Maybe Someone Should Do Something About This

Jan Hatzius, Chief Economist at Goldman Sachs, has a bleak forecast:

We see two main scenarios for the economy over the next 6-9 months — a fairly bad one in which the economy grows at a 1½%-2 percent rate through the middle of next year and the unemployment rate rises moderately to 10 percent, and a very bad one in which the economy returns to an outright recession. There is not much probability of a significantly better outcome. The reason is that “short-cycle” factors such as the inventory cycle and the impulse from fiscal policy are likely to continue deteriorating through early 2011, keeping G.D.P. growth very sluggish.

One note about this is that they don’t try to model geopolitical risks, which as best I can tell are all on the downside. Say Israel launches a war with Iran and Iranian countermeasures end up disrupting global oil supplies, then we’re really doomed.