Edward Conard

Top Ten New York Times Bestselling Author

  • “Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Thursday, January 12, 2023

AI Summary. US consumer prices rose 6.5% from a year earlier, down from 7.1% the prior month and below a 9.1% peak. Core prices, which exclude volatile food and energy, rose 5.7% year over year and at a 3.1% annualized rate over three months, the slowest pace in more than a year.

Gwynn Guilford Wall Street Journal
Date Posted:

Inflation is decelerating with Core CPI rising 5.7% y/y, down from 6% in November. Core CPI rose at 3.1% annualized in the three months ending in December, well above the Fed’s 2% target. Headline inflation is running at 6.5%. @wsj

Is inflation slowing?

Core argument: The consumer-price index rose 6.5% in December from a year earlier, down from 7.1% in November and well below the 9.1% peak reached in June.

The consumer-price index, a measurement of what consumers pay for goods and services, rose 6.5% last month from a year earlier, down from 7.1% in November and well below a 9.1% peak in June. Core CPI, which excludes volatile energy and food prices, climbed 5.7% in December from a year earlier, easing from a 6% gain in November. Core prices increased at a 3.1% annualized rate in the three months that ended in December, the slowest pace in more than a year.

Takeaways by Macro Roundup® AI

  1. The consumer-price index rose 6.5% in December from a year earlier, down from 7.1% in November and well below the 9.1% peak reached in June.
  2. Core CPI, which excludes volatile energy and food prices, climbed 5.7% in December from a year earlier, easing from a 6% gain in November.
  3. Core prices increased at a 3.1% annualized rate over the three months ended in December, the slowest pace in more than a year.

AI Summary. Goods prices have shifted from unusually large increases to unusually large decreases, while services prices continue to grow very quickly despite slowing from their rapid summer pace. Core inflation excluding housing and used cars ran at a modest 1.8% annual rate over three months, its lowest in nearly two years.

Jason Furman @Jasonfurman
Date Posted:

.@Jasonfurman argues that while core CPI excluding housing and used cars has moderated it still isn’t consistent with the Fed’s target, “the job of getting inflation to 2% or even 3% is still not done.”

Are falling goods prices offsetting rapid services inflation?

Core argument: Jason Furman notes that super-core inflation — excluding housing, about 40% of core, and used cars — ran at a 1.8% annual rate over the last three months, the lowest since February 2021.

The broad story continues to be that goods prices have gone from unusually large increases to unusually large decreases. And services prices have slowed a little from their rapid summer pace but continue to grow very quickly. Excluding housing (which is ~40% of core) and used cars, super-core inflation was consistently modest for the last three months at a 1.8% annual rate over this period. That is the lowest since February 2021. Overall, 3 consecutive months of relatively moderate core inflation. And some positive developments yet to happen, like future shelter slowdown. But a bit less moderation than hoped & the job of getting inflation to 2% or even 3% is still not done.

Takeaways by Macro Roundup® AI

  1. Jason Furman notes that super-core inflation — excluding housing, about 40% of core, and used cars — ran at a 1.8% annual rate over the last three months, the lowest since February 2021.
  2. Furman describes goods prices as having swung from unusually large increases to unusually large decreases, while services prices have slowed a little from their rapid summer pace but continue to grow very quickly.
  3. Furman counts three consecutive months of relatively moderate core inflation with a future shelter slowdown still to come, but sees a bit less moderation than hoped and the job of reaching 2% or even 3% not done.

AI Summary. Averting a federal debt-limit default requires Democrats to accept Republican concerns that federal spending has reached problematic levels, identify spending cuts, and in exchange raise the borrowing limit high enough that it cannot be used as leverage for years. A discharge petition could force a House vote if leadership refuses.

Michael Strain Project Syndicate
Date Posted:

.@MichaelRStrain warns the White House that House firebrands are not bluffing and that the Administration should start working on a package of spending cuts to try to avoid a default. @AEI

.@MichaelRStrain warns the White House that House firebrands are not bluffing and that the Administration should start...

How can a federal debt-limit default be averted?

Core argument: The author argues that House Republican holdouts are not bluffing on the debt ceiling, so Biden and congressional Democrats should abandon plans that assume those members will cooperate and begin negotiating a deal immediately.

The first step is to throw out any plans that depend on the House firebrands playing ball. They aren’t bluffing. Biden and congressional Democrats need to accept this reality and start working on a deal today. They should acknowledge the more widely shared Republican argument that federal spending has reached problematic levels – a conviction founded at least partly on the American Rescue Plan’s role in sparking inflation – and they should then find some spending that can be cut. In exchange, the debt ceiling should be raised high enough that it will be many years before it can again be used as a weapon. Second, responsible members of Congress must make plans to avoid a default. One idea worth exploring is to use a discharge petition to force a debt-ceiling increase to the floor of the House in the event that McCarthy is unwilling to do so.

