Monday, November 1, 2010

The Fed's 'tax on the consumer'

Fed is planning to implement "unconventional measures" to keep economy stable. Those measures would likely be another round of asset purchases. The main purpose of this move is to boost the economy and lower interest rates. However, it would also put even more pressure on US dollar. Since Bernanke announced those plans the dollar index has dropped 7%, while commodities, priced in dollars have risen dramatically. Prices for corn, wheat, cotton and sugar have also rose during last months. In the end this will trickle down to consumers in the form of higher prices for pizza, bread, gas, clothing,etc, creating a sort of an additional tax on consumers. According to one report, even a 5% rise in food prices, would force an average family to add 350$ a year on grocery budget.

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