The Energy Report: The markets . . . → Read More: Bob Moriarty: Peak Oil Passed]]> Self-professed contrarian and 321Energy Founder Bob Moriarty expects energy and food prices to follow oil on an upward trajectory, fueling more and more turmoil, unrest and violence around the planet, including the Western world. Read on for more insights in this exclusive interview with The Energy Report.

The Energy Report: The markets don’t appear to have slowed for the typical summer doldrums this year. Instead, they seem to be returning to their pre-May highs, testing the 200-day moving averages. What do you think of this rally?

Bob Moriarty: So many factors affect it that it’s really difficult to figure out exactly what the market’s saying. I suspect that much of this rally stems from a belief in QE3 (quantitative easing), and that’s not a particularly good sign.

TER: Didn’t Fed Chair Ben Bernanke indicate in testimony to Congress that QE3 isn’t on the table at this point?

BM: Well, that was on an even day. On even days, he says, “No QE3.” On odd days he says, “Yes, QE3.” The government’s gone crazy. The market is schizoid because it has no idea what will happen. He said some things that would absolutely lead you to believe that QE3 is going to happen, and he’s said other things that indicate it is not going to occur.

It’s not only the U.S. government; it’s the Greeks, the EU (European Union), the Spanish, the Portuguese, the Japanese, the English—everybody’s painted themselves into a corner, and we no longer have good alternatives. We only have bad ones.

TER: With only bad alternatives, why wouldn’t the market reflect that negativity?

BM: That’s what I don’t understand. I think the market’s going to fall out of bed shortly because QE1 and QE2 didn’t add anything to employment. They cost an enormous amount of money and didn’t accomplish anything. So while I believe it would be pretty stupid to do QE3, the fact of the matter is that Bernanke’s totally run out of options that make any sense.

TER: Another thing that doesn’t seem to make sense is that the price of oil has generally been lower than it was six months ago. The last time we spoke about energy you indicated your belief that peak oil happened a few years back. Why then aren’t we seeing higher oil prices?

BM: As for peak oil, it’s no longer a theory; it’s an absolute. We’ve passed peak oil. When oil hit $146/barrel (bbl.) back in 2008, that was based purely on speculation. It wasn’t based on real demand; it was the flavor of the day. At $90 and $100/bbl., oil is pretty expensive. Even though the world is in a depression—and people are starting to recognize that it is a depression—we’ve got pretty expensive oil, and it’s going to continue to go up.

TER: Some argue that oil prices will be mitigated by the fact that as people have to pay more for gas at the pump, they drive less. Plus, we now see the U.S. trying to spark an international effort to release barrels of crude reserves. Would such a release have an effect or would it just be a Band-Aid?

BM: It’s strictly a short-term Band-Aid based on Obama trying to win votes for 2012.

TER: In the peak oil context, then, if oil starts going up, will we see a corresponding decrease in demand?

BM: It means that for the next 20 years the price of energy and food will go up on a continual basis. It’s very dangerous because everything that’s going on in the Middle East is a function of the price of fuel.

TER: How will the toppling of governments during the Arab Spring affect food and energy prices?

BM: In the first place, there is no quid pro quo. One is an analog for the other. The cost of corn and wheat caused the revolutions, but the revolutions aren’t going to affect the price of corn and wheat. It works one way, but not the other way.

TER: Can’t we reduce the rate of increase in food prices by increasing production?

BM: Of course. You can be much more efficient in producing food if you use fertilizer. You get more bang for the buck. But then the increases in energy and food prices will translate into a direct increase in the price of potash.

TER: Potash has been increasing over the last couple of years. Where’s the top?

BM: Well, the earth has seven billion people to feed.

TER: Are you implying that using potash will make food available in places where people are now going hungry?

BM: Here’s what people need to understand. If the price of oil doubles overnight, you can drive less. But what if the price of food doubles overnight? Eat half as much? That will be the source of much turmoil for the next 15 years. We need to match what we’re capable of producing to the number of mouths we have to feed.

TER: Over the years, you’ve always said that eventually it will be food that has people rioting in the streets. That scenario has now started to unfold.

BM: People must have wondered whether I was in touch with reality, but everything that’s happening in the Middle East, and indeed in Europe, is related. The riots in Spain, Greece, England, Italy—those riots are coming to the United States. You’re seeing flash mobs start up now and I think the government’s hiding a lot of the fighting.

TER: You’ve been investing in potash for a couple of years. What prompted you to pick potash as opposed to another form of food production innovation?

