Edward Conard

Top Ten New York Times Bestselling Author

  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…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 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
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “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
  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “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
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Tuesday, November 22, 2022

AI Summary. In the US, the earlier spike in lower-end wages relative to other workers' pay has stopped, while the split between labor income and profits has shifted toward investors. Increases in public and military investment in major economies appear too small to matter, and longer-term forward real interest rates remain within their post-financial-crisis range.

Matt Klein The Overshoot
Date Posted:

.@M_C_Klein cites the end of a spike in compensation for low-skilled workers and longer-term forward real interest rates well within their post-financial crisis range and argues against a deliberate economic downturn to curb inflation.

Have wage gains at the bottom reversed in favor of profits?

Core argument: The earlier spike in US lower-end wages relative to other workers' pay has completely stopped, while the split between labor income and profits has, if anything, shifted in favor of investors.

In the US, the earlier spike in lower-end wages relative to other workers' pay has completely stopped, while the split between labor income and profits has, if anything, moved in favor of investors. For better or worse, the popular and elite reactions to the inflation outbreak suggest that policymakers are not going to respond to future downturns the way they did to the pandemic. Soft budget constraints do not appear to be on the menu. And while there have been some constructive increases in public investment (and military spending) in the major economies, they do not seem large enough to move the needle. Financial markets may be wrong, but it is noteworthy that longer-term forward real interest rates are well within their post-financial crisis range, even if they have jumped over the past 12 months.

Takeaways by Macro Roundup® AI

  1. The earlier spike in US lower-end wages relative to other workers' pay has completely stopped, while the split between labor income and profits has, if anything, shifted in favor of investors.
  2. Popular and elite reactions to the inflation outbreak suggest policymakers will not respond to future downturns as they did to the pandemic, with soft budget constraints apparently not on the menu.
  3. Increases in public investment and military spending in the major economies do not appear large enough to move the needle, and longer-term forward real interest rates remain well within their post-financial-crisis range despite jumping over the past 12 months.

AI Summary. China's Covid-19 lockdowns have expanded to cover areas responsible for one-fifth of national gross domestic product, with outbreaks growing in Beijing, the manufacturing hub of Guangzhou, and Chongqing. Beijing shut most non-essential businesses in its largest district, Chaoyang, home to 3.4mn people, closed restaurants and entertainment venues, and told residents to work from home.

Ryan McMorrow, Sun Yu, Gloria Li, et al Financial Times
Date Posted:

China reported almost 28,000 new Covid cases on Tuesday, with outbreaks in Beijing, Guangzhou, and Chongqing. Lockdowns are more extensive than during the Shanghai outbreak that slowed annual economic growth to 0.4% in Q2. @ft

How much of China's economy is under Covid lockdowns?

Core argument: China reported almost 28,000 new Covid-19 cases on Tuesday, with cases spiraling toward record highs and outbreaks growing in Beijing, the southern manufacturing hub of Guangzhou, and the southwestern metropolis of Chongqing.

Covid-19 cases in China are spiraling towards record highs, forcing officials to lock down again large swaths of the country. The world's second-biggest economy reported almost 28,000 new Covid cases on Tuesday, with outbreaks in Beijing, the southern manufacturing hub of Guangzhou, and the southwestern metropolis of Chongqing continuing to grow. Covid restrictions have hit areas responsible for one-fifth of China's gross domestic product. Officials in Beijing shut most non-essential businesses in the city's largest district, Chaoyang, which has a population of 3.4mn, and have closed restaurants and other entertainment venues in much of the city while telling residents to work from home.

Takeaways by Macro Roundup® AI

  1. China reported almost 28,000 new Covid-19 cases on Tuesday, with cases spiraling toward record highs and outbreaks growing in Beijing, the southern manufacturing hub of Guangzhou, and the southwestern metropolis of Chongqing.
  2. Covid restrictions in China have hit areas responsible for one-fifth of the country's gross domestic product, as officials lock down large swaths of the world's second-biggest economy.
  3. Beijing officials shut most non-essential businesses in Chaoyang, the city's largest district with a population of 3.4mn, closed restaurants and other entertainment venues in much of the city, and told residents to work from home.

AI Summary. Deposit rates sit above the federal funds rate when policy rates are near zero and below it when rates rise, so as rates increase depositors shift funds elsewhere and banks raise their deposit rates. Deposits' responsiveness to monetary policy has been attenuated, which can be explained by deposit growth relative to investment opportunities.

Alena Kang-Landsberg and Matthew Plosser Liberty Street Economics
Date Posted:

Researchers at @NewYorkFed evaluate the pass-through of the fed funds rate to deposit rates (that is, deposit betas) over the past several interest rate cycles, and discuss factors that affect deposit rates.

How do deposit rates respond to changes in monetary policy?

Core argument: The gap between the deposit rate and the Fed funds rate is negative when rates are near zero and deposit levels are high, and turns positive as policy rates rise.

We can observe that the gap [between the deposit rate and the Fed funds rate] is negative when rates are near zero (and deposit levels are high) and positive when rates rise. As a consequence, post-GFC and before the 1994 tightening, deposits were more attractive to depositors, and deposit supply was high relative to loans. However, as rates rise, the gap increases, depositors move elsewhere, banks raise their rates, and cumulative deposit betas rise. Since the 1990s, the response of deposits to monetary policy has been attenuated. This can be explained by the growth in deposits over the post-crisis period relative to investment opportunities.

Takeaways by Macro Roundup® AI

  1. The gap between the deposit rate and the Fed funds rate is negative when rates are near zero and deposit levels are high, and turns positive as policy rates rise.
  2. As rates rise and the gap widens, depositors move funds elsewhere, banks raise their rates, and cumulative deposit betas rise.
  3. The response of deposits to monetary policy has been attenuated since the 1990s, which can be explained by the growth in deposits over the post-crisis period relative to investment opportunities.

