Edward Conard

Top Ten New York Times Bestselling Author

  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
Upside of Inequality Oxford Unintended Consequences

AI Summary. Global institutional investors hedge only 41% of their foreign-currency exposure — the lowest rate since at least 2015 — leaving portfolios heavily exposed to dollar depreciation. A sudden shift in sentiment could trigger a self-reinforcing dollar selloff as unhedged holders rush to reduce exposure simultaneously.

Ruth Carson, Masaki Kondo, and Anya Andrianova Bloomberg
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A Bloomberg analysis finds only 41% of global investors’ foreign-currency exposure is hedged in six major markets, the lowest level since 2015. Foreigners now hold almost $40T of American assets.

Are unhedged dollar positions setting up a market crash?

Core argument: Global institutional investors hedged just 41% of their foreign-currency exposure as of June 30—the lowest share since at least 2015—leaving dollar-denominated assets acutely vulnerable to a sentiment-driven selloff.

Sift through the filings of pension funds and insurers around the world and one thing stands out: some of the biggest holders of US assets have little protection against a weaker dollar, leaving the currency at risk of steeper declines if sentiment suddenly turns. Across markets [Canada, Denmark, Australia, Taiwan, Japan and Finland for which data is available] investors hedged just 41% of their foreign-currency exposure as of June 30 — the lowest since at least 2015. While not a complete picture, it offers a glimpse into how the sudden rush last year to hedge against dollar losses triggered by President Donald Trump’s global tariff rollout has faded as the US currency slowly stabilized.

Takeaways by Macro Roundup® AI

  1. Global institutional investors hedged just 41% of their foreign-currency exposure as of June 30—the lowest share since at least 2015—leaving dollar-denominated assets acutely vulnerable to a sentiment-driven selloff.
  2. The retreat from peak hedging activity reflects fading demand for dollar-loss protection after the U.S. currency stabilized following the tariff-driven shock, compressing a key buffer against renewed depreciation.

Related Articles:

  • Financial Innovation and the International Monetary System — The U.S. dollar accounts for 59% of international payment values routed through SWIFT and ~90% of global foreign exchange turnover, while the Chinese renminbi has risen to 9% of foreign exchange turnover by displacing other major currencies, not the dollar.
  • The Global Balance Sheet 2026: Imbalance And Divergence — Paper wealth — asset price gains detached from real investment — drove nearly 60% of global household wealth growth in 2025, up from one-third historically. Only 20% came from net new real investment, compared to a 30% historical average.
  • Momentum, Rotation and the Value in Growth — Noting US underperformance relative to the world since the start of 2025, and the fact that the 5 largest US stocks now have a P/E only marginally above that…

AI Summary. 54 percentage point yield increase since 2022. The shift reflects reduced Federal Reserve absorption of long-duration debt, forcing private investors to demand greater compensation for interest rate risk.

Hanno Lustig The Two Cents
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Lustig presents a decomposition that attributes 156bp of the 254bp rise in the 10-year yield since March 2022 to an increase in the term premium, which he associates with the additional duration risk borne by investors as the Fed reduced its balance sheet.

Does reduced Fed demand for long-duration debt explain rising Treasury yields?

Core argument: Term premium accounts for 1.56 percentage points — nearly two-thirds — of the 2.54-point rise in the 10-year Treasury yield since March 2022, dwarfing the 98-basis-point contribution from rising expected short rates.

I plot a decomposition of the increase in the 10-year yield into a term premium component and a future short rate component. According to this measure, a big chunk —1.56 pps (or nearly 2/3 rds)— of the 2.54 pps increase in the 10-year yield since March 2022 is actually due to an increase in the term premium. That premium (the red line in the figure) turned negative around 2015, and [when] it bottomed out in 2020, yields (black line) were trading 135 bps below the path of future short rates (blue line). That’s not entirely surprising: The Fed was absorbing a large share of Treasury issuance at the long end of the yield curve —as well as MBS issuance— effectively removing a great deal of interest rate risk from the market.