Takeaways by Macro Roundup® AI

  1. The author argues that House Republican holdouts are not bluffing on the debt ceiling, so Biden and congressional Democrats should abandon plans that assume those members will cooperate and begin negotiating a deal immediately.
  2. The proposed bargain has Democrats acknowledging the Republican argument that federal spending has reached problematic levels — a conviction founded partly on the American Rescue Plan's role in sparking inflation — and finding cuts in exchange for a debt-ceiling increase large enough to defuse it for years.
  3. As a backstop against default, the author suggests responsible members of Congress explore a discharge petition to force a debt-ceiling increase to the House floor if McCarthy is unwilling to do so.

AI Summary. The European Union now imports more natural gas — and slightly more total energy by value, including oil, petroleum products and coal — from the United States than from Russia, following a buildout of US liquefied natural gas export capacity and a collapse in Russian gas supplies to Europe. The US became the world's largest exporter of liquefied natural gas.

Joseph Politano Apricitas Economics
Date Posted:

The EU now imports more natural gas from the United States than Russia, a trend that is likely to get more pronounced as more American LNG export capacity comes online. @josephPolitano

Does Europe now import more energy from the United States than Russia?

Core argument: The EU now receives more natural gas from the United States than from Russia, following the U.S. buildout of LNG export capacity that made America the world's largest LNG exporter and the collapse of Russian gas supplies to Europe.

In fact, the massive buildout of US LNG export capacity (America became the world’s number one LNG exporter last year) combined with the total collapse in Russian natural gas supplies to Europe has meant that the EU now gets more gas from the US than the Russian Federation. In Euro terms, the EU now actually imports slightly more total energy (including oil, petroleum products, coal, etc.) from the US than Russia. Barring a rapid about-face in Russian energy politics, this gap will likely only continue to grow—American LNG export capacity is expected to increase in 2023, especially as the Freeport LNG facility in Texas recovers from its accident last year, and the EU already banned further imports of Russian crude just over a month ago.

Takeaways by Macro Roundup® AI

  1. The EU now receives more natural gas from the United States than from Russia, following the U.S. buildout of LNG export capacity that made America the world's largest LNG exporter and the collapse of Russian gas supplies to Europe.
  2. Measured in euros, the EU imports slightly more total energy — including oil, petroleum products, and coal — from the United States than from Russia.
  3. The gap between U.S. and Russian energy supplies to the EU will likely widen as American LNG export capacity is expected to increase in 2023, with Texas's Freeport LNG facility recovering from its accident and the EU's ban on further Russian crude imports in place.

AI Summary. China is moving away from its "three red lines" policy limiting property developer leverage — targets for debt, equity, and assets — after the effort to curb risky lending and speculation was followed by developer defaults and a collapse in housing and land sales. Officials at multiple state-owned banks say they have effectively shelved the leverage curbs when assessing borrowers.

Thomas Hale, Sun Yu, and Cheng Leng Financial Times
Date Posted:

China is rolling back efforts to limit leverage in the real estate sector. @ft

Is China abandoning limits on property developer borrowing after a housing downturn?

Core argument: China is retreating from its "three red lines" policy capping developer leverage, after the effort to curb risky lending and real estate speculation helped fuel a wave of defaults and a property market slump.

China is moving away from its “three red lines” policy of limiting leverage in the property sector, after its effort to reduce risky lending and real estate speculation helped fuel a wave of defaults and triggered a slump in the property market. Beijing is now easing constraints on developer credit and even rolling out potential loans following a severe downturn that saw housing and land sales collapse, threatening a major pillar of an economy already ailing from coronavirus lockdowns. Officials at multiple state-owned banks said they had effectively shelved the leverage curbs — whose three red lines refer to targets for debt, equity, and assets for individual companies — in their assessment of borrowers. Late last year, state-owned banks announced hundreds of billions of dollars of potential new lending to property developers.

Takeaways by Macro Roundup® AI

  1. China is retreating from its "three red lines" policy capping developer leverage, after the effort to curb risky lending and real estate speculation helped fuel a wave of defaults and a property market slump.
  2. Officials at multiple state-owned Chinese banks said they had effectively shelved the three red lines — targets for debt, equity, and assets at individual companies — in assessing borrowers.
  3. State-owned banks announced hundreds of billions of dollars of potential new lending to property developers, following a downturn in which housing and land sales collapsed in an economy already ailing from coronavirus lockdowns.

AI Summary. China's efforts to stabilize its property sector and slow the adjustment may not be realistic, because in a speculative market expectations of rising prices generate demand, and once reversed, prices are hard to hold up. With real demand expected to fall sharply, wringing out speculation likely requires much lower prices and wider financial distress.

Michael Pettis South China Morning Post
Date Posted:

.@michaelxpettis warns that there is likely no way to stabilize the Chinese property sector without prices falling and a significant increase in financial distress.

