“…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
“…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 fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
“Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
“Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
“…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
“…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
“…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 must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
“Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
“…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
“…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
AI Summary.Global current account balances widened to about 3.8% of world GDP, driven mainly by a rise in China's surplus to about 0.6% of world GDP (3.7% of China's GDP) and larger surpluses across other Asian economies, while the United States remained the largest deficit economy at about 1% of world GDP. Imbalances are projected to remain elevated.
IMF StaffInternational Monetary Fund
Date Posted:
Global current account balances increased further in 2025 to ~3.8% of global GDP. The IMF calculates the rise was driven by a sharp increase in China’s surplus to ~.6% of global GDP (3.7% of China’s). The US deficit was ~1% of global GDP.
Are global current account imbalances widening as China's surplus grows?
Core argument: Global current account balances widened to about 3.8% of world GDP in 2025, continuing the upward trend since the pandemic and reversing the post-global-financial-crisis decline.
Global current account balances increased further in 2025 to about 3.8% of world GDP, continuing the upward trend observed since the pandemic and reversing the decline following the global financial crisis. The widening was driven primarily by a sharp increase in China’s surplus, which increased to about 0.6% of world GDP (3.7% of China’s GDP), alongside larger surpluses in several Asian economies, whereas the euro area surplus narrowed and oil exporters’ surpluses declined. At the same time, the United States remained the world’s largest deficit economy, with a current account deficit of about 1% of world GDP. Early 2026 trade data indicate that global imbalances are expected to increase slightly this year and are projected to remain elevated in 2027, with further increases in trade surpluses in China and other Asian exporters and weaker balances in the United States and the euro area.
Takeaways by Macro Roundup® AI
Global current account balances widened to about 3.8% of world GDP in 2025, continuing the upward trend since the pandemic and reversing the post-global-financial-crisis decline.
China’s surplus rose to about 0.6% of world GDP (3.7% of China’s GDP), driving the widening alongside larger surpluses in several Asian economies, while the euro area surplus narrowed and oil exporters’ surpluses declined.
The United States remained the world’s largest deficit economy at a current account deficit of about 1% of world GDP, and early 2026 trade data indicate global imbalances are expected to increase slightly in 2026 and remain elevated in 2027.
Related Articles:
Understanding Global Imbalances— The US, China, Germany, and Japan account for roughly two-thirds of global current account imbalances, with the US deficit at 4% of GDP financed by capital inflows into dollar assets. The average duration of a surplus or deficit spell roughly doubled since the 1980s, building large net foreign asset and liability positions.
Who Will Win The War Of Neo-Mercantilists?— China's manufacturing export surplus is around 2% of world GDP, roughly twice the largest surplus Japan ever ran, while domestic demand has stalled. Unexplained negative net income of about $125bn on its $4tn in net foreign assets, versus an expected $100bn surplus, supports the argument that the renminbi is about 30% undervalued.
The U.S. Trade Deficit: Myths and Realities— Taxing capital inflows would weaken the dollar but could raise domestic interest rates and depress investment, harming long-term growth, while an interest rate cut absent recession would be inflationary and erode any real depreciation needed to durably improve the trade balance. Fiscal restraint could weaken the dollar and reduce the trade deficit.
AI Summary.China's export growth accelerated after its currency depreciated, which the author argues is evidence that exchange rate moves, not just domestic demand, drive its trade surplus. Because Chinese domestic demand growth no longer pulls in imports, the author contends there is no realistic path to balanced trade without a stronger renminbi.
Brad SetserCouncil on Foreign Relations
Date Posted:
China’s export growth accelerated following the RMB’s depreciation in 2022, underscoring the role of exchange rates as a factor in external adjustment. Since rising domestic demand no longer lifts imports, Setser argues, reducing China’s trade surplus will require a stronger RMB.
Does balancing China's trade require a stronger currency?
Core argument: China requires a 1.5 percentage point contribution from net exports to growth each year, putting it on a collision course with trading partners absent a currency correction that supports more balanced trade even without trade restrictions.