BM: There are other areas of food production to invest in and certainly water would be one of them. But I happen to know some good potash companies and I just can’t see how potash could be anything but a really good investment.

One of the best—and it’s a company I’ve been invested in for three years—is Passport Potash Inc. (TSX.V:PPI, OTCQX:PPRTF). It was at $0.10 for the longest time due to some substantial management issues. Those were corrected, and the stock shot up to $1.86. It’s dropped back down to the $0.55–$0.66 range now, which is healthy, and it’s a pretty good investment. Passport Potash has a giant basin out in Arizona, and will be producing potash for years to come.

TER: Given that the U.S. is pretty well-endowed with food, how much higher can it go?

BM: It doesn’t make any difference if the U.S. is endowed with food or not, lots of countries aren’t, and it’s easy enough to ship potash to the growing areas. But it’s interesting that you mention the U.S., because the U.S. always had a tremendous competitive advantage over the rest of the world due to its high percentage of arable land. Ironically however, the U.S. is now actually a net importer of food due to screwed-up government policies.

TER: When did we become a net importer of food?

BM: In the last two or three years.

TER: A recent feature about new immigration laws in some of the states was focusing on the fact that Georgia’s losing immigrant farm workers and can’t replace them. The commentator asked why there’s a farm-worker problem with 10% unemployment in Georgia. They said because “the U.S. people won’t take these jobs.” He summarized that food production, and the jobs that go with it, will go overseas because Americans won’t work in the fields.

BM: That’s true, and U.S. people who are unemployed need to rethink their attitudes. We have 44 million people on food stamps, and at some point, the government isn’t going to be able to feed everybody. We need to reset our goals and start understanding where we are. One of the best things we could do is eliminate the ethanol subsidy. It’s caused revolutions all over the world, and eventually it will destroy the United States. It’s totally stupid, totally insane. It takes 81,000 calories of energy to produce 75,000 calories of ethanol, yet we’re still subsidizing corn.

TER: With the U.S. now a net importer of food and the chances of more food production moving offshore, does it make sense to be looking at potash production overseas as well?

BM: You’re trying to connect things that don’t have a connection. The United States and Canada are among the main potash producers in the world, and everywhere you raise crops for food, you need to increase efficiency. The price of food being where it is now, you can afford potash. The demand will continue to go up, and whether we use it domestically or export it is relatively meaningless.

TER: But isn’t it true that Brazil is trying to produce food and potash operations located there, and thus these operations would have a distinctive advantage?

BM: Yes and no. Verde Potash (TSX.V:NPK) has high-grade deposits there as well as government support. But the big issue in Brazil is the cost of transportation. It’s very expensive, and probably cheaper to dig potash in Arizona and ship it to Brazil than to ship it within Brazil. Brazil lacks infrastructure. Therefore, even though we’ve seen amazing gains in its soybean production, trying to get potash from one place to another is very difficult.

TER: Another commodity you’ve been interested in is uranium. Since the Japanese tragedy, a number of countries have said—or at least implied—that they’re going to reduce their reliance on nuclear energy. How much of an impact would that have on the uranium price?

BM: As far as the disaster in Japan goes, it’s like an iceberg with 90% of the problem below the surface where we don’t see it. I think it’s a lot more serious than anybody wants to admit, and that we’ll end up with tens of millions of people dying of radiation-caused problems. Consequently, I think nuclear is dead for 50 years.

We do need nuclear energy, but at the same time we need safe nuclear energy. With Fukushima, every bad thing that could happen happened, and every bad decision that a country could make was made. When people in Vancouver and Seattle start dying left and right from radiation poisoning, we’ll certainly reevaluate how we feel about nuclear.

TER: So you expect more backlash?

BM: We haven’t seen anything yet. People on the West Coast of the United States inhaled 30 particles of radioactivity a day for two or three months, and one particle can cause lung cancer down the road. It may be shocking how many people ultimately die as a result of that disaster, but it’s going to be 10 or 15 years before we figure it out. I think it’s a disaster of a magnitude that’s never before occurred in history.

TER: Perhaps due in part to the renewed focus on alternative energies in the wake of that disaster, the rare earth sector has commanded quite a bit of attention this past year. Is this sector one that appeals to you?

BM: No. I think it’s a very dangerous place to invest, and a lot of people stand to lose a lot of money. Jim Dines came out two years ago with the glowing recommendation for the rare earth elements and created a monster. While I have a world of respect for Jim Dines—the guy is absolutely brilliant—he’s brought $50 billion worth of investment into a $5 billion industry. While it’s true that China has a stranglehold on rare earths, it’s also true that supply-and-demand does work, and at some point, if the price goes high enough, it will suck the metals out of the ground.

