Is cannabis recession-proof?
During the last major recession in 2008 and 2009, the legal cannabis industry didn’t exist. Colorado and Washington didn’t legalize it until late 2012. Canada didn’t have a recreational sector until 2018.
We can look at tobacco and alcohol trends during recessions to make some predictions. But ultimately, we won’t know how cannabis performs until there is a recession.
And it’s coming. Despite the government’s redefinition of the word, a recession is an inevitable consequence of credit expansion.
So is cannabis recession-proof?
What is a Recession?
Before answering the question if cannabis is recession-proof, we should define recession, so we’re all on the same page.
Since 1999, it’s been nothing but cheap credit, followed by more cheap credit.
In a free market economy, people supply credit through their savings and investment. “Cheap” credit is the result of an abundant capital supply.
In this corporate-state economy, credit is a policy tool set by – unelected and unaccountable – central bankers.
“Cheap” credit results from keeping interest rates far below market levels.
But you cannot sustain a complex, capital-based economy using fake numbers conjured up on a computer screen.
Money needs scarcity to function correctly. We’ve handed unelected bankers extraordinary powers by disconnecting the market process from a gold standard.
Extraordinary powers that enable the growth of the corporate state and its wars of aggression. Powers that undermine liberal democracy, free markets, private property, and the rule of law.
Is Cannabis Recession-Proof? Examples from Alcohol
Oxford Academic published a study on alcohol trends during the 2008 recession. They found that heavy binge drinkers increased their use while light drinkers cut back.
The idea was people who’d lost their jobs or homes were stressed and drinking more because of it.
The study says, “These results are consistent with the existing literature, indicating that single men and the recently unemployed are most likely to drink excessively during economic crises.”
The demographic most likely to binge drink during a recession? 25-34 and 55-59-year-old males. The same demographic that the cannabis industry shares.
Is Cannabis Recession-Proof? Examples from Tobacco
A study published by the National Library of Medicine looked at tobacco use during the 2008-09 recession.
They found “new reported tobacco use,” and even among the poor, “persistent tobacco use” remained unchanged.
Even though consumers had less money and “felt worse off,” they continued to spend on cigarettes because they believed it relieved stress.
The researchers wrote, “among a sample of lower socioeconomic mothers, who had previously given up smoking, were difficulty coping with everyday problems, stress, and financial pressures.”
Is Cannabis Recession-Proof?
Cannabis is a stress reliever, and unlike tobacco or alcohol, it won’t slowly kill you while you consume it.
For these reasons, we believe cannabis is recession-proof to a degree. Saturated markets, like cannabis retail in Ontario, may face economic pressures. But overall, the cannabis industry will weather the storm.
The question is: what cannabis industry?
Suppose consumers are stressed about money, and Canada’s legal cannabis prices are too high. In that case, consumers may be more likely to patronize legacy markets like B.C. Bud.
Consumers may be more likely to grow their own as well.
And this won’t be unique to Canada but to any legal jurisdiction that struggles to compete against legacy markets.
Canada’s legal regime may weather the storm better than its U.S. counterparts. Until the Biden administration legalizes cannabis federally (if that ever happens), U.S. Cannabis producers and retailers still face troubles with the banking sector.
Throw in a recession, and many may close-up shop altogether or return to the underground legacy market.
So, is cannabis recession-proof? For the most part, yes. Just as tobacco and alcohol survive and become more prevalent during hard times, the same is likely true for cannabis.
There be winners and losers, and given the corrupt nature of governments, large cannabis producers may even get bailed out as the smaller guys declare bankruptcy.
However it plays out, a recession is inevitable, but cannabis will survive it.