AI Summary. New home construction fell 24% in the months following the start of Federal Reserve rate increases, consistent with the historical pattern in which housing starts decline within two years of a rate hike. Such construction declines can take years to bottom out.

Aziz Sunderji Wall Street Journal
Date Posted:

.@WSJ notes that the Fed has been raising rates at the fastest pace in four decades (+375 basis points in 9 months.) Key variables such as housing starts have declined much more rapidly than in previous cycles.

Do Fed rate hikes drive prolonged declines in home construction?

Core argument: New home construction fell 24% between the Federal Reserve's March rate increase and July, and declines in home construction following Fed rate increases can take years to bottom out.

The Nobel Prize-winning economist Milton Friedman famously argued that "monetary actions affect economic conditions only after a lag that is both long and variable." Historically, housing starts begin to decline within two years of a Fed hike. New home construction fell by 24% from the Fed increase in March to July. Declines in home construction that follow Fed rate increases can take years before they bottom out.

Takeaways by Macro Roundup® AI

  1. New home construction fell 24% between the Federal Reserve's March rate increase and July, and declines in home construction following Fed rate increases can take years to bottom out.
  2. Housing starts have historically begun to decline within two years of a Fed rate hike.
  3. Nobel Prize-winning economist Milton Friedman argued that monetary actions affect economic conditions only after a lag that is both long and variable.

AI Summary. Equity market bottoms are typically preceded by a meaningful rise in expected equity returns above cash, as investors must be incentivized back into stocks after significant losses. The authors estimate long-term excess expected returns remain relatively low by historical standards, with analyst consensus for long-term corporate cash flow growth barely changed.

Erin Miles, Khia Kurtenbach Bridgewater Associates
Date Posted:

Bridgewater notes that recent market conditions do not fit the historical pattern. Typically, rising discount rates and risk premiums lead to declining asset prices, which in turn leads to declining economic activity and earnings, and more pressure on equities.

Do expected equity returns signal a market bottom has arrived?

Core argument: Equity expected returns in excess of cash typically rise meaningfully before markets turn, because investors must be incentivized back into equities and out of safe assets after significant losses.

There is typically a meaningful increase in equity expected returns (shown below in excess of cash) before the turn in the market because investors need to be incentivized back into equities and out of safe assets following significant losses. Today, based on our read, the re-rating of equity prices has a way to go. Our estimate for long-term excess expected returns remains relatively low compared to history. Consistent with that, analyst consensus for long-term corporate cash flow growth has barely budged over the last year, not yet reflecting the cooling of the economy we expect to see.

Takeaways by Macro Roundup® AI

  1. Equity expected returns in excess of cash typically rise meaningfully before markets turn, because investors must be incentivized back into equities and out of safe assets after significant losses.
  2. The authors estimate long-term equity excess expected returns remain relatively low compared to history, and judge that the re-rating of equity prices has further to go.
  3. Analyst consensus for long-term corporate cash flow growth has barely budged over the past year, which the authors read as not yet reflecting the cooling of the economy they expect.

AI Summary. The Institute of International Finance reports global debt fell $6.4tn in a quarter to about $290tn, a drop amplified by a stronger dollar that makes loans in other currencies look smaller when measured in dollars. Debt has fallen to 343% of world economic output, about 20 percentage points below its pandemic peak.

Ben Holland Bloomberg
Date Posted:

@bloomberg reports that the dollar value of global debt as a share of the global economy is 20 percentage points under its pandemic peak, as a result of inflation and a sharply appreciated dollar.

Is global debt falling relative to world economic output?

Core argument: Global debt fell $6.4 trillion in the three months through September to about $290 trillion, according to the Institute of International Finance's quarterly Global Debt Monitor.

Total debt declined $6.4 trillion in the three months through September, to about $290 trillion, the IIF said in its quarterly Global Debt Monitor published Tuesday in Washington. That drop is amplified by the surging dollar, which makes loans denominated in other currencies look smaller when they’re measured in greenbacks. As a share of the world economy, debt has dropped to 343% -- about 20 percentage points below its pandemic peak last year. Soaring inflation in many economies has helped erode debt burdens measured against the size of economic output because the nominal value of gross domestic product has risen rapidly.

Takeaways by Macro Roundup® AI

  1. Global debt fell $6.4 trillion in the three months through September to about $290 trillion, according to the Institute of International Finance's quarterly Global Debt Monitor.
  2. The IIF said debt as a share of the world economy has dropped to 343%, about 20 percentage points below its pandemic peak last year, as soaring inflation lifted nominal GDP rapidly.
  3. The decline in global debt is amplified by the surging dollar, which makes loans denominated in other currencies look smaller when measured in greenbacks.

AI Summary. The authors estimate the Inflation Reduction Act will cut $30bn from Medicare drug plan subsidies, out of about $110bn in revenue, causing benefit cuts and premium increases for seniors. Traditional Medicare enrollees would face drug coverage cuts or switching to Medicare Advantage plans that may not cover their doctors.

Casey Mulligan and Tomas Philipson Wall Street Journal
Date Posted:

.@caseybmulligan and @TomasPhilipson estimate that The Inflation Reduction Act will reduce healthcare subsidies by $30B starting in 2025, leading to benefit cuts and premium increases for seniors. @WSJ

.@caseybmulligan and @TomasPhilipson estimate that The Inflation Reduction Act will reduce healthcare subsidies by $30B...

Will cuts to Medicare drug plan subsidies raise seniors' premiums?

Core argument: The authors estimate that beginning in 2025 the Inflation Reduction Act will cut Medicare reinsurance subsidies for beneficiaries with the most drug spending by $30 billion, out of revenue currently totaling about $110 billion.