I am a contrarian, and you’re never going to find me believing what everyone else believes. Too many people believe rare earths is a slam-dunk, and every slam-dunk investment I’ve seen in 65 years has been a loser.

Bob Moriarty’s 321energy.com covers oil, natural gas, gasoline, coal, solar, wind and nuclear energy. It’s his second site on the internet; convinced that gold and silver were at their bottoms and wanting to give others a foundation for investing in resource stocks, he and his wife, Barb, launched 321gold.com almost 10 years ago. Both sites feature articles, editorial opinions, pricing figures and updates on the current events affecting both sectors. Before his Internet career, Bob was a Marine F-4B pilot O 1C/G forward air controller with more than 820 missions in Vietnam. A captain at age 22, he was the youngest naval aviator in Vietnam and one of the war’s most highly decorated. He holds 14 international aviation records, and once flew an airplane through the Eiffel Tower’s pillars “just for fun.”

Companies Mentioned: Almaden Minerals Ltd. Antofagasta PLC Avrupa Minerals Brazil Resources, Inc. Estrella Gold Corp. Eurasian . . . → Read More: Mickey Fulp: Can Gold Prospectors Cushion Volatility?]]> Mercenary Geologist Mickey Fulp has adopted a new prospector-generator model portfolio with an emphasis on good people. In this exclusive interview with The Gold Report, he outlines the impact global volatility could have on junior mining companies.

The Gold Report: Is there a danger of food shortages starving emerging economies and putting an end to the secular commodity bull market? In your March 21 Musing newsletter, you tracked the commodities market back to 1955, illustrating the worldwide food inflation problem crushing poor countries. You have also written about the important role of these same emerging economies in pushing the eighth year in a commodity bull market. So I have to ask, could food shortages choke growing commodity demand?

Mickey Fulp: I think yes. I am less concerned about food inflation now that oil is down to less than $95 a barrel than I was when it was $115. It eases the pain a bit. But, we saw in the early part of the year two Middle Eastern countries with oppressive regimes fall. In Tunisia, a government that reigned for 23 years was taken down because of food riots. In Egypt, the catalyst for the government’s fall was food inflation. It is my opinion that if unrest were to spread to eastern Asia where a lot of the commodity demand growth is located, that could create another economic crisis and a collapse in the secular bull market for commodities—similar to what happened from mid-2007 to early-2009 when a U.S. banking crisis spread worldwide, bringing the global economic system to the verge of collapse.

TGR: Didn’t all commodities drop during that collapse, even gold at least for a short time?

MF: Absolutely. It went down to $680/oz.

TGR: I don’t even think the U.S. dollar did that well. Everyone just pulled in. So, if we see a shortage of food in eastern Asia, would that instill a growth slowdown and thus inhibit commodities? Or would precious metals begin to soar?

MF: I think precious metals would shine. Let’s use an analogy. In November of 2008, the gold price collapsed. It went down to $680/oz. and it hit a double bottom before it started rising. An amazing thing is that in the early part of 2009 gold and the dollar index increased at the same time. That’s quite unusual. The reason for that, in my opinion, was a run to what were perceived as safe havens. In the scenario we’re talking about right now, I would be very bullish on gold. That won’t preclude a selloff like we saw in the early fourth quarter of 2008, but to be safe, I will always want to have 10% of my net wealth in gold.

TGR: Wasn’t some of that 2008 decrease in gold due to massive deleveraging as people were forced to cash out to pay their calls?

MF: Yes and the reverse of that is happening now. The hedge funds and speculators pouring cash into gold paired with quantitative easing is a big reason for the run-up in the price of gold in the last year. We’re printing more and more fiat currency. So, if a crash were to happen again, the hedge funds will pile out of the commodities, take profits and sit on the sidelines for a while. If stocks start to collapse and margin calls come, people will liquidate whatever is . . .

TGR:. . .liquid.

MF: Yes, and that could be the precious metals again. But, the long-term purchasing power of gold is going to remain the same. So, overall we would expect gold to do quite well in an economic crisis.

TGR: You mentioned QE2 and hedge funds. Quantitative easing usually increases the price of gold while hedge funds depend on numerous other variables.

