Both sides of the political aisle are throwing their support behind a bill to embed key marijuana banking legislation in a larger package intended to improve American competitiveness, raising the prospect that a major cannabis bill will pass through the upper chamber this year. As part of a broad package being worked out in both chambers designed to improve supply chains and manufacturing, Sen. Patty Murray, D-Wash., is pushing for the SAFE Banking Act to be included. The legislation, which cleared the House earlier this year, would protect financial institutions that service state-legal marijuana businesses from being penalized by federal regulators.
Washington Senator Patty Murray is fighting to include cannabis legislation in a new bill that is currently being considered by the Senate. The legislation, which was featured in the House’s version of the bill known as the Competes Act, would aim to reduce the amount of cash that weed dispensaries are forced to use. This makes them prime targets for robberies, as well as creating other public safety concerns. “Weed dispensaries are currently sitting on a ton of cash because they’re not able to deposit it in banks,” Murray said in a statement. “This puts them and their employees at risk, and it’s just not safe.”
Several senators are attempting to incorporate the bill, which has been passed in the House six times and has dozens of Democratic co-sponsors, into the larger competition package. The aim is to use the Cannabis Act as a way of evening out some of the tax advantages that have been extended to the marijuana industry. “We’re going to have to get more aggressive on this,” said Senate Majority Leader Chuck Schumer (D-NY) in an interview. “The fact that there’s so much cash in cannabis creates all sorts of problems.”
Under current law, marijuana businesses are not able to deduct business expenses like advertising or rent from their taxes. They are also required to pay a higher tax rate than most other businesses. The new bill would allow them to deduct those expenses and lower their tax rate. “The bottom line is that the banking bill has been on the books for a long time. It’s ready to go. It must be enacted,” says Senate Democratic Whip, Jon Tester of Montana, a member of the conference committee and co-sponsor of the SAFE Banking Act.
According to one Montana newspaper, Sen Steve Daines believes that other Republicans may be willing to support the legislation. “We’ve got nine Republican co-sponsors officially on it, with around 50 Democrats,” he said. We have the votes in the Senate to pass the SAFE Banking Act as a standalone if we wanted to; there are just a few remaining undecideds.” But while the SAFE Banking Act may have enough support to pass in the Senate, it’s unclear whether House Republicans will take up the legislation. It’s also possible that President Biden could veto the bill if it does make it to his desk.
In the meantime, cannabis businesses are forced to operate on a cash-only basis.
Before the August recess, when Congress shifts its attention to the November midterm elections and legislation slows to a crawl, Senate conferees are expected to complete a compromise China competitiveness bill that may win the backing of 60 senators. Senator Schumer (D-N.Y.), who previously blocked the SAFE Banking Act due to concerns that its passage might harm prospects for tougher action on China, has now signed off on the new bill. The SAFE Banking Act would protect banks that work with cannabis businesses from being penalized by federal regulators. The legislation would also allow for greater transparency and tracking of the cannabis industry, which is currently operating in a legal gray area.
If the banking bill is coupled with provisions to expunge marijuana convictions and repair damage caused by the war on drugs, Senate Democrats are said to be willing to pass it. But it’s unclear if Republicans will go along with those provisions. However, conference committee rules prevent lawmakers from adding further social equity or criminal justice reform provisions to the SAFE Banking Act, making it more difficult for it to get Schumer’s approval and becoming part of the final package that goes to President Biden’s desk.
K Street lobbyists anticipate that about a dozen GOP senators will vote for the legislation, which cleared the House last year with support from every Democrat and almost all Republicans. Even so, some GOP senators have concerns about whether or not the bill is appropriate for inclusion in the China competitiveness package. Bill Cassidy (La.) and Roy Blunt (Mo.) said they aren’t sure if it’s a good fit. Lawmakers are rushing to pass the banking bill before it becomes a midterm election issue. Industry lobbyists are pushing for a quick passage of the bill, citing a recent spate of robberies at cash-only marijuana dispensaries as motivation. In March, an employee at a Washington state pot shop was shot and killed during an armed robbery, while a robber fatally wounded the owner of a Colorado dispensary during a holdup last month.
