Cannabis Famine Threatens Nation

Exactly 84 years ago today — on Friday, April 7, 1933 — 21 states across the nation flipped the switch on the first state-approved sales of alcoholic beverages since Prohibition.

The following headline ran on the front page of the San Francisco Chronicle the next morning:

The Associated Press story published on the front page of the San Francisco Chronicle on April 8, 1933, covers the possibility of a beer shortage a day after certain alcoholic beverages were legally sold across 21 states in the nation. Source: San Francisco Chronicle

As The Associated Press reported, “Joseph Durbin, editor of Brewery Age, announced a beer shortage within 10 days is threatened if demand for the beverage continues at present pace.”

More important to lawmakers and investors, the story confirmed “there was widespread evidence that so far the economic expectations were being realized.”

“For the first day of nationwide beer sales, it was estimated that the federal tax for beer brought in $7.5 million to the United States Treasury,” according to beer historian Bob Skilnik.

That’s $138.2 million in today’s dollars that flowed into the United States Treasury in the first 24 hours alone.

The Beer and Wine Revenue Act President Franklin Roosevelt had signed less than one month earlier was already paying off.

And the federal government wasn’t the only one cashing in on the boom…

“In just 48 hours, $25 million [the equivalent of $460.2 million today] had been pumped into various beer-related trades as diverse as bottling manufacturers to the sawdust wholesalers whose product lay strewn on the floors of saloons,” notes Skilnik.

Eighty-four years later, the cannabis industry is on the cusp of a similar boom.

Eight states (plus D.C.) have already passed legislation to open recreational cannabis markets.

And millions are already flowing into the bank accounts of the businesses helping create multibillion-dollar supply chains in those markets.

According to a 2016 study from the Marijuana Policy Group, every $1 spent on retail cannabis in Colorado for recreational and medical consumption generated $2.40 in economic activity.

Real estate, packaging providers and security services were just a few of the sectors that saw a boom in Colorado, according to Adam Orens, one of the co-authors of the study.

California’s countdown clock is set to Jan. 1, 2018 — eight months from today.

And shortages for real estate, greenhouses and labor across the state are just a few of the signs that what is projected to be a $7 billion industry is already bearing fruit.

Despite the fact that California Sen. Mike McGuire did not support the legalization of recreational cannabis in California, he notes, “There is no turning back, which is why we need to work together to implement the voice of the voters.”

As lawmakers scramble to lay the regulatory framework for California’s retail cannabis industry, millions of dollars are already changing hands.

And lawmakers across the nation are taking notice…

Today, Illinois is one of the states evaluating whether to jump on the recreational cannabis bandwagon.

Eighty-four years ago, Chicago’s State Street department stores saw the “greatest spending spree since the stock market collapse and the beginning of the Depression.” Bob Skilnik reminds us.

By the end of the year, Prohibition had ended across the nation.

As Colorado, Washington, California and other states continue reporting gains from their cannabis markets, state lawmakers in today’s “dry states” may realize they have a famine of their own.

By the time that happens, millions will have been made from the beginning of the end of cannabis Prohibition.

Regards,

Jose Vilchez-Azcona
for The Daily Reckoning

The Daily Reckoning