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There Are Three Things That Can Kill The “Perfect Reflation Trade”: Lessons From Two World Wars

There Are Three Things That Can Kill The "Perfect Reflation Trade": Lessons From Two World Wars
Tyler Durden
Wed, 12/16/2020 – 21:10

By Michael Every of Rabobank

Merry Christmas, War is Over(?) – A strategic/tactical view of the reflation..



There Are Three Things That Can Kill The "Perfect Reflation Trade": Lessons From Two World Wars Tyler Durden Wed, 12/16/2020 - 21:10

By Michael Every of Rabobank

Merry Christmas, War is Over(?) - A strategic/tactical view of the reflation trade

“So this is Christmas; And what have you done?
Another year over; And a new one just begun
And so this is Christmas; I hope you have fun
The near and the dear one; The old and the young
A very Merry Christmas; And a happy New Year
Let's hope it's a good one; Without any fear.”

-  John Lennon ‘Merry Christmas, War is Over


  • The markets are crying out that ‘War is Over’ this Christmas, and pricing for a perfect reflation without any tears

  • History after real wars shows that this confidence is likely to be misplaced unless politicians have really learned their fiscal lessons

  • Tactically, however, we suspect there could be misplaced market fears of inflation in H1 2021

  • Indeed, risk assets can arguably outperform in 2021 unless three key, linked risks are triggered: tighter monetary policy, a swing up in the USD, or too-tight fiscal policy

V for Victory and for Vaccine

At the start of 2020 we flagged a devastating global economic impact from Covid-19, if Europe and the US weren’t able to avoid the virus already spreading in Asia. Most of what we feared would occur then occurred: rolling on/off lockdowns, huge voluntary and involuntary restrictions on normal life, a collapse in services and travel, and massive supply-chain shocks.

This was inevitably going to require massive stimulus, and monetary policy alone wouldn’t suffice in the face of such tectonic supply and demand shock. It was clear government support would be required, and would push fiscal deficits to levels last seen during WW2.

Moreover, our suspicions that this spending would end up being de facto financed by central banks were also confirmed: extraordinary monetary policy was rolled out or expanded across both developed and developing economies. QE, and even open debt monetization, have become ‘normal’ even in economies one would never have expected, such as Poland and Indonesia.

Yet even as both lockdowns and the virus continue to rage in many countries, victory may be in sight.

We have not just one but multiple successful vaccines being rolled out that present the very real possibility of things ‘getting back to normal’ ahead. Indeed, the first member of the public, a 90-year old British lady, was injected with the vaccine on 8 December. Billions will hopefully follow.

Without any fear, for sure

Good spirits had already emerged after what looks (barring an unexpected “contested” election) to be US President Biden from 20 January; despite President Trump’s pro-business and pro-market policies, there appears a sense of market relief at the prospect of a more conventional personality in the White House, at least in terms of trade/geopolitics.

This was even more the case coupled with no Democratic majority emerging in the Senate rather than a ‘Blue Wave’: regardless of who wins the two Georgia senatorial run-offs on 5 January, Democratic control could only come via the deciding vote of the Vice-President, assumed to limit the policy room for manoeuvre for Biden and ensuring policy has to be relatively ‘consensus’.

‘War is Over’

Yet since the announcement of Covid-19 vaccines, markets have been trading as if ‘War is Over’ and a global peace-time boom here. As this Moneyweek front cover states “Prepare your portfolio for a return of the Roaring ’20s”, and indeed:

  • Risk is very much ‘on’;
  • US equity markets continue to reach new record highs;
  • 10-year US Treasury yields have risen to test near 1%;
  • US inflation expectations are up;
  • The USD has fallen against most major FX crosses;
  • Most key commodity prices have jumped; and
  • Net inflows to emerging markets have soared.

Yet is a “reflation” trade really justified? Our Rates Strategy team’s view of global financialisation continues to argue “No”. In fact, there is an argument to be made that under Covid-19 we have seen years of financialisation condensed into 10 months, with the rich/asset-holders getting far richer and the poor/many workers seeing life become more precarious.

Rather than re-exploring that theme here, we wish to examine how economic recoveries from actual wars have looked. To do so we need to focus on countries with histories of war and key data: we will use the US and UK. And rather than an in-depth analysis of how quickly or completely the US and UK economies will be able to bounce back from Covid-19, we want to look at how well both recovered in the immediate aftermath of both WW1 and WW2.

This could be the subject for an entire thesis, but what we want to do is focus on GDP, inflation, and bond yields as a proxy for how rapidly things returned ‘to normal’ – because that is what the market is telling us is about to happen again in 2021 now that the Covid-19 ‘War is over’. What does real post-war history show us?


The damage wrought by Covid-19 has been extraordinary. In the US, total loss of life has already exceeded all the military deaths recorded in WW1, and may be above those of WW2 before the end in a worst-case scenario. Compared to the total population, Covid-19 deaths are likely to be around the WW1 level of 0.1% and far below the 0.4% seen in WW2.

True, the majority of these Covid deaths were of the old and sick not the young and healthy, as in WW1 and WW2. Yet this fails to consider ongoing healthcare costs for many survivors, as Covid-19 can result in many permanent debilitating symptoms - not that WW1 and WW2 did not leave a vast number of young injured, of course.

In the UK, total Covid deaths also represent around 0.1% of the population. However, this is far less than the 895,000 who were killed in WW1, equal to a staggering 2.1% of the 1918 population, and the 450,000 who died in WW2, equal to 1.0%. As can be seen, the UK suffered far more in both wars than the US. Again, there will also be ongoing healthcare costs to bear for many survivors, of course, but less than after the two World Wars.

