We started this week with news that Teun Draaisma, Morgan Stanley superbull, had met his matador. And we’re ending it on a grim note too. Here’s the outlook from Goldman Sachs’s chief economist, Jan Hatzius, released on Thursday:
The slump in global credit markets may force banks, brokerages and hedge funds to cut lending by $2 trillion and trigger a “substantial recession”.
Coming, especially, from Goldman, this makes very grim reading.
On estimates of $200bn in writedowns on mortgage linked securities, Hiatzus reckons that banks will dramatically cut back their lending elsewhere in the economy. Instead of providing loans to corporations and stimulating growth, banks will be too busy sheltering their SIVs, CDOs and conduits.
Enter Joe Stiglitz - Nobel prize winning former World Bank economist, who told Bloomberg today that the US was now faced with “a very major slowdown, maybe recession” on the back of a “consumption binge.”
No doubt Goldman will already be making money from it.
