Financial Advisor Takes a Look at Money Printing
Dennis Tubbergen gives a quick lesson on what money printing is doing to the U.S.
Grand Rapids, MI -- (SBWire) -- 03/06/2013 --When financial advisor Dennis Tubbergen isn't busy with his own clients you can usually find him writing his blog at www.dennistubbergen.com. On February 26, 2013 Tubbergen's blog was titled, "Faber - It's a Disgrace to Think that Money Printing Solves Problems."
"Dr. Marc Faber, a past guest on my radio program, The Everything Financial Radio Show, was quoted this past week saying that even though he is amoung those that benefit from the money printing in which the Federal Reserve is engaging, he believes that it is a disgrace," stated Tubbergen.
Tubbergen quotes from the King World News article that was printed on February 21, 2013.
"My view is that the money doesn't flow, really, into the real economy. In other words, if you look at the whole recovery since 2009, and don't forget the recovery officially started in June 2009 in the United States, so we are almost 4 years into an economic expansion, but when you compare this expansion to expansions in the 1960s, 1970s or 1980s, following recessions, it's a very, very shallow expansion.
Unemployment is very high, and if you measure exactly the number of people that are employed, yes, they have gone up somewhat, but mostly in low paying jobs. Whereas the jobs that were lost were in high paying jobs. So you substitute high paying jobs with low paying jobs.
In general, the average family, whether it's in America, the UK, or anywhere in the eurozone, is not doing well.
"The only economy that is doing well is the economy of the super-rich. The people that live on Park Avenue, on Madison, around Central Park, and Mayfair in London and so forth, but the rest of the economy isn't doing well.
I'm not saying this because I have a grudge. I'm in the financial sector, I benefit from the money printing. But as a social observer I have to say it's a disgrace to think with money printing you can solve problems. Actually you aggravate problems because if you print an undue quantity of money, what happens is that the price level never really adjusts sufficiently on the downside.
So for many people, for many families, the cost of living is relatively high compared to their incomes, which in real terms, inflation adjusted, are going down. The easy monetary policies and zero interest rates actually lead to a profit inflation in the corporate sector.
Now corporations have huge profits, and huge cash positions. What do they do with it? Do you think they are going to build a factory somewhere in the U.S., given ObamaCare and given the regulations that exist? It's much easier for them to buy an existing business. So you have takeovers and acquisitions.
But economically speaking, let's say we have five competitors in an industry and two competitors merge. What they will then do is close down some stores. In other words, economically, mergers and acquisitions are designed to lay off people. To rationalize the business, to make it more cost efficient.
So economically it has rather a negative impact, but it's good for the stock market. So you have a huge difference between what the stock market is doing, namely going up very sharply, and what the real economy is doing, which is nothing."
"This is not the first time this has occurred historically," explains Tubbergen. "In my latest book, Finding Financial Freedom, I discuss other times in the past when policymakers have resorted to the printing press in their economic policies."
Tubbergen shares an excerpt from the book as follows:
But regardless of the politics, by Christmas 1921 ordinary Germans were feeling the squeeze of inflation.
By the end of 1921, workers had lost so much faith in the government that many just stopped voting. The economic hardships brought about by inflation were evident in everyday prices.
Owners of large industrial conglomerates benefitted from the inflation, so they constantly reminded the populace that amid the economic chaos, employment was still very high.
It didn't take long for the cost of basic staples to become out of reach for German consumers as the mark plunged. A liter of milk, which had cost 7 marks in April 1922 and 16 in August, by mid-September cost 26 marks. Beer had climbed from 5.60 marks a liter to 18, to 30. A single egg, 3.60 in April, now cost 9 marks. In only nine months, the weekly bill for an identical food basket had risen from 370 marks to 2,615.
"Money printing, as Faber states, does benefit big business, for awhile," continues Tubbergen. "However, if the money printing continues, bad things happen to the currency as occurred in Germany."
Tubbergen explains the mark was eventually destroyed and was replaced with a new currency, after which a deflationary depression appeared.
"Today's money printing will stop and when it does, a deflationary period will follow," concludes Tubbergen. "That will be bad news for stocks and business in my view until the debt excesses are purged from the system."
To read the blog in its entirety go to www.dennistubbergen.com and select his February 26, 2013 entry. His radio show interviews with weekly guest experts are available as podcasts at www.everythingfinancialradio.com
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.
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