The Inflation Reduction Act will lead to benefit cuts and premium increases for seniors. We estimate that beginning in 2025, plan subsidies—specifically, the reinsurance subsidies for the beneficiaries with the most drug spending—will be cut $30 billion, out of revenue that currently totals about $110 billion. With $30 billion less to finance prescription benefits, something will have to give. Traditional Medicare members face a difficult choice in 2025: either take drastic cuts in drug coverage or switch to Medicare Advantage plans that cover prescriptions but may not cover the hospitals and doctors who are currently providing them care.

Takeaways by Macro Roundup® AI

  1. The authors estimate that beginning in 2025 the Inflation Reduction Act will cut Medicare reinsurance subsidies for beneficiaries with the most drug spending by $30 billion, out of revenue currently totaling about $110 billion.
  2. The authors argue the Inflation Reduction Act will lead to benefit cuts and premium increases for seniors, since $30 billion less financing for prescription benefits means something will have to give.
  3. Traditional Medicare members face a difficult choice in 2025 between drastic cuts in drug coverage and switching to Medicare Advantage plans that cover prescriptions but may not cover their current hospitals and doctors.

Monday, November 28, 2022

AI Summary. Housing accounts for more than half of US service inflation pressure over the past three months, and softening in the housing sector is expected to feed into core consumer price inflation in about 12 months. A downward distortion from medical services is unlikely to repeat, leaving little confidence that disinflation has spread from goods to services.

Chris Marsh Money: Inside and Out
Date Posted:

October CPI showed continued disinflation month-over-month in durables and the service sector, but it will “take more time to be confident that disinflation is real.” @GeneralTheorist

Has disinflation spread from goods to services?

Core argument: Housing accounts for more than half of U.S. service inflation pressure over the past three months.

Housing now dominates—accounting for more than half of service inflation pressure over 3 months. It is expected that housing will take time to reflect past rent increases still, but at the margin, the housing sector is already softening—which should hit Core CPI in about 12 months. Medical services distorted service inflation downward—something unlikely to be repeated in coming months. Overall, the October print doesn’t yet provide confidence that disinflation has spread from durables to services.

Takeaways by Macro Roundup® AI

  1. Housing accounts for more than half of U.S. service inflation pressure over the past three months.
  2. Housing is already softening at the margin even as past rent increases still feed through, an effect expected to reach Core CPI in about 12 months.
  3. Medical services distorted service inflation downward in the October print, an effect unlikely to repeat, leaving no confidence that disinflation has spread from durables to services.

AI Summary. Private rent indexes from Zillow, Realtor.com and Apartment List have recently signaled flat or declining rents, following a surge in which rents rose at double-digit rates for about a year and a half.

Paul Krugman Krugman Wonks Out
Date Posted:

.@PaulKrugman argues that the rent surge of 2021-2022 was driven by changing preferences related to work-from-home during the pandemic, and has now largely ended.

Are rents flattening after their double-digit surge?

Core argument: Rents rose at double-digit rates for about a year and a half during the 2021–22 rental surge before leveling off, with Zillow's three-month-average index falling in October.

A couple of notes about [the above] chart: I show rates of rent growth [reported by Zillow] over a three-month period, a practice many economists have converged on in recent discussions: Monthly data are too noisy, but annual growth rates lag too far behind a rapidly changing economy. I also show inflation in the average rental rate reported by the Bureau of Labor Statistics (labeled official rent above.) As you can see, the rental surge of 2021-22 was quite spectacular, with rents rising at double-digit rates for about a year and a half. But it has leveled off recently. Zillow’s index (a three-month average) fell in October; other private measures, like those published by Realtor.com and Apartmentlist.com, have been signaling rent declines for two or three months.

Takeaways by Macro Roundup® AI

  1. Rents rose at double-digit rates for about a year and a half during the 2021–22 rental surge before leveling off, with Zillow's three-month-average index falling in October.
  2. Private rent measures from Realtor.com and Apartmentlist.com have signaled rent declines for two or three months.
  3. Many economists have converged on measuring rent growth over three-month periods, since monthly data are too noisy while annual growth rates lag too far behind a rapidly changing economy.

AI Summary. Long-dated Treasury yields have fallen below the Federal Reserve's overnight benchmark range of 3.75%–4% even as traders price in roughly another percentage point of rate increases. The resulting yield curve inversion is the most pronounced in four decades, a widely watched indicator of potential economic pain ahead.

Michael Mackenzie Bloomberg
Date Posted:

Bond markets forecast a 2023 recession, with long-dated Treasury yields below the Fed’s overnight benchmark range of 3.75-4%. @bloomberg

Is the bond market signaling an economic downturn ahead?

Core argument: Yields on 10-year and 30-year Treasuries have fallen below the lower bound of the Federal Reserve's 3.75%-4% overnight benchmark range as demand for longer-dated securities increased.

The bond market is zeroing in on a US recession next year, with traders betting that the longer-term trajectory for interest rates will be down even as the Federal Reserve is still busy raising its policy rate. Long-dated Treasury yields are already below the Fed’s overnight benchmark range -- currently 3.75% to 4% -- and there’s still an extra percentage point of central bank increases priced in for the coming months. Demand for Treasuries with longer tenors this week dragged the rate on 10-year and 30-year securities below the lower bound of the Fed’s overnight range. With front-end rates holding relatively steady, that’s seen an intensification of the most pronounced yield curve inversion in four decades -- a widely watched indicator of potential economic pain to come.

Takeaways by Macro Roundup® AI

  1. Yields on 10-year and 30-year Treasuries have fallen below the lower bound of the Federal Reserve's 3.75%-4% overnight benchmark range as demand for longer-dated securities increased.
  2. Traders have priced in roughly another percentage point of Fed rate increases in coming months while betting the longer-term path for interest rates is down, positioning for a US recession next year.
  3. With front-end rates relatively steady and long-end yields falling, the Treasury yield curve inversion is the most pronounced in four decades, a widely watched indicator of potential economic pain ahead.

