Edward Conard

Top Ten New York Times Bestselling Author

  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…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
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Wednesday, November 30, 2022

AI Summary. Trade surpluses of energy-exporting autocracies and China are projected to total roughly $1tn, with Russia's topping $250bn and Saudi Arabia's topping $200bn. Because these surplus countries are not adding to official foreign exchange reserves, private financial intermediaries globally must absorb U.S. Treasury bonds and the associated interest rate risk.

Brad Setser Follow The Money
Date Posted:

The run-up in energy prices has driven an increase in trade imbalances, with a ~ $1 Trillion surplus largely ending up in the hands of autocratic countries: China, Russia, Saudi Arabia, and the Gulf. @Brad_Setser

Who absorbs Treasury bonds when surplus autocracies stop adding reserves?

Core argument: The combined trade surpluses of the big autocratic surplus countries should total about $1 trillion in 2022, with Russia's topping $250 billion, Saudi Arabia's topping $200 billion, and the other Gulf monarchies' comparable to or slightly larger than the Saudi figure.

There was an enormous swing in the trade surplus of the energy-exporting economies, and surprisingly, China’s surplus also has continued to rise. Russia’s surplus is set to top $250 billion. Saudi Arabia’s surplus should top $200 billion. The other monarchies in the Gulf should have a surplus comparable to that of the Saudis—if anything, it will be a bit bigger. Summed up, these autocratic countries’ surpluses should total about $1 trillion in 2022. But there is an important difference between now and then: the big autocratic surplus countries are not adding to their formal foreign exchange reserves. By implication, private financial intermediaries somewhere around the world will need to absorb Treasury bonds. Just as financial intermediaries globally had to absorb U.S. “subprime” (household) risk prior to the global crisis, now they have to absorb U.S. interest rate risk.

Takeaways by Macro Roundup® AI

  1. The combined trade surpluses of the big autocratic surplus countries should total about $1 trillion in 2022, with Russia's topping $250 billion, Saudi Arabia's topping $200 billion, and the other Gulf monarchies' comparable to or slightly larger than the Saudi figure.
  2. The large autocratic surplus countries are not adding to their formal foreign exchange reserves, which implies that private financial intermediaries somewhere in the world will need to absorb Treasury bonds.
  3. Global financial intermediaries now have to absorb U.S. interest rate risk, just as they had to absorb U.S. subprime household risk before the global financial crisis.

AI Summary. Estimates of hourly wage changes by decile since the start of the pandemic recession find real wages rose for the bottom 40% of workers. Lower-income families spend an above-average share of income on food and energy, the categories with the most inflation, which narrows but does not erase their relative gain.

Paul Krugman Krugman Wonks Out
Date Posted:
Is Database:
Database

.@PaulKrugman suggests that wage growth for lower-income families has more than offset inflation, even accounting for their higher food and energy consumption.

Have real wages risen for the lowest-income workers despite higher inflation?

Core argument: Labor economist Arindrajit Dube estimates that real hourly wages for the bottom 40 percent of workers have risen, measuring wage changes by decile rather than quartile over a longer period since the start of the pandemic recession.

The labor economist Arindrajit Dube has estimated hourly wage changes — by decile rather than quartile — over a longer period since the beginning of the pandemic recession. He finds that real wages for the bottom 40 percent of workers have increased. Lower-income families spend a higher than average share of their income on food and energy, which are also the categories that have seen the most inflation recently. My rough calculations suggest that even when you take these food and energy costs into account, lower-income families have done better, not worse, than others, at least in terms of inflation’s effects. But it does lessen that difference somewhat.

Takeaways by Macro Roundup® AI

  1. Labor economist Arindrajit Dube estimates that real hourly wages for the bottom 40 percent of workers have risen, measuring wage changes by decile rather than quartile over a longer period since the start of the pandemic recession.
  2. Lower-income families spend a higher than average share of income on food and energy, the categories that have seen the most inflation recently.
  3. Rough calculations suggest that lower-income families have fared better, not worse, than others in terms of inflation's effects, even after accounting for food and energy costs, though those costs lessen the difference somewhat.

Krugman suggests that wage growth for lower-income families has more than offset inflation, even accounting for their higher food and energy consumption, “The labor economist Arindrajit Dube has estimated hourly wage changes — by decile rather than quartile — over a longer period since the beginning of the pandemic recession. He finds that real wages for the bottom 40 percent of workers have increased. Lower-income families spend a higher than average share of their income on food and energy, which are also the categories that have seen the most inflation recently. My rough calculations suggest that even when you take these food and energy costs into account, lower-income families have done better, not worse, than others, at least in terms of inflation’s effects. But it does lessen that difference somewhat.”

Paul Krugman, “Does Inflation Disproportionately Hurt the Poor?” Krugman Wonks Out, November 29, 2022, https://www.nytimes.com/2022/11/29/opinion/inflation-poor-income-inequality.html

Does Inflation Disproportionately Hurt the Poor?

