Edward Conard

Top Ten New York Times Bestselling Author

  • “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
  • “…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
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…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 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
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Tuesday, April 20, 2021

AI Summary. The authors argue that China's entry into global production, with its low-cost workforce, was pivotal in suppressing wage and price inflation in advanced economies rather than effective monetary policy alone. They contend that an aging population, slower labor force growth, and declining globalization are reversing this, reviving the inflation-unemployment tradeoff as workers' bargaining power strengthens.

James Pethokoukis American Enterprise Institute
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China’s disinflationary impact put the Phillips Curve into a coma. Demographic shifts & declining globalization are reversing this trend, reviving the Phillips Curve & leading to higher inflation.

Will aging populations and less globalization push inflation higher?

Core argument: Goodhart and Pradhan argue that China's disinflationary impact, rather than effective monetary policy, was the pivotal force behind low inflation since the 1990s, putting the Phillips Curve into a coma.

The low inflation environment since the 1990s is often attributed to effective monetary policy, but Goodhart and Pradhan argue that China's disinflationary impact was pivotal, putting the Phillips Curve into a coma. China's role allowed advanced economies to focus on consumption, leveraging its tech revolution and low-cost workforce, which suppressed wage and price inflation. However, demographic shifts, such as an aging population and reduced labor force growth, alongside declining globalization, are reversing these trends. This reversal is expected to revive the Phillips Curve, leading to higher inflation as labor bargaining power strengthens and monetary aggregates rise. The pandemic's economic policies further accelerate this shift, suggesting inflation will increase sooner than central banks anticipate, impacting debt management and potentially reducing inequality.

Takeaways by Macro Roundup® AI

  1. Goodhart and Pradhan argue that China's disinflationary impact, rather than effective monetary policy, was the pivotal force behind low inflation since the 1990s, putting the Phillips Curve into a coma.
  2. Goodhart and Pradhan contend that China's low-cost workforce and tech revolution suppressed wage and price inflation, allowing advanced economies to focus on consumption.
  3. Goodhart and Pradhan expect an aging population, slower labor force growth, and declining globalization to revive the Phillips Curve, raising inflation sooner than central banks anticipate as labor bargaining power strengthens.

Goodhart/Pradhan on what created the low inflationary environment that has set our expectations, “…Goodhart: People generally assume that the low, steady inflation that started in the 1990s is due to better monetary policy and the central bank’s ability to keep inflation down. We disagree. Pradhan: Central banks have picked up so much credibility because there’s debate that the Phillips Curve is dead and, as a result, central banks only have to worry about growth, as opposed to inflation. It makes their job relatively easy: If growth goes down, you cut rates. And if growth looks like it’s overheating, you raise rates to slow things down. But we argue that it’s China that put the Phillips Curve in a coma — and that the pandemic and demography are going to revive it.China was a massive disinflationary force because it allowed the US and other advanced economies to focus on consumption which, while keeping average global composition of growth pretty sound, really only resulted in investment in China. Also, the West was able to harness China’s technology revolution and well-trained and low-cost workforce. This all worked against what you would see in the Phillips Curve. Goodhart:At the same time, there was a huge influx of female workers and Baby Boomers into the workforce, which shocked the sector and led to weak bargaining power and lower inflation on wages and prices.Pradhan: Unfortunately, the central bank’s models didn’t catch these strong inflationary forces lurking in the background and instead attributed low inflation to their inflation-targeting regimes….”

James Pethokoukis, "5 questions for Charles Goodhart and Manoj Pradhan on global inflation and demographic reversal," American Enterprise Institute, April 17, 2021, https://www.aei.org/economics/5-questions-for-charles-goodhart-and-manoj-pradhan-on-global-inflation-and-demographic-reversal/

5 questions for Charles Goodhart and Manoj Pradhan on global inflation and demographic reversal

Why have America’s inflation rates been so low for decades? How do long-term demographic forces affect inflation? And would higher inflation really be a bad thing for Americans? Recently, I explored these questions and more with Charles Goodhart and Manoj Pradhan.