AI Summary. An analysis by the Burning Glass Institute finds that 41% of US job postings require at least a bachelor's degree, down from 46% before the Covid-19 pandemic. Degree requirements fell further early in the pandemic and have grown since, but remain below pre-pandemic levels.

Market Austen Hufford Wall Street Journal
Date Posted:

In November, 41% of American job listings required a college degree, down from 46% at the start of 2019, suggesting employers are relaxing degree requirements in tight labor markets. @wsj

Are employers requiring college degrees for fewer job openings?

Core argument: US job postings requiring at least a bachelor's degree stood at 41% in November, down from 46% at the start of 2019, according to an analysis by the Burning Glass Institute, a think tank studying the future of work.

US job postings requiring at least a bachelor’s degree were 41% in November, down from 46% at the start of 2019 ahead of the Covid-19 pandemic, according to an analysis by the Burning Glass Institute, a think tank that studies the future of work. Degree requirements dropped even more early in the pandemic. They have grown since then but remain below pre-pandemic levels.

Takeaways by Macro Roundup® AI

  1. US job postings requiring at least a bachelor's degree stood at 41% in November, down from 46% at the start of 2019, according to an analysis by the Burning Glass Institute, a think tank studying the future of work.
  2. The Burning Glass Institute analysis finds degree requirements in US job postings fell even further early in the Covid-19 pandemic and have risen since, while remaining below pre-pandemic levels.

AI Summary. An analysis of American time-use data finds that 53% of Americans over 65 spend more than eight hours of waking time alone each day. UK survey data show 40% of women aged 16 to 29 report feeling lonely at least some of the time, versus 22% of women over 70.

Federica Cocco Financial Times
Date Posted:
Is Database:
Database

Young adults in both the UK and US are spending more time alone and increasingly reporting feeling “lonely.” @ft

How much time alone do older and younger people report?

Core argument: An average 53% of Americans over 65 spend more than eight hours of waking time alone each day, according to the author's analysis of American Time Use Survey data, with the trend unchanged for those over 60.

On average, 53% of Americans aged over 65 spend more than eight hours of waking time on their own every day, according to my analysis of data from the American Time Use Survey. The trend remains unchanged for people over 60. But compared with a decade ago, the rise in the number of young people who spend more than eight hours on their own is alarming. Time on your own is one thing; feeling lonely is quite another. And young people seem worse affected by the latter. A March 2022 ONS survey found that 40% of women aged 16 to 29 in the UK report “feeling lonely often, always or some of the time,” compared with 22% of women over 70. For men, some 22% of this age group report feeling lonely, compared with 13% of the over-70s. And, of course, the impact of Covid lockdowns cannot be ignored.

Takeaways by Macro Roundup® AI

  1. An average 53% of Americans over 65 spend more than eight hours of waking time alone each day, according to the author's analysis of American Time Use Survey data, with the trend unchanged for those over 60.
  2. Compared with a decade ago, the number of young people spending more than eight hours a day on their own has risen.
  3. A March 2022 ONS survey found 40% of UK women aged 16 to 29 report feeling lonely often, always or some of the time, versus 22% of women over 70, while 22% of young men report it versus 13% of men over 70.

“…On average, 53% of Americans aged over 65 spend more than eight hours of waking time on their own every day, according to my analysis of data from the American Time Use Survey. The trend remains unchanged for people over 60. But compared with a decade ago, the rise in the number of young people who spend more than eight hours on their own is alarming. Time on your own is one thing; feeling lonely is quite another. And young people seem worse affected by the latter. A March 2022 ONS survey found that 40% of women aged 16 to 29 in the UK report “feeling lonely often, always or some of the time,” compared with 22% of women over 70. For men, some 22% of this age group report feeling lonely, compared with 13% of the over-70s. And, of course, the impact of Covid lockdowns cannot be ignored…”

Federica Cocco, “Are we ready for the approaching loneliness epidemic?” Financial Times, November 24, 2022, https://www.ft.com/content/c3aef690-b5a5-4f0d-9da5-2bf4c560c4f4

Are we ready for the approaching loneliness epidemic?

At most points in human history, being alone meant mortal danger and was to be avoided at all costs. It is only in recent decades that our risky experiment with loneliness has become almost mainstream.

A high incidence of single households is now a mark of a wealthy society. This is partly a consequence of avoiding or delaying marriage and childbirth, and of single housing becoming more affordable, but it has serious implications.

When we live alone we are more likely to engage in unhealthy behaviour, such as smoking or eating badly, because no one else can see. Studies show that people who live by themselves are more likely to suffer from alcoholism, high blood pressure, insomnia and weak immune systems.

In developed countries the share of people who report having friends or relatives they can count on has been steadily dropping over the past 15 years.

Older people are consistently worse affected: on average 53 per cent of Americans aged over 65 spend more than eight hours of waking time on their own every day according to my analysis of data from the American Time Use Survey.

The trend remains unchanged for people over 60. But compared with a decade ago, the rise in the number of young people who spend more than eight hours on their own is alarming.

Time on your own is one thing, feeling lonely is quite another. And young people seem worse affected by the latter. A March 2022 ONS survey found that 40 per cent of women aged 16 to 29 in the UK report “feeling lonely often, always or some of the time”, compared with 22 per cent of women over 70. For men, some 22 per cent of this age group report feeling lonely, compared with 13 per cent of the over-70s. And of course, the impact of Covid lockdowns cannot be ignored.

Aside from the effects this has on individual health, there is an impact on societies, too. Psychologists Roy Baumeister and Jean Twenge found evidence that feelings of social exclusion can make people more fearful and aggressive: with few superficial interactions our sense of reality can become distorted. Another study found a link with violent extremism. Hannah Arendt painted loneliness as fertile ground for terror in her 1951 classic The Origins of Totalitarianism.