The central economic debate in the United States right now is how aggressive the Federal Reserve should be in its effort to reduce inflation. Few economists are arguing against the need for higher interest rates to reduce demand, but there are trade-offs, at least in the near term. If monetary policy is too tight, we may have an unnecessary recession; if it’s not tight enough, inflation will persist, and maybe get entrenched in people’s expectations, so it will become harder to reduce later.

Also, there’s a question of where to stop: Even some economists who have been relatively hawkish, like Olivier Blanchard, former chief economist of the International Monetary Fund, have been arguing that getting inflation back down to 3 percent, rather than the current target of 2 percent, would be good enough.

To a large extent, we’re talking here about balancing risks. But how you weigh these risks depends in part on how bad you think inflation really is. And one argument I’ve been seeing a lot lately is that inflation is bad because it falls especially heavily on households with low incomes.

But is that claim correct? It sounds as if it should be true. And it’s all too easy to find scenes of uneven hardship in today’s America, with the 1 percent or even the upper middle class still living the good life while low-wage workers desperately seek help from food banks.

Inequality, however, isn’t something that just happened in the past two years; you could have found such scenes any time over the past few decades, even when inflation was low. And to the extent that low-income families are facing more hardship than they did a year ago, much of that can be attributed to the expiration of pandemic-era aid, especially the expanded Child Tax Credit.

So what can we say about the effects of inflation, specifically, on low-income families? What the data seem to say is that such families have actually been hurt less than families with higher incomes. True, as I’ll explain in a minute, there’s an asterisk on this conclusion, because not everyone faces the same rate of inflation. But there’s also an asterisk on this asterisk.

First, let’s note a key fact about the past two years: This era of surging inflation has also been an era of very tight labor markets. And tight labor markets typically lead to wage compression — that is, bigger wage increases at the bottom than at the top.

You can see this phenomenon clearly in data from the Atlanta Fed’s wage growth tracker, which among other things calculates annual hourly wage growth by quartile — quarters of the wage distribution:

As you can see, recent wage growth has been consistently faster for lower quartiles. Over the past year hourly wages for the first, or lowest, quartile have almost kept up with inflation, while falling well short of inflation for better-paid workers.

The labor economist Arindrajit Dube has estimated hourly wage changes — by decile rather than quartile — over a longer period, since the beginning of the pandemic recession. He finds that real wages for the bottom 40 percent of workers have actually increased:

A somewhat different measure comes from Realtime Inequality, run by economists at the University of California, Berkeley, which estimates changes in real factor income. Unlike hourly wage estimates, these numbers are affected by changes in employment and the number of hours worked; they also include nonwage income such as the profits of business owners and returns on investment. But they tell much the same story, of significant gains for the bottom half of the income distribution since January 2021:

It’s true that the top 10 percent has also done well, probably reflecting higher profits. But again, lower-paid workers seem to have done relatively well in the face of inflation.

So is the idea that inflation especially hurts low-income families a myth? Well, as I mentioned, there’s an asterisk here. We normally measure inflation using the Consumer Price Index, which tracks the cost of the goods and services purchased by the average family. But lower-income families spend a higher than average share of their income on food and energy, which are also the categories that have seen the most inflation recently:

My rough calculations suggest that even when you take these food and energy costs into account, lower-income families have done better, not worse, than others, at least in terms of inflation’s effects. But it does lessen that difference somewhat.

And there is, as I also suggested, an asterisk on the asterisk. What we’re really arguing about is U.S. policy — and the exceptional rise in food and energy prices is neither a result of U.S. policy nor likely to be much affected by American policy going forward. Put it this way: If you want to blame the president for high food prices, the president you should be blaming is named Vladimir Putin.

None of this says that the Fed shouldn’t be trying to reduce inflation. But you shouldn’t invoke the plight of the poor as a reason for tight money. If anything, tight money, by leading to more slack in labor markets and therefore more unemployment, will disproportionately hurt lower-wage workers.

AI Summary. A model of stock demand incorporates income inequality, pension funds' growing willingness to hold equities, and cheaper, easier stock access for ordinary investors through lower fees and funds. Comparing this "demand-weighted income" measure with household equity wealth yields a slow-moving valuation gauge, though inequality data arrive too slowly for real-time use.

James Mackintosh Wall Street Journal
Date Posted:

An Oliver Wyman model argues that the increase in inequality has driven equity valuations @jmackin2

Does income inequality help explain stock market valuations?

Core argument: Oliver Wyman has built a model of stock demand assessing the effect of inequality alongside two long-running shifts: pension-fund managers' greater willingness to hold stocks since the 1950s and easier access to stocks for ordinary investors through lower fees and funds.

Oliver Wyman has constructed a model of demand for stocks that tries to assess the effect of inequality and two other long-running shifts. These are the rise in willingness of pension-fund managers to hold stocks since the 1950s and the easier access to stocks for ordinary investors, both through lower fees and the popularity of funds. This “demand-weighted income” measure is then compared with household equity wealth to come up with something akin to a slow-moving price-to-earnings ratio. A price-to-inequality ratio won’t replace a simple price-to-earnings gauge. Inequality data are slow to be produced, so this can’t be used as a real-time indicator.

