Grand Rapids, MI -- (ReleaseWire) -- 11/17/2011 -- When financial advisor Dennis Tubbergen isn’t advising his clients or acting as a financial advisor to other financial advisors, he can frequently be found writing his blog at http://www.dennistubbergen.com or his weekly newsletter at http://www.moving-markets.com. On November 8, Tubbergen compared the woes of our currency to those of the Euro.
“The Financial Times ran an article recently that argued the U.S. Dollar is looking shakier than the Euro,” began Tubbergen.
The November 3, 2011 article states in part, “The U.S. economy is still on shaky ground. That could lead the Federal Reserve to engage in more quantitative easing, or printing of money, which would weigh heavily on the U.S. Dollar.”
The article goes on to say, “While the U.S. Dollar has rebounded from its August lows, this rally was largely a result of the Japanese Central Bank taking action to weaken the Yen and the Swiss Central Bank looking to slow the appreciation of the Franc.”
Two additional points made in the article caught Tubbergen’s attention as well. First, “In spite of the significant turmoil in Europe, the Euro has actually gained in value against the U.S. Dollar, rising from $1.31 to $1.38 since the first of October.” And secondly, “The ‘unorthodox’ policies of the Federal Reserve have kept the Euro from selling off more than it otherwise would have.”
“Essentially, arguing about whether the U.S. Dollar or the Euro is a stronger currency is a timing argument,” explains Tubbergen. “Both currencies will be under significant pressure moving ahead and at some not too distant date, it is my belief that both will look significantly different than they do now, if they survive at all long term.”
While that may strike some as an extreme opinion, Tubbergen believes when one looks at the debt levels that exist in both Europe and the United States and adds to those debt levels liabilities for entitlements and pensions, it is difficult to reach any other conclusion.
“In the United States, the official national debt will soon be $15 trillion,” cites Tubbergen. “Add to that number the liabilities for entitlements such as Social Security, Medicare, Medicaid, unemployment compensation and other programs, the number is much larger, likely to be over $100 trillion. Currently, 63% of every dollar spent by the federal government currently goes to programs where an individual gets a check from the government but doesn’t provide any services in exchange for the check. This is unsustainable.”
“Given that reality, policymakers and politicians around the world will be faced with only three possible alternatives,” argues Tubbergen.
Those alternatives are: 1) Raise taxes. While this is an option being proposed by many, one could confiscate the wealth of all the wealthy and still not solve the problem according to Tubbergen. 2) Cut benefits. Not a great idea if you are a politician who wants to be re-elected. 3) Print more money. This option seems the most painless from a political perspective, at least short term.
“Worldwide, excessive debt levels are leading to what I believe will be massive worldwide currency devaluation,” states Tubbergen. “I think we’re seeing the beginning of this devaluation with the recent actions of the Federal Reserve, the European Central Bank and as referenced in the article, the Swiss Central Bank and the Japanese Central Bank.”
So what does Tubbergen forecast for the near future?
“I look for this trend to continue,” concludes Tubbergen. “That begs a very pregnant question: What will this potential trend mean for you and your nest egg and what are you doing about it?”
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 USA Wealth Management, LLC and has an online blog that can be viewed at http://www.dennistubbergen.com and a monthly financial newsletter that can be read at http://www.moving-markets.com. His weekly talk show The Everything Financial Radio Show is simulcast on two Michigan metro stations and also airs to over 600,000 financial advisors, with recent podcasts available at http://www.everythingfinancialradio.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.