Is Reckless Government Spending Encouraged by the Federal Reserve?

Online, November 4, 2010 (Newswire.com) - Noted financial advisor Dennis Tubbergen frequently discusses the U.S. and world financial markets in his economic blog and his Moving Markets monthly newsletter. Tubbergen, who is CEO of USA Wealth Management, LLC, a federally-registered investment advisory company, has a lot to talk about lately given the current state of the economy and the intervention of the Federal Reserve.

"Many don't understand the relationship between the Federal Reserve and the U.S. government, but, given the current spending policies of the U.S. government and the current monetary policies of the Federal Reserve, they should," explains Tubbergen.

Tubbergen did some basic math with the U.S. government's budget and tax receipts and arrived at the following conclusions:
• Interest payments on the national debt are currently 4.63% of the budget.
• Interest payments on the national debt are currently about 10% of actual tax receipts.
• The actual dollar amount of interest payments on the national debt is about half of what it was in 2007.
• Since 2007, the actual amount of the debt has increased from about $9 trillion to almost $13.6 trillion.
• Today's low interest rate environment has made it possible to continue to spend what we would argue as irresponsibly without feeling any immediate effects.

"A reversion to 2007 interest rates could significantly increase the interest payments on the national debt up to $600 billion, or somewhere between 30% and 40% of tax receipts," warns Tubbergen. "This assumes that deficit spending stops now, which it likely won't."

A possible outcome?

"When interest consumes more of the budget than our creditors can stomach and our loans are reduced and potentially 'cut off,' there will be no doubt that we, as a country, are on our way to destroying the prosperity and opportunity once handed to us by our predecessors who worked so hard to create it," concludes 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.