Takeaways by Macro Roundup® AI

  1. Oliver Wyman has built a model of stock demand assessing the effect of inequality alongside two long-running shifts: pension-fund managers' greater willingness to hold stocks since the 1950s and easier access to stocks for ordinary investors through lower fees and funds.
  2. Oliver Wyman's "demand-weighted income" measure is compared with household equity wealth to produce a gauge akin to a slow-moving price-to-earnings ratio.
  3. A price-to-inequality ratio will not replace a simple price-to-earnings gauge, and because inequality data are slow to be produced, it cannot serve as a real-time indicator.

AI Summary. The Institute of International Finance estimates total debt owed by households, businesses, and governments at $290tn, more than one-third higher than a decade earlier. World debt has declined from a pandemic-driven record, but the risks it poses to economies and financial markets are intensifying.

Liz McCormick, Alexandre Tanzi, and Enda Curran Bloomberg
Date Posted:

While global debt declined slightly from last year, the total outstanding debt is $290 Trillion, up 1/3 from a decade ago, as borrowers face rising interest rates globally, report @mccormickliz @atanzi @endacurran

Are rising global debt costs intensifying risks to economies and markets?

Core argument: Total debt owed by households, businesses, and governments stands at $290 trillion, up by more than one-third from a decade ago, according to research by the Institute of International Finance.

The total debt owed by households, businesses, and governments stands at $290 trillion, up by more than one-third from a decade ago, according to research by the Institute of International Finance. Although the world’s debt has declined from a pandemic-driven record early this year, the risks it poses to economies and financial markets are intensifying.

Takeaways by Macro Roundup® AI

  1. Total debt owed by households, businesses, and governments stands at $290 trillion, up by more than one-third from a decade ago, according to research by the Institute of International Finance.
  2. Global debt has declined from the pandemic-driven record set early this year, while the risks it poses to economies and financial markets are intensifying.

AI Summary. The Investment Grade Corporate Bond Market Distress Index has risen only modestly during the current interest-rate tightening cycle and has recently trended sideways, with its peak not substantially above the level reached during the earlier 2015 tightening cycle.

Nina Boyarchenko, Richard Crump, et al Federal Reserve Bank Of New York
Date Posted:

Since the start of the current tightening cycle, increases in the Investment Grade Corporate Bond Market Distress Index (CMDI) have been relatively modest. The index remains close to historical medians. @NewYorkFed

Is the corporate bond market functioning well as interest rates rise?

Core argument: The Investment Grade Corporate Bond Market Distress Index has risen only modestly since the start of the current tightening cycle.

The increases in the Investment Grade Corporate Bond Market Distress Index since the start of the current tightening cycle have been relatively modest. Overall, the IG CMDI has trended sideways recently, with the 2022 peak not substantially above that observed in the 2015 tightening cycle.

Takeaways by Macro Roundup® AI

  1. The Investment Grade Corporate Bond Market Distress Index has risen only modestly since the start of the current tightening cycle.
  2. The 2022 peak in the Investment Grade Corporate Bond Market Distress Index was not substantially above the level observed during the 2015 tightening cycle.
  3. The Investment Grade Corporate Bond Market Distress Index has trended sideways overall.

AI Summary. The president of Germany's industry federation says more than a fifth of medium-sized German companies polled were considering leaving the country. With end-user energy prices not expected to return sustainably to pre-war levels, the authors anticipate not large-scale deindustrialization but a shift away from energy-intensive production, accompanied by friction and possibly lower growth.

Euro Intelligence Staff Euro Intelligence
Date Posted:

The president of the German federation of industry argues “more than a fifth of German medium-sized companies they had polled were considering packing up and leaving the country,” given expected structurally higher energy costs going forward.

The president of the German federation of industry argues “more than a fifth of German medium-sized companies they had...

Are high energy prices pushing German manufacturers away from energy-intensive production?

Core argument: The president of the German federation of industry told FAZ that more than a fifth of German medium-sized companies polled were considering leaving the country.

FAZ quotes the president of the German federation of industry as saying that more than a fifth of German medium-sized companies they had polled were considering packing up and leaving the country. Despite recent market moves, end-user energy prices will not revert to the pre-war times on a sustained level. What we expect to see in Germany is not so much large de-industrialization but a shift in production technologies. We expect to see a shift away from energy-intensive production, like bulk chemicals and steel, towards lower energy-intensive industrial segments and a shift towards low carbon technologies, in particular, a process that will be accompanied with friction and possibly lower GDP growth.

Takeaways by Macro Roundup® AI

  1. The president of the German federation of industry told FAZ that more than a fifth of German medium-sized companies polled were considering leaving the country.
  2. End-user energy prices are not expected to return to pre-war levels on a sustained basis despite recent market moves.
  3. Germany is expected to see a shift in production technologies rather than large-scale de-industrialization, moving away from energy-intensive output such as bulk chemicals and steel toward lower energy-intensity segments and low-carbon technologies, accompanied by friction and possibly lower GDP growth.

