net effect of QE2

The QE2 has pushed up all assets classes, from stock market to bond market and to commodity market The wealth effect will make people and corporations more confident and increase economic activities.

However, the negative effects are huge as well. The sharp rise of commodity prices and ever lower U$ will translate to higher inflation whether the CPI number reflects it or not. If for some reasons, companies can not pass the higher raw material costs to consumers, then, profit margin will suffer. The best example is Dean Food.

Eventually, the higher inflation will push FED to withdraw the excessive money supplies, then the bubble will burst. whether it is stock market or commodity market.

As an inflation hedge, the best assets market is U.S housing market right now.