Below is an abbreviated transcript of our conversation. You can read our full discussion here. You can also subscribe to my podcast on Apple Podcasts or Stitcher, or download the podcast on Ricochet.

Charles is a financial markets professor emeritus at the London School of Economics, and a former member of the Bank of England’s Monetary Policy Committee. Manoj is the founder and chief economist of the independent macroeconomic research firm Talking Heads Macro. They are the co-authors of The Great Demographic Reversal: Ageing Societies, Waning Inequality, and an Inflation Revival, released last August.

What is the current economic consensus on inflation? Why have we had low inflation over the past few decades?

Goodhart: People generally assume that the low, steady inflation that started in the 1990s is due to better monetary policy and the central bank’s ability to keep inflation down. We disagree.

Pradhan: Central banks have picked up so much credibility because there’s debate that the Phillips Curve is dead and, as a result, central banks only have to worry about growth, as opposed to inflation. It makes their job relatively easy: If growth goes down, you cut rates. And if growth looks like it’s overheating, you raise rates to slow things down. But we argue that it’s China that put the Phillips Curve in a coma — and that the pandemic and demography are going to revive it.

China was a massive disinflationary force because it allowed the US and other advanced economies to focus on consumption which, while keeping average global composition of growth pretty sound, really only resulted in investment in China. Also, the West was able to harness China’s technology revolution and well-trained and low-cost workforce. This all worked against what you would see in the Phillips Curve.

Goodhart: At the same time, there was a huge influx of female workers and Baby Boomers into the workforce, which shocked the sector and led to weak bargaining power and lower inflation on wages and prices.

Pradhan: Unfortunately, the central bank’s models didn’t catch these strong inflationary forces lurking in the background and instead attributed low inflation to their inflation-targeting regimes.

But your book argues that this dynamic is reversing, resulting in higher inflation. Tell me about this reversal.

Goodhart: First off, demography has clearly reversed in regards to ratio dependence, particularly with the old. The surge in the proportion of those who are actually working in the population is going to reverse, and the old actually consume more than those who are working age, as they consume a lot of public goods.

Beyond that, there’s a decline in globalization, for obvious political reasons. This will reverse the 40-year decline of bargaining power for labor in the West. These underlying trends — combined with the policy responses to COVID — are going to cause higher inflation much earlier than central bankers now predict.

Pradhan: If you look today, monetary aggregates are at very high levels. And the decline in velocity that has been holding monetary aggregates back will normalize as we hopefully start living more normal lives. And at the same time, that massive pool of personal savings that we’ve seen accruing will start to be spent, causing the output gap to close very quickly. By the end of 2022, it’s likely you’ll see monetary aggregates and the Phillips Curve pointing in the same direction towards higher inflation.

Is this good news? Inflation can sometimes be beneficial, right?

Pradhan: It depends. If you’re looking at the parts of the labor force that have not able to keep up with purchasing power, it wouldn’t be bad because you’re talking about a reduction of within-country inequality, which is good news. Inflation will also bring a small increase in productivity, a lowering of the real burden of debt, and many other benign developments. So initially, the broad effects of inflation will be welcomed as a huge success by nearly everyone.

But once it starts getting into things like financial markets or people’s earnings quality, inflation has significant attritional effects that make it very difficult. So while governments will welcome inflation because they’re the ones issuing debt, the central banks won’t like it. If they start to fight inflation, I fear that the ill effects from the slowdown they will try to induce will be very hard. So basically, this will be an attritional story that gets uglier over time.

Why aren’t other macroeconomists talking about this? As we mentioned earlier, the consensus seems to be that these are problems not worth really giving much attention to.

Goodhart: For one, our story is global, whereas people tend to think only in terms of their own nation-state. So the effect of China, which inflated the world, has been ignored. Moreover, all the Phillips Curve stuff concentrates on the level of employment and unemployment relative to inflation in one country. But given globalization, you cannot really do that.

