Financial advisor Dennis Tubbergen discusses current state of our economy, comments by U.S. Congressman John Campbell.

Grand Rapids, MI -- (SBWire) -- 04/12/2011 -- Back in January of this year, financial advisor Dennis Tubbergen wrote on his online blog about his admiration for Colin Powell’s honesty when discussing the current state of the economy in the U.S. Now Tubbergen is doing the same for U.S. Congressman John Campbell, R-CA.

Tubbergen, who is a financial advisor and CEO of USA Wealth Management, LLC, a federally-registered investment advisory company, devotes a lot of time to discussing such important topics as debt in the U.S. and how politics impacts our economy. He recently took the time to explain to the readers of his financial blog and the 7,000 financial advisors who receive his monthly newsletter Smarter Not Harder why he agrees with the comments made recently by Congressman Campbell on the Congressman’s website.

In part, Congressman Campbell wrote, “I learned something last week. I learned that fully 40% of the over $9 trillion in Treasury debt currently outstanding to the public has a maturity of 3 years or less. Put another way, it means that we are rapidly approaching $4 trillion in U.S. debt that matures by 2014 or sooner.”

The Congressman went on to explain that the interest rate paid on a 2-year Treasury note is 0.645%. The interest rate, or yield, on a 10-year Treasury note is 3.4%, and is 4.55% on a 30-year note. In other words, interest rates climb as the notes mature farther out in time.

Congressman Campbell explains at length that the Treasury is doing this to keep interest rates low, but also states, “But, when coupled with the huge deficits, these moves look a bit like a Ponzi scheme that will soon unravel.” The Congressman also claims, “Today, we are sowing the seeds of another crisis with too much leverage in the public sector. This time, though, it’s easy to see it coming.”

“There are many politicians in Washington that get it,” agrees Tubbergen. “Congressman Campbell couldn’t be more right. What the good Congressman doesn’t talk about, though, are the potential consequences of what the next crisis will be.”

Tubbergen believes there are only two options for the U.S. to take, neither of which is pleasant. The first would have our policymakers continue to print money and engage in Quantitative Easing 3 (we are currently undergoing QE 2).

“Given the monster deficits that the U.S. is facing, financing this level of spending using honest methods will likely be impossible,” explains Tubbergen. “Should the Federal Reserve continue this policy, it’s likely that the inflation we’re beginning to see will continue and probably escalate.”

Tubbergen thinks the second option would be to quit spending at the current levels. This option would likely lead to a deflationary period as the leverage works its way through the system.

Also not a great option.

“There are lots of smart folks on either side of the inflation – or even hyper-inflation – and deflation arguments,” notes Tubbergen. “In my mind we will see one or the other of these, and likely soon. Whether we see inflation or deflation depends largely on the decisions that our politicians make.”

Tubbergen advises all of us to become politically involved, even if we have not been in the past.

“A country can survive deflation,” Tubbergen concludes. “However, a highly inflationary environment and especially a hyper-inflationary environment can destroy the currency and the country. The Federal Reserve has been tinkering with the money supply since 1914 and since that time, Fed policies have been inflationary. In my view, should these policies continue, through more printing of money with no basis (quantitative easing), the outcome will be ugly.”

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 has an online blog that can be viewed at http://www.dennistubbergen.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. Listen to recent podcasts 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.