The best evidence that exports responded to changes in the currency, and not simply to changes in the path of China’s internal demand, is the acceleration in China’s export growth after the RMB’s depreciation over the course of 2022. Those who believe the path of internal demand is critical to rebalancing and that exchange rate moves are secondary need to explain how an acceleration in domestic demand would, on its own, lead China’s external accounts to adjust. One important, stylized fact about China is that domestic demand growth is no longer feeding over to import growth (ex-gold, that is). Bottom line: China, which needs a 1.5 percentage point contribution from net exports every year, is on a collision course with its trading partners without a currency correction that provides the basis for more balanced trade even in the absence of trade restrictions. And there isn’t a realistic path towards balance that doesn’t involve a stronger RMB; there aren’t, as Paul Krugman once put it, immaculate transfers.
Takeaways by Macro Roundup® AI
China requires a 1.5 percentage point contribution from net exports to growth each year, putting it on a collision course with trading partners absent a currency correction that supports more balanced trade even without trade restrictions.
The acceleration in China’s export growth following the renminbi’s depreciation over 2022 is the best evidence that exports responded to the currency rather than to the path of China’s internal demand.
Domestic demand growth in China no longer feeds through to import growth, excluding gold, and no realistic path toward external balance avoids a stronger renminbi.
Related Articles:
The Year of the Trojan Fire Horse: China’s Imbalanced Economy and Unrelenting Mercantilism— About 30% of Chinese industrial companies are unprofitable "zombies" kept alive by subsidies far larger than those elsewhere, rather than exiting amid falling industrial producer prices. Countries with large increases in manufactured imports from China also saw slowdowns in domestic manufacturing, including declining manufacturing shares of output across most of Southeast Asia.
Why the World Needs to Force China’s Yuan to Revalue— Goods prices have fallen in China since the pandemic while rising in developed markets, driving the inflation-adjusted yuan exchange rate sharply lower and increasing China's competitiveness. Goldman Sachs economists estimate China's price discount versus foreign peers at 32% in electric vehicles, 38% in refrigerators and 53% in shoes.
The World Should Not Ignore China’s Undervalued Currency— China's reported current account surplus of about 4% of GDP is roughly 3 percentage points above the International Monetary Fund's estimated norm, implying a currency undervaluation of about 20%. Adjusting for surging gold imports and a misreported investment income deficit would lift the surplus to about 6% of GDP and the estimated undervaluation to 30–35%.
AI Summary.Foreign investors made roughly $1.5tn in net purchases of US equities from the start of 2024 through July, with chipmaking economies like South Korea and Taiwan helping fund American tech firms' AI buildout. Bloomberg Economics estimates about 20% of foreign US equity holdings were AI-related in 2025, versus roughly 10% in 2019.
Shawn Donnan, Estelle Ou and Jorgelina Do RosarioBloomberg
Date Posted:
The profits of South Korean and Taiwanese firms are flowing into AI-related US equities. A Bloomberg analysis found ~20% of all foreign holdings of US equities were in AI-related sectors, up from ~10% in 2019.
Are foreign investors funding America's AI buildout?
Core argument: Foreign investors held roughly $4.9 trillion of US-listed shares in AI-centered industries at the end of June, a sum roughly equivalent to Germany’s annual GDP, according to Bloomberg Economics’ analysis of Treasury data.
The AI boom is creating massive demand for high-end chips and new pools of savings in places that make them like South Korea and Taiwan which are flowing to fund American tech companies and their $9 trillion AI build out. Foreign investors made roughly $1.5 trillion in net purchases of US equities alone since the beginning of 2024 through the end of July. A Bloomberg Economics analysis of Treasury data shows that in 2025 roughly 20% of all foreign holdings of US equities were in AI-related sectors, up from roughly 10% in 2019. That number has grown with soaring valuations since then. But even assuming that 20% level, foreign investors had about $4.9 trillion of exposure to US-listed shares of companies in industries at the center of the AI boom at the end of June. That’s roughly equivalent to Germany’s annual GDP.
