In testimony this morning before Congress’ Joint Economic Committee, Federal Reserve Chairman Ben Bernanke predicted “a host of economic problems, including the severe housing slump, will cause business growth to slow noticeably in coming months”, according to an Associated Press summary. Who’d have guessed that beneath Bernanke’s dull, banker-ish exterior was the sort of giddy optimism normally associated with a kid waiting on line to see a mall Santa?

Yesterday, Goldman Sachs economist Jan Hatzius issued a report describing California’s economy as being on the verge of falling into a recession. And if California goes, Hatzius warns, the national economy will follow. The villain, or at least the leading member of the cast of villains pushing California towards the edge, is the housing slump.

You may have missed news of Hatzius’ report, perhaps distracted by news that the governor is planning deep, across-the-board budget cuts, to be followed by more budget cuts, since the state’s budget deficit has swelled to an estimated $10 billion. Or perhaps you were distracted yesterday by the Dow’s 360 points drop.

Regardless of all the above, try to be cheerful. After all, the holidays are hard upon us. Soon, the malls will be filling up with Santas (many not smelling of booze, or stained by the weak bladders of the children who fill their laps). If you see Fed Chairman Ben Bernanke waiting on line for one of the jolly ol’ elves, please give him my regards.

Tags: Ben Bernanke, budget cuts, Congress' Joint Economic Committee, deficit, Federal Reserve, Goldman Sachs, governor, housing slump, Jan Hatzius, optimism, recession, Santa

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Tim Johnson 10 months ago 1 point
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Goldman Sach's economist doesn't know much about the California economy. Admittedly the economy has slowed. However since July over $30 billion in M&A's activity has occurred. If there is a credit crunch, it hasn't spilled over into business and industry. Additionally California adds 400,000 to 600,000 people a year. Thus, in four to six years it adds either a state of Louisiana or Oregon. Goldman Sachs should be examining how fast these actions will manifest themselves positively into the economy reversing the current housing slowdown. In a week of wildfires, a 5.6 earthquake the businesses in this proverbial economic giant completed nearly $1.3 billion in M&A and business capitalization activity. Rhetorically, what did your state do?
Goldman Sachs needs to read economic forecasts from UCLA, UC Santa Barbara, Univ. of the Pacific and Sacramento State. California, the nation's largest state economy deserves a more extensive review.

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