Economists have also tended to focus on the short-term rather than the medium- and longer-term, which means they can easily ignore demography, as it is very slow-moving. It started to change in 2010, but it’s only beginning to pick up steam right now, especially as a lot of working forces are declining and the need for people in service economies is increasing. That’s effectively going to force wages up as people chase for labor.

If your theory is right, should I be concerned about the amount of debt that the US government is taking on?

Goodhart: Concerned, but not despondent. Public spending on an aging society means a much higher level of taxation will have to be imposed on an increasingly small working group. The problem is that taxes are always extremely politically unpopular. So because of the unpopularity of taxation, we ultimately think inflation will rise. Politicians just will not raise tax rates sufficiently to bring what is currently a very large primary deficit back into balance.

Pradhan: Clearly, reducing the debt burden has to be faced through inflation, partly through central banks permanently holding a significant amount of the government debt on their balance sheets. But the central banks are greatly overestimating their ability to reduce their balance sheets to what they were before the Great Financial Crisis. In fact, they will have to become part and parcel of absorbing, and perhaps increasing, a steady supply of government bonds by turning them effectively into consols so that the government can issue and reissue them for the central bank to keep absorbing. Without that, I think the challenges that Charles has laid out will become a lot harder.

Ed Comment:"I don't know if we get inflation. Like everyone, I'm overly anchored by my historical expectations. But I believe China held down prices in underestimated ways, that globalization has largely run it course, as we gave offshore much of what was economically logical to offshore, and that demographics will gradually raise consumption faster than output as baby-boomers retire and "consume" their savings, though I'm not sure what that means given there is no production stored in caves (only in houses). I suspect that means they sell financial assets at lower prices than they expect to domestic and foreign buyers. But again, I'm not sure what that means because presumably prices fall to discourage sales. I also agree the policymakers would love inflation over taxation. But increased taxation, which funds consumption with precious equity that funds and underwrite the discovery of innovation at the margin, instead of cheap debt, which seems inevitable given we seems unlikely to raise middle-class taxes cut first by Republicans (which I publicly oppose) and soon to be by Democrats (which is why Republicans never should have done it in the first place), will slow growth and subsequently inflation. Either way--taxation directly or through inflation--perhaps preferable through unexpected inflation IF it taxes bondholders, although presumably that just taxes future borrowers via higher interest rates, it will slow growth by increasing consumption relative ti investment. Regardless, these 3 aspects of the story of the economy--slowing globalization, demographics, and inflation/taxation--that must be told (by me) to get the story 100% correct, i.e. flawless."

AI Summary. An estimated 17% of American workers are classified as low marginal product workers, contributing less to output than they cost to employ. Roughly 70% of these workers leave their jobs within a year.

Victoria Gregory Federal Reserve Bank of St. Louis
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17% of American workers are low marginal product workers, contributing less to output relative to their employment cost, with 70% leaving their jobs within a year.

How many American workers cost employers more than they produce?

Core argument: 17% of American workers are classified as low marginal product workers, contributing less to output relative to their employment cost.

In the current labor market, 17% of American workers are classified as low marginal product workers, indicating they contribute less to output relative to their employment cost. This segment of the workforce is characterized by high turnover, with approximately 70% leaving their jobs within a year. Such dynamics suggest a significant portion of the labor force is not fully utilized, potentially impacting overall productivity and economic growth. The high attrition rate among these workers may also lead to increased hiring and training costs for employers, further straining resources. Addressing this issue could involve targeted policy interventions to enhance worker skills and productivity, thereby reducing turnover and improving economic efficiency.

Takeaways by Macro Roundup® AI

  1. 17% of American workers are classified as low marginal product workers, contributing less to output relative to their employment cost.
  2. Roughly 70% of low marginal product workers leave their jobs within a year, a turnover rate that may raise employers' hiring and training costs.
  3. The prevalence of low marginal product workers suggests a significant share of the U.S. labor force is not fully utilized, with potential effects on productivity and economic growth.