Takeaways by Macro Roundup® AI
Foreign investors held roughly $4.9 trillion of US-listed shares in AI-centered industries at the end of June, a sum roughly equivalent to Germany’s annual GDP, according to Bloomberg Economics’ analysis of Treasury data.
AI-related sectors accounted for roughly 20% of all foreign holdings of US equities in 2025, up from roughly 10% in 2019, per Bloomberg Economics’ analysis of Treasury data.
Foreign investors made roughly $1.5 trillion in net purchases of US equities from the start of 2024 through the end of July, with savings from chipmaking economies such as South Korea and Taiwan flowing to American tech companies and their $9 trillion AI build-out.
Related Articles:
Califoreboding— A basket of 42 AI stocks accounts for 60%-80% of all S&P 500 earnings growth, price returns and capital spending, while 60% of S&P 500 stocks sit 20% or more below their highs and only 30% outperform the index. AI-related construction spending has risen 38%, the only positive trend as manufacturing, commercial real estate and residential construction decline.
Financing the AI Buildout— The authors estimate roughly 57 gigawatts of operating US data center capacity against a planned development pipeline of about 509 gigawatts, which is not a completion forecast since projects may be delayed, scaled back, or abandoned. Their central scenario has 182.8 gigawatts of added capacity becoming operational through 2032, 117.2 gigawatts completed later, and 226.9 gigawatts never completed.
One Hundred Years in the U.S. Stock Markets— Over a century, U.S. publicly traded stocks generated roughly $91tn in shareholder wealth enhancement, with returns strongly positively skewed and dominated by a relatively small number of high-performing firms. Because most possible outcomes fall below the mean in a skewed distribution, the authors argue financial planning should focus on median outcomes or the full distribution.
AI Summary.The Congressional Budget Office projects that if interest rates run 1.5 percentage points above its economic forecast, deficits would be $6tn larger over 2026–2036, reflecting a $4.9tn rise in net interest costs and $1.1tn in added debt-service costs. Debt held by the public would reach 133.1% of GDP in 2036, 12.9 percentage points above its baseline.
CBO StaffCongressional Budget OffIce
Date Posted:
If interest rates rise 150bp above CBO’s current extended baseline over 2026–2036 (which would leave the 10-year Treasury with a mean yield of 5.8% over that period), deficits would be $6T larger over the period.
How much would higher interest rates add to deficits and debt?
Core argument: CBO projects that interest rates 150 basis points above its economic forecast would make deficits a total of $6 trillion larger over the 2026–2036 period than in its baseline projections.
[If] interest rates are 150 basis points higher than those in CBO’s economic forecast—deficits are a total of $6 trillion larger over the 2026–2036 period than they are in the agency’s baseline projections. That increase in deficits is attributable to a $4.9 trillion increase in net interest costs resulting from higher interest rates on the amount of debt in CBO’s baseline projections and a $1.1 trillion increase in debt-service costs. In 2036, debt held by the public reaches 133.1% of GDP—12.9 percentage points more than debt that year in CBO’s baseline projections.
Takeaways by Macro Roundup® AI
CBO projects that interest rates 150 basis points above its economic forecast would make deficits a total of $6 trillion larger over the 2026–2036 period than in its baseline projections.
The $6 trillion deficit increase comprises a $4.9 trillion rise in net interest costs on the debt in CBO’s baseline projections plus a $1.1 trillion increase in debt-service costs.
Under the higher-interest-rate scenario, CBO projects debt held by the public reaches 133.1% of GDP in 2036, 12.9 percentage points above its baseline projection for that year.
Related Articles:
The Budget and Economic Outlook: 2026 to 2036— The Congressional Budget Office projects the federal deficit will grow from $1.9tn (5.8% of GDP) to $3.1tn (6.7%) over a decade, above the 3.8% averaged over the past 50 years, with rising net interest costs driving much of the increase. Federal debt held by the public is projected to rise from 101% to 120% of GDP.