“If you look at what’s happening in Colorado and Washington, there are increasing concerns about public safety with all this cash on the streets,” said Aaron Smith, executive director of the National Cannabis Industry Association. A key sticking point for some GOP senators is whether the legislation would protect banks. The current system is not working and the new bill will help to correct that, said Sen. Jeff Merkley (D-Ore.), a co-sponsor of the legislation. “This is a commonsense solution that says let’s provide banking services so we can get rid of this huge public safety hazard,” he said.
Merkley said he believes there is enough GOP support to pass the bill, but it’s unclear if Senate Majority Leader Mitch McConnell (R-Ky.) will bring it up for a vote. A spokesman for McConnell declined to comment on the legislation. Advocates have attempted to persuade Schumer and other hesitant Democrats that the banking bill’s passage would help boost cannabis legislation, not hurt it. “My experience has been that every time you get someone who is somewhat uncomfortable with wider change but might be persuaded on modest details, once you get them to vote for those minor changes, it becomes much simpler to get them to vote for much bigger changes,” said Steve Elmendorf, a Democratic lobbyist who is working on the issue. Elmendorf added that he thinks it’s “inevitable” that marijuana will be legalized at the federal level within the next five years.
Last week, the American Bankers Association and bankers groups from all 50 states urged Senate leaders to include the banking bill in the conference report, stating that the “urgently needed” legislation would address the recent spate of robberies and improve transparency and tax collection for cannabis businesses. “The inability of state-licensed cannabis firms to access safe and regulated financial services has created public safety risks and unnecessary costs for these businesses,” the groups wrote. The banking bill is also supported by many law enforcement groups, including the National Sheriffs’ Association and the Major County Sheriffs’ Association. “This legislation will provide much-needed clarity to financial institutions that choose to serve state-licensed, legal cannabis businesses and ancillary companies,” the groups said in a letter to Senate leaders.
The legislation has also picked up support from several business groups, including the National Association of REALTORS®, the American Trucking Associations, and the U.S. Chamber of Commerce. State officials have been inundating the Senate with similar missives. Colorado Attorney General Philip Weiser (D) and Ohio Attorney General Dave Yost (R) recently penned a letter to Senate leaders, noting that the existing system encourages crime while also preventing accurate monitoring of trillions of dollars in marijuana sales.
Federal Reserve Could Raise Its Benchmark Rate 75 Basis Points
On Wednesday, the President of the Federal Reserve Bank of Cleveland, Loretta Mester, stated that if the current state of the economy has not changed by the time the Federal Reserve Board of Governors meets in July to determine the next move in monetary policy, she will be advocating for an increase of interest rates of 75 basis points.
In recent months, one of the most important factors driving market activity has been the Federal Reserve’s plan to continue its path of monetary tightening. This comes as the Fed looks to take aggressive action to rein in skyrocketing inflation, despite acknowledging the risk that steeper interest rate rises will increase the likelihood of an economic recession.
Inflation is currently at a 40-year high, so the Federal Reserve decided to raise its benchmark interest rate by 75 basis points earlier this month. This was the largest rise in the rate since 1994.
Mester, who is a voting member of the Federal Open Market Committee, stated that the meeting in July will likely entail a dispute among FOMC policymakers over whether to opt for 50 basis points or 75 basis points. Mester is a member of the Federal Open Market Committee.
She stated in a recent interview that “If conditions were exactly the way they were today going into that meeting — if the meeting were today — I would be advocating for 75 because I haven’t seen the kind of numbers on the inflation side that I need to see in order to think that we can go back to a 50 increase.”
Mester stated that she will be doing an analysis of the current supply and demand situations in the coming weeks prior to the meeting in order to establish the most desirable course of action regarding the tightening of monetary policy.
The present goal range for the federal funds rate is between 1.5 and 1.75 percent; however, according to the “dot plot” of individual FOMC members’ views, the Fed’s benchmark rate will be 3.4% by the end of the year.
Mester said, “I think it’s really important that we do that, and do it expeditiously and do it consistently as we go forward, so it’s after that point where I think there is more uncertainty about how far we’ll need to go in order to rein in inflation.” “I think getting interest rates up to that 3-3.5 percent, it’s really important that we do that, and do it expeditiously and do it consistently as we go forward.”
U.S. markets dropped significantly on Tuesday following the release of a dismal reading of consumer confidence. The reading, which came in at 98.7 instead of the Dow Jones consensus estimate of 100, added to the unease that investors already felt regarding the sluggish growth of the economy and the potential compounding effect of aggressive monetary policy tightening.