AI Summary. A published analysis found a record 48,953 US gun deaths, about 15 per 100,000 people. Gun homicide rates have been highest among Black men aged 20–24, peaking at 142 per 100,000 and up to 23x the rate for white men, while gun suicide rates were highest among white men aged 80–84.

Dominique Mosbergen Wall Street Journal
Date Posted:
Is Database:
Database

2021 saw a record 48,953 gun deaths or 15 fatalities per 100,000 people. Black men aged 20-24 suffered 142 firearm homicides per 100,000 people in 2021, a 74% increase since 2014. @wsj

How do US gun death rates differ by race, age, and cause?

Core argument: A record 48,953 US gun deaths, about 15 per 100,000 people, occurred last year, according to an analysis published in JAMA Network Open.

A record 48,953 deaths in the US, or about 15 fatalities per 100,000 people, were caused by guns last year, said the analysis published Tuesday in the journal JAMA Network Open. Since 1990, rates of gun-related homicide have been highest among Black men aged 20 to 24, the analysis said, with 142 fatalities per 100,000 people in this group in 2021—a 74% increase since 2014. Homicide rates are as much as 23 times higher among Black men, and as much as nearly four times higher among Hispanic men than among white men, the analysis said. Gun fatality rates from suicide were highest among white men aged 80 to 84 years, at 47 fatalities per 100,000 people in this group in 2021—a 41% increase since 2007, the analysis showed.

Takeaways by Macro Roundup® AI

  1. A record 48,953 US gun deaths, about 15 per 100,000 people, occurred last year, according to an analysis published in JAMA Network Open.
  2. Gun homicide rates since 1990 have been highest among Black men aged 20 to 24, reaching 142 per 100,000 people in 2021, a 74% increase since 2014, the analysis said.
  3. Gun suicide rates were highest among white men aged 80 to 84, at 47 per 100,000 people in 2021, up 41% since 2007, while homicide rates were as much as 23 times higher among Black men than white men, the analysis said.

2021 saw a record 48,953 gun deaths or 15 fatalities per 100,000 people. Black men aged 20-24 suffered 142 firearm homicides per 100,000 people in 2021, a 74% increase since 2014, “…A record 48,953 deaths in the US, or about 15 fatalities per 100,000 people, were caused by guns last year, said the analysis published Tuesday in the journal JAMA Network Open. Since 1990, rates of gun-related homicide have been highest among Black men aged 20 to 24, the analysis said, with 142 fatalities per 100,000 people in this group in 2021—a 74% increase since 2014. Homicide rates are as much as 23 times higher among Black men, and as much as nearly four times higher among Hispanic men than among white men, the analysis said. Gun fatality rates from suicide were highest among white men aged 80 to 84 years, at 47 fatalities per 100,000 people in this group in 2021—a 41% increase since 2007, the analysis showed….”

Dominique Mosbergen, “Gun Death Rate Nears Three-Decade High, With Men at Most Risk,” Wall Street Journal, November 29, 2022, https://www.wsj.com/articles/gun-death-rate-nears-three-decade-high-with-men-at-most-risk-11669749562

Gun Death Rate Nears Three-Decade High, With Men at Most Risk

The rate of gun deaths in the U.S. reached a 28-year high in 2021 after sharp increases in homicides of Black men and suicides among white men, an analysis of federal data showed.

A record 48,953 deaths in the U.S., or about 15 fatalities per 100,000 people, were caused by guns last year, said the analysis published Tuesday in the journal JAMA Network Open. Gun deaths declined in the 1990s, but have been rising steadily over the past decade and skyrocketed during the Covid-19 pandemic, said researchers who conducted the analysis.

Gun-related deaths of women and children have risen, the analysis said, but men remain far more likely to die from guns.

“The disparities are so marked,” said Chris Rees, a co-author of the study and an assistant professor of pediatrics and emergency medicine at Emory University School of Medicine.

Dr. Rees and his colleagues analyzed U.S. firearm fatality rates from 1990 to 2021 using data from the Centers for Disease Control and Prevention. More than 1.1 million people in the U.S. have died from guns since 1990, the analysis showed.

“The magnitude of the numbers are incomprehensible,“ said Eric Fleegler, a study co-author and an associate professor of pediatrics and emergency medicine at Harvard Medical School.

Since 1990, rates of gun-related homicide have been highest among Black men aged 20 to 24, the analysis said, with 142 fatalities per 100,000 people in this group in 2021—a 74% increase since 2014. Homicide rates are as much as 23 times higher among Black men and as much as nearly four times higher among Hispanic men than among white men, the analysis said.

Gun fatality rates from suicide were highest among white men aged 80 to 84 years, at 47 fatalities per 100,000 people in this group in 2021—a 41% increase since 2007, the analysis showed.

Men remain far more likely than women to die from guns, but firearm deaths among women have increased more than 70% since 2010, the study said. More suicides and homicides among some groups drove the rate higher among women, Dr. Rees said.

“The trend of increasing firearm fatalities unfortunately crosses all sexes,” Dr. Rees said.

Since the 1990s, the geographical distribution of firearm deaths has shifted, with gun death rates decreasing in the Western U.S. and increasing in the Southern U.S., researchers said.

