every significant competitor, then they can raise cannabis prices to unreasonable levels.

But all these means is that Canada’s cannabis consumers will have less to spend on other goods. Prices wouldn’t rise in other sectors.

Canopy would be engaged in price-gouging, not inflation.

And what is to stop other cannabis producers from entering the field and competing with Canopy to bring prices back in line with market preferences? (Other than costly regulatory rules imposed by governments.)

Inflation, whether it’s in the cannabis industry or groceries, is caused by central banks.

They engage in “open market operations,” where they buy bonds from the big institutional banks (the ones you find on Wall Street or Bay Street).

Now, do central banks buy these bonds with their gold reserves? Of course, not. The Bank of Canada, for example, has no gold.

Do central banks even debit their accounts when they credit the institutional banks? Of course, not. That would defeat the purpose.

The central bank exists to print money. To add digital numbers to a balance sheet. This is how they control interest rates like they’re crafting “public policy” rather than destructively interfering with the market economy.

And then, the big banks engage in fractional reserve banking, further pyramiding the money supply.

And when you increase the money supply, its price in terms of other goods will fall. In other words, money loses its purchasing power—the prices of goods and services increase.

Banks create inflation. You can call that corporate greed, but, as I said, that’s like saying the United States in the Milky Way Galaxy.

Technically correct, but saying it aloud says more about your intelligence than you think.

There is no such thing as inflation when we have market-based money, like gold, silver, bitcoin, or hash-coin. Just the criminal act of counterfeiting money.

Footnote(s)

https://financialpost.com/news/economy/metro-is-using-profit-margins-to-absorb-food-inflation-resists-calls-for-higher-wages





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