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Goldman Giddy At Government Generosity

Tyler Durden's picture




 

It was just this Sunday that Jan Hatzius was apologizing for this hike in 2011 GDP to 2.7%. It appears that once respected economist has now joined the legions of momentum chasers and will "revise" his forecast going forward every time there is an event. To wit: following last night's complete abdication of fiscal prudence by both democrats and republicans, Goldman now says it's 2011 GDP will likely be boosted from 2.7% to 3.7%. In the all out defense of the ponzi, old-school concepts such as even remote credibility are getting thrown out with the bathwater. Wall Street needs one more year of record bonuses or else the MAD card will be played. And of course, who cares about the costs... Perhaps one should play a simple thought experiment at this point: why not just issue one quadrillion in debt and fix the economy once and for all. After all why worry: rates will be forever at zero, Bernanke will buy all deficit funding bonds ever, and nobody will ever sell their rates holdings.

From Jan Hatzius:

BOTTOM LINE: The “framework” that President Obama and congressional Republican leaders have agreed to, if enacted, could boost growth above our recently revised forecast for 2011. While the details of the agreement are not yet entirely clear and some political uncertainty remains, our rough estimate is that this package could add 0.5 to 1.0 pp to growth in 2011.  We will await details on the specifics of the fiscal package, as well as additional clarity on the likely legislative outcome before deciding on any changes to our forecast.

Key Points: 

1.  The fiscal package as presented last night by President Obama as an agreement between the White House and congressional Republicans should substantially reduce the drag on growth from federal fiscal policy in 2011.  We already assumed that the 2001/2003 tax cuts would be extended in their entirety, and that emergency unemployment benefits would be extended for an additional three months. However, the payroll tax reduction, an extension of unemployment benefits through the end of 2011, and the extension of other personal tax breaks included in last year’s stimulus package add an incremental $185 billion (1.2% of GDP) in stimulus above and beyond what we currently have built into our assumptions. Since this will be spread out over the course of the year, and the various provisions will each have different effects on spending behavior, the effect on real GDP growth in 2011 is likely to be a boost of somewhere between ½ and 1 percentage point relative to our current forecast, depending on the specific timing of provisions and other assumptions.  This effect rests heavily on our starting fiscal assumptions; other forecasters may assume larger or smaller effects due to differences in their assumptions of fiscal policy in 2011 prior to the announcement.

2. Details of the package may still change slightly. While the president announced the broad outlines of the package last night, no cost estimate has been provided yet, and some details remain unclear.  So while we are reasonably confident of the magnitude of the large pieces, it is too early to quantify the effect of the entire package.  Moreover, some congressional Democrats have expressed interest in changing the agreement; major changes don’t look very likely, but small changes are conceivable.

3. The legislative outlook is not yet clear, but the risk that tax cuts expire remains low.  As we noted in last night’s Skinny, many Democrats have voiced concerns with the proposal while many Republicans have expressed support. Given this unusual political dynamic, the legislative outlook is somewhat uncertain, though we are still confident that one way or another, the expiring tax cuts will be extended by the end of the year. We expect additional clarity over the next 24 hours, as members of each party caucus privately to discuss the agreement, and congressional leaders work on a strategy to move the bill forward. Action this week is possible, though the deal is unlikely to be finalized by the House and Senate until next week at earliest. Congress hopes to adjourn for the year on December 17, though this date could be pushed back if work on the fiscal package has not been completed.

4. The package obviously has implications for the deficit that we will also work out once more details are known. Our latest estimates, $1.25trn for FY 2011 and $1trn for FY 2012, were already under review for adjustments to accommodate our stronger growth forecast. On balance, we would expect the FY 2011 figure to rise, but probably not by much more than $100bn, while the net implications of these changes for the FY 2012 deficit are less clear. We would not expect significant increases in coupon issuance as a result, as the Treasury Department had stopped cutting the sizes of these auctions before it needed to. Our current thinking is that most, if not all, of any increased borrowing is apt to occur in bills.

 

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Tue, 12/07/2010 - 11:36 | 785525 No One
No One's picture

Again, why doesn't the government just ask everyone who has credit card debt to send their latest statements to the Fed, and they will take care of them (up to $50K per person)?

Those who don't have any Credit Card debt get a nice check ranging from 25K to 50K (per person).

The Fed can keep printing money, and then the consumers can go on the debt-laden spree!!!!

Long term consequences be damned!!!! We will have China like GDP growth until the people can't pay again.

Tue, 12/07/2010 - 11:38 | 785540 Upswaller
Upswaller's picture

Giddy Up.

Tue, 12/07/2010 - 11:38 | 785546 Deep
Deep's picture

The only thing going to stop this insanity is the bond market.

Will they, who knows.

 

Tue, 12/07/2010 - 11:49 | 785595 hedgeless_horseman
hedgeless_horseman's picture

The bond market can't do its job, because Wall Street is being hosed down with Fed liquidity.

http://www.seattlepi.com/dayart/20100513/450mn-unamerican13__0501656992.jpg

Tue, 12/07/2010 - 11:39 | 785550 3ringmike
3ringmike's picture

quadrillion has such a nice ring to it!