Dr. Rees said the analysis, published soon after mass shootings in Virginia and Colorado, doesn’t answer why firearm deaths are increasing. But it does demonstrate that some groups are at higher risk from gun violence that policy changes could help mitigate, he said.

“For certain populations that are at higher risk of suicide, more suicide-prevention programs can be targeted at them,” he said. “For groups with higher rates of firearm-related homicide, there are certain programs like violence prevention, firearm-buyback programs and safe storage.”

AI Summary. Adjusted for inflation, U.S. house prices are 3.3% below their recent peak on the national index and 4.4% below on the 20-city composite, yet remain above the levels reached at the prior housing bubble peak and are historically high. Affordability worsened as mortgage rates rose even as house prices declined.

Bill McBride Calculated Risk
Date Posted:

Inflation-adjusted home prices are 3.3% under their recent peak, but affordability decreased as mortgage rates increased. @calculatedrisk

Are inflation-adjusted house prices still historically high despite recent declines?

Core argument: In real terms, the U.S. National house price index sits 3.3% below its recent peak and the Composite 20 index 4.4% below its 2022 peak.

In real terms, the National index is 3.3% below the recent peak, and the Composite 20 index is 4.4% below the recent peak in 2022. In real terms, house prices are still above the bubble peak levels. There is an upward slope to real house prices, and it has been over 16 years since the previous peak, but real prices are historically high. Affordability worsened in September as mortgage rates increased, even though house prices declined.

Takeaways by Macro Roundup® AI

  1. In real terms, the U.S. National house price index sits 3.3% below its recent peak and the Composite 20 index 4.4% below its 2022 peak.
  2. Inflation-adjusted house prices remain above the bubble peak levels reached more than 16 years ago, leaving real prices historically high despite the upward slope in real house prices over time.
  3. Affordability worsened in September as mortgage rates increased, even though house prices declined.

AI Summary. Alibaba founder Jack Ma has been living in central Tokyo for nearly six months amid Beijing's continuing crackdown on China's technology sector and its most prominent businessmen, having been spotted in countries including Spain and the Netherlands since his fallout with Chinese authorities.

Kana Inagaki, Leo Lewis, Ryan McMorrow, and Tom Mitchell Financial Times
Date Posted:

Jack Ma has been living in central Tokyo for the last six months in the aftermath of the Chinese government’s regulatory crackdown on his businesses. @ft

Jack Ma has been living in central Tokyo for the last six months in the aftermath of the Chinese government’s regulatory...

Are China's top tech founders leaving the country amid the crackdown?

Core argument: Jack Ma, Alibaba's founder and once China's richest business leader, has lived in central Tokyo for almost six months amid Beijing's continuing crackdown on the country's technology sector and its most powerful businessmen.

Jack Ma, the Alibaba founder and once the richest business leader in China, has been living in central Tokyo for almost six months amid Beijing’s continuing crackdown on the country’s technology sector and its most powerful businessmen. Since his fallout with Chinese authorities, Ma has been spotted in various countries, including Spain and the Netherlands. People involved in Japan’s modern art scene said that Ma had become an enthusiastic collector. Friends close to the billionaire in China said he had turned to painting watercolors to pass the time after being forced to retreat from his frenetic public life, jet-setting between meetings with top officials in China and around the globe.

Takeaways by Macro Roundup® AI

  1. Jack Ma, Alibaba's founder and once China's richest business leader, has lived in central Tokyo for almost six months amid Beijing's continuing crackdown on the country's technology sector and its most powerful businessmen.
  2. Since his fallout with Chinese authorities, Jack Ma has been spotted in countries including Spain and the Netherlands, and people involved in Japan's modern art scene say he has become an enthusiastic collector.
  3. Friends of Jack Ma in China said he turned to painting watercolors after being forced to retreat from a public life of jet-setting between meetings with top officials in China and abroad.

AI Summary. The founders of Chinese developer Soho China built a family office holding stakes in two Manhattan office towers, whose combined equity value of about $500m roughly matches their stake in the Beijing-based company that made their fortune. Their strategy of moving wealth abroad shielded it from China's property collapse.

Blake Schmidt and Pei Yi Mak Bloomberg
Date Posted:

A good example of capital flight from the PRC: the founders of Soho China now live in New York, where their real estate assets value may exceed their Chinese assets. @bloomberg

Does moving wealth abroad protect fortunes from China's property collapse?

Core argument: Zhang Xin and Pan Shiyi hold about half a billion dollars of combined equity in the General Motors Building on Fifth Avenue and Park Avenue Plaza in Midtown Manhattan through a discreet family office.

Zhang Xin and her husband Pan Shiyi, who grew Soho China Ltd. into a behemoth that reshaped the country’s skylines, have built a discreet family office. Two of its biggest assets: stakes in the General Motors Building on Fifth Avenue and Park Avenue Plaza in Midtown. Now, after the implosion of the Chinese property sector, the combined equity value of just these two investments — about half a billion dollars — is roughly the same as the couple’s holding in the Beijing-based company responsible for their wealth. Their five-part strategy — build a successful business in China, list it on a global exchange, pay out billions of dollars in dividends, set up a family office abroad, and buy up foreign real estate — means their fortune is relatively protected while other Chinese billionaires have seen their riches crumble after running foul of President Xi Jinping’s clampdowns.

