Assignment 10 (Economics)

Paper details:

Recommend responding in a 275-word response. Check it for spelling/punctuation and develop the draft in a word document. You can use your own experience to reflect. Review the following articles and describe how they relate.

Review the following articles and describe how they relate to aggregate demand and aggregate supply.

Hawaii Lawmakers Face Tough Choices Amid Pandemic Recession

Hawaii lawmakers face tough choices as they convene a new legislative session this week amid a pandemic that has pummeled tourism and depleted tax revenue.

By Associated Press (Links to an external site.), Wire Service Content Jan. 18, 2021, at 9:03 a.m.

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HONOLULU (AP) — Cut spending, raise taxes or perhaps both. Hawaii lawmakers face tough choices as they convene a new legislative session this week amid a pandemic that has pummeled tourism, the state’s biggest industry, and depleted tax revenue.

Lawmakers expect to spend time addressing how to spend federal funds allocated to help Hawaii test for the coronavirus, distribute vaccines and bolster hospitals. They’ll also consider how to help Hawaii’s economy recover from the public health crisis. One possibility is to promote the expansion and improvement of broadband internet so it’s easier for people to work and study at home. Front and center, however, will be coping with what Gov. David Ige estimates is an annual budget shortfall of $1.4 billion.

Ige has already borrowed $750 million to cover operating expenses (a first) and put off contributions to employee retirement funds. He also raided an emergency fund.He was on the verge of imposing furloughs resulting in a 9% pay cut, but put those off until at least July after a new round of federal stimulus funds freed up money to maintain existing salaries.

Some lawmakers are considering tax increases, possibly on higher-income earners, to help plug the hole. Sen. Kalani English, the Senate majority leader, said another possibility might be shifting away from a fuel tax that imposes a levy on the amount of gas purchased to one based on the number of miles driven. “We’re just trying to be innovative and creative and say, OK, somebody have an idea, let’s talk about it, because we need all the help we can get,” said English, a Democrat.

In the House, Majority Leader Rep. Della Au Belatti said in addition to potential tax increases, lawmakers could divert surpluses built up in special funds with money allocated for a particular purpose. In some cases, those funds could be appropriated for other uses. Despite “everything being on the table,” Belatti also said “we’re not going to tax our way out of this crisis.” She said leaders will have to consider streamlining and consolidating state agencies to save money and improve the way government works. The pandemic provides an opportunity to take a close look at what government does, she said. “How should we conduct government and how can we provide services smarter and better?” said Belatti, also a Democrat.

The president of the Tax Foundation of Hawaii warned that raising taxes could backfire, squeezing a private sector already reeling from the pandemic recession. “We’re very concerned that additional taxes, fees or other kinds of revenue enhancements are really going to kick them when they’re down,” said Tom Yamachika. He warns even more people could leave the state and more companies could go out of business, which would reduce the number of people paying taxes that support government. He said sacrifices should be shared.

The unemployment rate in Hawaii stood at 10.1% in December compared to 2.6% the same month a year earlier. The state tied Nevada (Links to an external site.) for the second worst jobless rate in the nation after New Jersey. Beth Giesting, the director of the Hawaii Budget and Policy Center, said the state should avoid draconian cuts because the economy needs government spending to keep going at a time when the private sector is struggling.

She argued that cuts to public budgets only deepen and prolong recessions. “We want them to understand that any dollars they cut are magnified in terms of the economic impact,” she said of lawmakers. To help pay for spending, she favors tax increases on high income earners and capital gains and possibly temporarily eliminating some tax exemptions and credits. English said one area of focus will be legislation that won’t cost money, like reinstating Hawaiian Independence Day as a state holiday.

The holiday commemorates the day in 1843 when Hawaii was formally recognized as an independent nation by Britain and France. English said Hawaii observed the holiday until the 1920s. It could replace Election Day on the holiday calendar now that Hawaii has adopted mail-in voting and people don’t need to go to the polls to cast ballots.

Some lawmakers are expected to try to reform the state’s marijuana laws with bills to outright legalize it or tweak earlier decriminalization efforts it by changing the amounts that trigger criminal penalties. Currently Hawaii allows marijuana for medical purposes. English said the need for more tax revenue could give legalization some momentum, but he cautioned other states that expected a financial windfall from such a move failed to get one.

