Grand Rapids, MI (PressExposure) March 14, 2011 -- Financial advisor Dennis Tubbergen has been discussing the decline of the U.S. Dollar against other major world currencies for months. Although the U.S. Dollar has shown some signs of strength of late, the trend of 2010 was well established to be down. Now Tubbergen shares some of his opinions, opinions which were formed after careful evaluation of the facts.
"To summarize, as much change as we've seen, I believe there is more change ahead," explains Tubbergen. "I also believe this change could be more dramatic than that we've already seen."
Tubbergen notes, in the interest of full disclosure, that he expected much of the change would have already begun.
"For example, I expected that the current, stale stock market rally would have already ended," he admits. "It has not, but it continues largely because of a weak U.S. Dollar, not any economic news that is especially rosy."
In case you doubt that last statement, Tubbergen offers an excerpt from a speech that Federal Reserve Chairman Ben Bernanke recently made, in which Bernanke states, "Policies have contributed to a stronger stock market just as they did in March 2009, when we did the last iteration of this. The S&P is up 20% plus and the Russell 2000, which is about small cap stocks, is up 30% plus."
"In other words, the Federal Reserve's policies of printing money out of thin air have devalued the U.S. Dollar and, since the indexes Mr. Bernanke referenced are priced in U.S. Dollars, the values of these indexes have increased," reports Tubbergen.
But for Tubbergen, two points come to mind.
"First, when the Federal Reserve began to print money - by buying freshly-issued U.S. Treasuries - the stated objective was to get the economy moving again by reducing unemployment and freeing up the credit markets," continues Tubbergen. "This hasn't happened as a result of these policies, so now, in my opinion, the Federal Reserve Chairman is trying to point to what could be perceived to be a policy success."
Why is he pointing at the stock market rally?
"There's not much else to point to or shout about so he's drawing attention to the only thing he can," adds Tubbergen. "Second, when a rational person looks at the decline of the U.S. Dollar and the rate of that decline and then compares this decline to the stock market's rally, these charts are a mirror image of each other.
Tubbergen believes the question is this: Have the stock markets rallied in terms of real value, or has the currency in which these markets are priced simply declined in value to give the illusion that the market has rallied?
"When examining the evidence, I think that it's more of the latter," states Tubbergen. "How long can this continue? Not long as far as I'm concerned. Already this policy is leading to inflation all around the world. "
Tubbergen goes on to explain that the recent unrest in Egypt can be attributed to inflation to some extent, and that inflation is occurring in just about every country around the world, with China and India two that immediately come to mind for him.
"As the world's reserve currency, many of the commodities that are purchased around the world are priced in U.S. Dollars," cites Tubbergen. "Take oil for example. Oil is priced in U.S. Dollars. As the U.S. Dollar weakens, oil becomes more expensive for those using currencies that are not declining or declining at a slower rate than the U.S. Dollar. As a result, inflation is created. At least in part, Federal Reserve policies are adding to inflationary pressures around the world."
Tubbergen points out that in a February 4, 2011 Wall Street Journal article, Bernanke rejected complaints from China and other developing countries that U.S. policies were driving up global food and energy prices, saying, "It's really up to emerging markets to find appropriate tools to balance their growth."
"Unfortunately, in my opinion, Bernanke may get his wish and he may not like the outcome," concludes Tubbergen. "Already around the world, many countries are beginning to talk about an alternate world reserve currency. And, it's more than just talk in some cases."
Tubbergen adds that China and Russia have begun trading in oil in their own currencies rather than U.S. Dollars, and HSBC no longer allows the deposit of U.S. Dollars in its Mexican banks. The Chicago Mercantile Exchange is also now accepting both U.S. Dollars and gold as acceptable payment methods.
"The writing is on the wall," warns Tubbergen. "Given current policies, in my opinion, the days of the U.S. Dollar as the world's reserve currency are numbered. I believe that change could happen far sooner than anyone thinks."
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, with recent podcasts available at http://www.everythingfinancialradio.com. His seminar schedule is also available at the radio link.
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.