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Financial Advisor Comments on Federal Reserve Chastising European Central Bank

Dennis Tubbergern's radio shows are available on his website as podcasts.

 
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Grand Rapids, MI -- (SBWIRE) -- 08/15/2013 -- In today's world it is hard to stay abreast 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 hand when it comes to understanding the latest events in U.S. and world economics.

Whether people enjoy his monthly newsletter at http://www.moving-markets.com or his blog at http://www.dennistubbergen.com, Tubbergen is dedicated to sharing his viewpoints and opinions. On August 14, his blog was titled U.S. Federal Reserve Chastises European Central Bank Demanding More Money Be Printed.

“The Telegraph recently reported that the U.S. Federal Reserve called the ECB on the carpet for monetary policies that, in the view of the Fed, are misguided," began Tubbergen. "The very fact that the Fed is speaking out publically against the ECB may be a sign of how desperate the economic situation is getting."

Below Tubbergen quotes from the August 1, 2013 article.

The U.S. Federal Reserve has launched a blistering attack on the European Central Bank, calling for quantitative easing across the board to lift the eurozone fully out of its slump.

In a rare breach of central bank etiquette, a paper by the Richmond Fed said the ECB is hamstrung by institutional problems and acts on the mistaken premise that excess debt is the cause of the eurozone crisis when the real cause is the collapse of growth, which has, in turn, spawned a debt crisis that could have been avoided.

“The ECB lacks a coherent strategy for creating the monetary base required to sustain the money creation necessary for a growing economy,” said the paper, written in July by Robert Hetzel, the bank’s senior economist.

It called for direct action to buy “bundles” of small business loans, as well as “packages of government debt” across EMU states, including German Bunds. “The ECB will have to be clear that surplus countries will experience inflation above 2pc for extended periods of time,” and must be prepared to “explain to the German public” that this is desirable.

“Most important, the ECB needs to start by recognising that Europe’s problems are more than structural. It needs to stop using monetary policy as a lever for achieving structural changes and to end its contractionary policy.”

While the paper reflects the views of the author, there is no doubt that many Fed officials feel the same way.

"Interesting that the Richmond Fed would issue a paper that claimed the economic problems in Europe were not attributable to excessive debt," noted Tubbergen. "That’s laughable. With debt-to-GDP ratios at historic highs, to suggest that debt is not the core issue in the European economic crisis, is simply ludicrous."

Tubbergen went on to say the Richmond Fed stated that the real cause of the economic crisis was the collapse in economic growth, not debt. According to Tubbergen, that is like saying wet sidewalks cause rain.

"When an economic system relies on the fractionalized banking system with low bank reserve requirements and a fiat currency, an economy expands through debt," Tubbergen stated. " As I’ve discussed, when an economy is dependent on debt to expand and grow, at some point debt in the system reaches its capacity and the debt accumulation trend along with economic growth stops and reverses."

Tubbergen believes the Richmond Fed is making the case that if the economy grew faster, the debt levels that exist would be less an issue. That is true. If you get a raise and bring home more money, it easier to make your debt payments.

"But, the simple truth is this," concludes Tubbergen. When economic growth is dependent on debt accumulation, at some point growth will stop. Printing money doesn’t eliminate debt, it only postpones the ultimate symptoms of debt excesses."

To read the blog in its entirety go to http://www.dennistubbergen.com and select his August 14, 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 http://www.dennistubbergen.com. To view Tubbergen’s latest Moving Markets? newsletter, go to http://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.