MF: Right. Hedge funds rush to the next big thing. That’s what we saw in early May when we experienced an across-the-board commodities correction. It didn’t last very long and it was not very deep, but hedge funds en masse ran out of commodities. Now, for the most part, commodities have stabilized. In the meantime, the junior resource sector continues to slowly progress to the downside.

TGR: That is my next question. You say the hedge funds will go to the next big opportunity. Since the junior precious metals market has underperformed compared to the gold price, do you see any probability that hedge funds will go into the junior market in the expectation of an equity catch up?

MF: That’s an interesting thought. Certainly, the junior sector looks downtrodden right now. There is always low liquidity during the summer doldrums. Toronto brokers summer in their cottages on the lake; Vancouver’s sharks go to the mountains; Europeans take leave for six weeks; and everybody in New York City is in the Hamptons. The Toronto Venture Index valuation lost 30% since closing above 2,400 on February 28. A post-Prospectors & Developers Association Conference pro selloff started in March, then we had “sell in May and go away.” Now we have a couple of months of summer doldrums looming. We generally see a seasonal uptick after everyone comes back to work in the first part of September. That is the time of year when we would expect higher volumes that could lead to higher junior valuations.

TGR: We started this conversation with agricultural intrigue. In the U.S., we’ve had an amazing amount of flooding, slicing into crop forecasts. As we move through the summer, do you expect more interest in “flight to safety” vehicles like gold for wealth preservation?

MF: Maybe. But here’s another argument to that scenario. We are approaching the seasonal low for gold. In most years, precious metals dip in July and August. For me, this is one of the annual opportunities for buying gold. I’ll get it for a better price than I will once the wedding, holiday and festival seasons start in the early fall in India and continue into China and the Muslim world. Low season’s coming up.

TGR: When you analyze companies, you review share structure, people and flagship projects. As you look at the juniors, are there some downtrodden companies that possess that unique combination of features that merit acquiring during the summer?

MF: I recently moved out of two gold companies because they experienced healthy run-ups and decided to move on to something else. That moved me out of the precious metals sector and more into the prospect-generator model. I cover Almaden Minerals Ltd. (TSX:AMM; NYSE:AAU), Avrupa Minerals (TSX.V.AVU), and Estrella Gold Corp. (TSX.V:EST) and am going to add another prospect generator soon. I have also added one new startup gold company called Brazil Resources Inc. (TSX.V:BRI). It’s the same team that was successful with Uranium Energy Corp (NYSE.A:UEC).

TGR: But this is a gold play?

MF: Yes. The company’s goal is to build a mid-tier gold mining company in Brazil in the near to midterm. I wrote about it in a recent Musing on my web site. It’s available free to all email subscribers and it’s an easy process to sign up and gain access.

TGR: Mickey, you have done quite a bit of geology in Peru and Chile in your career. How does Brazil play in terms of geological wealth compared to Peru and Chile?

MF: The geology is very permissive and it has a phenomenal gold budget. In my opinion, Brazil has been underexplored because it’s mostly in the Amazon with little outcrop and infrastructure; only about 15 juniors have active projects in Brazil and no major discoveries have occurred so we don’t see as much competition there. Additionally, Brazil is fairly bureaucratic, making business startup difficult. I like the people involved in Brazil Resources because they have run a successful startup before, I have a positive working relationship with them, and I respect them. I think they will be successful. I also like the relative lack of competition in Brazil paired with a tight share structure in the company.

TGR: Earlier, you said that on a macro-level you’re moving your portfolio out of gold plays and into prospect-generator models. What is it about this type of company that intrigues you?

MF: Prospect generators spend someone else’s money to advance projects. That means the company can avoid share dilution and preserve capital. The key is to find good prospects and good partners. It is an especially effective model in unsettled and down times in the market.

TGR: So, it is unsettled times that made you focus on the prospect-generator model?

MF: Not necessarily. I have been in prospect generators for at least two years now. I’ve just moved out of some pure precious metal plays because they had very good run-ups so I took profits. Part of it is I need to be stimulated. I will move into and out of stocks and pick new things because I like to generate ideas and make speculative money work for me and my subscribers. So, when a company has a two- or three-time run-up and I don’t see another double in the next year, then I take that money off the table and move it into another stock. If I pick a stock at $0.25 and it goes to $0.50, that’s a two-bagger. The chances of it going to $2 and another two-bagger is a lot less than if I go find another $0.25 company and play it to go to $0.50. It’s a matter of the power of two, of doubling your money. So, if you don’t think something has potential to double from where it is right now and you already have your double, then take that money off the table and go find another cheaper one.