A number of countries, including the UK, Japan, Denmark and Australia, are trying to tackle loneliness. Those searching for solutions might want to visit the small English town of Frome to see its innovative approach to social isolation.

The town’s GP practice employs staff who reach out to lonely people in the area. There are talking cafés and “talking benches” where these NHS employees are available for a chat. Taxi drivers are given information on services for vulnerable customers.

The data makes the argument: from 2013 when the initiative started to 2017, emergency hospital admissions in the town fell 14 per cent. During the same period, they rose 29 per cent across the rest of the county.

AI Summary. Rare political protests broke out in at least 10 Chinese cities, including Shanghai, Beijing, Wuhan, and Chengdu, producing clashes with police and a spate of detentions. The demonstrations followed outrage over a deadly apartment fire in Urumqi partly blamed on coronavirus restrictions, amid frustration with lockdowns, mass testing, and surveillance.

Edward White, Thomas Hale, and Ryan McMorrow Financial Times
Date Posted:

Rare, widespread political protest spread across major Chinese cities over the weekend, seemingly driven by frustrations with zero-Covid. @ft

Rare, widespread political protest spread across major Chinese cities over the weekend, seemingly driven by frustrations...

Are pandemic lockdowns sparking mass protests across Chinese cities?

Core argument: Rare political protests shook at least 10 Chinese cities over the weekend, including Shanghai, Beijing, Wuhan, and Chengdu, producing clashes with police and security officers and a spate of detentions.

At least 10 cities, including Shanghai, Beijing, Wuhan, and Chengdu, were shaken by rare political protests over the weekend, triggering clashes with police and security officers that led to a spate of detentions. The sudden outbreak of civil disobedience was sparked by outrage after a deadly apartment fire in Urumqi, Xinjiang, was partly blamed on coronavirus restrictions. While most of the protests appeared to have been stamped out by Monday, they followed months of frustration, especially among China’s young people, with relentless lockdowns, quarantines, mass testing, and electronic surveillance under Xi’s zero-Covid policies.

Takeaways by Macro Roundup® AI

  1. Rare political protests shook at least 10 Chinese cities over the weekend, including Shanghai, Beijing, Wuhan, and Chengdu, producing clashes with police and security officers and a spate of detentions.
  2. The protests were sparked by outrage over a deadly apartment fire in Urumqi, Xinjiang, that was partly blamed on coronavirus restrictions, and followed months of frustration among young people with lockdowns, quarantines, mass testing, and electronic surveillance under Xi Jinping's zero-Covid policies.
  3. Most of the Chinese protests appeared to have been stamped out by Monday, in what amounts to the stiffest challenge to Xi Jinping's rule.

AI Summary. China's trade data show manufacturing exports sharply higher, pushing its trade surplus up even as its commodity import bill hit record levels. The author argues China's currency remains managed, so a weaker yuan alongside a large surplus reflects policymakers' judgment that they must sustain export growth relative to GDP to offset domestic weakness.

Brad Setser @Brad_Setser
Date Posted:
Is Database:
Database

China’s trade surplus has continued to grow since the pandemic, with manufacturing exports ~ 14% of GDP. The trade surplus is poised to grow, as China’s bill for imported commodities falls. @Brad_Setser

Is China's managed currency sustaining export growth despite a record surplus?

Core argument: Setser argues the deglobalization narrative is absent from China's trade data, as manufacturing exports have risen massively and pushed China's trade surplus higher even while its commodity import bill hit record levels.

The popular deglobalization narrative simply isn't in China's trade data -- manufacturing exports are up massively, and that has pushed the surplus up even as China's commodity import bill reached record levels (the commodity bill is poised to fall now, by the way.) China's currency is (still) managed (in my judgment, even if the PBOC's reported reserves don't change,) so movements reflect the interaction of market pressure and political decisions. But at some level, a weaker CNY, even with a massive trade surplus, reflects a judgment by China's policymakers that they need to sustain the rise in exports (relative to China's GDP) even as global demand for manufactures drops (to offset China's domestic weakness.)

Takeaways by Macro Roundup® AI

  1. Setser argues the deglobalization narrative is absent from China's trade data, as manufacturing exports have risen massively and pushed China's trade surplus higher even while its commodity import bill hit record levels.
  2. Setser judges China's currency remains managed even when the PBOC's reported reserves are unchanged, so exchange rate movements reflect the interaction of market pressure and political decisions.
  3. In Setser's judgment, a weaker yuan alongside a large trade surplus reflects Chinese policymakers' determination to sustain the rise in exports relative to GDP as global demand for manufactures drops, offsetting domestic weakness.

China’s trade surplus has continued to grow since the pandemic, with manufacturing exports ~ 14% of GDP. The trade surplus is poised to grow, as China’s bill for imported commodities falls “…The popular deglobalization narrative simply isn’t in China’s trade data — manufacturing exports are up massively, and that has pushed the surplus up even as China’s commodity import bill reached record levels (the commodity bill is poised to fall now, by the way.) China’s currency is (still) managed (in my judgment, even if the PBOC’s reported reserves don’t change,) so movements reflect the interaction of market pressure and political decisions. But at some level, a weaker CNY, even with a massive trade surplus, reflects a judgment by China’s policymakers that they need to sustain the rise in exports (relative to China’s GDP) even as global demand for manufactures drops (to offset China’s domestic weakness.)..”