Mester said that the experience of consumers with inflation, which reached 8.6 percent at the headline level in May, was “clouding” their confidence in the economy. In May, the headline inflation rate was 8.6 percent.
She stated that the Federal Reserve is “on a path now to bring our interest rates up to a more normal level and then probably a little bit higher into restrictive territory, so that we can get those inflation rates down so that we can sustain a good economy going forward.”
“Job one for us now is to get inflation rates under control, and I think right now that’s coloring how consumers are feeling about the economy and where it’s going.”
Mester agreed that there is a possibility of a recession as the Fed moves forward with its program of tightening. As a result of the Federal Reserve’s efforts to reduce demand and bring it closer to constrained supply, her baseline projection is for growth to be slower this year, below what she refers to as “trend growth.” She sets the value of “trend growth” at 2%.
She stated, “I expect to see unemployment rates rise over the next two years to a little above 4% or 4.25%, and again that’s still very good labor market conditions.”
“So we’re in this transition right now, and I think that’s going to be a painful one in some respects and it’s going to be a bumpy ride in some respects, but it’s very necessary that we do it to get those inflation numbers down.”
Wheat Producers are Helping to Bring Down Food Prices
It has been four months since Russia invaded Ukraine, which caused trade flows to be disrupted and caused futures’ prices to rise. The fear of a grain crisis is slowly giving way to the hope that important producers will harvest large enough harvests to help repair war-torn reserves. This is essential for the production of wheat, which is needed to feed the world’s population, corn, which is needed to feed hogs, chickens, and cattle, and oilseeds, which are needed to make food.
“Supply may not be as impaired as we think because other areas will compensate for any losses from Ukraine, and it is happening across the board,” said Marc Ostwald, global strategist at ADM Investor Services in London.
It is anticipated that Australia, which is one of the top exporters of wheat, will produce another massive crop this year. On the other hand, corn is piling up outside bins in the principal growing region of Brazil. The worry that spring weather problems would drastically cut down on the amount of land used for growing grain and soybeans in North America has dissipated.
The Bloomberg Agriculture Spot Subindex is on course to have its worst monthly loss since 2011. Concerns about decreasing grain and oilseed supplies, as well as fears that an economic downturn could reduce demand, have pushed crop futures lower from recent highs. While such improvements often take time to reach grocery shelves, Darden Restaurants Inc., owner of the Olive Garden and LongHorn Steakhouse restaurants, reports that chicken and beef prices are cooling slightly.
Fuel pump costs will also have a significant impact on the direction of food inflation for the rest of the year. According to Joe Glauber, former head economist of the US Department of Agriculture, supermarket prices are projected to “moderate over the next six months, particularly if oil prices decline.”
As of June 24, the average daily price of a gallon of gasoline in the United States had fallen for ten consecutive days after reaching some of its highest levels on record. Crude oil futures are down more than 10% from a near all-time high in the days after Russia’s late-February invasion on Ukraine, one of the world’s largest grain and vegetable-oil shippers. Fertilizer, a major expense for farmers, has fallen after reaching new highs.
The United Nations’ food price index fell from a record high in March after the war stifled Ukrainian exports and provoked a slew of sanctions against Russia. Even if the rate of increase slows, high food prices will continue to put pressure on the poor. A government prediction released last week predicts that food prices will rise by much to 8.5 percent this year, however the analysis did not account for the recent decline in agricultural futures.
Furthermore, Goldman Sachs Group Inc., one of the more positive commodity watchers, claimed prices haven’t peaked yet, despite Bloomberg’s broad index of spot commodities falling around 13% from a record high.
“We agree that when the economy is in a recession for long enough, commodity demand falls and hence prices, fall,” experts such as Jeffrey Currie stated in a note. “We are not yet at that state, with economic growth and end-user demand simply slowing, not falling outright.”
Darden Restaurants is enthusiastic about the future. The Orlando, Fla.-based company says it is not passing on higher meat, dairy, and wheat prices to customers because it does not expect the higher expenses to last. Meat prices are starting to “come down a little bit,” and impending crop harvests could help lower wheat prices, according to Chief Financial Officer Rajesh Vennam last week.
