Goldman Sachs Says Economy Will Falter

Goldman Sachs, one of Wall Street’s most powerful investment banks, painted a new, grim picture of the American economy. It is yet one more warning that the United States will approach a recession, if it does not have one. The bank’s former chief executive is even more pessimistic.

Goldman revised its prediction for GDP improvement to 2.4% this year and 1.6% next year, according to a Bloomberg report on the downgrade. A deceleration of this sort means it would take very little to tip the economy into recession late this year or early next. It blamed the Federal Reserve’s plan to increase interest rates, at least in part.

The change of heart by Goldman becomes part of the debate about interest rates. On the one hand, an increase could tame inflation, which recently has risen by about 8% year over year, according to numbers posted for the consumer price index. On the other hand, one finds the argument that high interest rates could make money more expensive, particularly for the consumer. This expensive money could hit just as the holiday season starts. The period usually produces most of the profits for the retail sector. The sector increases its workforce by hundreds of thousand as it anticipates heavy consumer traffic. If that is undermined, gross domestic product could crater.

Former Goldman CEO Lloyd Blankfein showed his anxiety runs much greater. He commented on CBS’s “Face the Nation” that the chance of a recession carries “a very, very high risk factor.” Blankfein’s legend sits close to that of Jamie Diamond, head of JPMorgan. His views carry great weight.

Recession or not, the U.S. economy faces trouble it has not encountered for years. No preparations appear available.

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