QE3 Despite Drought

Despite inevitably higher food prices starting this fall, stemming from a severe drought, the Fed will ignore this when they launch a third round of Quantitative Easing in September. It’s because the drought is a short-term event that will probably reverse itself in ‘13. Moreover, groceries are barely 7% of the average family budget, and since wages are not tied to inflation this price rise won’t become permanent.

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