Grand Rapids, MI -- (ReleaseWire) -- 06/13/2013 -- In today's world it is hard to stay on top of everything that is happening financially. Dennis Tubbergen, a financial advisor, author, radio show host and CEO of PLP Advisors, LLC can be counted on to give a little help when it comes to understanding the latest events in U.S. and world economics.
Whether enjoying his weekly newsletter at www.moving-markets.com or his blog at www.dennistubbergen.com, Tubbergen is dedicated to sharing his viewpoints and opinions. On June 4, his blog was titled Can the Money Printing Stop?
"An article in The Telegraph recently offered some interesting perspective on the money printing in which many of the world's central banks are engaged," began Tubbergen.
He quotes below from the May 23, 2013 article.
Wednesday night's panic in Tokyo, where the Nikkei dropped a stomach churning 7pc, kicking off a global chain reaction that saw the FTSE fall 143.48 points, demonstrates just how difficult it is going to be for the world's central banks to exit their loose money policies.
It's not even as if Ben Bernanke, chairman of the Fed, said he was planning to exit; in fact, initially he said the reverse, in testimony to Congress. It was only in the Q&A, and in minutes to the last meeting of the Fed's Open Markets Committee, that a clear bias emerged to slow the pace of asset purchases "in the next few meetings", so long as the economic data were strong enough.
What the subsequent violent gyrations in markets indicate is that any hint of applying the brakes risks generating a fresh financial crisis, which, in turn, would render the economic recovery still-born.
Both financial markets and the real economy have become addicted to "quantitative easing." So much so that they cannot do without it.
The upshot is that we are going to see financial repression of the type being practised in virtually all the major advanced economies -- including, if only to a more limited extent, the eurozone -- continue into the indefinite future.
There are only three ways to deal with a big debt overhang. The hard way is to try to work your way out of it, or to cut your cloth according to your circumstances. More often than not, this proves self-defeating. The austerity required ends up shrinking the economy, thereby further increasing the size of the debt burden.
You can also default, but it will take years, even decades, to win back the confidence of capital markets after such an event, or you can do what Britain, and now Japan, are attempting, and inflate your way out of it.
Central bankers dream of getting back to "normal" -- normal interest rates, a normal balance sheet and so on -- but that point isn't going to come any time soon. They are stuck on a money printing treadmill and there appears no way off.
"In order to fully understand this, one has to understand the primary problem, which is debt excess," explains Tubbergen. "As this article correctly states there are only three ways to deal with debt."
And those ways are?
"One, pay it down a little at a time," notes Tubbergen. "This creates a miserable deflationary environment and an economic cycle that feeds on itself causing economic contraction at a rate that is ever-increasing."
The second way, according to Tubbergen, is that you can just decide not to pay the debt and leave your creditors hanging. This default on the debt makes it go away but it closes the door to any future credit for quite some time. If you don't pay your debts, you don't get more credit.
"Three, you can attempt to get rid of the debt by printing money," concludes Tubbergen. "While this tactic sounds good theoretically speaking it can't work long term. At some point, people wake up and figure out that trading something intangible like paper money (fiat currency) for something tangible is a bad idea. That's when the economic crash occurs."
To read the blog in its entirety go to http://www.dennistubbergen.com and select his June 3, 2013 entry.
Tubbergen’s syndicated radio show can be heard on metro Michigan stations WTKG 1230 AM and WOOD Newsradio1300 AM and 106.9 FM.
About Dennis Tubbergen
Dennis Tubbergen has been in the financial industry for over 25 years and has his corporate offices in Grand Rapids, Michigan. Tubbergen is CEO of PLP Advisors, LLC and has an online blog that can be read at www.dennistubbergen.com. To view Tubbergen’s latest Moving Markets? newsletter, go to www.moving-markets.com.
The opinions expressed herein are those of the writer and not necessarily those of USA Wealth Management, LLC. This update may contain forward-looking statements, including, but not limited to, statements as to future events that involve various risks and uncertainties. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual events or results to differ materially from those that were forecasted. Therefore, no forecast should be construed as a guarantee. Prior to making any investment decision, individuals should consult a professional to determine the risks, costs, benefits and fees associated with a particular investment. Information obtained from third party resources is believed to be reliable but the accuracy cannot be guaranteed.