Tag Archives: Goldman Sachs

The Easy Question in Financial Regulation

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Many questions in the field of financial regulation are hard to answer:    Would the separation of commercial banking and investment banking help prevent crises?   To what extent should individual consumers be protected against foolishly borrowing too much?  Should Credit Default Swaps be regulated out of existence?    What should regulators do about patterns of high executive compensation that is evidently not a reward for performance?  I have views on these questions, just as other observers do.  But in these cases I see the arguments on both sides. read more

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An Evaluation of the First 200 Days of Obama Economics

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Friday marks 200 days in office for President Obama.   “How has he done?” asks Fortune.

The first thing to say is that Barack Obama took over the presidency at an extremely difficult time. A variety of analogies suggest themselves: He is Harry Houdini who has been thrown in the river, in a straitjacket, with chains wrapped around him. Or he has taken over as the captain of a ship with a rotting hull, while the ship is under attack in a hurricane. To capture the state of the economy, perhaps the best metaphor is that Obama took over as pilot of an airplane in the middle of a steep dive. For a president precedent, he is Lincoln, who takes office as the South secedes. Or he is Roosevelt, who takes office at the depth of the Great Depression. read more

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Goldman Sachs Puts Odds That NBER Committee Will Declare Current Recession at 95%

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A guest post, from Goldman Sachs — U.S. Economic Research:

September 9, 2008

 

  

To us, the very weak employment report last Friday pretty much closes the argument when it comes to whether or not the economy is in recession—it is.

 

The model puts the chance that August will be classified as part of a recession by the NBER at 95%.  Several factors push the probability so high.  Most important is the ongoing labor market deterioration.  The large increases in unemployment combined with the decline in payroll employment, both over the last three months, are very significant signs pointing toward recession.  The decline in the stock market and the fact that housing starts are off 30% from the prior year also push up the estimated probability.

In fact, April was the only month this year for which the data did not signal a recession, as the probability temporarily dipped below 50%.  The reasons for this were: (1) some temporarily better labor market data, since largely revised away; and (2) the brief rally in the equity market following the government brokered purchase of Bear Stearns.  Apart from this dip, the general trend has been a slow drift up from a somewhat high probability of being in recession to a very high probability.,.. 

….  Put differently, if the economy is not in recession now, then the meaning of the term has changed, at least according to this model. 
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