In short, Covid-19 was on the relative scale of WW1 in the US, but was far smaller in the UK, and compared to WW2 in both.


Despite often being dubbed ‘a war’, the quandary of battling Covid-19 is that it requires restraint in economic activity, albeit mostly in services rather than the goods sector.

In the US, GDP shrank by a record amount in Q2 2020 before rebounding by another record in Q3, but with new lockdowns in Q4 it is likely to end the year with a significant recession; the long-term damage and loss of swathes of small businesses and service-sector jobs is still being tallied. The UK’s Covid-19 recession was still the deepest for 300 years, and the ongoing structural damage to GDP is likely to be similar to that in the US.

By contrast, WW1 and even more so WW2 saw US production increase massively. The shift to a war economy and vast government military spending was highly stimulatory, and had key spill over effects in many industrial and technological sectors.
The US also suffered no damage at all to its capital stock given its benign geographic position. It emerged a global superpower, with its post-war debt large but domestically held. (Please see here for a look at the long-run trend in public debt in key economies and how it was dealt with.)

WW1 and WW2 also saw the UK shift to a war economy, and an initial surge in GDP growth rates as private-sector businesses were co-opted for the war effort. Output was maximized despite domestic consumption being constrained via rationing.

Notably, the UK still exited both wars in a greatly weakened economic condition, with damaged infrastructure and a loss of both housing and capital stock. It also had enormous public and external debt to service.

* * *

US: post-war post-partum

So that’s the backdrop: what about the post-war recovery?

After WW1, the US did not see a boom but a bust. Over 1919-21 there was a nasty recession as the government rolled back spending and the private sector failed to fill that gap. After WW2 a similar pattern emerged: initially there was a sharp slump as huge public spending into war industries was reversed. Indeed, GDP did not start to pick up strongly until around 1950. There was actually a five year gap before the so-called post-WW2 boom kicked in.

Likewise, US CPI of 20% y/y in WW1 due to a squeeze on key resources was not followed by post-war inflation. Aside from a brief spike in early 1920, the US actually recorded deflation, then low inflation. The ‘Roaring 20s’ did not see CPI roar – and a large part of this was due to the deflationary straitjacket of the gold standard of that time.

After WW2, inflation was also initially low apart from a one-off jump in 1947 as price and wage controls that had been in place since 1942 were unwound. Once that adjustment had taken place, however, inflation remained constrained until the growth of the 1950s kicked in years later.

In terms of US 10-year Treasury yields, there was no post-WW1 spike either. In an environment of global deflation and then low inflation, this should not be a surprise.

Indeed, the 1920s was a decade in which unpayable wartime debts (owed to the US by the UK and France, and to the UK and France by Germany, which Germany was unable to pay, but instead borrowed again from the US) were reshuffled rather than resolved. This eventually ended in the 1929 Wall Street Crash and the political extremism of the 1930s, then war. During this entire time US Treasury yields drifted lower.

During WW2, US Treasury yields were capped by the Fed, with this ‘yield curve control’ used to help finance the war effort. (As we have noted before, this policy is not new.) Even after WW2, US yields still remained capped to help pay off wartime debts via continued financial repression. Would one really want to have been holding a 10-year US Treasury at around 2.4% when inflation was spiking to 19.5%? Markets had no choice, however.

In short, in the US we have a story of immediate post-war slumps, not booms; of post-war deflation for the most part, except where government controls were removed; and post-war stability in bond yields due to government controls.

The feel-good growth did not begin in earnest until 1950, a full five years after the iconic picture of a sailor kissing a girl in Times Square. That is *five* full Christmases, something for the markets to ponder as we head into this one so optimistic.

It was logical, however, given the US saw government spending slump from such high levels: how could the private sector fill that gap?

* * *

UK: Post-haste decline

In the UK, which had seen far more physical damage in WW1 and had fought for far longer, the post-war economic recovery was mixed.

The private-sector initially enjoyed a boom as investment picked up and the key shipbuilding industry in particular replaced lost merchant shipping stock. However, government spending contracted rapidly, and post-war recessions in other countries dragged down export-dependent UK industry. The economy slipped back into a serious recession over 1921–1922: the gold standard ensured it stayed there for most of the decade.

Following WW2, there was again a recession due to the cut in huge wartime spending and then the sudden withdrawal of US Lend-Lease support in September 1945: a US loan in July 1946 was needed to restore economy stability. From 1946-48 the UK saw bread rationing, which was not necessary during the war. Indeed, it was 1947 before UK GDP growth started again as public investment kicked in. That was two long, cold Christmases.

The post-WW1 environment was also deflationary, not inflationary – and it stayed that way for the next decade. Again, thank the prevailing gold standard from 1925 onwards at the too-high pre-war exchange rate, a peg which was only dropped again in 1931. For obvious reasons the same period was also one of increased unionisation and union militancy in the UK.

Post-WW2, inflation pressures were notably higher, and in advance of a pick-up in growth, due to shattered supply chains and a much stronger labour movement, but initially stagflationary not reflationary.

In markets, post-WW1 UK gilt yields saw a moderate decline from a 1920 peak of 5.32% to hold at 4.3-4.5% for most of the decade, with BoE rates high to keep sterling on gold. Given deflation, this meant very high real rates – and so hardly the stuff of end-of-war good spirits.