Takeaways by Macro Roundup® AI

  1. Zhang Xin and Pan Shiyi hold about half a billion dollars of combined equity in the General Motors Building on Fifth Avenue and Park Avenue Plaza in Midtown Manhattan through a discreet family office.
  2. The couple's two New York property stakes are worth roughly the same as their holding in Beijing-based Soho China Ltd., the company responsible for their wealth, after the implosion of China's property sector.

AI Summary. Chinese companies are relocating or establishing operations in Singapore to hedge against geopolitical risk, with law and advisory firms estimating 400 to more than 500 new Chinese entities registered there in a single year, which experts describe as a rise from prior years. Singapore does not disclose origin countries in its public company statistics.

Mercedes Ruehl and Leo Lewis Financial Times
Date Posted:

At least 500 Chinese firms have redomiciled or registered in Singapore over the past year to hedge against geopolitical risk. @ft

At least 500 Chinese firms have redomiciled or registered in Singapore over the past year to hedge against geopolitical...

Are Chinese companies moving to Singapore to hedge geopolitical risk?

Core argument: One lawyer's firm found more than 500 new Chinese companies registered in Singapore this year, which experts noted was a rise from previous years, while a separate business advisory group calculated the figure at 400, including family offices.

The exact number of Chinese companies being set up is unclear because Singapore does not disclose the origin country in its public statistics. However, one lawyer said his firm’s internal research division found more than 500 new Chinese companies had set up this year in Singapore, which experts noted was a rise from previous years. Another business advisory group in the city-state that had reviewed the data calculated the number at 400, including family offices, but also asked not to be identified due to the sensitivities involved. Analysts expect the number of family offices — many of which are from China — to be well over 1,000 by the end of this year, compared with 400 at the end of 2020.

Takeaways by Macro Roundup® AI

  1. One lawyer's firm found more than 500 new Chinese companies registered in Singapore this year, which experts noted was a rise from previous years, while a separate business advisory group calculated the figure at 400, including family offices.
  2. Analysts expect Singapore's family offices, many of them from China, to number well over 1,000 by the end of this year, compared with 400 at the end of 2020.
  3. The exact number of Chinese companies setting up in Singapore is unclear because Singapore does not disclose the origin country in its public statistics, and one advisory group providing estimates asked not to be identified due to the sensitivities involved.

AI Summary. Characterizations of China's protests as an uprising are an exaggeration, and the security services are likely to suppress them given how much the system has invested in such contingencies and its record of prioritizing political security. Still, the willingness of many to protest publicly despite likely personal costs is meaningful.

Bill Bishop Sinocism
Date Posted:

China newsletter publisher @niubi notes that the scale of the protests is “remarkable and meaningful, but expects that the Chinese security services “will succeed in nipping [protests] in the bud.”

China newsletter publisher @niubi notes that the scale of the protests is “remarkable and meaningful, but expects that the...

Will China's security services suppress the protests?

Core argument: Characterizing China's protests as an "uprising" or "revolt" is an exaggeration at this stage, and the security services are likely to nip the demonstrations in the bud.

While there have been some breathless claims using terms like “uprising” and “revolt,” I think that is an exaggeration of the protests at this stage and that the security services will succeed in nipping them in the bud. But no mistake, the fact that so many were willing to stand up publicly in spite of the likely personal costs is remarkable and meaningful. Still, in spite of how stirring these protests have been, I would be surprised if they continue in any meaningful way, given how much work the system has put into dealing with just these kinds of contingencies and how it has repeatedly demonstrated that when it comes to ensuring political security, there is no bottom line.

Takeaways by Macro Roundup® AI

  1. Characterizing China's protests as an "uprising" or "revolt" is an exaggeration at this stage, and the security services are likely to nip the demonstrations in the bud.
  2. The willingness of so many to protest publicly despite the likely personal costs is remarkable and meaningful, even if the protests are unlikely to continue in any meaningful way.

AI Summary. The Pentagon estimates China probably accelerated its nuclear expansion and is on track for a stockpile of 1,500 nuclear weapons by 2035. It also reports China is investing heavily in space capabilities, including kinetic-kill missiles and ground-based lasers, and now has more than 260 intelligence, surveillance, and reconnaissance satellite systems, almost double its 2018 total.

Demetri Sevastopulo Financial Times
Date Posted:

The Chinese are seeking to deploy 1,500 nuclear weapons by 2035 and have doubled their intelligence, surveillance, and reconnaissance (ISR) satellite systems since 2018 to 260 satellites, according to a new Pentagon report. @ft

The Chinese are seeking to deploy 1,500 nuclear weapons by 2035 and have doubled their intelligence, surveillance, and...

Is China accelerating its nuclear and space weapons buildup?

