Belfast Telegraph

Goldman's euro chaos profit plan

By Stephen Foley

Goldman Sachs showered its hedge fund clients with ideas on how to profit from financial chaos in the eurozone, as markets gyrated wildly last month.

The giant investment bank provided ideas for complicated derivatives trades that would pay off if confidence ebbed in the soundness of the European banking system, and a top trading strategist told clients he believed the banks would need $1trn (£622bn) of extra capital to weather the crisis.

The alarming outlook was penned by Alan Brazil, a veteran strategist who sits on the Goldman trading desk, in a separate division to that which produces the bank's more formal and more widely disseminated economic and company research.

"Here we go again," Mr Brazil says in the report, amid pages of charts displaying negative statistics similar to those that portended problems before the 2007-09 financial panic. "Solving a debt problem with more debt has not solved the underlying problem. In the US, Treasury debt growth financed the US consumer but has not had enough of an impact on job growth. Can the US continue to depreciate the world's base currency?"

Mr Brazil penned his note on August 16, amid market vacillations that followed the loss of the US' AAA credit rating and the European Central Bank's attempt to stabilise interest rates for the Spanish and Italian governments.