Goldman CEO Thinks Economic Recovery “May Have Already Started”

By: EW News Desk Team   Date: 16 November 2011

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EW News Desk Team

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EconomyWatch, News Desk Team

 

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16 November 2011

Lloyd Blankfein, the chief executive officer of Goldman Sachs, said that global economic markets are rebounding faster than expected, and recovery may have surprisingly already started.

His comments, made at an investor conference, contradict recent statements from the Federal Reserve Bank of San Francisco and German Chancellor Angela Merkel.

“I don’t think that we can conclude that this slowdown is secular rather than cyclical change,” Blankfein said, pointing out that it is too early to say that Wall Street activity has declined because the industry has fundamentally changed.

The world will snap back and it will be a surprise and it will be faster than people think. I don’t know when that will be and we will gear ourselves accordingly.

Trends of globalization and advancing technology are long term and will create demand for future financing, trading and investment management, he said.

Goldman's business has suffered this year as its client trading profit has dropped and its investments have weakened. The bank's return on equity, a measure of profitability, for the first three quarters was 6 percent, excluding a one-time item, far lower than the 30 percent the company generated before the financial crisis, reported Reuters.

Yesterday, the Federal Reserve Bank of San Francisco released a grim report on the economic outlook for 2012, forecasting with a 50 percent probability that the US might slip into recession next year.

At the same time, German Chancellor Angela Merkel called for unity amongst her Christian Democrats party-members, calling the eurozone’s current government debt crisis “Europe’s toughest hour since the Second World War.”

Related: US faces 50% chance of recession in 2012
 Related: Merkel: Europe in worst crisis since WW2
 Related: Europe faces recession risks

Blankfein, while noting that the firm is cutting costs and adapting to changing regulation and slower economic growth, said he is wary of overreacting by assuming the world has permanently changed. He reminded investors that Goldman Sachs reported record earnings in 2009 following a quarterly loss in 2008, in part because competitors pulled away from making markets for clients.

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“We’re managing our costs, obviously, but we’re not thinking necessarily that there’s such a radical, structural change,” he said. “We want to be in shape for the upturn.”

Related: The end game for eurozone has begun: Nouriel Roubini
 Related: Capitalism’s pallbearers: The companies that run, and could destroy, the global economy


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