For the first time, lawmakers will be accepting verbal testimony from the public via video. Though adopted to keep people safe during the pandemic, the step also makes it much easier for Neighbor Island residents to tell lawmakers what they think. ”They don’t have to get on a plane, fly to Honolulu, rent a car, come to the Capitol, which is how it used to be,” said English, who represents parts of Maui, Lanai and Molokai.

Members of the public will need to register online at www.capitol.hawaii.gov for an account, submit written testimony and receive a link to a Zoom videoconference to testify. For help, contact the Capitol’s non-partisan Public Access Room at (808) 587-0478 or par@capitol.hawaii.gov. The Capitol building will remain closed to the public because of the pandemic. No in-person testimony will be allowed.

Copyright 2021 The Associated Press.

Rare earths: Battling China’s monopoly after Molycorp’s demise?
By Valentina Ruiz Leotaud | Sep. 10, 2016

Will China’s 95% control of the global rare earths market remain unchallenged?

After Molycorp – the only mine and processor of REEs in the United States- filed for bankruptcy in 2014, everyone seemed to think so. This viewpoint remained unchanged despite the fact that in August of 2016, Lexon Insurance Co. offered to lend the estate $4.2 million to continue operations of its Mountain Pass mine under care and maintenance. Perceptions of China’s dominance weren’t shaken when shares for Australia’s Lynas Corporation surged 20% in early July after the company announced record production and sales volumes, particularly in the neodymium-praseodymium segment. This improved performance also helped Lynas reduce interest rates in its $203 million Japan Australia Rare Earths senior loan facility.

But, could unexpected decisions and ongoing projects developing in different countries start paving the way towards a more diversified and less opaque REEs market? After a wavy trajectory that started with extremely high prices between 2008 and 2011 and a dramatic 70% fall afterwards, the first semester of 2016 saw a slight recovery.

Two major factors are driving the climb:

China’s six major suppliers’ decision to stockpile on 5,000 tons of nine types of rare earth metals this year, and government’s plans to create a separate national reserve by buying 15,000 tonnes from them.
Beijing’s efforts to stop illegal mining and exports of REEs, which saw the closure of 230 unauthorized mines between September 2014 and May 2015.
Second, a number of countries are starting to get down to work and developing rare earths projects aimed at capitalizing the widespread use of these minerals throughout a variety of industries. In Australia, Arafura Resources’ 100%-owned Nolans Project is working towards becoming a long-term supplier for the next 30 years by exploiting its rare earths-phosphate-uranium deposit, which is rich fluorapatite, allanite, and monazite and contains 56 million tonnes of mineral resources at an average grade of 2.6% rare earth oxides.

The company’s plan is to produce and process a concentrate resulting in a rare-earth intermediate products, which will be separated overseas into their individual components. Also in Australia, Northern Minerals just received government approval for its Browns Range pilot plant, which should start producing a concentrate of coveted heavy rare earths by mid-2017. Although NM is a local company, for this project it received assistance from China’s Huatai Mining, whose leadership agreed to inject $30 million in equity.

On the other hand, Australian Peak Resources is developing the Ngualla Rare Earth Project in Tanzania, whose construction is expected to start in 2017. Production should begin by late 2018/early 2019. The mine has a high proportion of neodymium and praseodymium, and the plan is to produce approximately 2,300 tonnes per annum of mixed neodymium and praseodymium rare earth oxide, 250 tonnes per annum of mid and heavy rare earth carbonate and 5,900 tonnes per annum of lanthanum and cerium carbonate.

In Malawi, Mkango Resources -the only rare earths-focused company listed on the London Stock Exchange- is working on the Songwe Hill Rare Earths Project, loaded with light neodymium and praseodymium, and heavy dysprosium and terbium. Its feasibility study should be completed in some 18 months, and construction should be finished by 2020. The company also identified two more potential rare earths targets at its Phalombe licence in the South African country. In Canada, Commerce Resources received, in August of 2016, $2 million in fresh financing and started a new round of definition drilling on its Ashram rare earths deposit in Quebec, rich in neodymium, praseodymium, europium, terbium, dysprosium, and yttrium.

