Interviewed at the Investment Company Institute's (ICI) General Membership Meeting on Thursday, Blankfein told ICI president and CEO Paul Schott Stevens that he is relatively optimistic about the U.S. market. However, more growth would occur if businesses started taking some modest risks.
"Debt is cheap, but no one is borrowing to invest in their own businesses," Blankein said.
The Goldman CEO expressed some concern about the Federal Reserve balancing inflation concerns, spurred by the quantitative easing program, and on the other side, the prospect for a deflationary period.
"The country is in somewhat of a deflationary period now, because many people continue to think that, 'tomorrow will be better or cheaper,'" Blankfein said. He compared it to the Japanese mentality, where "deflation is insidious."
Still, with signs of recovery in parts of the economy, such as the housing market, it is a "terrific environment for growth," Blankfein said.
Lloyd Blankfein was less optimistic in discussing the European outlook, where he believes the situation is going to be "problematic for a long time."
The euro zone's governance structure presents some unique challenges, Blankfein said, such as coming up with an interest-rate policy that is "good for both Spain and Germany."
Echoing what has been a constant market headline in recent years, Blankfein questioned how long Germans will want to pay taxes that ultimately are going to support the weaker economies such as Greece. He also warned that if unemployment in the economically weaker countries such as Spain and Greece continue to rise, it could lead to social unrest.
The U.S. can only play a limited role in helping Europe to resolve the situation, he said. "We want them to succeed, but we have different views on the power of central government and regulations," Blankfein said. Nonetheless, "when they needed dollars, our government took a credit risk by swapping dollars for euros - we are doing a lot for them," he said.
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