TGR: In the prospect-generator model, you’re talking about spending someone else’s money to avoid dilution. But, it ultimately does need some good projects. You have often talked about a missing generation of geologists. In fact, in one of your Musings you talked about the importance of mentors. In a prospect-generator model, how important are the company geologists?

MF: They are of paramount importance. A prospect-generator model works only if the company has a cadre of excellent, field-savvy geologists with particular expertise in an area, a commodity or a deposit type. So, the geologist’s skill set is the first and foremost key to making a prospect generator work.

TGR: Tell me about the geologists and management at the three companies you mentioned earlier, Almaden, Estrella and Avrupa.

MF: Sure. Most of the time in these companies, the geologists and the management are one and the same. Almaden Minerals is run by geological engineer and Chairman Duane Poliquin. He founded the company in 1986 and it has been very successful. Almaden’s recent discovery is high grade and looks like it could be a district-wide gold-silver play in eastern Mexico. His son, Morgan, is now the company president. They are both good geologist prospectors and they’re the brains behind the outfit. Almaden really is a family-run organization. It is AMEX listed, has only 56M shares out and over $25M in working capital.

Estrella Gold is a fairly new company run by geologist-CEO Keith Laskowski who was responsible for Eurasian Minerals Inc.’s (TSX.V:EMX) success in Haiti. He is working in Peru, where the country is becoming more left-leaning in the wake of the election of a former military man. Economic and social policies no doubt will swing left in the country. However, Peru is a great destination for major mineral deposits. And Estrella Gold has the right set of investors behind it, with a low number of shares. It’s also a bit beaten up right now because of the political uncertainty. Avrupa Minerals is a relatively new prospect generator, less than a year old. It holds base metal plays in Kosovo and Portugal. The company announced recent success in vending four projects in Portugal, including a tungsten-gold play with potential. The company focus is on the Iberian Pyrite Belt and it just signed a joint venture agreement for three strategically-located properties with Antofagasta plc (LSE:ANTO).

TGR: Who are the geos there?

MF: The geologist-CEO is Paul Kuhn, a man I’ve known for 25 years. He’s spent a significant part of his career in eastern to southern Europe and western Asia—Avrupa Minerals’ focus areas. The company has a very competent staff in Portugal and I expect continued success there.

TGR: So, if we are looking at summer doldrums for the next several months and Rick Rule advises becoming accustomed to volatility, what is your favored investment strategy in the short term?

MF: I have a “wait and see” attitude right now. I’ve been buying some uranium stocks on weakness. As a contrarian, I like to buy when other people are exiting. There will be other buying opportunities in the near term, but I’m not sure if this is the time to do it. I suggest finding some good, fundamentally strong companies that you like, that you think will be healthy for the long term and can survive a downturn, and put in some low bids—stink bids. If they get filled so be it. And, if they don’t, oh well, they didn’t get to the level that you thought was a good risk-reward price. Don’t sell on emotion or panic. Develop a core speculating philosophy and stick with it. Modify it as market conditions require, but stick with what your basic investing philosophy demands.

TGR: Mickey, I appreciate your time.

Michael S. “Mickey” Fulp is author of The Mercenary Geologist. He is a certified professional geologist with a B.Sc. in earth sciences with honors from the University of Tulsa and M.Sc. in geology from the University of New Mexico. Mickey has more than 30 years experience as an exploration geologist searching for economic deposits of base and precious metals, industrial minerals, coal, uranium, oil and gas and water in North and South America, Europe and Asia. Mickey has worked for junior explorers, major mining companies, private companies and investors as a consulting economic geologist for the past 24 years, specializing in geological mapping, property evaluation and business development.

P = (1+markup) MC. To justify the change in P, of course not due to his . . . → Read More: Learning About Inflation From a Box of Eggs]]>

Milan Kumar Biswas, General Manager of Keggfarms Pvt. Ltd. knows something about inflation. In a note addressed to his customers, stuffed in a box of eggs, he announced an increase in the unit price of his eggs.

P = (1+markup) MC. To justify the change in P, of course not due to his own greed (the “markup”), Mr. Kumar blames various “exogenous” factors for the price increase, all bunched in what economists call “marginal cost”. He tells us about the components of his marginal cost:

1. Input costs for feed: read food grains and other food items.
2. Man-power: read wages.
3. Packaging and transportation costs: read a mixture of wages, services and fuel prices.

This points to something more than just food inflation. Mr Kumar, just like our RBI Governor, seems to suggest that price pressures are indeed quite generalised.