Tue, 12/07/2010 - 11:44 | 785571 praps
praps's picture

Quadrillion here, quadrillion there, soon you're talking serious money.

Tue, 12/07/2010 - 13:09 | 785997 knukles
knukles's picture

Blow job here and a blow job there and pretty soon ya' think you're a fuckin' Senator.

Amazing.  This deal and Goldlok's umpteenth revision to its forecast in 6 hours and it's like any of it matters one iota.
Best to come out of all this is the additional grit for ZHies thoughts and recollections.

 

Tue, 12/07/2010 - 11:40 | 785553 cossack55
cossack55's picture

Rather than trust the mails, can I just pick-up my $1 million in cash (no new crinkled $100 bills, please) in my wheel barrow.  I promise to speak German.

Tue, 12/07/2010 - 11:41 | 785555 SilverIsKing
SilverIsKing's picture

They're running a sale on silver at the COMEX.  There's limited inventory so get what you can under $30 while supplies last.

Tue, 12/07/2010 - 12:25 | 785800 SilverIsKing
SilverIsKing's picture

And it's gone!

Tue, 12/07/2010 - 11:41 | 785557 MsCreant
MsCreant's picture

For those who like fucking dip, here it is...and falling.

Tue, 12/07/2010 - 11:43 | 785568 Cookie
Cookie's picture

Blythe moves into action

Tue, 12/07/2010 - 11:42 | 785562 RobotTrader
RobotTrader's picture

Paulson dumping GLD en masse today?

Tue, 12/07/2010 - 11:47 | 785581 TradingJoe
TradingJoe's picture

Been saying that for quite some time now, PMs Hype by Sorosinio and "Paulie" is going to be over once they see no meaning to hold it any longer! IMHO Gold/Silver have to come down hard before another meaningful leg up!

Tue, 12/07/2010 - 11:43 | 785569 hedgeless_horseman
hedgeless_horseman's picture

Bernanke's 60 Minutes appearance is sitting in my craw.  I fear the reality is worse than even we here imagine.

Tue, 12/07/2010 - 12:08 | 785685 A Man without Q...
A Man without Qualities's picture

I agree.  You know, the markets move based upon the merest basis point over or under on official data, yet the thing I can't get over is the fact that when you really dig into numbers, whether it is sales figures for the car companies, profits at GE, inflation, unemployment, GDP, balance of trade etc etc, you find the numbers have always been massaged as far as they will go.  We have accounting standards, FRSB, that have been designed to aid and abet window dressing.  Pension fund solvency metrics where you can hit just about any number you want.  "Cash flow" where there is no cash and less flow but rather the hope that the payment will come through eventually.  What I know is that unemployment is not 9.8%, what I suspect is that GDP (even allowing for the fact you can borrow or print what you want) is nowhere near $14 trillion.  I believe the US establishment has been caught up in a lie about the strength of the economy and has used every trick year in year out to justify more borrowing and more spending.  I suspect the banks, via their servicing arms are running desperately short of cash, sitting on homes that are literally rotting away so they can still keep the asset on the books at par.

It looks like the escape plan is via (very) high inflation, maybe with the Fed buying stocks for their own account so they have something to back the new currency with.  Someone here wrote that the US has run consecutive monthly trade deficits since 1992, with a cumulative total trade deficit of $6 trillion.  Yet, the government is happy to add another $600 bn to the deficit to fund tax cuts and UI - i.e. not one cent allocated to improving domestic industry, worker skills, education.  There were senators in ancient Rome that dealt with the trade deficit by adding more lead to the silver coins, today it is done with the push of a button, but the end result will be the same.

Tue, 12/07/2010 - 12:55 | 785939 hedgeless_horseman
hedgeless_horseman's picture

There were senators in ancient Rome that dealt with the trade deficit by adding more lead to the silver coins, today it is done with the push of a button, but the end result will be the same.

Rome was sacked by Vandals, and our markets are vandalized by Brian Sack.

Tue, 12/07/2010 - 11:44 | 785573 Horatio Beanblower
Horatio Beanblower's picture

Irish Budget announcement due soon from Dublin - http://www.rte.ie/news/

 

There's talk in the air of a rebellion.  

Tue, 12/07/2010 - 11:45 | 785574 b_thunder
b_thunder's picture

well, hatzius is right that "this package could add 0.5 to 1.0 pp to growth in 2011."

the unemployment check will be spent, boosting "consumptions" of chinese-made crap and pumped from abroad oil.  but that's for 2011 and 2011 only (provided that the bond  market doesn't collapse from all this newly found "fiscal soundness".)

anyway, i suppose private jets, private boats, and other "small luxuries" will be in high demand.   for the rest of us the trade remains: gold, silver, gold!

 

Tue, 12/07/2010 - 11:47 | 785584 cowdiddly
cowdiddly's picture

I agree, Why keep jacking around with these pissy little trillion dollar syphillictic(I know its not a word) drips. Just immediately issue every stock and bond to the FED. An add all the bankstas bonuses on to the deficit.Oops already doing that. And for cripes sakes at least make a 100 dollar bill that can be printed at warp speed without jamming the printer or better yet make 1000 dollar bills available because a Benjamin won't buy Jack .