The Alpha Beta Gamma of the Labor Market: Extended Excerpt Image 1


Victoria Gregory, Guido Menzio, and David Wiczer, "The Alpha Beta Gamma of the Labor Market," Federal Reserve Bank Of St. Louis, April 2021, https://s3.amazonaws.com/real.stlouisfed.org/wp/2021/2021-003.pdf

Ed Comment:. I edited my claim that low skilled workers turn over frequently form my Harvard Q&A because I only had my experience to back it up (and I didn’t want to talk about Bain’s portfolio companies but this provides the evidence. Highlight this factoid (the reason for including the entry): 70% of low-skilled workers (who represent 17% of workers) leave their job within a year.

Research from FRBSL breaks American workforce into three types of workers in terms of quality. By their measure (though my descriptive words, only 57% of America workers are high quality, and 17% of American workers are effectively low marginal product workers, for example high likelihood of leaving a job within 3m

α (57% of workers)"...On average, α workers have the shortest unemployment spells, the highest likelihood of reaching 2 years of tenure on the same job, and the highest labor income while employed...."so high quality workers.

γ (17% of workers)"...In contrast,γ workers have the longest unemployment spells, a very high likelihood of leaving a job within the first quarter from its inception, a very low likelihood of reaching two years of tenure on a job, and the lowest income while employed...."so low quality, ~ low marginal product workers

β (26% of workers)"...Workers of type β are in between α’s and γ’s..."

What these groups look like by age, gender and educational attainment, "...Using the output of the k-means algorithm, we can assign each individual worker in the data to a particular type. We can then compute the average of some observable characteristics for different types of workers. We find that the average birth year is 1963 for α-workers, 1964 for β-workers and 1967 for γ-workers. These small age differences seem to rule out the possibility that the algorithm simply picks out differences in transition patters that are related to the life cycle of a worker.We find that the fraction of women is 48% for α-workers, 49% for β-workers, and 46% for γ-workers. Again, we take this evidence that the algorithm is not splitting workers based on gender. Lastly, the fraction of workers with some college education is 62% for α workers, 56% for β-workers, and 50% for γ-workers. Along this dimension, there are starker differences, and yet having some college education hardly predicts a worker’s type..."
Core findings, "....Different types of workers have very different patterns of labor market transitions. First, consider the distribution of job durations for different types. For α-workers, the fraction of job spells lasting less than 1 quarter is 14% and the fraction of job spells lasting more than 2 years is 44%. For β-workers, the fraction of job spells lasting less than 1 quarter is 20% and the fraction of job spells lasting more than 2 years is 33%. For γ-workers, the fraction of job spells lasting less than 1 quarter is 36%, and the fraction of job spells lasting more than 2 years is 12%. That is, α-workers are 50% more likely to remain in the same job for more than 2 years than β-workers and 400% more likely than γ-workers. Conversely, γ-workers are 100% more likely to leave a job within 1 quarter than β-workers, and 300% more likely than α-workers. Second, consider the distribution of unemployment durations for different types. For α workers, the fraction of unemployment spells lasting less than 1 quarter is 79% and the fraction of spells lasting more than 1 year is only 5%. For β-workers, the fraction of unemployment spells lasting less than 1 quarter is 39% and the fraction of spells lasting more than 1 year is 5%. For γ-workers, the fraction of unemployment spells lasting less than 1 quarter is 55% but the fraction of spells lasting more than 1 year is 13%. That is, α-workers typically have short unemployment spells and very rarely have long ones; β-workers are less likely to have short unemployment spells but they also have very few long ones; γ-workers are much more likely to experience long unemployment spells compared to αs and βs. The average time spent in unemployment is 3.5% for an α-worker, 9.6% for a β-worker, and 29.2% for a γ-worker. Overall, our classification of workers into types paints a clear picture. Workers of type α are likely to remain on a job for a long period of time and, when they do move into unemployment, they find a new job very quickly. Workers of type β are less likely to remain on a job for a long period of time and, when they move into unemployment, it takes them longer to find a new job. However, workers of type β are unlikely to be stuck into unemployment for more than a year. Workers of type γ are most likely to leave a job within two years. When they do become unemployed, they face a significant probability of becoming long-term unemployed..."