Brad Setser, “Setser On China’s Trade Surplus,” @Brad_Setser, November 27, 2022, https://twitter.com/Brad_Setser/status/1597000480760410114

There are all sorts of reasons why China’s yuan is under pressure to depreciate right now – notably, China’s domestic economic troubles and the difficulties created by zero COVID. But Robin is absolutely right to note the scale of China’s trade surplus. It really is massive. For one measure of the underlying surplus, look at China’s surplus in manufactures in dollars … (in the customs data, using the goods current account numbers actually scales everything down a lot for fairly inexplicable reasons)

The popular deglobalization narrative simply isn’t in China’s trade data — manufacturing exports are up massively, and that has pushed the surplus up even as China’s commodity import bill reached record levels (the commodity bill is poised to fall now by the way)

China’s currency is (still) managed (in my judgement, even if the PBOC’s reported reserves don’t change) so movements reflect the interaction of market pressure and political decisions. But at some level, a weaker CNY even with a massive trade surplus reflects a judgement by China’s policy makers that they need to sustain the rise in exports (relative to China’s GDP) even as global demand for manufactures drops (to offset China’s own domestic weakness)

p.s. one reason why China’s trade surplus hasn’t gotten as much attention as its scale warrants is that it hasn’t been reflected in the current account (even goods in the BoP is well below customs). I am starting to suspect the reported current account data is managed too!

AI Summary. The US Federal Communications Commission has barred Chinese telecommunications companies Huawei and ZTE from selling equipment in the US, citing national security concerns. The ban covers network base station equipment, phones, cameras, WiFi routers, and rebranded "white label" products.

James Politi Financial Times
Date Posted:

The FCC has banned China-based Huawei and ZTE from telecommunications sales into the American market, citing national security concerns. The move may further fuel tensions with Beijing. @ft

The FCC has banned China-based Huawei and ZTE from telecommunications sales into the American market, citing national...

Are Chinese telecom makers barred from selling equipment in the US?

Core argument: The Federal Communications Commission barred China-based Huawei and ZTE from selling telecommunications equipment in the US, citing national security concerns in a move that could further fuel tensions with Beijing.

Washington’s top telecommunications regulator has barred China-based Huawei and ZTE from selling equipment in the US, citing national security concerns in a move that could further fuel tensions with Beijing. The Federal Communications Commission announced the step on Friday, saying it was the latest effort by US authorities to “build a more secure and resilient supply chain” in the telecommunications industry. “The action we take today covers base station equipment that goes into our networks. It covers phones, cameras, and WiFi routers that go into our homes. And it covers rebranded or ‘white label’ equipment that is developed for the marketplace. In other words, this approach is comprehensive,” said Jessica Rosenworcel, chair of the FCC.

Takeaways by Macro Roundup® AI

  1. The Federal Communications Commission barred China-based Huawei and ZTE from selling telecommunications equipment in the US, citing national security concerns in a move that could further fuel tensions with Beijing.
  2. FCC chair Jessica Rosenworcel said the approach is comprehensive, covering network base station equipment, phones, cameras, WiFi routers, and rebranded or "white label" equipment developed for the marketplace.
  3. The FCC described the action as the latest effort by US authorities to "build a more secure and resilient supply chain" in the telecommunications industry.

AI Summary. The backlog of US weapons ordered by Taiwan but not yet delivered has grown to $18.7bn from more than $14bn, including undelivered orders for 208 Javelin antitank weapons and 215 Stinger surface-to-air missiles. Defense manufacturers cite pandemic-driven supply-chain problems and difficulty keeping up with orders.

Gordon Lubold, Doug Cameron, and Nancy A. Youssef Wall Street Journal
Date Posted:

The backlog of US weapons delivery has grown to $18.7B from more than $14B last December, as competing demands from Ukraine and Taiwan stress the military supply chain. @wsj

The backlog of US weapons delivery has grown to $18.7B from more than $14B last December, as competing demands from Ukraine...

Is the backlog of US weapons promised to Taiwan growing?

Core argument: The backlog of US weapons deliveries to Taiwan has grown to $18.7 billion from more than $14 billion in December, according to congressional and government officials familiar with the matter.

The flow of weapons to Ukraine is now running up against the longer-term demands of a US strategy to arm Taiwan to help it defend itself against a possible invasion by China, according to congressional and government officials familiar with the matter. The backlog of deliveries, which was more than $14 billion last December, has grown to $18.7 billion. Included in the backlog is an order made in December 2015 for 208 Javelin antitank weapons and a separate one at the same time for 215 surface-to-air Stinger missiles. None of them have arrived on the island, according to congressional sources and people familiar with the matter. Executives at Lockheed Martin Corp., Boeing Co., and other defense companies say pandemic-driven supply-chain problems have set back production for many systems and that they have struggled to keep up with orders even before Russia’s invasion of Ukraine boosted demand.

Takeaways by Macro Roundup® AI

  1. The backlog of US weapons deliveries to Taiwan has grown to $18.7 billion from more than $14 billion in December, according to congressional and government officials familiar with the matter.
  2. Taiwan's December 2015 orders for 208 Javelin antitank weapons and 215 Stinger surface-to-air missiles have not arrived on the island, according to congressional sources and people familiar with the matter.
  3. Executives at Lockheed Martin, Boeing, and other defense companies say pandemic-driven supply-chain problems set back production of many systems and that they struggled to keep up with orders even before Russia's invasion of Ukraine boosted demand.

AI Summary. Germany pledged €100bn in extra military funding, but barely any has reached the armed forces, the parliamentary body created to allocate it has met once, and the defense ministry submitted no procurement proposals. Opposition leaders say the 2023 defense budget is set to shrink by €300mn and that inaction is fueling distrust among allies.

Sam Jones and Guy Chazan Financial Times
Date Posted:

German defense spending is set to decline by €300M in 2023 as the country continues to fall short of its NATO-set obligation of spending the equivalent of 2% of GDP on defense. @ft

German defense spending is set to decline by €300M in 2023 as the country continues to fall short of its NATO-set obligation...

Has pledged military funding reached the underequipped armed forces?

Core argument: Barely any of the €100bn in extra military funding Chancellor Olaf Scholz pledged after Russia's full-scale invasion of Ukraine has reached Germany's armed forces in the nine months since his Zeitenwende declaration.