Takeaways by Macro Roundup® AI

  1. Term premium accounts for 1.56 percentage points — nearly two-thirds — of the 2.54-point rise in the 10-year Treasury yield since March 2022, dwarfing the 98-basis-point contribution from rising expected short rates.
  2. The term premium bottomed at -1.355% in 2020, when Fed absorption of long-end Treasury and MBS issuance stripped duration risk from the market and pushed yields 135 basis points below the expected path of short rates.
  3. The term premium’s steady climb since 2022 signals that investors now demand compensation for bearing interest rate risk rather than paying for the privilege, reversing a multi-year structural distortion created by quantitative easing.

Related Articles:

  • What Are Bond Markets Telling Us? — U.S. bond market indicators, including long-term inflation expectations and default insurance prices, show no meaningful rise in concern about government insolvency or debt sustainability.
  • What Are US Treasury Markets Really Telling Us? Part I — Lusting agrees with Krugman that low CDS prices on Treasurys argue against default panic, but finds them a weak signal. Constructing synthetic Treasuries from…
  • America’s Risky Debt: What Markets See That Policymakers Don’t — The safety premium that investors historically paid for US government bonds over equivalent alternatives has compressed toward zero and, at longer maturities, reversed — with global investors now pricing foreign government bonds as safer than US Treasurys.

AI Summary. Heavy corporate investment in new technology can shift businesses from net savers to net borrowers, absorbing household savings and widening the current account deficit, as occurred during the early-2000s technology boom.

Robin Brooks Robin Brooks Substack
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Brooks argues, “The AI buildout isn’t why government bond yields are rising,” noting the US non-financial corporate sector was a net saver as of Q1 2026, which suggests government deficit spending is driving up long yields.

Does massive technology investment shift corporations from savers to borrowers?

Core argument: Government dissaving—not corporate capital expenditure—is the primary driver of U.S. domestic savings consumption and current account deterioration.

The chart shows quarterly data for the US saving-investment balance going back to 1990. This is an identity that apportions the current account balance into net saving in various sectors of the economy. Households tend to be net savers, as is the financial sector and non-financial corporates. The government tends to be a net borrower. The last time we had a lot of excitement about technological innovation and higher productivity growth was in the “IT bubble” of the early 2000s, which saw non-financial corporates flip from being net savers to borrowers, i.e. the capex buildout at the time was very large and - for a few years - accounted for the entire current account deficit. Nothing like that’s happening now. It’s government dissaving, i.e. the budget deficit, that’s eating up resources, while the non-financial corporate sector stayed a net saver in data through the first quarter of this year.

Takeaways by Macro Roundup® AI

  1. Government dissaving—not corporate capital expenditure—is the primary driver of U.S. domestic savings consumption and current account deterioration.

Related Articles:

  • AI Is Driving Up Treasury Yields: ‘It Just Touches Everything’ — Heavy corporate bond issuance driven by AI investment has reduced demand for long-term government debt, pushing 10-year Treasury yields up ~0.3 percentage points as investors rotate into higher-yielding corporate bonds.
  • The Other US Capex Question — Weak non-AI business investment in the U.S. is driven primarily by near-zero labor force growth from tightened immigration policy, not by AI spending crowding out capital, since corporate savings are sufficient to fund both simultaneously.
  • Corporate America Is Minting Money—and Not Just in Tech and Finance — S&P 500 earnings per share are growing above 13% year-over-year for the sixth consecutive quarter, with sales rising at the fastest pace since late 2022 and margins expanding across most sectors. The gap between earnings-per-share growth and net income growth has narrowed to under 1 percentage point, indicating profit gains

AI Summary. The gap between long-term government bond yields and equivalent swap rates has narrowed to its smallest in months, reflecting increased investor willingness to hold long-dated government debt following expanded buybacks of longer-dated bonds.

