Great commentary right now on CNBC by Starbucks CEO Howard Schultz. He succinctly summarizes what QE is doing. He says it is “artificially” causing higher prices. Coffee prices have risen almost 50% since QE2 rumors first began in August. Schultz says the price rise is hurting his business and that he will not be passing the costs along to the consumer. He says the only people benefiting from this price rise are the commodity speculators because the consumer remains too weak to accept the price rise.
So what do we have? It’s quite literally a ponzi scheme. We have a Fed that has openly admitted that they want prices “higher than they otherwise should be”. And speculators are taking them up on their offer by borrowing in dollars and buying any and all inflation hedges. Meanwhile, the real economic benefit of this all is nil. In fact, it is doing nothing but generating margin compression, excess volatility in financial markets and promoting the financialization of this country – the same thing that nearly destroyed it just two years ago.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.