Nine months ago, in the wake of Russia’s full-scale invasion of Ukraine, Olaf Scholz declared a Zeitenwende — a turning point — for Germany’s military and its place in the world. But since then, barely any of the €100bn in extra funding the German chancellor pledged has made its way to the armed forces. The parliamentary body set up in the spring to allocate money to modernization and reform programs has met once. The defense ministry had no procurement proposals to submit to it. Its next sitting will not be until February.  Far from rising, the 2023 defense budget, opposition leader Friedrich Merz noted, was set to shrink by €300mn based on current government plans. The lack of German action was “[giving] rise to considerable distrust” at NATO and in allied capitals, he claimed.

Takeaways by Macro Roundup® AI

  1. Barely any of the €100bn in extra military funding Chancellor Olaf Scholz pledged after Russia's full-scale invasion of Ukraine has reached Germany's armed forces in the nine months since his Zeitenwende declaration.
  2. The parliamentary body created in the spring to allocate Germany's military modernization money has met once, with the defense ministry submitting no procurement proposals, and will not sit again until February.
  3. Opposition leader Friedrich Merz said Germany's 2023 defense budget was set to shrink by €300mn under current government plans, and claimed the lack of German action was giving rise to considerable distrust at NATO and in allied capitals.

AI Summary. The authors estimate that nonlinear interactions among atmospheric circulation patterns and regional soil moisture deficits amplified an extreme North American heat event's severity by about 40%. They find global warming has shifted such a peak temperature anomaly from virtually impossible to roughly a 1-in-200-year event, projected to become far more frequent.

Samuel Bartusek, Kai Kornhuber, and Mingfang Ting Nature
Date Posted:

Temperatures anomalies that were once-in-1,000-yearly events in North America in the 1970s are now expected to be 5-yearly events, according to new research in @Nature

How much do nonlinear interactions amplify extreme heat events?

Core argument: Nonlinear interactions between the drivers of the 2021 North American heatwave amplified its severity by roughly 40%, probably driven in part by land-atmosphere feedback catalyzed by long-term regional warming and soil drying.

We find that slow- and fast-moving components of the atmospheric circulation interacted, along with regional soil moisture deficiency, to trigger a 5-sigma heat event. Its severity was amplified by ~40% by nonlinear interactions between its drivers, probably driven in part by land-atmosphere feedback catalyzed by long-term regional warming and soil drying. Since the 1950s, global warming has transformed the peak daily regional temperature anomaly of the event from virtually impossible to a presently estimated ~200-yearly occurrence. Its likelihood is projected to increase rapidly with further global warming, possibly becoming a 10-yearly occurrence in a climate 2 °C warmer than the pre-industrial period, which may be reached by 2050.

Takeaways by Macro Roundup® AI

  1. Nonlinear interactions between the drivers of the 2021 North American heatwave amplified its severity by roughly 40%, probably driven in part by land-atmosphere feedback catalyzed by long-term regional warming and soil drying.
  2. Slow- and fast-moving components of the atmospheric circulation interacted with regional soil moisture deficiency to trigger a 5-sigma heat event.
  3. Global warming since the 1950s has transformed the event's peak daily regional temperature anomaly from virtually impossible to an estimated ~200-yearly occurrence, possibly becoming a 10-yearly occurrence in a climate 2 °C warmer than pre-industrial, which may be reached by 2050.

AI Summary. Research finds that scores on the Armed Forces Qualification Test account for 71% of the black-white wage gap among young men and the entire gap among young women, with black women earning slightly more than white women at equal scores. The authors argue wage differences reflect skill disparities rather than racial bias.

Roland Fryer Wall Street Journal
Date Posted:
Is Database:
Database

Research by @RolandFryer suggests skill disparities rather than racial bias drive wage differences, with AFQT score accounting for 71% of black-white age gap among young men.

Do test score differences explain the black-white wage gap?

Core argument: Neal and Johnson find that Armed Forces Qualification Test (AFQT) scores account for 71% of the black-white wage gap among young men, which they read as skill disparities rather than racial bias driving wage differences.

Neal and Johnson's research highlights that the Armed Forces Qualification Test (AFQT) score accounts for 71% of the black-white wage gap among young men, suggesting that skill disparities rather than racial bias are the primary drivers of wage differences. Their study found that for young women, the AFQT score explained the entire wage gap, with black women earning slightly more than their white counterparts when qualifications were equal. The Pentagon's evaluation of AFQT scores showed that black and white recruits with similar scores performed equally well, further indicating no racial bias. This evidence suggests that current racial inequities are more a result of skill differences than discriminatory treatment, emphasizing the importance of investing in education to improve skills and economic outcomes.

Takeaways by Macro Roundup® AI

  1. Neal and Johnson find that Armed Forces Qualification Test (AFQT) scores account for 71% of the black-white wage gap among young men, which they read as skill disparities rather than racial bias driving wage differences.
  2. For young women in Neal and Johnson's study, AFQT scores explained the entire black-white wage gap, with black women earning slightly more than white women at equal qualifications.
  3. The Pentagon's evaluation of AFQT scores found that black and white recruits with similar scores performed equally well, cited as evidence of no racial bias.

“…“We find,” they wrote in the abstract of their paper, “that this one test score explains all of the black-white wage gap for young women and much of the gap for young men.” With their approach, antiblack bias played no role in the divergent wages among women; a black woman with the same qualifications as a white woman made slightly more money. And it accounted for at most 29% of the racial difference among men, with 71% traceable to disparate performance on the AFQT. The AFQT itself was evaluated by the Pentagon, which found that black and white military recruits with similar AFQT scores performed similarly on the job—indicating no racial bias….”