Post-WW2, the BoE meanwhile kept base rates at the low of 2% prevailing for the whole of the war, indeed right up until late 1951; gilt yields only picked up from 2.76% to around 3.5%, which given higher inflation overall meant real yields were low or negative.

In short, the UK saw a painful post-WW1 victory due to an inappropriate fiscal, monetary and exchange rate policy and a challenging global environment on top of massive war debts and loss of young men. After a rocky start due to external vulnerabilities, it saw a happier recovery post-WW2 due to looser monetary and fiscal policy, a more appropriate exchange rate, and a benign global backdrop once the US Marshal Plan was introduced.

The key lessons from the US and the UK should be obvious: post-war ‘victory’ does not always look or feel like victory at all. It depends on: 1) the starting position; 2) monetary policy; 3) fiscal policy; 4) exchange-rate policy; and 5) global demand.

Markets need to carefully consider these factors if they want to be sure they are right to be so upbeat about the war being over.

* * *

Awful Austerity Again?

1) Starting base

In which regard, the 2021 starting base is good in that we don’t have excess wartime production, except perhaps of ventilators (or office space). Rather we have suppressed supply and demand that can come back online as the virus situation allows.

However, permanent economic damage will have been done. There are (very) early estimates that up to 48% of US small businesses may never reopen, and structural unemployment may push much higher. Indeed, office-focused cities and tourism-based locations may never recover fully – and should they even aim to? After all, following the Covid-19 virus ‘war’ there will inevitably be another at some point. War is never really over. Does it make sense to return to an economic model primed for disruption by events that are no longer black swans? Or to one that has been structurally “disrupted”?

2) Monetary policy

Meanwhile, monetary policy is arguably close to its useful limit, with nominal rates trapped around zero or just below in most major economies. QE is now a standard policy tool, with significant room for expansion in some major economies: yet it also faces declining returns, and does not provide a solution for real economy problems.

3) Fiscal policy

So what of fiscal policy: is it going to help or hurt? Arguably the latter! True, we have arguably crossed the Rubicon to Modern Monetary Theory (MMT), as we had suspected would have to occur in 2020. Look at central bank balance sheets and their QE and government bond issuance. Is any of this massive “asset-swap” really going to be unwound ahead?

Yet the traditional economic advisors around governments are not embracing this fact. Rather, as after every war, there are already signs that more traditional fiscal and economic thinking is going to try to reassert itself.

“Belt tightening”, “dealing with the debt”, or “balancing the books” is the message – not that most extraordinary state spending due to the virus has been de facto covered by central bank debt monetisation, just as it is during a real war!

Almost certainly, fiscal deficits as a % of GDP will be much smaller in 2021 than they were in 2020: and as the government pulls money out of the economy on a net basis, is the private sector ready to put more than that *in*?

Will they have confidence and output automatically ‘bounce back’ as neoclassical economic theory assumes? Or will a lower net flow of public spending, or even just public spending lower than is required to boost confidence, prevent that bounce from happening?

Both WW1 and WW2, as well as the 2008 crisis, show the risks of reducing fiscal stimulus too soon. Doing so would mean a post-war hangover, not a post-war party awaits.

4) Exchange rate policy

The USD is down markedly against most major crosses, which is seen as pro-growth and risk-on. Yet consider this also means emerging market exporters, especially in Asia, are seeing a rise in deflationary pressures and a hit to export earnings on top of the evaporation of tourism-driven FX inflows. This does nothing to drive growth there given their economies are not primarily consumption-driven.

Indeed globally, almost nobody wants a stronger currency. Europe doesn’t; China doesn’t; Japan doesn’t; the UK doesn’t; and neither Australia nor Canada nor New Zealand do. Only a few emerging markets would arguably benefit from FX stability or appreciation – but even then only the ones who can look to domestic demand for growth.

5) Global demand

Beyond the base-effects bounce of 2021, which economy can truly say that it has brighter prospects post-Covid than it did pre-Covid? And to what extent is that economy able to lift others around it? Who is going to be doing the economic heavy lifting?

Not the US, apparently, despite the return to a US consumer of last resort vis-à-vis Asia during the Covid crisis. Not Europe. Not Japan. Not the UK. Meanwhile, China is openly talking about ‘dual circulation’, which will ensure that more of what Chinese growth there is stays in China via lower reliance on imports.

We already saw pre-Covid that a process of deglobalisation and regionalisation had begun: even under a US Biden administration, this can arguably be expected to continue in a stop-start fashion.

In short, when one looks at the five post-war structural factors, it is hard to see how current fundamentals sit alongside the ‘War is Over’ market exuberance unless fiscal stimulus continues.

* * *

The Tactical View

Let’s now take a tactical cross-asset view. First, a recap:

The S&P 500 printed a record high of 3,393 on February 19, 2020, but just over a month had fallen over 34% to levels not seen since late 2016 – essentially wiping out more than three years of equity gains. Then the Fed turned the market on a dime: the backstop of an alphabet soup of liquidity programs, unlimited QE, and the promise to buy corporate debt jointly dampened tail risk, reduced volatility, skewed risk-reward ratios, and shifted investor sentiment. Of course, trillions of USD in global fiscal stimulus helped matters as well.

The high yield and equity markets turned in tandem, and other risk assets in the FX and commodity space eventually followed suit, albeit with a lag and with less gusto. The S&P 500 is once again forging new all-time highs.

We had expected risk assets to take another hit, and for safe-havens to find some relief into year-end 2020. This was based on the expectation that a second wave of Covid-19 infections, triggering regionalised lockdowns, would weigh on market sentiment.

