The Fed's 'Tax on the Consumer'

Investors have been pleased because the Federal Reserve is pumping more money in the economy, but some experts say that this move could end up causing many people losing their hard earned money. When Fed Chairman Ben Bernanke pledged that the central bank would take "unconventional measures" to keep the economy afloat. These "unconventional measures" is likely to be asset purchases which is also known as quantitative easing(QE2). This move is planned to boost the economy and lower interest rates. Although it would also add more pressure on an already weak U.S. Dollar.


Since Ben Bernanke's comments, the dollar index has dropped by 7%, while goods(priced in dollars) have increased in price. Crude oil has increased in price by 14%, gold increased by 8%. Prices for cotton, corn, sugar, wheat and coffee also increased in price. Everything will increase in price including coffee, bread, pizza, gas, clothing and more. David Giroux stated that" The problem I have with QE2, it behaves like a tax on the consumer". American households already spend $340 Billion dollars a year on gasoline. Recently, the price of a gallon of gas increased by 4.8%. A 5% rise in food prices would eventually force a family to add $350 a year to their grocery budget. This is the Fed's sneaky "tax" on consumers.

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Summarized by Talat Zaitoun 10B1