[ by Melanie Gretchen ]

Goldman CEO Lloyd Blankfein is making his intentions clear.  As the U.S. fiscal cliff approaches, Mr. Blankfein, who is also Chairman of the investment bank, said that he's all for budget cutbacks in the long term but not right now.  Speaking at the Canadian Club of Toronto, the Goldman chief said there can't be another stimulus because of the consequences to the government's balance sheet. 

"You can't austere yourself into a higher GDP.  I'm all for implementing budget changes that accelerate over the long term, but in the short term I wouldn't take too much money away from people or cut back on a lot of expenditure programs."

A (Not So) Brave New World? In January, Bush-era tax cuts expire and across-the-board spending cuts are set to take effect, which economists warn could usher in another recession if Congress doesn't step in.  In response to questions from Royal Bank of Canada CEO Gord Nixon, Mr. Blankfein said no one is debating whether the US has a fiscal deficit problem, but the question remains how the US will resolve it.

"Things have always worked themselves through and I think they will now, but that fiscal cliff is looming as a real problem, and it doesn't have to be."

The Bigger Pictures. The U.S., though the largest economy in the world, is not the only one facing a tough road ahead, according to Mr. Blankfein.  The world economy, he said, will continue to "muddle through." 

Factors Affecting the World Economy

• Europe's growth problem
• The possibility of a breakup of the Euro
• A hard landing in China because a lot of the demand in the world over the last five years has come from China.

For now, he said, the U.S. has to convince the market it will deal with its problems in the long term.

"I'm very confident in the outcome, but you have to recognize that it is one of the risks of the world that instead of providing a lot of extra demand, China disappoints, but it won't be for a long time if it does."

For further details, go to [NY Post, 9/19/12].