Wheat and soybean futures have lost roughly 15% this month, while maize has fallen 13%. Coffee, sugar, and cocoa have all taken a step back.
Food is more of a national security issue in China than an inflation concern. As grain and cooking-oil prices fall, June consumer-price growth in China is projected to be less than 2.5 percent, according to Zhaopeng Xing, senior China analyst at ANZ Bank China Co. in Shanghai.
However, given the uncertain future for grain supplies from Ukraine, India, and other key exporters, he believes it is still too early to declare an end to food inflation.
Palm oil, the world’s most widely used vegetable oil, has fallen almost 30% from its peak as leading shipper Indonesia increases exports to reduce bloated stocks. The decline, combined with a drop in soybean oil and other commodities, might mean cheaper household products like chocolate, margarine, and shampoo. However, as with other agricultural markets, any sign of supply disruption or adverse weather might spark another wild ride.
For the time being, the reduction in essential commodities may provide a much-needed halt in inflation.
“Markets would really love to be able to breathe less stressfully again,” said Arnaldo Correa, a partner at Archer Consulting in Sao Paulo. “Light a candle for your guardian angel, and let’s see how things will play out.”
Asia’s Energy Prices Are Chaotic. Why Should The World Worry?
These are just a few of the more eye-catching scenes unfolding in the Asia Pacific region, where several countries are coping with their biggest energy crises in years — as well as the mounting anger and unrest created by cost-of-living increases.
The sense of crisis is obvious in Sri Lanka and Pakistan. Public outrage has already led to a wave of resignations in Colombo and contributed to Imran Khan’s demise as Prime Minister of Pakistan.
Many observers believe that the political reckoning has only just begun; both countries have been forced into extreme measures, including going cap in hand to the International Monetary Fund and instituting shorter work weeks in an effort to preserve energy. Prime Minister Ranil Wickremesinghe declared on Wednesday that the Sri Lankan economy has “completely collapsed.”
Elsewhere within the region, the symptoms of crisis may be less evident, but the ramifications might be far-reaching. Even in comparatively wealthy countries such as Australia, economic concerns are emerging as consumers feel the sting of rising energy costs.
Wholesale electricity prices were up 141 percent year on year in the first quarter of 2022; households are being urged to reduce usage; and on June 15 – for the first time – the Australian government suspended the national electricity market indefinitely in an effort to bring prices down, relieve pressure on the energy supply chain, and prevent power outages.
However, the experience of India, whose power consumption has lately reached all-time highs, demonstrates most clearly why this is a global — rather than regional — catastrophe.
Following prolonged outages caused by high temperatures, the world’s third-largest carbon emitter announced on May 28 that state-run Coal India will import coal for the first time since 2015.
While the cost of energy imports has risen dramatically around the world, with international coal prices five times higher than a year ago and natural gas prices up to ten times higher, experts say there are reasons why some Asian economies, particularly import-dependent, developing ones, have been hit the hardest.
Poorer countries that are still developing or newly industrialized are simply less able to compete with more affluent competitors — and the more they need to import, the worse their problem will become, according to Antoine Halff, an adjunct senior research scholar at Columbia University’s Center on Global Energy Policy.
A bigger problem awaits.
How these countries respond may be an even bigger problem than rising costs.
Under public pressure, governments and politicians may be inclined to return to cheaper, dirtier kinds of energy like coal, regardless of the impact on climate change.
And there are indications that this has already begun.
In Australia, the federal government’s Energy Security Board has suggested that all energy providers, including coal-fired ones, be compensated for maintaining additional capacity in the national grid in order to avoid power disruptions. In addition, the New South Wales government has invoked emergency powers to reroute coal from state mines to local generators rather than overseas.
Both policies have been chastised by some who accuse the administration of compromising its commitment to green energy.
In India, a country of 1.3 billion people that relies on coal for almost 70% of its energy generation, New Delhi’s plan to expand coal imports is expected to have far-reaching environmental consequences.
Scientists argue that dramatic reductions in coal mining are required to minimize the worst consequences of global warming, but this will be difficult to achieve without the cooperation of one of the world’s largest carbon emitters.
“Any country, be it India, be it Germany, be it the US if they double down on any kind of fossil fuel it will eat up the carbon budget. That’s a global problem, ” Sandeep Pai, senior research lead for the Energy Program at the Center for Strategic and International Studies concurred.
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