Two years ago, the Canadian government and industry leaders also announced that the country wanted to secure 20% of global supply by 2018, relying on projects by Rare Element Resources, Avalon Advanced Materials, Quest Rare Minerals and Great Western Minerals. But regardless of the number of developments across the world, analysts from Commodity Inside and Market Research deem the rare earths market to be unstable and distorted. If China were to increase export quotas from current levels -they say- prices would plummet dramatically and this could potentially put many companies out of business even before they become fully operational.

8 Countries Experiencing Serious Economic Growth (Chapter 11)
By Team Wall Street Survivor June 17, 2017

When it comes to investing your money, it’s time to think outside of North America. The long-term return outlook for US equities does not look good for the next ten years. When markets are expensive as they are today, they tend to produce below-average returns. Instead, it may be time to look outward.

There are many countries in Africa and Asia that are seeing serious economic growth and will create a sound investment for your portfolio. Below, you’ll find a list of eight promising countries that are experience a serious economic boom.

Ethiopia

With an aggregate growth rate of 8.9% in 2017, Ethiopia is shaping up to be the fastest growing country in Africa. Although it is in one of the world’s least developed countries, there are key industries that have started to thrive such as the service and construction industries. Economists are predicting that Ethiopia will reach middle-income status by 2025 and should overtake Kenya as East Africa’s largest economy in 2017.

Bhutan

South Asia’s hidden gem, Bhutan, will see an estimated growth rate of 9.9% in 2017 making it a very promising country to invest in. Its growth rates are expected to skyrocket in the coming years due to a surge in agriculture and forestry. A new power plant is currently under construction in Dagan leading to a boost in Bhutan’s hydro-power capacity. Bet big on these industries.

Ghana

The expected growth rate for Ghana in 2017 is a whopping 7.5, a major uptick from the 3.6 percent growth rate of 2016. These numbers show that Ghana is shaping up to become one of Sub-Saharan Africa’s main economic players. As long the political climate remains secure, the country’s gold and cocoa reserves will continue to see profit. Furthermore, recent discoveries of oil will allow for additional economic growth.

Côte d’Ivoire

Côte d’Ivoire is poised to enter the economic playing field in Sub-Saharan Africa since the country’s civil war came to an end. With an aggregate growth rate of 8.0% they should see emerging market status within a few years. The government is now putting the money received from exports such as coffee, palm oil and cocoa into education and infrastructure development.

Laos

With an investment in the power sector, Laos is expected to grow its economy by 7% this year. Moreover, by 2020, the country’s power network is positioned to provide electricity to 10% of households and is looking to export electricity as well.

The Philippines

Investment in public infrastructure is the pillar on which economic growth in the Philippines rests on. The goal is to invest more than 5% of the country’s GDP in infrastructure. An influx of capital from China and Japan should help realize that goal, plus, existing fiscal drives such as consumer spending and call centres will add to the ever-expanding economy of one of East Asia’s most popular tourist destinations. The total projected growth for 2017 is 6.9%.

Cambodia

The garment factories that used to make their homes in Vietnam are swiftly making their way over to Cambodia. With a surge in the garment industry, Cambodia is looking at a growth rate of 6.9% for 2017 alone. The garment exports which held steady $6 billion in 2015 is going to be even more profitable in the years to come.

Myanmar

Free of military dictatorship, Myanmar is looking at a 2017 economic growth rate of 6.9%. With an abundance of natural resources ripe for the cultivating and a young workforce, the country has attracted foreign investors who are putting their money in the energy, garment industry and the food and beverage sector.

Investing in developing countries is a great way to make money and diversify your portfolio.

HOWEVER….

Not all countries have the same economic rules and regulations when it comes to foreign investors. Make sure your investment will be sound and of course, rewarding.

http://blog.wallstreetsurvivor.com/2017/06/17/8-countries-experiencing-serious-economic-growth/

Record corn prices mean more expensive meat, dairy
By STEVENSON JACOBS, AP Business Writer Sun Jun 22, 2017

NEW YORK – Raging Midwest floodwaters that swallowed crops and sent corn and soybean prices soaring are about to give consumers more grief at the grocery store. In the latest bout of food inflation, beef, pork, poultry and even eggs, cheese and milk are expected to get more expensive as livestock owners go out of business or are forced to slaughter more cattle, hogs, turkeys and chickens to cope with rocketing costs for corn-based animal feed.