Roland Fryer, "Disparity Doesn’t Necessarily Imply Racism,"Wall Street Journal, November 25, 2022, https://www.wsj.com/articles/disparity-doesnt-necessarily-imply-racism-skills-wages-black-white-afqt-research-discrimination-jim-crow-grandmother-11669383926

Disparity Doesn’t Necessarily Imply Racism

I was raised, in part, by my paternal grandmother—a phenomenal black woman born in 1925 who came of age during Jim Crow, attended Bethune-Cookman University in the early 1940s, and experienced both the promise and limitations of the civil-rights era when integrating schools in Florida in 1969. She did her best to teach sixth-graders subject-verb agreement minutes after being spat on by their parents. Her life’s journey provided unlimited content as we sat together for nearly three decades, stuck to the plastic slipcovers on her sofa, playing cards, drinking sweet tea, and talking uninhibitedly about race in America.

The first discussion I can remember happened in 1988, when I was 11, after a visit to McDonald’s. After ordering, my grandmother paid with a crisp $20 bill from her pocketbook, and the cashier put the change directly on the counter. When we got to the parking lot, she was incensed. “You see that? White woman didn’t want to touch me.” I had noticed it too, but thought the cashier was being nice, trying to avoid passing on her own germs.

My grandmother—no doubt based in part on her experiences—saw racism everywhere, in every inequity, every statistic. Racial differences in wages? Racism. Racial differences in educational achievement? Racism. Racial differences in teen birth rates? Racism. This sort of casual empiricism—which has crept back into mainstream media and other institutions—was a competitive sport among my family and friends. Did you see the way that white woman tightened her grip on her purse, because I was behind her? Does this guy follow everyone around the store?

A decade after the McDonald’s incident, in graduate school, I read a 1995 paper titled “The Role of Premarket Factors in Black-White Wage Differences.” Using a nationally representative sample of more than 12,000 14- to 17-year-olds from 1979, Derek A. Neal and William R. Johnson estimated that blacks earned between 35% to 45% less than whites on average.

They examined how much of the wage gap could be attributed to present-day discrimination in the workplace versus differences in skill as measured by the Armed Forces Qualification Test, a cousin of the ACT and SAT. Importantly, they weren’t trying to measure the effect of America’s racist history running back to the early 17th century, when the first African slaves were brought to work the tobacco farms of Virginia, only the extent to which blacks earn lower incomes because employers today make racially discriminatory decisions. Nor did they focus on prejudice more broadly: They ignored that my grandmother was spat on in the parking lot at work and concentrated on whether she was treated fairly once she entered the building.

“We find,” they wrote in the abstract of their paper, “that this one test score explains all of the black-white wage gap for young women and much of the gap for young men.” With their approach, antiblack bias played no role in the divergent wages among women; a black woman with the same qualifications as a white woman made slightly more money. And it accounted for at most 29% of the racial difference among men, with 71% traceable to disparate performance on the AFQT. The AFQT itself was evaluated by the Pentagon, which found that black and white military recruits with similar AFQT scores performed similarly on the job—indicating no racial bias.

The paper felt like an attack on what I knew. An assault on all those conversations with my grandmother, which taught me that racism—present-tense racism—dictated black-white inequality. I told myself that Messrs. Neal and Johnson, both of whom were white, were probably bigots, and I set out on a mission to disprove their work.

I vented about my battle with Messrs. Neal and Johnson to a fellow graduate student at Penn State, a white guy from the cornfields of Southern Illinois. He was no more at home at a top-25 economics doctoral program than I was, and we spent a fair amount of time together during our first year, staring at Euler equations in our favorite textbook, “Recursive Methods in Economic Dynamics.”

I told him I was sure discrimination was a bigger factor than Messrs. Neal and Johnson were letting on, but “I just can’t get this data to cooperate.” He asked why I was so convinced, and I erupted in a rant about the prevalence of racism and recognizing bigots on sight. My grandmother would’ve nodded rhythmically along. My friend responded with a burst of loud, sharp laughter in my face.

He pointed out how far I was straying from our Euler equations. How on any subject other than race, I would have never given in to such sloppy thinking. The double identity—a classically trained economist taught to tease out causal relationships and a black Southern boy taught that discrimination is ubiquitous—had lived seamlessly inside me until that moment. Messrs. Neal and Johnson, as it turns out, aren’t bigots, and their conclusions have stood the test of time and my attempts to disprove them. I extended their analysis to unemployment, teen pregnancy, incarceration and other outcomes—all of which follow the same pattern. Moreover, the relationship between skills and wages has been confirmed by study after study, even when using different data and methods. Kevin Lang, an economist at Boston University, corrects important issues in Messrs. Neal and Johnson’s work but finds the same relationship between AFQT scores and wages. Taken together, an honest review of the evidence suggests that current racial inequities are more a result of differences in skill than differences in treatment of those with the same skill.

I write this with some degree of trepidation, in part because I still have my grandmother in my ear and in part because I am keenly aware of the harm in underestimating bias. But there is also a cost to overemphasizing its impact. A black kid who believes he will face daunting societal obstacles is likely to underinvest in trying to climb society’s rungs. Every black student in the country needs to know that his return on investment in education is, if anything, higher than for white students.

The solution is neither to stop fighting biased behavior nor to curb honest inquiry about race in America. We shouldn’t stop searching for and penalizing discriminatory employers, or trying to reduce racial differences in police brutality, or estimating whether the value of a home appraisal depends on the race of the homeowner, or reducing bias in bail decisions by using artificial intelligence. I could go on, like the conversations stuck to those slipcovers. The solution isn’t to look away from discrimination. It does exist. But we also can’t point at every gap in outcomes and instantly conclude it’s racism. Prejudice must be measured rigorously. Statistically. Disparity doesn’t necessarily imply racism. It may feel omnipresent, but it isn’t all-powerful. Skills matter most.

Fryer“Disparity doesn’t necessarily imply racism. It may feel omnipresent, but it isn’t all-powerful. Skills matter most. ”