Greg Ritchie and Elizabeth Stanton Bloomberg
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Modest compression of the spreads between Treasury yields and synthetic “swap” securities (~5.5bp for the 30 year and ~3bp for the 10 year) suggest Bessent’s Treasury purchase program has had a degree of success at lowering long-term government yields.

Are investors returning to long-term government bonds?

Core argument: The 30-year Treasury-swap spread narrowed to its smallest since February following Bessent’s announcement, as Treasuries outperformed equivalent-maturity swaps and benchmark yields drifted lower.

Since Bessent’s announcement, Treasuries have outperformed equivalent-maturity swaps, narrowing the 30-year spread to the smallest since February. Swaps are popular with some investors as an alternative to owning bonds; the gap between [swap rates] and US government yields [gauges] how willing [investors] are to hold Treasuries instead. The 10-year swap spread has compressed too, with the gap three basis points smaller at around 38 basis points. Still, the recent drop has only dented a years-long rise in long-term US government borrowing costs. The 10-year US yield inched up 3bp to 4.66% after touching 4.75% last week. “While conducting buybacks at the long end of the yield curve may technically decrease yields, higher structural US budget deficits, which [require] a significant supply of Treasuries to finance the US debt, [are] not changing anytime soon,” said Libby Cantrill, head of public policy at Pimco.

Takeaways by Macro Roundup® AI

  1. The 30-year Treasury-swap spread narrowed to its smallest since February following Bessent’s announcement, as Treasuries outperformed equivalent-maturity swaps and benchmark yields drifted lower.
  2. The Treasury’s plan to at least double longer-dated bond buybacks drove the repricing.
  3. the swap-yield gap—a direct gauge of investor preference for Treasuries over derivatives—compressed in response.

Related Articles:

  • Let the Bond Market Speak — Treasury intervention in a functioning bond market suppresses the price signal that transmits collective market information to decision makers, removing the mechanism by which orderly volatility performs its intended economic function.
  • US 30-Year Bonds Erase Gains From Treasury’s Buyback Surprise — US government bond yields have returned to near two-decade highs despite a buyback program targeting long-dated debt, indicating that investor concern over rising government borrowing remains unresolved.
  • America’s Risky Debt: What Markets See That Policymakers Don’t — The safety premium that investors historically paid for US government bonds over equivalent alternatives has compressed toward zero and, at longer maturities, reversed — with global investors now pricing foreign government bonds as safer than US Treasurys.

AI Summary. The safety premium that investors historically paid for US government bonds over equivalent alternatives has compressed toward zero and, at longer maturities, reversed — with global investors now pricing foreign government bonds as safer than US Treasurys.

Hanno Lustig Aspen Economic Strategy Group
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Lustig shows the premium investors pay for Treasurys over substitutes such as AAA corporate debt and G10 sovereign debt has compressed post 2020. “Investors are now indifferent between [Treasurys] and close substitutes.”

Are global investors losing confidence in US government debt safety?

Core argument: The U.S. Treasury safety premium has compressed to near zero post-2022 and at points reversed, signaling that markets no longer treat Treasurys as unambiguously superior to credit-risk-adjusted corporate equivalents.

The top panel uses the credit risk-adjusted AAA-Treasury spread. We use the CDS to strip the default-risk compensation out of the corporate-bond yield. What remains is a clean estimate of the safety premium that investors pay for Treasurys over otherwise-equivalent corporate exposure. Post-2022, it has compressed toward zero, and at points, has reversed. The bottom panel uses the Treasury Premium, defined as the difference between the synthetic-dollar foreign sovereign yield and the US Treasury yield at the same maturity. The synthetic-dollar foreign yield is constructed by swapping the coupon payments on foreign G10 sovereign bonds into dollars using the foreign-exchange forward market. This eliminates currency risk over the life of the bond, so the resulting dollar cash-flow stream is directly comparable to a US Treasury yield of the same maturity. At longer maturities, global investors now seem to prefer the safety of foreign G10 bonds.

