Financial advisor Dennis Tubbergen gives some excerpts from his newest book on the economy and where we might be headed.

Grand Rapids, MI -- (SBWire) -- 05/04/2011 -- Dennis Tubbergen is a financial advisor, advisor to financial advisors, author and radio talk show host. Lately Tubbergen has been dedicating some of his time to writing a book.

“I just finished a book with the title Economic Consequences,” explains Tubbergen. “It deals with the possible consequences of bad economic policy. Look for the book in about a month.”

In the meantime, Tubbergen shares some excerpts with his clients and the readers of his online blog and his monthly Moving Markets™ newsletter.

“As you now know, in my view, much of the world has reached its capacity for debt,” warns Tubbergen. “As I’ve stated, debt has consequences. It needs to be paid or defaulted upon and neither option is pretty or likely to be readily accepted by the population.”

So what does Tubbergen believe lies ahead? How will this significant level of debt be dealt with? Will it get paid by cutting spending? By raising taxes or getting economic growth that increases tax revenues? Or will the United States deal with debt by printing more money?

Tubbergen feels the question that many Americans should be asking is: “Depending on how the public debt is dealt with and which choice is made by policymakers, how will I be affected?”

“While many economists and analysts differ on what lies ahead economically speaking, from my perspective, not many are predicting a robust economic recovery,” claims Tubbergen. “Many analysts are looking at deflation, even a deflationary depression, while others are predicting inflation, or even a hyper-inflationary depression environment. In my opinion, there are many smart folks on either side of this argument.”

Tubbergen states many politicians and policymakers have always been in favor of controlled inflation, an ideal environment for an economic system using a flat currency and a central banking system.

“By definition, this type of system is inflationary,” notes Tubbergen. “By hitting the money throttle via reducing interest rates and reducing bank reserve requirements, more money is created via the fractionalized banking system and when more money is created, economic activity increases.”

Many of these same politicians and policymakers live in fear of deflation, warns Tubbergen, an environment where prices fall. They also fear runaway, uncontrolled inflation, an environment where prices rise significantly and unrest among the voters is quickly created, especially when price inflation outpaces wage inflation.

“It’s a balancing act controlled by the Federal Reserve, and far from an exact science, especially given the current level of debt and the current unprecedented actions of our policymakers,” cites Tubbergen.

Tubbergen refers to the fact that Bloomberg.com noted in November of 2010 that Federal Reserve Chairman Ben Bernanke was using financial “tools devised during the financial crisis” to attempt to get the money throttle to work.

“After reducing bank reserve requirements to minimum levels and dropping key interest rates to near zero, the equivalent of opening the money throttle to a ‘wide open’ level, the economy just wasn’t reacting as the policymakers had hoped,” explains Tubbergen. “So, the Fed opted for round one of quantitative easing, a.k.a. printing money out of thin air. Still, the economy didn’t react as expected.”

Tubbergen explains many in Congress, under pressure from their constituents to do something to reduce the level of unemployment, were pressuring the Fed chairman to do something more. With no options left other than to do what they’d already done, the Federal Reserve decided to engage in another round of quantitative easing, buying more Treasury securities, a.k.a. printing more money, to the tune of another $600 billion through June of 2011.

“The Bloomberg article noted that the U.S. Dollar weakened as Bernanke gambled on the fact that he could reduce the unemployment rate while keeping inflation and asset price bubbles under control,” adds Tubbergen. “Interestingly, the article used the term ‘gambling’ to describe Bernanke’s actions. That’s a pretty good word to use in my opinion, given that the first round of quantitative easing by the Fed resulted in a weaker U.S. Dollar and no significant change in the unemployment rate.”

According to Tubbergen, since this second round of quantitative easing began in November of 2010, it seems that Bernanke’s bet is not paying off.

“The asset price bubbles that Bernanke hoped to avoid are now glaringly evident in many commodities markets,” states Tubbergen. “Gold and silver – real money in my opinion – are at historic highs given the continued devaluation of the U.S. Dollar. The bubble in commodities prices was one obvious outcome of this action given the huge quantities of money that the Fed injected into the system.”

Tubbergen explains the first round of quantitative easing saw the Fed buying $1.7 trillion in U.S. Treasuries, and the second round will bring that total to $2.3 trillion, a number starting to approach the entire amount of taxes collected by the U.S. government in one year.

“That’s a truly staggering number and a number that has many pundits pointing to an inflationary cycle that has already begun,” warns Tubbergen. “While the asset bubbles that we’re seeing in some commodities markets supports the inflation argument, when one looks at the housing market the deflation argument looks solid.”

So what will the outcome of debt be, inflation or deflation?

“As a financial radio show host, I’ve had the pleasure of interviewing some smart economists on either side of this argument,” concludes Tubbergen. “There is little consensus on the deflation versus inflation issue – the only consensus among these economists is that there will be consequences to this debt.”

To read more about Tubbergen’s opinions on the economy and to view more excerpts from his new book, go to his online blog at http://www.dennistubbergen.com.

Dennis Tubbergen has been in the financial industry for over 25 years and has his corporate offices in the USA Wealth Management Building in downtown Grand Rapids, Michigan. Tubbergen is CEO of USA Wealth Management, LLC and 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. Content contained within the writer’s as of yet unpublished book is subject to change.