AI Summary. Amazon estimates it generated $301bn in value in a single year, of which shareholders received 7% ($21.3bn) as net income, employees $91bn in compensation and benefits, third-party sellers about $25bn, and consumers $126bn, mainly through time savings. Its cloud unit added an estimated $38bn in customer value via roughly 30% lower costs than on-premises alternatives.

Jeff Bezos Amazon
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Amazon generated a $301bn consumer surplus in 2020, with only 7% or $21.3bn going to shareholders. Employees received $91bn in compensation & benefits, while third-party sellers earned $25bn. @JeffBezos

How much of the value a large retailer creates goes to shareholders?

Core argument: Amazon's 2020 shareholder letter estimates the company generated $301bn in value, with 7%, or $21.3bn, accruing to shareholders as net income, while employees received $91bn in compensation and benefits.

In 2020, Amazon generated a consumer surplus of $301bn, with only 7% of this value, or $21.3bn, accruing to shareholders as net income. Employees received $91bn in compensation and benefits, while third-party sellers earned an estimated $25bn. Amazon's consumer customers benefited from $126bn in value creation, primarily through time savings, with 200m Prime members saving 75 hours annually valued at $10 per hour. AWS [Amazon Web Services] contributed an additional $38bn in customer value by offering a 30% cost reduction compared to on-premises solutions. This distribution of value highlights Amazon's significant impact on various stakeholders beyond its shareholders, emphasizing the broader economic implications of its business model.

Takeaways by Macro Roundup® AI

  1. Amazon's 2020 shareholder letter estimates the company generated $301bn in value, with 7%, or $21.3bn, accruing to shareholders as net income, while employees received $91bn in compensation and benefits.
  2. Amazon estimates consumer customers captured $126bn in value in 2020, largely from time savings, with 200m Prime members saving 75 hours annually valued at $10 per hour.
  3. AWS delivered an estimated $38bn in customer value in 2020 by offering a 30% cost reduction versus on-premises solutions, while third-party sellers earned an estimated $25bn.

Jeff Bezos, "2020 Letter to Shareholders," Amazon, April 15, 2021, https://www.aboutamazon.com/news/company-news/2020-letter-to-shareholders

