Roy Orbison’s hit song sums up the current sentiment prevailing in the USA. Eveyone either knows someone who has lost a job or has lost his/her job him/herself. All are scared of job loss.
The Obama team has worked hard to change this situation, most notably with the “Stimulus Bill,” which should have been named the “Stabilization Bill.” But the bad beat goes on. We are all “Running Scared.”
Many blame business for sitting on large earnings instead of investing these in hiring more employees. But companies do not hire just to fill the company cafeteria, they hire to increase their output to fill expanding demand. And demand is not expanding, at least not rapidly enough to justify taking on new hands.
No matter how you slice it or dice it, without the plentiful source of credit given us by securitized debt demand will not go back to the levels seen up until the 2008 financial meltdown. No amount of government spending or investment can replace this fountain of credit used to buy everything in sight.
And the sad part is that the funds that were available then, are still available. The problem is that they are being held by individuals, companies and other investors in “cash” assets, which means in the main US Treasury debt. In essence this large source of private credit has moved to public debt.
In my book the only way to redirect these funds to the private sector is to revitalize the securitized debt market. We have the new rules in place to control this market and thereby avoid the mistakes and misunderstandings that led to the financial meltdown that in turn produced the “Great Recession of 2009.” Let’s get these funds into the pockets of the consumers again.