While the second wave hit, and is still raging in many places, and regionalised lockdowns were seen, news of multiple Covid-19 vaccines proved a game-changer for risk appetite. The market looked through near term winter weakness to the light at the end of the tunnel. ‘War is Over’ is the theme, as noted.

After all, equities are forward looking, and are always trying to see round corners. Furthermore, the breakdown of equity moves was telling. At first, companies set to benefit from the corporate bond backstop rallied, as did equities sensitive to interest rates. Over the summer, the top five companies in the S&P 500 led the way and eventually ended up with a market concentration of nearly 25% of the entire index.

Those top-five companies --not all are in the technology sector, but mega-tech became a buzz name for the group- were either less impacted by Covid-19 than many others, or in fact benefited from the socio-economic forces created by the Covid-19 pandemic.

We know retail played a large role in the equity rally, with the ‘gamification’ of brokerage apps spawning a new breed of small investors happy to buy deep OTM options in tech companies, which created an outsized effect given the gamma impact on dealing desks.

As volatility fell, risk parity funds and vol-control CTAs bought more equities, momentum jumped on the move, and flows into US equity markets continued. Then came the vaccine news and the rotation into the ‘War is Over’ trade.

Looking ahead, we now seem to be in a market where good news helps drive value and re-opening stocks higher, while bad news pushes interest rates lower and helps drive growth stocks higher.

Moreover, as has been the case for many, many years now, volatility is key. As long as volatility remains suppressed, risk assets can find support; and historically, there is a strong link between central bank accommodation and the level of market volatility.

In short, as long as central banks are "rigging the game" the equity game will indeed be played.

Indeed, with global front-end rates low and likely to remain there for several years at least, there is a strong argument that volatility will continue declining and risk assets remain supported.

* * *

Perfect cocktail?

This environment looks a perfect cocktail for equities, with hope, dampened volatility, and low real yields creating a positive feedback loop encouraging continued inflows from systematic and discretionary funds through 2021.

Notably, this also fits the historical “post-war” pattern with US equities rallying in the year after both WW1 and WW2 ended, before retracing those gains after the initial euphoria worse off.

However, let’s think even more tactically and less big picture.

As we have laid out, low inflation remains the structural risk going forward, but on a tactical basis we must voice caution heading into Q2 2021 very low CPI base effects and a return to (new) normalcy could trigger a short-term rise in inflationary pressures, and/or fears over potential stagflation.

In particular, commodity prices may help push inflation up. We already see this dynamic in commodities, driven by: genuine supply-demand; a weaker USD; central-bank liquidity; and the general ‘War is Over’ risk-on search for peacetime yield.

Historically, such fluctuations in commodity prices would not be a surprise. After both WW1 and WW2 we saw an initial pop higher in oil prices before a sustained downturn. Our house oil forecast for the next few years sits in line with this pattern.

Indeed, we see potential upside for oil prices in the coming months, even if only driven by USD weakness. The theoretical link between a lower USD and commodity prices is well known, but there is a mechanical impact as well. For example, if a European pension fund has to allocate 100bn to the Bloomberg commodity index, then a 10% rise in EUR/USD will force them to buy 10bn of commodities to maintain their allocation target.

We strongly suspect the Fed will look through a temporary rise in inflation, but it could shock markets for a while: after all, the biggest risk facing US stocks is the mere thought of higher rates. For consumers, however, it will mean a drop in real incomes on top of the Covid shock: recall the Arab Spring followed the last global commodity-price surge, which was hardly ‘risk on’.

Admittedly, for stocks the key question is what the market sees as the driver for any near-term higher yields: if it is better growth and inflation prospects, then value stocks may still outperform growth, and cyclicals outperform defensives.

In the rates space, US breakevens are arguably a better way of playing a temporary rise in inflation than nominals, as the Fed may increase the WAM of its Treasury purchases to lean against any rise in real yields. That said, given the moves observed over recent months (Figure 11) one can argue breakevens are already pricing in a similar story and upside could be limited.

To reiterate, we remain firmly of the view that from a structural perspective US rates will remain low for the foreseeable future.

* * *

Dollars - and sense

On the USD, the recent sell-off has been brutal, and the inverse relationship between it and equities remains intact.

In the coming months, there is little reason to see this weak USD trend changing. Further out, however, it is useful to question how long USD weakness can be maintained. The huge structural supply/demand imbalance in the Eurodollar market has been temporarily balanced by Fed policies, including swap lines and the FIMA repo facility. Nonetheless, USD liabilities outside the US are still massively higher than the availability of USD there as measured by FX reserves. (See here for more.)

This will be even more the case if the US is unwilling or unable to provide massive fiscal stimulus. This would imply a smaller fiscal deficit and so a lower net supply of USD to both its economy and to the rest of the world – and far lower growth to boot, meaning less global exports to it. In short, there is likely more of a floor for the USD from here than expected, which means global reflation themes cannot be driven by that trend alone.

‘War is Over’ (Reprise)

However, risk assets can arguably outperform over the course of 2021 even if we see a lower rate of GDP growth than the disappointing average in the decade before Covid-19. To our mind, there are three main risks to this view, however.

First is central banks tightening monetary policy. This seems extremely unlikely. In the last rates cycle, only the US and Canada among developed markets raised their policy rate by more than 100bp, after many years, and the Fed’s attempt to unwind its bloated balance sheet did not last long before being more than reversed. Central bank escape-velocity will be harder to achieve this time round. Nonetheless, fears of reflation happening earlier than expected may be seen in H1 2021 due to a combination of base effects, commodity prices, and post-Covid joie de vivre on headline inflation. Tactically, this must be noted even if strategically it is a blip in the opposite trend.