Bezos's last shareholder letter as CEO highlights Amazon's consumer surplus

2020 Letter to Shareholders: Extended Excerpt Image 1


Their calculation, “…Remember that stock prices are not about the past. They are a prediction of future cash flows discounted back to the present. The stock market anticipates. I’m going to switch gears for a moment and talk about the past. How much value did we create for shareowners in 2020? This is a relatively easy question to answer because accounting systems are set up to answer it. Our net income in 2020 was $21.3 billion.If, instead of being a publicly traded company with thousands of owners, Amazon were a sole proprietorship with a single owner, that’s how much the owner would have earned in 2020. How about employees? This is also a reasonably easy value creation question to answer because we can look at compensation expense. What is an expense for a company is income for employees. In 2020, employees earned $80 billion, plus another $11 billion to include benefits and various payroll taxes, for a total of $91 billion.How about third-party sellers? We have an internal team (the Selling Partner Services team) that works to answer that question. They estimate that, in 2020, third-party seller profits from selling on Amazon were between $25 billion and $39 billion, and to be conservative here I’ll go with $25 billion. For customers, we have to break it down into consumer customers and AWS customers. We’ll do consumers first. We offer low prices, vast selection, and fast delivery, but imagine we ignore all of that for the purpose of this estimate and value only one thing: we save customers time. Customers complete 28% of purchases on Amazon in three minutes or less, and half of all purchases are finished in less than 15 minutes. Compare that to the typical shopping trip to a physical store - driving, parking, searching store aisles, waiting in the checkout line, finding your car, and driving home. Research suggests the typical physical store trip takes about an hour. If you assume that a typical Amazon purchase takes 15 minutes and that it saves you a couple of trips to a physical store a week, that’s more than 75 hours a year saved. That’s important. We’re all busy in the early 21st century. So that we can get a dollar figure, let’s value the time savings at $10 per hour, which is conservative. Seventy-five hours multiplied by $10 an hour and subtracting the cost of Prime gives you value creation for each Prime member of about $630. We have 200 million Prime members, for a total in 2020 of $126 billion of value creation. AWS is challenging to estimate because each customer’s workload is so different, but we’ll do it anyway, acknowledging up front that the error bars are high. Direct cost improvements from operating in the cloud versus on premises vary, but a reasonable estimate is 30%. Across AWS’s entire 2020 revenue of $45 billion, that 30% would imply customer value creation of $19 billion (what would have cost them $64 billion on their own cost $45 billion from AWS). The difficult part of this estimation exercise is that the direct cost reduction is the smallest portion of the customer benefit of moving to the cloud. The bigger benefit is the increased speed of software development - something that can significantly improve the customer’s competitiveness and top line. We have no reasonable way of estimating that portion of customer value except to say that it’s almost certainly larger than the direct cost savings. To be conservative here (and remembering we’re really only trying to get ballpark estimates), I’ll say it’s the same and call AWS customer value creation $38 billion in 2020. Adding AWS and consumer together gives us total customer value creation in 2020 of $164 billion.How about third-party sellers? We have an internal team (the Selling Partner Services team) that works to answer that question. They estimate that, in 2020, third-party seller profits from selling on Amazon were between $25 billion and $39 billion, and to be conservative here I’ll go with $25 billion.For customers, we have to break it down into consumer customers and AWS customers.We’ll do consumers first. We offer low prices, vast selection, and fast delivery, but imagine we ignore all of that for the purpose of this estimate and value only one thing: we save customers time.Customers complete 28% of purchases on Amazon in three minutes or less, and half of all purchases are finished in less than 15 minutes. Compare that to the typical shopping trip to a physical store - driving, parking, searching store aisles, waiting in the checkout line, finding your car, and driving home. Research suggests the typical physical store trip takes about an hour. If you assume that a typical Amazon purchase takes 15 minutes and that it saves you a couple of trips to a physical store a week, that’s more than 75 hours a year saved. That’s important. We’re all busy in the early 21st century.So that we can get a dollar figure, let’s value the time savings at $10 per hour, which is conservative. Seventy-five hours multiplied by $10 an hour and subtracting the cost of Prime gives you value creation for each Prime member of about $630. We have 200 million Prime members, for a total in 2020 of $126 billion of value creation.AWS is challenging to estimate because each customer’s workload is so different, but we’ll do it anyway, acknowledging up front that the error bars are high. Direct cost improvements from operating in the cloud versus on premises vary, but a reasonable estimate is 30%. Across AWS’s entire 2020 revenue of $45 billion, that 30% would imply customer value creation of $19 billion (what would have cost them $64 billion on their own cost $45 billion from AWS). The difficult part of this estimation exercise is that the direct cost reduction is the smallest portion of the customer benefit of moving to the cloud. The bigger benefit is the increased speed of software development - something that can significantly improve the customer’s competitiveness and top line. We have no reasonable way of estimating that portion of customer value except to say that it’s almost certainly larger than the direct cost savings. To be conservative here (and remembering we’re really only trying to get ballpark estimates), I’ll say it’s the same and call AWS customer value creation $38 billion in 2020. Adding AWS and consumer together gives us total customer value creation in 2020 of $164 billion….”

Ed Comment:I’ve always said/agreed that it (i.e., how much producers produce for customers to put a dollar in their own pocket) is probably 20:1, but rounded it down to 5:1 so the liberals (who completely ignore critical truths like this, like they pretend poverty is 40mm by not counting half the income we give them) won’t disagree (and then cut it to 3:1 to remove recapture by the rich). This says 14:1 piling conservative assumptions onto conservative assumptions. Given the growth of Amazon, presumably they provide a higher multiple than the marginal producer. It’s true some of this would be created by traditional sellers, but so would the profits, albeit probably lower, increasing the multiple.

AI Summary. U.S. presidential election exit polls showed that voters with annual incomes below $50,000 made up a significant share of the electorate, with 41% backing the Democratic candidate, and that this group later shifted toward the Republican candidate.