How Might Fiscal Policy Respond to the Rise of Artificial Intelligence?— The Congressional Budget Office estimates that a permanent 0.5 percentage point increase in annual productivity growth would lower publicly held federal debt after 30 years by 39% of GDP, offsetting roughly half the projected rise from 101% of GDP to 175%. Higher revenue and slower spending growth outweigh higher interest costs.
Soaring Bond Yields, Gaping Deficits and Towering Debts: What Could Go Wrong?— An analysis of 22 rich countries estimates that if each refinanced its entire debt at current five-year bond yields, Britain would need the largest primary surplus to stabilize its debt-to-GDP ratio, about 1.5%, followed by Italy at 1.4%, France at 1.2% and America at 1%.
AI Summary.A basket of 42 AI stocks accounts for 60%-80% of all S&P 500 earnings growth, price returns and capital spending, while 60% of S&P 500 stocks sit 20% or more below their highs and only 30% outperform the index. AI-related construction spending has risen 38%, the only positive trend as manufacturing, commercial real estate and residential construction decline.
Michael CembalestJ.P. Morgan
Date Posted:
Since January 2024, JPM’s 42 AI-related stocks drove 67% of S&P 500 returns, 58% of earnings growth, and 81% of capital spending. Cembalest notes, “the technology share of GDP growth has risen from almost zero in 2022 to ~33%,” and only 20% of states are outpacing national GDP growth, the lowest level since 1979.
How concentrated are US market and economic gains in AI?
Core argument: A basket of 42 AI stocks accounts for 60%–80% of all S&P earnings growth, price returns and capital spending since January 2024, with AI primarily benefitting AI supply chain companies rather than the companies adopting it.
A basket of 42 AI stocks accounts for 60%-80% of all S&P earnings growth, price returns and capital spending since Jan 2024. At the same time, 60% of S&P 500 stocks are down 20% or more from their all-time highs despite the market being close to all-time highs. Only 30% of stocks are outperforming the S&P 500, one of the lowest figures since 1991. AI is primarily benefitting AI supply chain companies rather than the companies adopting it. The technology share of GDP growth has risen from almost zero to 2022 to ~33%. Only 20% of US states are growing faster than the national average, almost the lowest figure since 1979. AI accounts for the only positive trend in US construction spending, having risen by 38% since January 2024. Unfortunately the other three main categories are down since then (manufacturing -28%, commercial real estate -13% and residential -6%). That’s why the decline in planned data center projects is something to watch.
Takeaways by Macro Roundup® AI
A basket of 42 AI stocks accounts for 60%–80% of all S&P earnings growth, price returns and capital spending since January 2024, with AI primarily benefitting AI supply chain companies rather than the companies adopting it.
60% of S&P 500 stocks are down 20% or more from their all-time highs even as the index sits near record levels, and only 30% of stocks are outperforming the S&P 500, one of the lowest figures since 1991.
AI accounts for the only positive trend in US construction spending, rising 38% since January 2024, while manufacturing is down 28%, commercial real estate 13% and residential 6%.
Related Articles:
Financing the AI Buildout— The authors estimate roughly 57 gigawatts of operating US data center capacity against a planned development pipeline of about 509 gigawatts, which is not a completion forecast since projects may be delayed, scaled back, or abandoned. Their central scenario has 182.8 gigawatts of added capacity becoming operational through 2032, 117.2 gigawatts completed later, and 226.9 gigawatts never completed.
How Much Revenue Does The AI Buildout Need In 2030?— The authors estimate AI capital spending of $560bn in 2026 and, in a high-investment case, $3.5tn of net AI capital in service by 2030, requiring roughly $1.3tn in annual infrastructure revenue once depreciation, operating costs and a 15% return are covered. That implies 7.4x growth from current annualized revenues, with downstream revenues of $1.9–2.6tn.
One Hundred Years in the U.S. Stock Markets— Over a century, U.S. publicly traded stocks generated roughly $91tn in shareholder wealth enhancement, with returns strongly positively skewed and dominated by a relatively small number of high-performing firms. Because most possible outcomes fall below the mean in a skewed distribution, the authors argue financial planning should focus on median outcomes or the full distribution.