The floods engulfed an estimated 2 million or more acres of corn and soybean fields in Iowa, Indiana, Illinois and other key growing states, sending world grain prices skyward on fears of a substantially smaller corn crop. The government will give a partial idea of how many corn acres were lost before the end of the month, but experts say the trickle-down effect could be more dramatic later this year, affecting everything from Thanksgiving turkeys to Christmas hams.

Rod Brenneman, president and chief executive of Seaboard Foods, a pork supplier in Sawnee Mission, Kan. that produces 4 million hogs a year, said high corn costs were already forcing producers in his industry to cut back on the number of animals they raise. “There’s definitely liquidation of livestock happening,” and that will cause meat prices to rise later this year and into 2009, said Brenneman, who is also the vice chairman of the American Meat Institute.

Brenneman’s cost for feeding a single hog has shot up $30 in the past year because of record-high prices for corn and soybeans, the main ingredients in animal feed. Passing that increase on to consumers would tack an extra 15 cents per pound onto a pork chop.

It’s a similar story for U.S. beef producers, who now spend a whopping 60-70 percent of their production costs on animal feed and are seeing that number rise daily as corn prices hover near an unprecedented $8 a bushel, up from about $4 a year ago. “This is not sustainable. The cattle industry is going to have to get smaller,” said James Herring, president and CEO of Amarillo, Tex.-based Friona Industries, which buys 20 million bushels of corn each year to feed 550,000 cattle.

Corn’s prices were already rising before the floods, driven up 80 percent over the past year as developing countries like China and India scramble for grains to feed people and livestock. U.S. production of ethanol, an alternative fuel that can be made with corn, has also pushed prices higher, prompting livestock owners to lobby Washington to roll back ethanol mandates.

Before the floods, corn farmers were enjoying record profits selling the grain to feed animals and for use in cereals and as a sweetener in soda and candy. But a sharply smaller corn crop could wipe out those gains. In Iowa, the No. 1 U.S. corn grower, floods inundated about 9 percent of corn crops, representing about 1.2 million acres — almost 1.5 percent of the country’s anticipated harvest. In Indiana, another 9 percent of corn and soybean crops were flooded, potentially costing farmers up to $840 million in lost earnings, Indiana Agriculture Director Andy Miller said. Floodwaters also tossed farm equipment, sprayed cornfields with debris and silt and sucked away large chunks of topsoil. For livestock owners and meat producers, the damage may be felt long after the corn grows back.

Even before the floods, Tyson Foods was complaining that high grain prices would drive up its costs by $600 million this year. The world’s largest poultry company has already raised its prices over the past year, and expects to keep raising them, CEO Dick Bond told analysts at a conference in May. Higher feed prices will eventually filter through to the cost of milk, cheese and yogurt, too, since 65 to 75 percent of a dairy farmers’ production costs are for feed, said Chris Galen, a spokesman for the National Milk Producers Federation. With the cost of animal feed only going higher, many poultry and dairy farmers are starting to look for cheaper alternatives.

Nebraska dairy farmer Dan Rice, who has 1,500 cows, said one alternative is to buy some of the byproducts of cereal or flour production, but they’re not nearly as productive compared to corn. “If we all feed less corn and get less production, then the price at the grocery stores are going to go up,” said Rice, who supplies milk to grocery stores in Omaha and around Kansas City.

Without easy ways to cut costs, many livestock producers will have little choice but to slaughter more animals and send them to market. “We’re in survival mode now,” said Paul Hill, chairman of West Liberty Foods, a turkey processor based in West Liberty, Iowa. He estimated U.S. turkey producers will reduce their flocks by 10 to 15 percent nationwide, a cutback that will send consumer prices dramatically higher. “The cost of Thanksgiving and Christmas turkeys will go up this year, and maybe even more next year,” said Hill, who is also the chairman of the National Turkey Federation.

If corn were to rise to $10 a bushel, Richard Lobb, spokesman for the National Chicken Council, said recouping costs through higher retail prices may not be possible. “Can you possibly charge enough for the chicken to recoup that investment?” he said. “That’s a question no one can answer yet because it’s never been done.”

Associated Press writers David Mercer in Champaign, Ill., and Lauren Shepherd in New York contributed to this report.

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