On 1), we knew about food inflation from the the WPI and the CPI. What is novel is the information on the pass-through to processed food items from unprocessed ones. It is a clear example of the cascading effects of input costs into prices downstream from the production chain.

On 2), unfortunately we have no direct and timely statistical evidence about wages in India. Hence, we, alongside our Central Bank, are left grasping for evidence from anecdotal and piecemeal information. If true, it would be indeed bad news. A input cost increase passed onto wages, i.e. the famous “second round effects”. This puts us into something like that classic story of mishandled inflation, the oil shock of the 1970s.

On 3), we unfortunately have no clue what are the developments in services prices. Hopefully CSO will soon release a new CPI so we can start seeing some of this.

Last, but not the least, can we also trust Mr. Kumar that he will not raise his markup in a period of ongoing recovery of demand? Economists have long disagreed on this question. See the seminal papers by Rotemberg and Woodford, and, more recently, Ramey and Nekarda.

True inflation . . . → Read More: An Upsurge in Inflation?]]> There is a lot of concern about inflation. Most of it is based on perusing the following numbers of the year-on-year changes in price indexes:

True inflation in India is somewhere between the CPI-IW (which overstates the importance of food) and the WPI (which overstates the importance of tradeables and thus the exchange rate). YOY CPI changes are stubbornly above 10\%, and the yoy WPI inflation seems to have risen in each of the above three changes.

However, the year-on-year growth is the summation of the changes of the last 12 months. To get a sense of what is going on in the recent period, and to not be confused by ancient information, it is essential to look at month-on-month changes. This requires seasonal adjustment.

At http://www.mayin.org/cycle.in, we have a program of regular release of this data, which includes month-on-month changes expressed as `seasonally adjusted annualised rates’ (SAAR). This shows:

This shows a rather different picture. We have food inflation, particularly with fruits and vegetables, given that we’ve just had a bad monsoon. But the overall WPI Food inflation contained one big jump in July and has slowed down after that.

The CPI(IW) gives a lot of weight to food. Hence, it showed a big value in July. After that, it has reported softer values.

The WPI itself was showing values around 10% in July and August, but gave values near 5% in September and October.

This, then, seems to be a relatively benign inflationary environment to me, particularly from the viewpoint of monetary policy. Monetary policy should not take interest in food prices in connection with a monsoon failure, because the time horizon over which monetary policy acts is long – perhaps between 9 and 18 months. By this time, conditions in WPI Food will have been reshaped by many new harvests.

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“Growing consumption of increasingly less expensive food, and especially “fast food”, has been cited as a potential cause of increasing rate of obesity in the United States over the past several decades. Because the . . . → Read More: Minimum Wage and Obesity]]> David O. Meltzer and Zhuo Chen explored the relationship between minimum wage rate in the U.S and body weight (link):

“Growing consumption of increasingly less expensive food, and especially “fast food”, has been cited as a potential cause of increasing rate of obesity in the United States over the past several decades. Because the real minimum wage in the United States has declined by as much as half over 1968-2007 and because minimum wage labor is a major contributor to the cost of food away from home we hypothesized that changes in the minimum wage would be associated with changes in bodyweight over this period. To examine this, we use data from the Behavioral Risk Factor Surveillance System from 1984-2006 to test whether variation in the real minimum wage was associated with changes in body mass index (BMI). We also examine whether this association varied by gender, education and income, and used quantile regression to test whether the association varied over the BMI distribution. We also estimate the fraction of the increase in BMI since 1970 attributable to minimum wage declines. We find that a $1 decrease in the real minimum wage was associated with a 0.06 increase in BMI. This relationship was significant across gender and income groups and largest among the highest percentiles of the BMI distribution. Real minimum wage decreases can explain 10% of the change in BMI since 1970. We conclude that the declining real minimum wage rates has contributed to the increasing rate of overweight and obesity in the United States. Studies to clarify the mechanism by which minimum wages may affect obesity might help determine appropriate policy responses.”

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Ila Patnaik has an . . . → Read More: Implications of a Bad Monsoon for Monetary Policy]]> The progress of the 2009 monsoon seems to be 29% below normal. This may be adversely affecting food prices. In the latest available data, inflation based on CPI-IW has surged back to values near 10%. (This is the three-month moving average of the rate of change of seasonally adjusted CPI-IW).

Ila Patnaik has an article in Indian Express analysing the implications of this situation for monetary policy.

India really needs an `inflation report‘ institution.