Takeaways by Macro Roundup® AI

  1. The U.S. Treasury safety premium has compressed to near zero post-2022 and at points reversed, signaling that markets no longer treat Treasurys as unambiguously superior to credit-risk-adjusted corporate equivalents.
  2. At longer maturities, global investors now price dollar-hedged G10 sovereign bonds above U.S. Treasurys, marking a structural erosion of the safe-haven premium that has historically anchored U.S. borrowing costs.

Related Articles:

  • The United States Capital Structure — Government bondholders hold the riskiest position in the U.S. fiscal structure, absorbing adverse shocks through inflation or financial repression, while entitlement recipients function as senior claimants whose payments are politically protected.
  • Are Government Bonds Safe in Times of War and Pandemic? — US government bonds, normally safe assets, become risky in times of war because of negative real returns due to bursts of inflation. As in the fiscal theory of…
  • U.S. Treasury Investors Are Long in AI — U.S. government debt acts as a leveraged bet on long-run productivity growth, because tax revenue rises automatically with faster growth while spending commitments stay flat. Each 0.1 percentage point increase in permanent productivity growth raises the fundamental value of government debt by $1.3tn, implying a 71 basis point decline in

AI Summary. Japan holds $1tn in U.S. government bonds — the largest foreign position globally — giving the U.S. a strong incentive to support a stronger yen rather than risk Japan selling those bonds or raising rates sharply enough to redirect domestic capital away from U.S. debt markets.

Katie Martin Financial Times
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To shield Treasuries from selloffs and higher yields, the US prefers its own yen support tools: ESF yen purchases as a signal and the Fed’s rarely used FIMA facility, lending Japan dollars against Treasuries to forestall direct Japanese Treasury sales.

Does the U.S. need a stronger yen to protect its debt markets?

Core argument: Japan’s $1 trillion in U.S. Treasury holdings—the world’s largest foreign position at ~4% of total outstanding—give the U.S. a direct strategic interest in defending the yen, as Japanese dollar sales would intensify pressure on a 10-year yield already at 4.7%.

Japan has two traditional routes to push up the battered yen. One is a massive rise in Japanese interest rates, and the other is massive sales of dollars — i.e., of US Treasuries. Neither would be good news for the US. Japanese yields are already seriously elevated by historical standards — 2.8% on the 10-year and 4% on the 30-year. The US is just not in a position to lose a big buyer of Treasuries when its own 10-year yield is tickling 4.7% and the 30-year is well over 5. And it certainly can’t tolerate a big seller of Treasuries, in the form of Japanese authorities selling dollars, hoping to prop up the yen. (Japan’s Treasury holdings already lead the world, at $1tn, or just below 4% of the total outstanding.) Much better to stand behind Japan and hope to scare off the yen sellers. Recent use has been made of the Exchange Rate Stabilization Fund [ESF] to signal that intent. Bessent has also said he will encourage the Fed to bump up Fima, the Fed’s international repo facility, in the coming months. This tool has rarely been wheeled out since it was established during the 2020 Covid shock. Its current $60bn per counterparty, per day limit has been reached just once. The fact that US authorities approved the use of this facility suggests the US side sees potential risk that fx intervention could push up US Treasury yields.

Takeaways by Macro Roundup® AI

  1. Japan’s $1 trillion in U.S. Treasury holdings—the world’s largest foreign position at ~4% of total outstanding—give the U.S. a direct strategic interest in defending the yen, as Japanese dollar sales would intensify pressure on a 10-year yield already at 4.7%.
  2. U.S. participation in Friday’s joint yen intervention, executed via euros from the Exchange Stabilization Fund, delivers a credible “back off” warning to yen sellers without triggering the Treasury market disruption that direct dollar sales would cause.
  3. Japan’s 10-year yield at 2.8% and 30-year at 4%—elevated by historical standards—redirect domestic capital away from U.S. Treasuries, compounding Washington’s vulnerability at a moment when its 30-year yield exceeds 5%.

