Goldman analysts, led by Jim O’Neil, say the deleveraging cycle is happening but it won’t imperil long-term economic recovery, according to FTA.
"These are very rough `back of the envelope’ estimates. However, taken at face value, they suggest that holding everything else constant, deleveraging could shave about 1-2ppt off growth over the next three years as the US financial system recovers from the crisis, and about 0.5- 1ppt thereafter, as consumption as a share of GDP declines towards its historical average," the Goldman note says.
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"These are very rough `back of the envelope’ estimates. However, taken at face value, they suggest that holding everything else constant, deleveraging could shave about 1-2ppt off growth over the next three years as the US financial system recovers from the crisis, and about 0.5- 1ppt thereafter, as consumption as a share of GDP declines towards its historical average," the Goldman note says.