Tue, 12/07/2010 - 12:59 | 785947 Cdad
Cdad's picture

Why?  Because the art of maintaining a sense of control while this currency debauchery ensues is far harder than any honest criminal on Wall Street dare mention.

All of it, from QE to the Euro, has little time left.  Investors continue to file out of the building, and every day that portfolio managers forecast great earnings through the propaganda machine of CNBC at the same time The Bernank has to keep printing money...that is the clock on the credibility of Wall Street ticking, that sound you hear. 

My guess is one more good round of bonuses and they'll give it up.  For we are short Wall Street lies and long PMs...and in a continuing fashion.

That is why they must meddle and futz in such confusing ways...to keep the quants off of the faint smell of uselessness, to keep the machines from hearing the sound of the sell signal.

It won't matter anyway...save for the day on which the edifice finally cracks.  And China...it is they who will bring down the gavel on the entire matter when they halt the importation of Bernank inflation very soon.

Tue, 12/07/2010 - 11:47 | 785588 6 String
6 String's picture

Perhaps one should play a simple thought experiment at this point: why not just issue one quadrillion in debt and fix the economy once and for all. After all why worry: rates will be forever at zero, Bernanke will buy all deficit funding bonds ever, and nobody will ever sell their rates holdings.

Well, ZH, this is why you are dead-wrong about the massive 4 trillion haircut to GDP you keep begging on about...that is a total suckers bet, therefore I don't blame you for getting a little ranty about all this since your call for equities to zero are about as right as Bernake himself or how utterly dumb Rosie looks. Perhaps you should look no further than that of Zimbawe?  

It doesn't matter that consumers are broke, it doesn't matter that the U.S. Treasury is broke, it doesn't matter that housing will fall another 20%, it doesn't matter if U.S. households net worth falls another 15 trillion because their entire stock and bond portfolios correlate to zero, it doesn't matter that the country is run by the TBTF's, it doesn't matter if people spend welfare checks on Apple thingys, it doesn't matter if all the Government data is skewed to look good, none of this matters.

All that matters is how much noise there is between the next round of 100% certain more money printing.

That is the only game in town.

Tue, 12/07/2010 - 11:48 | 785591 firstdivision
firstdivision's picture

So any of the respected (and I use that term as loosely as one can) credit rating agencies going to down grade the US rating?  It would appear to me, that the US has sealed its fate to once again sustain a crisis in the next year or two.

Tue, 12/07/2010 - 11:49 | 785598 RobotTrader
RobotTrader's picture

Looks like Paulson is trading in his GLD for the "worst of the worst" bank stocks.

Like Allied Irish Bank....

LOL....

Tue, 12/07/2010 - 11:50 | 785607 Careless Whisper
Careless Whisper's picture

Goldman case against Sergey fading fast.

MANHATTAN (CN) - Two government witnesses - both of them executives with trading company Teza Technologies - denied on Monday that programmer Sergey Aleynikov ever promised them proprietary code for a high-frequency trading system belonging to Goldman Sachs.

and Goldman's HFT program is inferior:

Had Aleynikov even suggested that he would steal Goldman Sachs code for Teva's benefit, Malyshev said, he would have called him "an idiot" and "fired him on the spot."

and everyone seems to be a Goldman shareholder:

Meanwhile, in a written submission, prosecutors are trying to exclude evidence that FBI Agent Michael McSwain is a Goldman Sachs shareholder.

http://www.courthousenews.com/2010/12/07/32386.htm


Tue, 12/07/2010 - 12:05 | 785676 Dagny Taggart
Dagny Taggart's picture

...somebody was sent to bankster re-education class.

Tue, 12/07/2010 - 12:18 | 785754 Clapham Junction
Clapham Junction's picture

I see tattoos......

ON ARMS.

Tue, 12/07/2010 - 12:25 | 785802 NotApplicable
NotApplicable's picture

GDP = Government Desktop Porn?

Tue, 12/07/2010 - 13:24 | 786054 GeneH3
GeneH3's picture

Justice Field, the lone dissenter in Legal Tender III (1884):  "From the decision of the court I see only evil likely to follow. There have been times within the memory of all of us when the legal-tender notes of the United States were not exchangeable for more than one-half of their nominal value. The possibility of such depreciation will always attend paper money. This inborn infirmity no mere legislative declaration can cure. If congress has the power to make the notes a legal tender and to pass as money or its equivalent, why should not a sufficient amount be issued to pay the bonds of the United States as they mature? Why pay interest on the millions of dollars of bonds now due when congress can in one day make the money to pay the principal? And why should there be any restraint upon unlimited appropriations by the government for all imaginary schemes of public improvement, if the printing-press can furnish the money that is needed for them?"

Tue, 12/07/2010 - 13:35 | 786097 Cdad
Cdad's picture

Wow...Goldman must be angry just now.  CNBC just named this the "Obama breakout!"

F'n amazing.

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