The second is governments implementing tighter fiscal policy. It is important to note that while there is little official rhetoric about a return to austerity - quite the opposite in fact-- there are also a range of actions, overt to covert, and large to small, which suggest that this is what may still happen anyway. For example, payment of deferred tax payments or the reversal of VAT cuts, to say nothing of pay freezes or new tax hikes. After all, the alternative is fundamentally too challenging for the conservative central bank/Treasury economics teams to embrace. History also suggests we will probably get this wrong.

The third is the USD. Any new global dollar liquidity squeeze, driven by either a US recession, the need for even looser fiscal and monetary policy in other economies, or geopolitical tensions/instability, for example, would push USD higher and risk firmly off again. In a post-Covid environment, are global ‘wars’ over or just getting started?

In short, when one looks at the three risk factors above, current fundamentals arguably *do* sit alongside the ‘War is Over’ market exuberance – if one thinks politicians will act correctly ahead.

Yet who is it starts the wars, may we ask?

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China’s Birth Rate Plummets 10% To Lowest On Record

China’s Birth Rate Plummets 10% To Lowest On Record

China’s birthrate fell 10% last year to its lowest level on record, a significant drop…



China's Birth Rate Plummets 10% To Lowest On Record

China's birthrate fell 10% last year to its lowest level on record, a significant drop in spite of extensive efforts by the CCP to encourage people to get busy.

Children play outside a cafe in Beijing, China. (AFP)

The country had just 9.56 million births in 2022, the lowest figure since they began keeping records in 1949, according to a report by the National Health Commission.

The high costs of child care and education, growing unemployment and job insecurity as well as gender discrimination have all helped to deter many young couples from having more than one child or even having children at all. -NBC News

China's population also fell for the first time in six decades, dropping to 1.41 billion people - a demographic shift that's caused officials to worry that the country will 'get old before it gets rich' - with a slowing economy and declining tax receipts amid increases in government debt due to soaring health and welfare costs.

According to the report, the demographic downturn is largely thanks to China's one-child policy imposed between 1980 and 2015. Nearly 40% of Chinese babies last year were the second child of a married couple, while 15% were from families with three or more children.

The sharp decline in births comes despite Beijing's efforts to increase child care and provide other financial incentives. In May, President Xi Jinping presided over a panel to study the topic.

Not just China

As we noted in June, Japan's birth rate has also plummeted to a record low for the seventh straight year, with the number of babies born falling below 800,000 this year, health ministry data showed on June 2.

The number of newborns in Japan fell to 770,747 this year, down 40,875 from the previous year and the lowest since the country began record-keeping in 1899, Kyodo News reported, citing health ministry data.

Japan’s fertility rate—the average number of children born to a woman in her lifetime—fell from 1.30 in 2021 to 1.26 last year, equivalent to the previous low recorded in 2005. The number is far below the 2.07 rate necessary to sustain a stable population.

The decline in Japan’s birth rate is attributed to people delaying parenthood due to the economic impact brought on by the COVID-19 pandemic, as well as the prevailing trend among couples to delay marriage, according to the report.

The US birthrate has also been in decline, falling slightly in 2022 compared to 2021, with roughly 3.7 million babies born nationwide. It still hasn't recovered to pre-pandemic levels according to the CDC.

And as Mike Shedlock noted two years ago.

More via Mish Talk, worth a review:

The Pandemic Caused a Baby Bust, Not a Boom

Scientific American reports The Pandemic Caused a Baby Bust, Not a Boom

When the COVID pandemic led to widespread economic shutdowns and stay-at-home orders in the spring of 2020, many media outlets and pundits speculated this might lead to a baby boom. But it appears the opposite has happened: birth rates declined in many high-income countries amid the crisis, a new study shows.

Arnstein Aassve, a professor of social and political sciences at Bocconi University in Italy, and his colleagues looked at birth rates in 22 high-income countries, including the U.S., from 2016 through the beginning of 2021. They found that seven of these countries had statistically significant declines in birth rates in the final months of 2020 and first months of 2021, compared with the same period in previous years. Hungary, Italy, Spain and Portugal had some of the largest drops: reductions of 8.5, 9.1, 8.4 and 6.6 percent, respectively. The U.S. saw a decline of 3.8 percent, but this was not statistically significant—perhaps because the pandemic’s effects were more spread out in the country and because the study only had U.S. data through December 2020, Aassve says. The findings were published on Monday in the Proceedings of the National Academy of Sciences USA.

Birth rates fluctuate seasonally within a year, and many of the countries in the study had experienced falling rates for years before the pandemic. But the declines that began nine months after the World Health Organization declared a public health emergency on January 30, 2020, were even more stark. “We are very confident that the effect for those countries is real,” Aassve says. “Even though they might have had a bit of a mild downward trend [before], we’re pretty sure about the fact that there was an impact of the pandemic.”

Covid Accelerated the Existing Trend

Covid accelerated the already declining birth rates. 

Given the 16-year lag between births and the civilian noninstitutional population coupled with the aging of the workforce there will be fewer and fewer workers supporting retired workers on Social Security. 

Notice the relatively steep decline in the birth rate starting in 2008 and continuing through today. 

That impact will start showing up in 2024 and last a minimum of 12 years.

How long depends on whether the birth rate picks up after Covid. I highly doubt the birth rate will pick up.

