Are Politicians Sanctioning Incompetence?

Online, October 6, 2010 (Newswire.com) - One of the goals of the Federal Reserve was to dump money into the economy by buying U.S. Treasuries in order to provide banks with enough liquidity to make loans and have the 'money multiplier effect' kick in (whereby each dollar injected into the economy is transformed into multiple dollars). But according to a recent discussion paper posted on the Federal Reserve Board's website by economists Seth B. Carpenter and Selva Demiralp, that event has not yet happened and is not likely to given current economic conditions. Financial advisor Dennis Tubbergen agrees.

Tubbergen, who is CEO of USA Wealth Management LLC, a federally registered investment advisory company, refers to John Mauldin's weekly e-letter in which Mauldin states, ". . . bank reserves increased dramatically since the start of the financial crisis. Reserves are up a staggering 2,173 percent from $47.3 billion on September 10, 2008." The e-letter goes on to say M2 is up only 11.4 percent since September 10, 2008 and bank loans are down $140.2 billion."

The article suggests that with the current purchasing of U.S. Treasuries by the Fed, we could rename the Fed "Feddie" to more closely match Fannie and Freddie. And if the 'Feddie' purchases another $1.0 trillion of Treasuries, it is 'simply enabling the U.S government to continue down the road of reckless deficit-financed spending.'

"According to this article, reserves are up and loans are down," explains Tubbergen. "The bottom line is that the Feds' policies haven't worked."

Tubbergen recalls speaking with Mike Vance, the former Dean of Disney University several years ago and asking the man in charge of teaching excellence to Disney employees what the biggest mistake is that employers make. Vance replied it was 'sanctioning incompetence,' or allowing employees to perform at any level below excellence.

"The Fed is now considering round two of 'quantitative easing,' injecting still more hot-off-the-presses dollars into the economy in the hopes of the policy working this time," concludes Tubbergen. "Politicians who allow the Federal Reserve to continue to pursue policy that won't work and may move us closer to national bankruptcy, are, in fact, sanctioning incompetence."

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.