Huggies Price Cut Shows Why Bond Market Backs Fed QE3
By John Detrixhe and Cordell EddingsProcter & Gamble Co.’s failure to raise the price of Cascade dishwashing soap shows why investors are buying Treasuries at the lowest yields in history, giving the Federal Reserve more scope to boost the economy.
The world’s largest consumer-products company rolled back prices after an 8 percent increase lost the firm 7 percentage points of market share. Kimberly-Clark Corp. (KMB) started offering coupons on Huggies after resistance to the diapers’ cost. Darden Restaurants Inc. (DRI) raised prices at less than the inflation rate as patrons order more of Olive Garden’s discounted stuffed rigatoni than it anticipated.
Comment: As long as the new money is in the hands of the banks, one gets asset price inflation. It is when money will finally find its way into the hands of the consumers and business people when goods price inflation will occur.