Debate rages about why companies are not hiring. Many say it is because they are husbanding their funds and bulking up their bottom lines. I say it is because demand is still slack or at least not as robust as we expected in the wake of financial stability and the stimulus plan.

I keep saying that real recovery will not come until we revive the securitized debt market with its huge credit creation effect. Remember, in the run up to the 2008 Recession we were all borrowing heavily against our homes to buy second homes, new cars, vacations, and more. We were using the equity in our homes to live beyond our pay checks.

It is now obvious that the average American is cutting back on purchases and living closer to his current income. Fear of job loss is one reason for this. Another is the shock of seeing home prices plummet, thus rendering those debts against them larger than their values.

The only way out is to revive the securitized debt market and reintroduce the added income stream coming from this credit. Obviusly debt against homes is out. One alternative is to peg the securitized debt more closely to the asset acquired by this source of credit. New car purchases would be a good example.

To me it has become abundently clear, the only way we can get back to the economic heights we enjoyed until 2008 is through returning to the creative credit mechanisms we enjoyed that allowed us to consume beyond our pay check. In this case the average person simply parallels the policy adopted by the Obama administration, i.e. massive deficit spending.

Fed Chairman Ben Bernanke’s recent estimate that the US economy is in an “uncertain” state has reverberated around the world. Just when all thought things were going well the top US banker urges caution in looking toward the future.

I continue to state that there will be no real recovery until we once more raise the securitized debt market to the top spot among credit creating mechanisms in the country. Without this key, massive source of credit, consumption will not return to the heights reached in most of the first decade of the 21st Century.

President Obama has shot his main bolt - there will be no second huge “Stimulus Plan.” At best he will be able to secure funding to keep the unemployed afloat for another year.

Not to put too fine a point on it, a one billion dollars stimulus plan will not substitute for the multi-trillion securitized debt market that produced most of the steam for our economy until 2007.

It seems that most commentary on the economy is painting a bleak outlook. I continue to state that there will be no real recovery until we restore securitized debt to its previous position as the single largest source of credit. Now that the Congress has completed the new financial regulations that will, inter alia, provide substantial control over the market for securitized debt, we should do all we can to get it moving again and back to its previous position as the main motor for our economy.

This is the summer of their discontent. And the they here are the “working class,” that marvelous phase the socialists use to refer to their people and for which they give no definition other than to say, “you just know who we are.”

I am in Spain where the Madrid metro is on strike in protest of the government cutting their wages, along with all other public servants. By now you have probably had your fill of the news that the Greek economy is bankrupt, with Spain and Portugal to follow suit. Fortunately the European Union has put into place a special fund to keep Greece and others like it afloat. But the price to pay is for the receiving governments to reduce their government deficits and debt. Thus the wage cuts in Spain.

The issue reveals the Europeans still locked in the class warfare described by 19th century socialists, Karl Marx for one. The “working class” against the money or ruling class.

In the current situation the European governments facing economic collapes have two choices, increase taxes or cut costs. Increasing taxes falls heavier on the money class, so those in power, who also have the money, turn to cutting government exepenses. This means reductions in pay for public emplopyees and cuts in welfare benefits, e.g. retirement benefits and health care. These cuts fall more heavily on the “working class.” And the working class is taking to the streets.

I see a long hot summer with lots of strikes by public employees protesting the wage cuts being imposed on them by “European bureaucrats” and the “ruling class.”