AI Summary.France's official retirement age for full benefits was 62 in 2023, versus 67 in Denmark and the US, and its average actual retirement age was the lowest in Western Europe while life expectancy at 65 reaches about 87, two years longer than in the US.
Paul KrugmanKrugman Wonks Out
Date Posted:
The sharp rise in the price of credit default swaps on French government debt implies a 1.2% of default over the next 5 years, which Krugman thinks “is too low” and cautions “France may have crossed the line from too big to fail to too big to save.”
Does France retire earlier than other wealthy countries despite longer lifespans?
Core argument: France’s official retirement age for full benefits was 62 in 2023, compared with 67 in both Denmark and the United States, and its average actual retirement age was the lowest in Western Europe.
France does stand out, even among fiscally troubled nations, in one main way: its persistent inability to get realistic about retirement. The official French retirement age — the age at which workers can collect full benefits — was only 62 in 2023. By comparison, the retirement age in Denmark was 67 (which is also the age in the U.S.). The average actual age of retirement, which is always lower than the statutory age because some people choose to accept reduced benefits, was lower in France than anywhere else in Western Europe. You don’t have to be a conservative to see France’s early retirement as unsustainable, especially given that French life expectancy at age 65 is about 87 years of age, 2 years longer than in the US. France’s reliance on the euro means that it’s all too easy to see how this loss of confidence could turn into an ugly crisis.
Takeaways by Macro Roundup® AI
France’s official retirement age for full benefits was 62 in 2023, compared with 67 in both Denmark and the United States, and its average actual retirement age was the lowest in Western Europe.
French life expectancy at age 65 is about 87, two years longer than in the United States, a gap that strengthens the case that France’s early retirement is unsustainable.
France’s reliance on the euro makes it easy to see how a loss of confidence could turn into an ugly crisis.
Related Articles:
France’s Marine Le Pen Pledges To Rein In Public Spending— France's National Rally party, historically a champion of big-state spending, has pledged to clean up the country's degraded public finances alongside tax cuts it describes as a fully financed "competitiveness shock." The party also proposed lowering the retirement age from 62 to 60 for those who start working young, estimating €15bn–€20bn in pension savings from correcting "unjust or inefficient" measures.
France is the Biggest Loser in the Global Rates Reset— French government borrowing costs now exceed the country's nominal income growth by about 2 percentage points, the most unfavorable gap between borrowing costs and growth in the rich world. By contrast, Spanish and Greek bond yields remain about 2 percentage points below their income growth rates.
Le Boomer Spread— The gap between French and German 10-year government bond yields exceeded 140 basis points, up from 40–50 basis points, which the author attributes to political choices favoring pensioners over bondholders, including a suspended pension reform leaving the minimum retirement age near 62. French over-65s hold higher average incomes than working-age people.
AI Summary.Corporate profit margins, long regarded as one of the economy's most reliably mean-reverting series, have risen continuously so far this century. Measured through the national income accounts used in calculating GDP, profits now take a larger share of the economy than on the eve of the 1929 crash.
John AuthersBloomberg
Date Posted:
Is Database:
Database
Since 2000, post-tax corporate profits as a share of GDP have trended upward across cyclical setbacks and are now near an all time high, above their 1929 level.
Have corporate profit margins stopped reverting to the mean?
Core argument: Corporate profits measured in the National Income and Product Accounts take a larger share of the U.S. economy than on the eve of the 1929 Great Crash.
Throughout the 20th century, profit margins were regarded as one of the purest mean-reverting series in the economy. So far this century, however, margins have done nothing but rise. Measured with the National Income and Product Accounts, part of the GDP calculation, profits are currently taking a bigger share of the economy even than on the eve of the Great Crash in 1929. The series comes with a lag, so we can assume the profit share on this basis is comfortably at a record by now.
Takeaways by Macro Roundup® AI
Corporate profits measured in the National Income and Product Accounts take a larger share of the U.S. economy than on the eve of the 1929 Great Crash.
Profit margins were regarded throughout the 20th century as one of the purest mean-reverting series in the economy, yet so far this century they have done nothing but rise.
