Tax on customers added by QE2 effect on commodity costs

When the Federal Reserve pumped billions of dollars into the economy with quantitative easing last week, investors rejoiced. Nevertheless, customers are holding the short end of the stick as they pay more for gasoline, food and clothes. The Fed’s move to print billions for buying bonds boosted stocks, but it is also sending prices higher 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 taxing consumers

The central financial institution hinted at stimulating the economy after midterm elections as commodity prices went up at the beginning of Sept. People who wanted to invest their money had QE2 as good news. Less cash will be spent on things to stimulate the economy though from people and businesses that have to pay for gasoline and food. "Stagflation" which is an economic condition where the economy isn't growing as prices rise is what economists suggest will take place. The Fed printing more money could be something that makes QE2 fail though. It might make the cost of gasoline and other commodities go up a bit.

QE2 increases gas

One example is the QE2 Fed taxes on oil. Customers really feel it. 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 haven't been this high. This is the case with heating oil, gasoline and crude oil. There is less cash for consumers even if oil businesses are excited. About 10 percent of income goes to gasoline and utilities with American families. On just gasoline, about $340 billion a year is spend on gas. There has been a 4.8 percent increase in the cost of gas. Since August this has happened. Another $51 billion will be staying from the economy as 10 percent is being flooded her which is what the Fed is doing.

Spend more for groceries and clothes with QE2

Commodity prices have increased a ton with QE2. This has led to commodity-dependent industries changing also. After commodity on coffee had been at a new high last week, Kraft Foods and Starbucks had to raise coffee costs, USA Today accounts. Cotton is higher leading to Jones Apparel Group and Hanes brands raising prices. McDonald’s is reported to be raising menu prices in 2011 because of rising costs for meat and sugar. If food prices rise as little as five percent, the average family will spend about $350 a year more on groceries.

Articles cited

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