Deflationary and Inflationary Impacts

  1. Inflationary: Shortage of workers increases wage pressures
  2. Deflationary: Fewer workers support an increasing number of retirees
  3. Deflationary: Older workers need more assistance, buy fewer things, travel less. 
  4. Deflationary: More government debt and deficits. Government spending has a negative impact on real GDP.

*  *  *

Time for another sexual revolution?

Tyler Durden Fri, 10/13/2023 - 22:40

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TDR’s Top 7 Cannabis Developments For The Week Of October 9

Welcome to TDR’s review of the Top 7 Cannabis Developments for the week of October 9. Aside from presenting a synopsis of news events, interviews and…



Welcome to TDR’s review of the Top 7 Cannabis Developments for the week of October 9. Aside from presenting a synopsis of news events, interviews and closing market prices for publicly-listed companies.

7. Trulieve Announces Filing of Amended Federal Tax Returns Claiming $143 Million Refund

Trulieve Cannabis announced the filing of amended federal tax returns with refund claims for several of the company’s business entities for the years 2019, 2020, and 2021. In total, the company is claiming a refund of $143 million from taxes paid which the company believes it does not owe, although there is no guarantee of receipt.

Trulieve believes its determination is supported by legal interpretations that challenge the company’s tax liability under Section 280E of the Internal Revenue Code.

6. The Cannabist Company Pays Down $25 Million of Debt

The Cannabist Company Holdings has delivered a notice of partial redemption to the holders of the company’s outstanding 13% senior secured notes due May 14, 2024. The Notice provides that the company will, on October 23, 2023, redeem US$25 million of the total US$38.2 million principal amount of the Notes currently outstanding.

On the Redemption Date, Holders of Notes will have a portion of their 13% Notes, in denominations of $1,000, redeemed effective as of the Redemption Date on a pro rata basis in accordance with the terms of the trust indenture between the company and Odyssey Trust Company dated May 14, 2020, as amended and supplemented.

5. Marijuana Consumers Who Caught COVID Had ‘Better Outcomes And Mortality’ Than Nonusers, Study Finds

Cannabis consumers who caught COVID-19 had significantly lower rates of intubation, respiratory failure and death than people who do not use marijuana, according a new study based on hospital data that was presented this week at the annual conference of The American College of Chest Physicians (CHEST) in Honolulu.

Authors analyzed records from 322,214 patients from the National Inpatient Sample, a government database that tracks hospital utilization and outcomes. Of those patients, 2,603—less than 1 percent—said they consumed cannabis.


Chart Of The Week—Select MSOs Net Cash Flows After Interest Expense, CAPEX, Taxes And Debt Maturities

Interview Of The Week: Jason Wild Speaks On The Eve Of TerrAscend’s Investor Day

TerrAscend (TSX: TSND) Chairman Jason Wild is here to share the latest developments in the industry, the recent news surrounding the house speaker in Washington, the upcoming ballot news in Florida and more.

Georgia To Become First State Selling Medical Marijuana In Pharmacies

Widely Held MSOs & LP Weekly Performance

CompanySymbolPrevious Week CloseEnd Of Week Close% Change On Week
AdvisorShares Pure Cannabis ETFMSOS7.087.04-0.56
Aurora CannabisACB0.56720.5039-11.16
Ayr WellnessAYRWF1.821.70-6.59
Canopy GrowthCGC0.70480.70-0.68
Cresco LabsCRLBF1.661.670.60
Curaleaf HoldingsCURLF4.224.06-3.79
Green Thumb IndustriesGTBIF10.129.75-3.65
High Tide Inc.HITI1.651.54-6.66
Marimed Inc.MRMD0.39040.382-2.15
TerrAscend Corp.TSNDF1.841.903.26
Tilray BrandsTLRY2.062.01-2.42
Trulieve CannabisTCNNF5.155.04-2.13
Verano HoldingsVRNOF4.084.315.63


4. States Made More Than $5.7 Billion In Marijuana Tax Revenue Over 18-Month Period, New Federal Census Bureau Report Shows

The U.S. Census Bureau has released its first report on state-level marijuana tax revenue data following what the agency calls “a complete canvass of all state agencies” going back to July 2021. In the 18-month period between then and the end of 2022, the data show, states collected more than $5.7 billion from licensed cannabis sales.

The launch of the report, which the agency plans to update on a quarterly basis going forward, signals that at least some parts of the federal government are now beginning to treat the cannabis industry as a legitimate sector of the economy. The Census Bureau first announced in January 2021 that it would begin collecting marijuana tax figures for its quarterly summary of state and local government tax revenue. It also said it wants states to submit cannabis revenue data as part of annual reports as well.

In the news…

4Front Ventures has agreed to issue 1,283,425 subordinate voting share purchase warrants pursuant to an amendment to a previously entered promissory note purchase agreement. Pursuant to the Agreement, the lender has agreed to extend the maturity date of its loan, which has a principal amount of US$2,000,000, with a payment of an extension fee of C$65,000, which is payable in Warrants.

Aleafia Health announced that Red White & Bloom Brands Inc. has been selected as the successful bidder pursuant to the court-approved sale and investment solicitation process in connection with the previously announced proceedings of Aleafia and certain of its subsidiaries under the companies’ Creditors Arrangement Act.

BioHarvest Sciences announced that VINIA, its flagship nutraceutical product derived from red grape cells, has received its Canadian product license from Health Canada’s Natural and Non-Prescription Health Products Directorate.

