CIA 4U Economics Challenge: Commodities and Resources

Last year the government said the bill would include two reforms – one that will delay the coming into force of a windfall tax until miners recover their investments, and a second that will set a ceiling on mining royalties.

Under existing law, miners have to pay a minimum of 5 per cent in royalties, but the law does not state a maximum.

Kinross has said the reforms to the mining law would allow it to reap a bigger benefit from the project, which makes the signing of a contract more likely.

Those three are in relatively advanced stages of exploration, but junior miners have about 15 other exploration projects under way.

But Solyndra’s failure was actually caused by technological success: the price of solar panels is dropping fast, and Solyndra couldn’t keep up with the competition. In fact, progress in solar panels has been so dramatic and sustained that, as a blog post at Scientific American put it, “there’s now frequent talk of a ‘Moore’s law’ in solar energy,” with prices adjusted for inflation falling around 7 percent a year.

This political class will do everything it can to ensure subsidies for the extraction and use of fossil fuels, directly with taxpayers’ money and indirectly by letting the industry off the hook for environmental costs, while ridiculing technologies like solar.

Fracking is not a dream come true; solar is now cost-effective.

NEW DELHI--India Monday increased the import tax on gold for a second time in 10 months in an effort to cut demand for the yellow metal, one of the biggest contributors to the country's large current-account deficit.

India had doubled the import tax to 4% in March as part of the government's budget announcement.

India's current-account gap ballooned to a record $22.3 billion, or 5.4% of gross domestic product, in the July-September quarter.

The South Asian nation--where gifting of gold jewelry is a tradition during weddings and festivals--is the world's largest consumer of the metal, and it meets all its demand through imports.

The government increased the import tax to 6% from 4% with immediate effect. It also made a similar change in the import tax of platinum, which is considered by many as an alternative to gold for investment and for making jewelry.

The tax increase in March and the effect of the rupee's fall, which increased its local price, have already eased the demand for gold. But the government still considers the imports uncomfortably high.

The government also relaxed the conditions imposed upon gold deposits made by individuals with banks.

soft commodities have been in collective and perpetual decline since 1850

Applying weights drawn from the value of production in 2011 suggests that real commodity prices have increased by 252.41% from 1900, 191.77% from 1950, and 46.23% from 1975. Of course, this result is largely driven by energy products. Applying weights drawn from the value of production in 2011 but which exclude energy suggests that real commodity prices have still been on the rise, having increased by 7.76% from 1900, 58.44% from 1950, and 1.97% from 1975. Applying weights drawn from the value of production in 2011 but which exclude both energy and precious metals suggests that real commodity prices have a more mixed record, declining by 3.94% from 1900, increasing by 39.91% from 1950, and declining again by 10.97% from 1975. Finally, applying equal weights (but including both energy and precious metals), real commodity prices have increased 2.01% from 1900, have increased 44.18% from 1950, and have decreased by 3.93% from 1975. Cumulatively, the picture emerging from this exercise is a clear pattern of rising real commodity prices from at least 1950.

While long-run price increases may not be an iron law (pardon), this does suggest that while innovation, substitution, and conservation can reduce the price impact of rising demand for fundamentally scarce resources, they can't necessarily eliminate it entirely

The Dutch Disease also applies to the price of land, which has increased due to the expansion of mining concessions combined with speculative land investments made by local and international entrepreneurs

In Europe or Argentina the average costs of producing one kilo gram (kg) of potatoes is between 15 cents to 19 cents respectively—while in Colombia it costs 25 cents. This puts local small and medium sized producers at a great disadvantage.

This strike and other protests are expected  to  follow suit  are revealing that the lethal combination between a rentier model of capitalism and trade liberalization without safety nets and policies designed to protect local production.

The USDA forecasts that the domestic corn crop will rise 31 per cent from last year to a record 14.1bn bushels.

Planted Illinois corn acreage jumped from 17 per cent to 74 per cent in the week, USDA reported.

"They could trade down from organic to normal, from premium milk to regular. This is at least one reason why [the inflation rate] when it comes to food is misleading. People have enough choice that they don’t really need to spend more on food."

"But, the best cure for high prices is high prices — you can bet that farmers will be planting grains on their front lawns and as supply rises, prices will settle and will then eventually take consumer prices down."

Generally, raw food commodity prices take around six months to see a change at the retail level.