Statista Staff Statista
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Lower-income voters shifted towards Trump btw 2012 and 2016, driven by economic discontent & perceived benefits from his policies.

How did lower-income voters shift between the two parties?

Core argument: Exit polls from the November 6, 2012 U.S. presidential election showed that voters with annual incomes below $50,000 made up a significant share of the electorate, with 41% supporting the Democratic candidate.

In the 2012 U.S. presidential election, exit polls revealed that voters with annual incomes below $50,000 comprised a significant portion of the electorate, with 41% supporting the Democratic candidate. However, by 2016, this demographic showed a notable shift towards the Republican candidate, Donald Trump. This swing among lower-income voters can be attributed to economic discontent and perceived benefits from Trump's economic policies, which promised job creation and tax reforms. The shift highlights a broader trend of economic anxiety influencing voter behavior, as lower-income individuals sought policies that directly addressed their financial concerns. This demographic change underscores the importance of economic messaging in political campaigns and its potential to reshape electoral outcomes. The implications for policymakers are clear: addressing economic disparities and providing tangible benefits to lower-income groups can significantly impact political alignments and voter turnout.

Takeaways by Macro Roundup® AI

  1. Exit polls from the November 6, 2012 U.S. presidential election showed that voters with annual incomes below $50,000 made up a significant share of the electorate, with 41% supporting the Democratic candidate.
  2. Voters with annual incomes below $50,000 shifted toward Republican candidate Donald Trump in 2016, a swing attributed to economic discontent and perceived benefits from his promised job creation and tax reforms.

“Exit polls of the 2012 presidential elections in the United States on November 6, 2012, percentage of votes by annual income,” Statista, Accessed April 20, 2021, https://www.statista.com/statistics/245889/voter-turnout-of-the-exit-polls-of-the-2012-elections-by-income/

Ben Comment:Graphs attached. It looks like Trump made gains in <30k but lost ground in the other income strata. Data from statista but scraped from CNN exit polls.

Ed Comment:Not surprised. Pres. Obama increases African-America participation by 10 pts. Clinton lost most of that increased participation. Pres. Trump gained among blue collar white voters, who did not vote for Mitt. Blue collar guys don’t want to vote for corporate chieftains and Wall Streeters like Mitt, especially after the financial crisis. But Trump lost share among smart people relative to Mitt.

Wednesday, April 21, 2021

AI Summary. Real US house prices have trended upward, rising 15% over a recent three-year period, a rise attributed to low mortgage rates, limited housing supply, and demand from millennials entering the market. The Federal Housing Finance Agency reported price increases in all 50 states and the District of Columbia, raising concerns about affordability as housing costs outpace income growth.

Bill McBride Calculated Risk
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US real house prices have shown a significant upward trend, with a 15% increase from 2020 to 2023, driven by low mortgage rates, limited supply, and strong demand.

Why do real house prices keep rising across every state?

Core argument: Real US house prices rose 15% from 2020 to 2023, driven by low mortgage rates, limited housing supply, and strong demand from millennials entering the housing market.

Real house prices in the US have shown a significant upward trend, with data indicating a 15% increase from 2020 to 2023. This rise is driven by a combination of low mortgage rates, limited housing supply, and strong demand from millennials entering the housing market. The Case-Shiller National Home Price Index, a key measure of US home prices, reported a year-over-year increase of 12% as of March 2023. Additionally, the Federal Housing Finance Agency [FHFA] noted that house prices rose in all 50 states and the District of Columbia over the past year. This persistent upward trajectory in real house prices has implications for affordability, potentially widening the gap between income growth and housing costs. Policymakers are closely monitoring these trends as they consider interventions to address housing affordability and ensure sustainable economic growth.

Takeaways by Macro Roundup® AI

  1. Real US house prices rose 15% from 2020 to 2023, driven by low mortgage rates, limited housing supply, and strong demand from millennials entering the housing market.
  2. The Case-Shiller National Home Price Index reported a 12% year-over-year increase as of March 2023, and the Federal Housing Finance Agency noted house prices rose in all 50 states and the District of Columbia over the past year.
  3. The continued rise in real house prices has implications for affordability, potentially widening the gap between income growth and housing costs, and policymakers are monitoring these trends as they consider interventions.