California Governor vetoes cannabis cafe and marijuana labeling bills…

Canopy Growth has received EU GMP certification from RP Tuebingen, Regional Health Inspectorate of Baden-Wuerttemberg for the company’s cannabis cultivation facility in Kincardine, Ontario.

Cardiol Therapeutics announced positive study results from one of its international collaborating research centers demonstrating that subcutaneously administered cannabidiol, the active pharmaceutical ingredient in Cardiol’s novel CRD-38 subcutaneous formulation prevented increases in key cardiac inflammatory and remodelling markers in a model of heart failure.

Charlotte’s Web Holdings announced the appointment of Angela McElwee to its Board of Directors.

CLS Holdings USA announced its financial results for the fiscal quarter ended August 31, 2023.

Colorado cannabis sales surpassed the $15 billion mark in August – a milestone since legal adult-use sales launched in the state in 2014.

Connecticut cannabis sales hit $25.2M in September 2023…

Cresco Labs announced the launch of its Good News brand in the Commonwealth of Pennsylvania.

Curaleaf Holdings will report its financial and operating results for the third quarter ended September 30, 2023 after market close on November 9, 2023.

Curaleaf Holdings has filed its application to list the Company’s subordinate voting shares on the Toronto Stock Exchange.

Eurofins CDMO Alphora Inc. announced that it has received its Health Canada Cannabis Drug License issued within the Cannabis Act and Cannabis Regulations for its Oakville, Ontario operations in September 2023. 

Goodness Growth Holdings and Grown Rogue International, Inc. have completed the issuance of warrants to purchase listed shares as previously announced on May 25, 2023.

Heritage Cannabis Holdings announced the procurement of an EU GMP certified extraction machine to be added to the existing fleet of extractors which will double the company’s hydrocarbon processing capacity.

iAnthus Capital Holdings announces that Robert Galvin will transition out of his role as Interim Chief Operating Officer of the Company, effective immediately. 

IM Cannabis, a medical cannabis company with operations in Israel and Germany, releases message from the CEO about the Israel-Hamas War and announces the company, through its wholly-owned subsidiaries, IMC Holdings Ltd. and Rosen High Way Ltd., has secured C$1,390,000 in short-term debt.

IM Cannabis announced that Uri Birenberg will join the company’s leadership team as Chief Financial Officer effective October 10, 2023. 

Lead GOP Senate cosponsor of a bipartisan marijuana banking bill says a planned floor vote is on pause until he can ensure the legislation will later pass the Republican-controlled House, according to a cannabis financing executive who spoke with the senator this week.

Legislative Review of the Cannabis Act: What We Heard Report

Letter to Attorney General Garland and DEA Administrator Milgram urging halt to rescheduling process.

MariMed, Inc announced “Small Batch Exclusives,” a unique, limited-time program that gives customers the opportunity to purchase legendary flower strains.

MariMed Inc. retail footprint has once again expanded, as the company officially unveiled an adult-use Thrive dispensary in Casey, Illinois. This marks the fifth dispensary in operation within the state of Illinois and the 12th dispensary in MariMed’s expanding portfolio across five states.

Organigram Holdings has obtained a receipt for a final short form base shelf prospectus filed with the securities commissions in each of the provinces and territories of Canada. A corresponding shelf registration statement on Form F-10 has been filed with the United States Securities and Exchange Commission (SEC File No. 333-274686) but is not yet effective.

RISE Dispensaries owned by Green Thumb Industries Inc. announced that RISE Dispensary Brandon, the Company’s 9th retail location in Florida, will open on October 14th.

SAFE Banking now with 84 co-sponsors…

SunStream Bancorp announced a receivership court order granting the sale of certain assets of Greenpeak Industries Inc. and certain affiliated entities d.b.a. Skymint to Skymint Acquisition Co., a newly formed designee entity of Tropics LP.  Tropics is a limited partnership fully owned by an affiliate of Sunstream, a joint venture sponsored by SNDL Inc.

Texas activists say they have secured enough signatures to put a local marijuana decriminalization initiative on the ballot in the city of Lubbock if lawmakers there do not enact the reform legislatively.

The Cannabist Company Holdings will report its financial results for the third quarter ended September 30, 2023 before U.S. financial markets open on Tuesday, November 14, 2023. 

The Cannabist Company to report third quarter 2023 results on November 14, 2023 before U.S. financial markets open.

Trulieve Cannabis announced the relocation of a medical cannabis dispensary in Melbourne, Florida.

Trulieve Cannabis has added $500,000 to a ballot initiative aimed at legalizing the recreational use of marijuana, bringing its total contributions to $39.55 million, according to a newly filed finance report.

Verano Holdings announced the opening of Zen Leaf Newington, the company’s second social equity joint venture location in Connecticut and fourth cannabis dispensary statewide, on October 13, following a ceremonial ribbon cutting at 9 a.m. local time.

Vext Science has completed the previously announced non-brokered private placement of $11.5 million through the issuance of 67,647,058 common shares at a price of $0.17 per Common Share, including the full exercise of a $1.5 million over-allotment option.

3. TerrAscend Corp. Raises Full Year 2023 Guidance Prior To Investor Day Presentations At The TSX

Tier-1 cannabis multistate operator TerrAscend Corp. has made a notable splash in advance of Investor Day presentations at the Toronto Stock Exchange. The company has elevated forward-looking forecasts for net revenue and Adjusted EBITDA from ongoing operations for the entirety of 2023, signaling that business operations are exceeding previously-stated expectations.