Core argument: The Pentagon says China "probably accelerated" its nuclear expansion and is on track to hold a stockpile of 1,500 nuclear weapons by 2035.

The Pentagon said Beijing “probably accelerated” its nuclear expansion last year and was on track to have a stockpile of 1,500 nuclear weapons by 2035. The Pentagon said China was also investing heavily in space, including everything from intelligence assets to weapons to counter an adversary, such as kinetic-kill missiles and ground-based lasers. It said China had more than 260 intelligence, surveillance, and reconnaissance (ISR) satellite systems, which marked an almost doubling since 2018. US officials say China has shown no willingness to engage in any talks about nuclear weapons.

Takeaways by Macro Roundup® AI

  1. The Pentagon says China "probably accelerated" its nuclear expansion and is on track to hold a stockpile of 1,500 nuclear weapons by 2035.
  2. China operates more than 260 intelligence, surveillance, and reconnaissance satellite systems, almost double its 2018 total, according to the Pentagon.
  3. The Pentagon says China is investing heavily in space, including intelligence assets and weapons such as kinetic-kill missiles and ground-based lasers to counter an adversary, while US officials say Beijing has shown no willingness to discuss nuclear weapons.

Thursday, December 1, 2022

AI Summary. US applications for new businesses dropped early in the COVID-19 pandemic and then rose to record levels, remaining historically elevated, including among applications with characteristics likely to result in hiring and growth. Business applications have historically tracked actual business formation closely.

Ryan Decker and John Haltiwanger Federal Reserve Bank Of Boston
Date Posted:

Applications to start new businesses, including firms that are likely employers, surged during the pandemic. @UpdatedPriors @JHaltiwanger_UM

Did the pandemic surge in business applications lead to real business formation?

Core argument: US applications for new businesses hit an all-time high in July 2020 after dropping in March and April of that year, and remained historically elevated through the fall of 2022.

A striking feature of the US economic experience during the COVID-19 pandemic has been a surge in applications for new businesses. After initially dropping in March and April of 2020, applications rose to record levels, an all-time high in July 2020 and remaining historically elevated through the fall of 2022 (Figure 1.) The surge was apparent even among “likely employers,” that is, applications with characteristics that are likely to result in the hiring of workers and growth. Historically, there has been a tight relationship between business applications and true business formation, but questions have remained about the degree to which the pandemic’s surging applications would translate into actual employer businesses with broader labor market implications.

Takeaways by Macro Roundup® AI

  1. US applications for new businesses hit an all-time high in July 2020 after dropping in March and April of that year, and remained historically elevated through the fall of 2022.
  2. The pandemic surge in US business applications extended to "likely employers," applications with characteristics that are likely to result in the hiring of workers and growth.
  3. Business applications have historically tracked true business formation closely, leaving open the question of how far the pandemic's application surge would translate into actual employer businesses with broader labor market implications.

AI Summary. The Federal Reserve signaled it may moderate the pace of interest rate increases to 0.5 percentage points after four consecutive 0.75-point hikes, while warning it has a long way to go in fighting inflation. It also indicated the endpoint of the tightening cycle would probably need to be higher than its earlier projection of 4.6%.

Colby Smith Financial Times
Date Posted:

In a speech yesterday, Jay Powell signaled the pace of rate increases would slow but that the terminal rate will likely be higher than the 4.6% rate that Fed officials had projected in their last quarterly forecast. @ft

In a speech yesterday, Jay Powell signaled the pace of rate increases would slow but that the terminal rate will likely be...

Will the Fed slow rate increases while raising its endpoint?

Core argument: Fed chair Jay Powell said "the time for moderating the pace of rate increases may come as soon as the December meeting," suggesting a downshift to a 0.5 percentage point increase after four consecutive 0.75 point rises.

Jay Powell has sent a strong signal that the Federal Reserve will slow the pace of interest rate rises next month in an otherwise hawkish speech warning that the US central bank has a long way to go in its fight against inflation. “The time for moderating the pace of rate increases may come as soon as the December meeting,” the Fed chair said. The remarks from Powell suggest the Fed is preparing to “downshift” to a 0.5 percentage point increase when it meets in two weeks after it raised rates by 0.75 percentage points at each of its past four meetings. He reiterated that the endpoint of the tightening cycle would probably need to be higher than forecasted in projections released in September, which suggested most officials anticipated a so-called terminal rate of 4.6%. Most economists have penciled in the fed funds rate topping 5%.

Takeaways by Macro Roundup® AI

  1. Fed chair Jay Powell said "the time for moderating the pace of rate increases may come as soon as the December meeting," suggesting a downshift to a 0.5 percentage point increase after four consecutive 0.75 point rises.
  2. Powell reiterated that the endpoint of the tightening cycle would probably need to be higher than September's projections, which suggested most officials anticipated a terminal rate of 4.6%.
  3. Most economists have penciled in the fed funds rate topping 5%, above the 4.6% terminal rate indicated in the Federal Reserve's September projections.

AI Summary. An analysis of American stock market performance over a roughly three-year span found energy the best-performing sector of the S&P 500, followed by information technology, with the index up 23% overall and health care also performing well. On this measure, market leadership shifted away from big technology firms toward old-economy industries.