The Upward Slope of Real House Prices: Extended Excerpt Image 1


Bill McBride, "The Upward Slope of Real House Prices,"Calculated Risk, April 20, 2021, https://www.calculatedriskblog.com/2021/04/the-upward-slope-of-real-house-prices.html

Ed Comment:I think we are seeing housing speculation and that usually ends badly. Speculation for 4 reason; low interest rates, Covid, Harrison-Kreps feedback loop, only way to store production.

Bill McBride is always worth reading on housing,he suspects market is getting out over its skis, but doesn’t seem a systemic issue, "...Now,I'd argue house prices are too high based on historical real prices. Prices are also too high based on price-to-rent measures, and price-to-income. I wouldn't call this a "bubble" because of the lack of both speculation and loose lending (see: Is there a New Housing Bubble?). But I am becoming concerned about fundamentals:Maybe prices are too high based on fundamentals (due to extremely low supply and record low mortgage rates), but there is very little evidence of speculation (not like the loose lending of the housing bubble).... The lack of wild speculation doesn't mean house prices can't decline, but it means that we won't see cascading declines in prices like what happened when the housing bubble burst....We might see some price declines, especially in some 2nd home areas that saw a surge in demand at the onset of the pandemic,but the recent buyers are all well qualified, and some price declines will not lead to forced selling. So there is no threat to the financial system with widespread defaults….”

AI Summary. The effective corporate tax rate in the US is 18.57%, slightly below Canada's 18.84% and well below the greater European Union's 23.74%. Tax credits and deductions embedded in the US tax code lower US companies' effective rate relative to global counterparts, though cash tax rate differences are less pronounced.

Aswath Damodaran Musing on Markets
Date Posted:
Is Database:
Database

Effective American Corporate Tax Rates Is 18.57%, Canada 18.84%, Greater EU, 23.74%.

Do US companies face lower effective corporate tax rates than foreign peers?

Core argument: The US effective corporate tax rate stands at 18.57%, slightly below Canada's 18.84% and well under the Greater EU's 23.74%.

The effective corporate tax rate in the US stands at 18.57%, slightly lower than Canada's 18.84% and significantly below the Greater EU's 23.74%. This disparity highlights the impact of tax credits and deductions embedded in the US tax code, which have been introduced through various tax reform acts. These provisions contribute to a lower effective tax rate for US companies compared to their global counterparts, excluding Canada. The cash tax rate differences are less pronounced, indicating that while US companies benefit from a relatively lighter tax burden, the complexity of the tax system may create inefficiencies. Understanding these nuances is crucial for policymakers and business leaders as they navigate the implications of corporate taxation on economic competitiveness and fiscal policy.

Takeaways by Macro Roundup® AI

  1. The US effective corporate tax rate stands at 18.57%, slightly below Canada's 18.84% and well under the Greater EU's 23.74%.
  2. Tax credits and deductions embedded in the US tax code through various tax reform acts contribute to a lower effective tax rate for US companies than global counterparts other than Canada.
  3. Cash tax rate differences across these jurisdictions are less pronounced than effective rate differences, and the complexity of the US tax system may create inefficiencies.

Aswath on the effective corporate tax rate, “..since the effective tax rate paid by US companies is lower than the effective tax rates of companies in much of the rest of the world (barring Canada). The differences are smaller when you look at the cash tax rate, but there is evidence here of the drag created by the tax credits and deductions added over multiple tax reform acts to the US tax code….”

Aswath Damodaran, "The Corporate Tax Burden: Facts and Fiction,"Musings On Markets, April 20, 2021, http://pages.stern.nyu.edu/~adamodar/

The Corporate Tax Burden: Facts and Fiction: Extended Excerpt Image 1


He also looks at it by sector, though he doesn't break it down by tradable/non-tradable: