Goldman Sachs - A PERSPECTIVE ON CURRENT MARKET CONDITIONS

Remarks by E. Gerald Corrigan
Managing Director
Goldman, Sachs & Co.
A PERSPECTIVE ON CURRENT MARKET CONDITIONS
March 18, 2008
New York,


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Some interesting points made in the remarks

By my count, the last four decades have witnessed four such events (systemic shocks) as follows:

The LDC debt crisis of the 1980’s

The 1987 stock market crash

The 1997-98 Asia, Russia, Long Term Capital episode

The current credit market crisis



There can be no doubt that ample financial market liquidity and relatively low
interest rates were an important driving force behind the pervasive “reach for
yield” phenomenon of recent years and that the reach for yield phenomenon, in
turn was an important factor in driving the surge in demand for and supply of
highly complex structured credit products.



To a considerable extent, the “hot spots” where contagion forces have emerged share at least two common denominators; first; the risk aversion contraction in market liquidity; and, second ; various forms of leverage made it very difficult and costly to unwind positions.

we tend to forget that centuries of experience tell us in unmistakable terms that
bubbles almost never deflate gradually – they burst.

we must recognize that (1) given the credit-driven nature of the
crisis; (2) the dollar; (3) emerging inflationary risks; and (4) near-term risks to
economic growth, there are limits as to the extent to which Fed actions, by
themselves, can out-muscle the complex forces that are driving the credit crisis.