The pace of the new year is getting closer and closer, and it is time for investment bank analysts to make a year-end summary.

Looking back at 2020, Jan Hatzius, chief economist of Goldman Sachs Group, said in the latest research report that because the epidemic pushed the US economy into the worst but possibly the shortest recession in history, the forecasts he made for this year at the end of last year were almost completely wrong.

In this troubled year, he thinks he has learned four important lessons:

First, the integration of real-time data into the standard GDP and employment data framework can yield huge benefits, especially in times of crisis

Second, in order to add value, forecasters should be both flexible and eclectic, especially in times of crisis

Third, Keynesian economic policy has won two consecutive crises (meaning that people can "solve" debt with more debt until the debt building collapses).

Fourth, the masses and the market economy have extraordinary adaptability.

The importance of real-time data

Looking back at the beginning of the year, it was only after the blockade in northern Italy at the end of February that Goldman Sachs Group began to treat the epidemic cautiously and regarded it as a global impact.

In the following month, the bank slashed its second-quarter forecast for the US economy, but was relatively optimistic about the shape of the rebound after the first plunge in GDP data, raising its GDP growth forecast for 2021 to well above trend growth.

Why is Goldman Sachs Group so confident? The reason is that mobile phone locations, credit and charge card transactions, workers' teams and a range of other real-time data provide them with timely and detailed information on the details of the US economy.

In the face of these public data, Goldman Sachs Group invested a lot of resources to match the standard economic indicators such as GDP and employment rate.

When the US economy bottomed out in April, Goldman Sachs Group judged according to his forecasting model that the recovery would come quickly in the short term, raising the bank's optimism about the US economy in the third quarter and next year.

Goldman Sachs Group believes that the inclusion of real-time data in the standard economic indicator accounting framework can bring many benefits, especially during the crisis.

Understanding data from all directions and multiple angles

In his book, Philip Tetlock, a professor at the University of Pennsylvania, classifies "prophets" who predict the economy into two categories:

One is the hedgehog, this kind of people use a single model, everything can apply their own deductive reasoning.

Second, foxes, such people are inductive decision-makers, do not believe in an all-inclusive model, but will use several different methods for triangular analysis, and finally come to a conclusion.

In Goldman Sachs Group's view, 2020 is not a suitable year to use the "hedgehog" method for research, in this year, it would be better to become a "fox".

Specifically, Goldman Sachs Group was convinced that fiscal deficits put the private sector at greater risk of austerity in dealing with negative shocks, but in March, when the private sector ran a surplus, Goldman Sachs Group dared not take it lightly.

Goldman Sachs Group also believes that fiscal tightening usually seriously affects economic growth in the short to medium term. In August, Goldman Sachs Group saw an unusually high personal savings rate that was expected to ease the impact of fiscal tightening on spending, sparking Goldman Sachs Group's continued attention.

There are many similar examples, so I will not enumerate them here.

Printing money to save the market is right.

In the current world, "printing money" has become the norm.

Real GDP in the US fell at its worst ever in the second quarter, but disposable income also grew the most as the government increased its support for unemployment insurance, tax rebates and small businesses.

Some people worry that the massive stimulus measures will lead to an unstable rise in inflation expectations or lead to a currency run, but this has not actually happened.

Others say radical policies are necessary to stabilize financial markets and the real economy in times of extreme danger, and that stimulus measures prevent the possibility of an extremely negative second round of effects.

In Goldman Sachs Group's view, on the basis of the 2008 financial crisis, this year's epidemic crisis further demonstrated that monetary and fiscal policy makers should be very active in introducing demand-side stimulus measures in the face of a severe recession.

The supply side of the American economy is elastic.

Goldman Sachs Group also found that the masses and the market economy have a strong adaptability.

For example, at least from the employer's point of view, the sudden shift from office to home work is much less damaging than expected.

There has also been a seamless transition from offline physical shopping to online ecommerce: us retail sales returned to pre-epidemic levels as early as June, when offline shopping sales fell 35 per cent compared with the average.

Goldman Sachs Group further saw that so far, the supply side of the US economy has been very flexible: fewer bankrupt enterprises and more new enterprises than expected; although the labor market is still weak, the unemployment rate is still falling; as front-line health care workers learn more about the virus, the lethality of the virus has declined, and the impact of each epidemic wave on economic activity has been smaller than expected.

However, given that infection rates remain high, risk reduction measures such as wearing masks and ventilation are still important in the near term, but they may not be so necessary after people are vaccinated next year.