QE2-driven commodity cost boosts a taxes on consumers

When the Federal Reserve pumped billions of dollars into the economy with quantitative easing last week, investors rejoiced. But for customers, the Fed’s monetary stimulus is a tax that has brought on the price of oil, groceries and clothing to rise. The Fed’s move to print billions for purchasing bonds boosted stocks, but it is also sending costs increased for oil, corn, sugar, wheat, coffee and cotton. Source for this article – Fed QE2 imposes tax on consumers as it raises commodity prices by Personal Money Store.

The Fed's consumer tax

At the beginning of Sept, commodity prices shot up. Numerous expected that as soon as midterm elections were over, the central financial institution would be stimulating the economy. Individuals who wanted to invest their money had QE2 as good news. People and companies paying for gas and groceries will end up with less cash. Stimulating the economy could be harder with less money. "Stagflation" which is an economic condition where the economy isn't growing as prices rise is what economists suggest will take place. QE2 might backfire a bit if the cost of oil and other things goes up a lot with the Fed printing more cash.

Pay more for fuel with QE2

The most obvious example of the QE2 Fed tax on customers is oil. The Fed announced QE2 last week. Just a day after, over $85 a barrel had been what gas prices rose to. In the last six months, costs have not been this high. This is the case with heating oil, gasoline and crude oil. Oil corporations seem perfectly alright with the change. Of course, consumers feel the pinch more than ever. About 10 percent of income goes to gasoline and utilities with American families. Gas gets $340 billion a year spent on it. This is just from consumers. There has been a 4.8 percent increase within the price of gas. Since Aug. this has happened. One more $51 billion can be staying from the economy as 10 percent is being flooded her which is what the Fed is doing.

QE2 raises prices for garments and groceries

Numerous of the commodity dependent industries have been affected by the QE2 which has made commodity prices go up. After commodity on coffee had been at a new high last week, Kraft Foods and Starbucks had to raise coffee prices, USA Today reports. Prices will go up for Jones Apparel Group and Hanes. This is because cotton prices have gone up. McDonald’s is reported to be raising menu prices in 2011 due to increasing costs for meat and sugar. About $350 a year more on groceries can be spent by an average family each year with an increase in food costs of just five percent.

Details from

CNN

money.cnn.com/2010/10/28/news/economy/quantitative_easing_consumer_impact/

USA Today

ibtimes.com/articles/79394/20101106/qe2-inflates-commodities-threatens-70s-styled-malaise.htm

The Motley Fool

fool.com/investing/general/2010/11/05/youll-pay-the-price-for-qe2.aspx