Another Look at the Federal Reserve and Government Spending

Online, November 6, 2010 (Newswire.com) - Noted financial advisor Dennis Tubbergen has been spending some time lately in his blog and his Moving Markets monthly newsletter examining the relationship between the Federal Reserve and the U.S. government. Tubbergen, who is CEO of USA Wealth Management, LLC, a federally-registered investment advisory company, thinks the Federal Reserve has created a problem by keeping interest rates low in order to spur economic recovery. But even Tubbergen agrees the problem has no good solution.

"Interest rates will have to remain low in order to finance the excessive federal deficit spending," notes Tubbergen. "An increase in interest rates now would be too damaging to the national budget and may cause many of our creditors to 'pull the plug' and wither reduce or cut us off from credit."

In an attempt to enlighten the public, Tubbergen lists a few more of his conclusions regarding the Federal Reserve and the U.S. government below:

• According to the Pulitzer Prize winning website Politifact.com, mandatory spending was $2.112 trillion in 2009.
• Total federal tax receipts in 2010 (according to ustaxrevenue.com and The Tax Policy Center) are expected to be $2.165 trillion.

"Given these numbers, mandatory spending and interest payments exceed tax receipts," states Tubbergen. "And that's at today's low interest rates!"

Tubbergen goes on to refer to an article in The Daily Reckoning from September 30, 2010, in which the author states the Social Security program in the U.S. officially began to pay out more than it takes in.

"This may not have been a problem, but the $2.6 trillion Social Security trust fund has been spent by our politicians," worries Tubbergen. "Not a dollar exists in that fund, only IOUs in the form of special bonds created by the politicians in order to access those funds."

So what is in store for the U.S.?

"In my opinion, the more out of control that U.S. spending becomes the more likely it is that higher interest rates will be needed to attract investors who are willing to take on U.S. debt and include it as part of their investment portfolios," forecasts Tubbergen.

For more information on Dennis Tubbergen's views, visit www.dennistubbergen.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.