"We risk becoming the best informed society that has ever died of ignorance"
- Rubén Blades

"You can't make up anything anymore. The world itself is a satire. All you're doing is recording it"
- Art Buchwald

"It's getting exciting now, two and one-half. Think of everything we've accomplished, man. Out these windows, we will view the collapse of financial history. One step closer to economic equilibrium"
- Tyler Durden

"It is your corrupt we claim. It is your evil that will be sought by us. With every breath, we shall hunt them down."
- Boondock Saints

Wednesday, December 7, 2011

How QE Helped Main Street, Example 2: Collectors Of Fine Wines

Following earlier discussion posted here, we investigate another way in which typical Main Street individuals benefited from quantitative easing.

Below we show the graph of the Liv-Ex Wine 100 Index over the past four years. The Wine 100 Index is an index based on the auction prices of the 100 wines selected as most representative of the secondary market. It represents an indicator of the price of the typical wine in your neighbourhood liquor outlet, such as Lafite Rothschild 2006.

For a blue-collar worker who's just lost his job and had his mortgage go underwater, the 20% decline in value of his wine collection in late 2008 would have been a devastating blow. But fortunately the Fed stepped in, first with TARP and then with quantitative easing. The resulting 80% rise in the price of fine wines has certainly helped our friend. It's true his mortgage is still underwater and he has no jobs, but as he must feel enriched as he drinks to his misfortune.

 For myself, I prefer cocoa.

Your correspondent in Africa.