Economist Staff The Economist
Date Posted:

Over the past three years, the best-performing sectors of the S&P 500 have been energy and IT, outpacing the Technology sector. @TheEconomist

Has stock market leadership shifted from big technology to old-economy industries?

Core argument: The S&P 500 has risen 23% since January 1st, 2020, with energy the best-performing industry sector, followed by information technology.

We have examined which American industries and firms have done best over the past three years based on stock market performance. The headline is that market leadership has flipped dramatically. The digital hares have given ground to old-economy tortoises. Big tech is no longer running away with the race. Firms once derided as obsolete and sluggish suddenly look vital again. We have chosen January 1st, 2020, as the starting date for our analysis. Since then, the S&P 500 index of leading American shares has risen by 23%. The best-performing industry sector is energy, followed by information technology (IT). Health care has done well, as might be expected during a public-health crisis: the second-best-performing company in the S&P 500 is Moderna, a leading vaccine maker, whose share price is up by nearly 800%.

Takeaways by Macro Roundup® AI

  1. The S&P 500 has risen 23% since January 1st, 2020, with energy the best-performing industry sector, followed by information technology.
  2. Moderna, a leading vaccine maker, is the second-best-performing company in the S&P 500 since January 1st, 2020, with its share price up by nearly 800%.
  3. Market leadership in American equities has flipped since January 1st, 2020, with big tech giving ground to old-economy firms once derided as obsolete and sluggish.

AI Summary. Bank of America estimates household deposits would take 12 to about 40 months, depending on income quartile, to return to 2019 levels at their recent rate of decline, while Goldman Sachs projects US households will hold under $1tn in excess savings and JPMorgan warns those savings could be depleted.

Megan Greene Financial Times
Date Posted:

.@economistmeg argues in @ft that by mid-2023, consumers and corporations will have depleted the excess savings they built up during the pandemic, and the long-awaited recession will get underway.

.@economistmeg argues in @ft that by mid-2023, consumers and corporations will have depleted the excess savings they built...

How quickly are household excess savings being drawn down?

Core argument: Bank of America expects household deposits, at their current three-month average rate of decline, to take between 12 and about 40 months depending on income quartile to return to 2019 levels.

Bank of America expects that at the current three-month average rate of decline of household deposits, it would take between 12 and about 40 months (depending on income quartile) to return to 2019 levels. Goldman Sachs estimates US households will have less than $1T in excess savings by the end of 2023. JPMorgan recently warned excess savings could be completely depleted by the second half of next year. There are many reasons to fall on the pessimistic side of these estimates. The personal savings rate jumped from 8.3% at the end of 2019 to 26.3% at the height of Covid-19 in March 2021. In September, it had fallen back to 3.1%, well below the historical average. And for all the cash still left in aggregate household bank accounts, consumers are not feeling very confident. The Conference Board’s consumer confidence index has been declining since mid-2021.

Takeaways by Macro Roundup® AI

  1. Bank of America expects household deposits, at their current three-month average rate of decline, to take between 12 and about 40 months depending on income quartile to return to 2019 levels.
  2. Goldman Sachs estimates US households will hold less than $1tn in excess savings by the end of 2023, while JPMorgan warns excess savings could be completely depleted by the second half of next year.
  3. The US personal savings rate rose from 8.3% at the end of 2019 to 26.3% in March 2021 before falling to 3.1% in September, well below its historical average.

AI Summary. US consumer prices excluding food and energy rose a below-forecast 0.2% month over month, one of the smallest increases of the year, while consumer spending accelerated. The saving rate fell to 2.3%, its lowest since 2005, according to Commerce Department data.

Reade Pickert Bloomberg
Date Posted:

The PCE inflation measure rose 0.2% in October, under the forecast, while the personal savings rate fell to 2.3%, the lowest since 2005. @bloomberg

Is core inflation cooling while consumer spending accelerates?

Core argument: The core personal consumption expenditures price index, excluding food and energy, rose a below-forecast 0.2% in October from a month earlier, the second-smallest increase this year, according to Commerce Department data.

A key gauge of US consumer prices posted the second-smallest increase this year while spending accelerated, offering hope that the Federal Reserve’s interest-rate hikes are cooling inflation without sparking a recession. The personal consumption expenditures price index, excluding food and energy, which Fed Chair Jerome Powell stressed this week is a more accurate measure of where inflation is heading, rose a below-forecast 0.2% in October from a month earlier, Commerce Department data showed Thursday. The saving rate fell to 2.3% in October, the lowest since 2005, the Commerce Department report showed.

Takeaways by Macro Roundup® AI

  1. The core personal consumption expenditures price index, excluding food and energy, rose a below-forecast 0.2% in October from a month earlier, the second-smallest increase this year, according to Commerce Department data.
  2. US consumer spending accelerated as core inflation slowed, offering hope that the Federal Reserve's interest-rate hikes are cooling inflation without sparking a recession.
  3. The US saving rate fell to 2.3% in October, the lowest since 2005, the Commerce Department reported.