Monetary Policy: Quantitative Easing

[Musburger]

My Blog Entry for today. I worked on this for about 20 minutes so don't expect a 20 page dissertation. But monetary policy is every bit as important as the fiscal policy Congress just fought out in Congress, yet it's not even on the radar of Americans or Congress. Sad really.
How does Quantitative Easing Affect America?
By musburger

The Wall Street Journal recently published an interview with the Federal Reserve’s Donald Kohn who is quoted with the following:

In reply to:

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[PeeJay]

Please explain how business inventories values are eroded. Would seem to me that inventories' value would increase along with the higher cost of commodities.

 

[Musburger]

To keep the same profit margin when input costs rise, you have to raise the price. However, when consumers have less discretionary income due to rising gas and food costs, the demand for your product falls. As a result, the inventory sits there. After a while, you realize you can't raise your price or even have to lower it resulting in a loss.