For its full fiscal 2023, TerrAscend now expects net revenue and Adjusted EBITDA to register a minimum of $317 million and $63 million, respectively, versus previous a previous forecast of $305 million and $58 million. This represents year-over-year growth of 28% in net revenue and 62% in Adjusted EBITDA from continuing operations—both well above Tier-1 industry averages.

Furthermore, TerrAscend anticipates that its gross margin will surpass the 50% mark, and generate positive free cash flow from ongoing operations during the latter half of the year.

2. Cannabis Adversary Steve Scalise Drops Out Of Speaker Race

The House GOP’s pick for speaker, Steve Scalise, announced Thursday he will no longer seek the gavel as he confronted a likely insurmountable vote shortage. While Scalise had won a majority of votes in an internal GOP ballot a day earlier, he faced an ever-growing list of Republicans who vowed to support only his opponent, Rep. Jim Jordan, on the floor. The Ohio Republican is now expected to make another run for the position.

Scalise announced his decision on Thursday evening, following a conference meeting in which it became clear that he had no path to winning the 217 votes needed to ascend to the speakership.

1. Jim Jordan Wins Nomination In GOP’s Chaotic House Speaker Battle

House Republicans voted Friday to nominate conservative firebrand Jim Jordan for speaker of the House — the latest twist in a chaotic battle for speakership. Jordan, the chairman of the Judiciary Committee, received 124 votes — still more than 90 votes shy of the 217 he will need to grab the gavel in a vote on the House floor, according to members and aides who were the room. That floor vote has not yet been scheduled.

Jordan had an opponent in the conference vote for speaker: Rep. Austin Scott, who filed to run for the top spot shortly before the vote went down. Scott received 81 votes in the candidate forum.

Jordan had earlier backed out of the speaker race, saying he would cast a vote for Rep. Steve Scalise after the majority leader earned the nomination is a similar closed-door session Wednesday. Scalise backed out Thursday night after he failed to secure the votes needed to become speaker.

The post TDR’s Top 7 Cannabis Developments For The Week Of October 9 appeared first on The Dales Report.

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Playgroups are struggling to survive – here’s why we need them

Playgroups are good for parents’ wellbeing – and are a place where they can take a first step into volunteering.

Playgroups can be a lifeline for new parents. Run by volunteers, they give young children a space to explore and interact with others, and parents a chance to have a cup of tea and a chat.

This was certainly the case for me. Having low moments following the birth of my children, as one in five women may do, these playgroups helped me make connections with other parents and carers. They led to new friends for my children and provided a safe space to go on difficult days.

I witnessed first-hand the value of these groups, and the integral role volunteers fill in communities. But, according to charity Early Years Scotland, community-based playgroups are “struggling to survive” due to a decrease in volunteers.

Now, I’m researching the value of playgroups for families and communities, understanding what role they play in the first years of parenthood, and how that can contribute to community wellbeing and resilience.

Building community

Playgroups have been a staple part of communities in the UK since the 1970s. They create a sense of belonging for the people who attend and help parents build their parenting skills as well as develop connections, which improve their mental wellbeing.

Playgroups are also a place where parents can take a first step into volunteering, learning skills that can allow them to go on to take further leadership roles in their wider community. And playgroups can have economic benefits, if volunteers gain knowledge and confidence that they can take into paid employment.

However, there has been an overall reduction in volunteering across the UK since the pandemic, despite the remarkable grassroots efforts witnessed during lockdowns.

Early Years Scotland has attributed the decrease in volunteers in part to an increase in working hours. Parents may have also been returning to work earlier after parental leave as a result of the cost of living crisis, leaving less time to get involved with playgroups.

During lockdown, inside group activities like playgroups were unavailable. But I saw volunteers innovating: moving outside and creating new spaces, such as the Scottish Buggy Club.

My own local playgroup moved to outdoor facilities at a local farm. Activity groups such as the charity group Fun First moved online for their classes.

Still, for many families, the pandemic was a very isolating experience. Research shows that parents of young children suffered – in particular women and lower-income parents.

Mothers with babies
Playgroups give parents a place to connect. Oksana Shufrych/Shutterstock

Now, the cost of living crisis is limiting opportunities for activities with children. As winter looms, more parents will be stuck inside with small children with nowhere to go. We know that single parents are particularly susceptible to social isolation.

We are at risk of losing community groups that create opportunities for their members to establish “thick networks”: collaborations between local people that create a welcoming and valuable local culture.

To help families, help volunteers

Recent policy initiatives from the Scottish and UK governments have focused on families. There is an effort in Scotland to focus on community-based responses to sustain community wellbeing.

But there have been complaints that resources are not being seen at a community level, where funding is decreasing and there is not enough support for volunteers.

In the short-term, solutions would include more resources to support volunteers – training, incentives and community funding, which will enhance their role and encourage volunteers to stay in their role for longer. But the decrease of volunteers is more fundamental that this.

Long-term strategies are needed if governments wish to rely on the services offered to local communities by the members of that community. These include encouraging businesses and industries to seriously consider the wealth of research that shows flexible working, job shares and four-day weeks are beneficial for the economy, productivity and wellbeing. With more time, more people could be able to help out in places like playgroups.

Finally, introducing a universal basic income, such as the participation income model – which requires that people contribute to their community in order to receive income – could help people to take on community and voluntary roles and instil a wider sense of wellbeing in the population.

Ruth Lightbody works for Glasgow Caledonian University. In 2023 she has been awarded funding from the British Academy/Leverhulme Small Research Grant to research playgroups and resilient and wellbeing communities.

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