Goldman’s economist says the data over the last few weeks pushed them over the edge, noting the unemployment rate is the one data point he’d pick out. Notes unemployment rate has risen more than 1/3 of a percentage point on a 3-month average basis from the bottom, which has historically been associated with a recession (he said its 10 out of 10). Says we’re likely already in a recession or will be there shortly. He observes things are deteriorating pretty rapidly, and they think others will be taking similar views. Thinks the Fed cuts 50 basis points at the January meeting, and then a further 125 basis points after that.
Update: More from the FT here, including this:
Goldman Sachs said on Wednesday it now expected a recession in 2008 as its economists forecast gross domestic product to fall in the second and third quarters.
“The recent data suggest that the US economy is falling into recession. We expect economic activity to contract modestly through late 2008, followed by a gradual recovery in the course of 2009,” Jan Hatzius, chief US economist, said.
“Fed officials are likely to respond by cutting the funds rate target to 2½% by late 2008.”
So? The economy has always been cyclical. That’s a certainty.
The timing of its cycles and the steepness of its rates of falling or climbing are the always the big questions.
The causal factors are generally always out in plain view but agreement on what factors are most relevant or have the greatest causality are always discussed ‘ad infinitum’ by the economic ‘wise men.’
Questions of what triggers majors economic changes and how interactivity and synergisms affect the economy usually lead to disagreement among the ‘wise men.’
As a retired person, I am more concerned about inflation or even worse stagflation than I am about a recession.
The “recession” is the correction of past errors enabled by artificially cheap credit and a flood of Monopoly money. And the more the Fed tries to stave off the inevitable, the harsher the correction becomes.
reactionary do you think we should go back to the gold standard? i don’t know anything about economics but it would seem logical to base our money system on gold don’t you think?
In theory, paper money can work. In practice, the temptation to inflate is just too great and the paper slowly but inexorably returns to its intrinsic value. Hard money would put a long-overdue check on many rapacious private and public activities.
Magnolia [#3]: Reactionary’s comments on a previous thread suggest that he wouldn’t want to “go back to the gold standard” because it was too liberal: it allowed for banking.
Banking results in the creation of money, as I explained on the previous threat. That was true from 1789 to 1933, when the United States adhered to a gold standard. It was true from 1933 to 1971, when we had a gold-exchange standard. It is still true.
For the roots of the current fiasco, look to budget-busting tax cuts enacted earlier in this decade. They postponed a recession at the cost of doubling the publicly held debt of the U.S. government and facilitating an unsustainable run-up in asset values.
Here’s the previous thread:
http://new.kendallharmon.net/wp-content/uploads/index.php/t19/article/8317