QE2 Consequences – Raw Material Inflation, Egypt, and Less Jobs
From when Ben Bernanke first gave his “QE2 is coming” Jackson Hole speech on August 27th, 2010 to the end of 2010: the S&P500 rose +19%, oil +16%, copper +32%, coffee +34%, corn +43%, and cotton +57%. (Source: Greenlight Capital)
Half of Egypt’s 80 million people live on less than $2 per day. When the cost of food and clothing go up 40-60% driven primarily by money-printing (AKA QE2), it is the people in poverty that suffer the most. It will not be surprising if we see more riots around the world driven primarily by food inflation. And who can blame them if they can’t afford to feed their families.
To make it worse, the biggest generator of jobs in the United States are from small businesses. Unfortunately small businesses do not have the pricing bargaining power of large public companies. With sky-rocketing raw material costs leading to lower profit margins, hiring is being put on the back-burner.