from


(snip)"Via Mark J. Grant, author of Out of the Box,

Not So Fast

“For every action there is an equal and opposite reaction,” Isaac Newton tells us. It is within this context that we also account for “unintended consequences;” those nasty things that no one thinks of that tend to jump out of the bushes at you when you thought you had everything figured out. In Bernanke’s rush to increase employment and raise asset prices and lower mortgage rates, if not to help the President with his re-election; I would assert that the Fed did not go far enough in its thinking and that they may get stung by what they have not considered.

The issue here is gas at the pump.

Far more important to most Americans than the interest rate on their mortgages is how much they have to pay to fill up their cars. This is true, I think, for the group affected by both costs but the amount of people in the United States that have no mortgages and still have to pay for gas to go to work and the grocery store is a far larger amount of people than those that own houses.
Further, the amount of time necessary to lower mortgage rates is a much longer proposition than the time it takes to raise prices at the gas stations. With oil hovering around $100.00 and likely to go higher as a consequence of the Fed’s recent actions; trouble may be brewing.

Even without Bernanke’s recent move the price of gas has escalated dramatically. Regular gas, since July 1, has risen 54 cents to $3.87 which is a 14% move up in just two and one-half months. It is now highly likely, in my view, that regular gas will reach $4.00/gallon and move higher from there. This will cause a hue and a cry from the streets and the Press will turn its attention to this and the Fed and Mr. Obama may well get blamed for this outcome and hence the “unintended consequence” swings fully into view.(snip)


The author's point of course is that renewed FED QE3 money printing will again cause US dollar denominated commodity prices to increase ... with a major jump already occurring in crude oil prices which will soon be passed through to create even higher prices for gasoline. America's working poor and middle class are arguably 'joined at the hip' to gasoline consumption. They have already cut out vacations and 'recreational' activities which involve significant consumption of gasoline. Thus demand for gasoline by America's working poor and middle class has arguably already reached the 'inelastic' stage ... where gasoline use has already been reduced to the minimum necessities of driving to work, shopping trips, etc. Thus sustained high gasoline prices, or even worse rising gasoline prices, are now 'demanding' family budget dollars which are therefore no longer available to be spent on non-essential consumer goods or non-essential services.

The implication is that, while FED QE3 money printing will benefit bankers, upper middle class and rich owners of stocks and commodities etc. - the 'unintended consequences' of rising US dollar denominated gasoline ( as well as food ) prices will act as a de-facto 'tax' on America's working poor and middle class. This diversion of family budget dollars implies reduced business levels for ( non-luxury level ) consumer goods and services typically patronized by the poor and middle class, but increased business levels for full blown luxury goods and services typically patronized by the rich.

Bringing the point closer to home for SW readers, FED QE3 is 'good' news for dancers working in upscale Manhattan clubs, but 'bad' news for dancers working in blue collar suburban clubs !