The National Income and Product Accounts profits series comes with a lag, so the profit share on this basis can be assumed to be comfortably at a record.
Related Articles:
US Focus: The Effect Of Soaring Profits— US nominal pre-tax corporate profits in the national accounts grew 23% over the past year, a pace not seen outside post-recession spikes since the mid-2000s. Wider margins were the key driver, as domestic profit growth far exceeded the 8% rise in corporate value added, pushing margins near all-time highs while the labor share hit new lows.
The Post‑COVID Decline in the Labor Share— The share of US national income paid to workers fell 1.6 percentage points below its pre-pandemic level, reaching a post-war low. The authors find this decline stems mainly from changes within industries rather than shifts in activity across sectors, following cyclical patterns seen in earlier recessions.
Are US Corporate Profit Margins Too High?— US after-tax non-financial corporate profit margins remain elevated by historical standards, estimated at 7.6% versus a post-1949 high of 8.2%, while employee pay as a share of non-financial corporate gross value added has fallen from 66% to 56%. One argument holds that subdued demographic growth leads companies to prioritize maximizing margins over expanding capacity.
AI Summary.A global bond sell-off pushed long-term borrowing costs in the US, Europe and the UK to their highest levels in decades, with the 30-year US Treasury yield reaching 5.73%, its highest since 2002. Investors cited concerns over inflation and high public debt burdens, with French and Italian yields also rising.
Ian Smith, Emily Herbert and Kate DuguidFinancial Times
Date Posted:
The US 10-year Treasury yield fell to 5.29% from 5.36% after strong auction demand. The 30-year yield rose to as high as 5.73%, its highest level since 2002, before settling at 5.66%.
Are inflation and debt worries pushing long-term yields to decades-highs?
Core argument: The 30-year US Treasury yield rose as much as 0.09 percentage points to 5.73%, its highest level since 2002, before easing to 5.66% following a strong 10-year Treasury auction.
A sell-off in US government bonds eased after an auction of 10-year Treasuries drew strong demand in a sign that investors were seeking to lock in the highest yields since the turn of the millennium. US 10-year Treasury yields, a benchmark for borrowing costs in the world’s biggest economy, climbed as high as 5.36% in volatile trading early on Wednesday. But yields fell back sharply after a $39bn auction went smoothly, with the 10-year recently trading at 5.29%. France’s 10-year borrowing costs rose to 4.87%, heading back towards the post-2002 high reached this month, amid persistent worries that the Eurozone’s second-biggest economy was heading for a debt reckoning.
Takeaways by Macro Roundup® AI
The 30-year US Treasury yield rose as much as 0.09 percentage points to 5.73%, its highest level since 2002, before easing to 5.66% following a strong 10-year Treasury auction.
A global bond sell-off pushed long-term borrowing costs in the US, Europe and the UK back to their highest levels in decades, as fears over inflation and high public debt burdens rattled investors.
French and Italian government bond yields each rose more than 0.1 percentage points, extending a series of wild swings in European government debt markets.
Related Articles:
France is the Biggest Loser in the Global Rates Reset— French government borrowing costs now exceed the country's nominal income growth by about 2 percentage points, the most unfavorable gap between borrowing costs and growth in the rich world. By contrast, Spanish and Greek bond yields remain about 2 percentage points below their income growth rates.
Soaring Bond Yields, Gaping Deficits and Towering Debts: What Could Go Wrong?— An analysis of 22 rich countries estimates that if each refinanced its entire debt at current five-year bond yields, Britain would need the largest primary surplus to stabilize its debt-to-GDP ratio, about 1.5%, followed by Italy at 1.4%, France at 1.2% and America at 1%.
How Might Fiscal Policy Respond to the Rise of Artificial Intelligence?— The Congressional Budget Office estimates that a permanent 0.5 percentage point increase in annual productivity growth would lower publicly held federal debt after 30 years by 39% of GDP, offsetting roughly half the projected rise from 101% of GDP to 175%. Higher revenue and slower spending growth outweigh higher interest costs.