Related Articles:

  • US and Japan Aim to Transform Yen Landscape With Joint Moves — A coordinated currency intervention by the US and Japan to strengthen the yen exceeded the scale of previous joint efforts, with Japan alone spending an estimated $53bn in a single day.
  • Shadow Government Bond Yields in the G10 — Government bond yields across major economies are artificially suppressed by central bank intervention; if those interventions were removed, long-term yields would rise materially above current market levels.
  • Global Debt Report 2026 — Across the OECD last year, $13.5T of governmental debt needed refinancing, 70% ($9.5T) of which was US debt, up from 57% in 2020. The US and Japan were…

AI Summary. The 30-year inflation-protected US government bond yield has reached levels seen only briefly during the 2008 financial crisis, signaling severe stress in long-term inflation expectations and potential damage to central bank credibility.

John Authers Bloomberg
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The 30-year TIPS yield is at an all-time high – excluding a few days during the 2008 crisis.

Are long-term inflation expectations breaking down despite central bank efforts?

Kevin Warsh raised more questions than he answered at his press conference last Wednesday. Non-farm payrolls this week, and interventions from other Fed officials, might clarify things. For now, two points. First, Warsh confused people, but the point of not offering guidance is that the market forms its own view from the data, and the projected course of interest rates at the end of the week was barely changed. Second, something is afoot in long-term yields, which suggests possible damage to the Fed’s credibility. The 30-year TIPS (Treasury Inflation-Protected Security) yield has only ever been higher for a few days at the worst of the 2008 crisis. That’s not good.

Related Articles:

AI Summary. Paper wealth — asset price gains detached from real investment — drove nearly 60% of global household wealth growth in 2025, up from one-third historically. Only 20% came from net new real investment, compared to a 30% historical average.

Rebecca Anderson, Jan Mischke, Arvind Govindarajan, Sylvain Johansson, et al. McKinsey
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A McKinsey analysis finds global wealth is increasingly composed of “paper wealth,” driven by the rise of US equity values to 2.4x the book value of net corporate assets, and the debt of Chinese corporations, which grew to 80% of their real asset value.

Is global wealth growth becoming increasingly disconnected from real economic activity?

Core argument: Paper wealth drove ~60% of global household wealth growth in 2025, nearly double the one-third average from 2000–2024, as asset price gains increasingly decoupled from underlying economic activity.

In 2025, global wealth growth was driven to a greater extent by paper wealth, or nominal asset value growth decoupled from the real economy. Only 20% of household wealth growth was based on net new investment (real assets including machinery and equipment, homes and buildings, infrastructure, and intellectual property, less depreciation), compared to 30% on average from 2000 to 2024. Nearly 60% came from asset price growth above and beyond general inflation and negative net worth positions from other sectors. [For example, this includes equity value growth above net assets for corporations as well as government bonds greater than the book value of government assets]. This was a marked increase over the average from 2000 to 2024, when paper gains drove one-third of global wealth growth.

Takeaways by Macro Roundup® AI

  1. Paper wealth drove ~60% of global household wealth growth in 2025, nearly double the one-third average from 2000–2024, as asset price gains increasingly decoupled from underlying economic activity.
  2. Net new real investment—spanning machinery, buildings, infrastructure, and intellectual property net of depreciation—accounted for only 20% of household wealth growth in 2025, down 10 percentage points from the 2000–2024 average of 30%.

Related Articles:

  • The Next Crash: Why This Time Might Not Be Different — U.S. stocks are historically expensive, with the gap between earnings yields and inflation-adjusted bond yields at 1.4% — well below the 4.7% long-run average. When this gap is this narrow, 10-year stock returns have historically been poor.
  • The Summer I Turned Pretty — Capital spending booms historically peak when end-demand companies stagnate while equipment suppliers still thrive; today, semiconductor profits are rising even as the large cloud companies funding AI infrastructure see earnings and cash flow decline, raising doubt over who will sustain AI investment.
  • One Hundred Years in the U.S. Stock Markets — Btw January 1926 and December 2025, 60% of US firms had negative total returns relative to T-bills. 46 firms accounted for half of the $91T in net wealth…