Goldman Sachs (GS) CEO Lloyd Blankfein thinks Washington will resolve the fiscal cliff before the end of the year, but says 2013 will still be a tough year.
"The next 12 months will be tricky," warned Blankfein, speaking at a conference Wednesday hosted by The New York Times' Dealbook. "Any compromise will involve some dose of austerity -- a deflationary policy."
That's a stark contrast to fellow Wall Street titan Jamie Dimon, CEO of JPMorgan Chase (JPM). Speaking earlier at the same conference, Dimon predicted that U.S. economy will soar within months of a fiscal cliff resolution being reached.
Blankfein, who has been attending meetings at the White House and participating in conference calls about the fiscal cliff, said that spending cuts and higher tax rates will have a dampening effect on economic growth.
"In the near-term, we will have certain kinds of winds that will come just by trying to balance the budget," he added.
While Blankfein is expecting a deal, he says it likely won't come until the very last minute since Washington is a "bizarre world."
"The fact that there is so little movement here now is consistent with a deal not getting done, but also consistent with a deal getting done," said Blankfein. "Any side that puts out its compromised position will not get shot at by the other side, but by its own side."
To avoid their own parties' wrath, moderates from both the Democrat and Republican parties will wait it out.
"The way this deal is going to happen is when both sides -- Democrats and Republicans -- put their hands on a proposal together just before the vote has to take place," said Blankfein.
Beyond this fiscal cliff, Blankfein said that Goldman Sachs is preparing for a "post-crisis world."
"We are still dealing with the legacies and there is a lot that could go wrong," said Blankfein. "We're where the United states was in 1944, where we were still fighting the war, but we knew it was going to be over. We knew who won, who the survivors were, and we started preparing for our post-world war."
We are now live on Twitter (finally) at the GS Annual Meeting. Follow us here for updates on our work, our research, and our people.
— Goldman Sachs (@GoldmanSachs) May 24, 2012
Welcome to Twitter, Goldman Sachs! The above tweet is how @GoldmanSachs announced its entrance to the Twittersphere on Thursday and by Friday morning, the account had racked up more than 10,741 followers.
Goldman Sachs (GS) timed the launch of its Twitter account MOREMaureen Farrell - May 25, 2012 9:40 AM ET
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