All of the big Wall Street banks keep economists on their payroll to forecast trends and assist their traders in establishing positions. Goldman Sachs happens to have one of the best in the industry in Jan Hatzius. Now, Hatzius is calling on the Fed to set an explicit nominal GDP target which, combined with more quantitative easing, would bolster economic growth. Hatzius's baseline scenario (no action on the Fed's part) has unemployment at over 7% at the end of 2015 (a truly scary proposition), he forecasts that a nominal GDP target combined with more QE could get unemployment under 7% before 2013 rolls around.
A rising tide (in terms of GDP) certainly lifts all ships-- a thriving economy wouldn't just be beneficial to Goldman; it would also be welcome relief for the millions of unemployed who have suffered through this crisis. And the biggest roadblock to Fed action right now is... Republican politicians. While Democratic (Krugman, Stiglitz, Roubini) and Republican (Mankiw, Rogoff) economists alike have called on the Fed to be more aggressive, Republican presidential candidates have all decided that Ben Bernanke should be replaced as Fed chairman... because he's done too much to help support the economy. Which is kind of an absurd position, given that, without his support, we would be looking at catastrophic unemployment worse than we had during the Great Depression.
But the real message to take out of this is that, when it comes to fixing the economy, Wall Street and Main Street are on the same page-- both would benefit from aggressive action by both the Fed and the government to tackle the unemployment problem. But it's politicians that are blocking the road path to fixing that problem.
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