.@michaelxpettis warns that there is likely no way to stabilize the Chinese property sector without prices falling and a...

Can China stabilize its property market without much lower prices?

Core argument: Beijing appears to seek stabilization of China's property sector and a slower pace of adjustment to limit financial distress, a goal the author argues may not be realistic.

For now, Beijing seems to want to stabilize the property sector and slow the pace of adjustment to reduce financial distress. It is not clear, however, that this is a realistic goal. In a speculative market, it is the expectations of rising prices that generate the demand for more rising prices, and once these expectations are reversed, it is very hard to prevent prices from falling. With real demand expected to fall sharply in the next few years, it will be impossible to wring speculation out of the property market without much lower prices and a significant increase in the spread of financial distress.

Takeaways by Macro Roundup® AI

  1. Beijing appears to seek stabilization of China's property sector and a slower pace of adjustment to limit financial distress, a goal the author argues may not be realistic.
  2. In a speculative property market, expectations of rising prices generate the demand that drives further price increases, and once those expectations reverse, preventing price declines becomes very difficult.
  3. With real demand expected to fall sharply over the next few years, the author argues speculation cannot be wrung out of China's property market without much lower prices and a significant spread of financial distress.

AI Summary. The US and Japan have extended their security alliance to cover space, agreeing that attacks to, from or within space present a challenge that could trigger the treaty clause obliging each side to respond to an attack on the other, amid concern about the threat from China.

Felicia Schwartz, Kana Inagaki, and Demetri Sevastopulo Financial Times
Date Posted:

Japan and the United States are expanding their security cooperation to space pledging to defend each other’s satellites from Chinese attacks. @ft

Japan and the United States are expanding their security cooperation to space pledging to defend each other’s...

Do mutual defense treaty obligations now extend to attacks in space?

Core argument: The US and Japan extended their security alliance to space to defend against attacks on satellites, amid growing concern about the threat from China, following talks in Washington between US secretary of state Antony Blinken, defense secretary Lloyd Austin and their Japanese counterparts.

The US and Japan have announced they are extending their security alliance to space in a push to defend against attacks on satellites amid growing concern about the threat from China. “We agree that attacks to, from or within space present a clear challenge,” said US secretary of state Antony Blinken after he and US defense secretary Lloyd Austin met their Japanese counterparts in Washington on Wednesday. “We affirm that, depending on the nature of those attacks, this could lead to the invocation of Article 5 of our Japan-US security treaty,” Blinken added, pointing to the section of the treaty stipulating that an attack on either party would prompt the other to “act to meet the common danger.”

Takeaways by Macro Roundup® AI

  1. The US and Japan extended their security alliance to space to defend against attacks on satellites, amid growing concern about the threat from China, following talks in Washington between US secretary of state Antony Blinken, defense secretary Lloyd Austin and their Japanese counterparts.
  2. US secretary of state Antony Blinken said attacks to, from or within space could, depending on their nature, lead to invocation of Article 5 of the Japan-US security treaty, under which an attack on either party would prompt the other to "act to meet the common danger.".

Friday, January 13, 2023

AI Summary. JPMorgan Chase said it may be forced to pay more for deposits, which analysts called a warning shot for the entire banking industry. The bank reported fourth-quarter deposits of $2.4tn, down 4% from a year earlier and its first year-on-year decline since 2016.

Joshua Franklin Financial Times
Date Posted:

JP Morgan reported deposits in Q4 2022 were down 4% from a year earlier, the first year-on-year decline since 2016. Investors and analysts anticipate that banks will have to pay more for deposits going forward. @ft

JP Morgan reported deposits in Q4 2022 were down 4% from a year earlier, the first year-on-year decline since 2016. ...

Will banks have to pay more to keep deposits?

Core argument: JPMorgan Chase reported fourth-quarter deposits of $2.4tn, down 4% from a year earlier, the bank's first year-on-year decline since 2016.

JPMorgan Chase said it might be forced to pay more for deposits this year in what analysts called “a warning shot for the entire industry”. JPMorgan said deposits in the fourth quarter were $2.4T, down 4% from a year earlier. This was the bank’s first year-on-year decline since 2016. Investors and analysts anticipate that banks will eventually have to reward deposit holders with better rates to retain their business and JPMorgan said it expected that would be the case in 2023.

Takeaways by Macro Roundup® AI

  1. JPMorgan Chase reported fourth-quarter deposits of $2.4tn, down 4% from a year earlier, the bank's first year-on-year decline since 2016.
  2. JPMorgan Chase said it might be forced to pay more for deposits in 2023, which analysts called "a warning shot for the entire industry".
  3. Investors and analysts anticipate that banks will eventually have to reward deposit holders with better rates to retain their business.

AI Summary. The 12-month median wage change has returned to its level in the second half of the 1990s, and if the quarterly Employment Cost Index—widely viewed as the best wage gauge—follows suit, the job market would no longer be a worrying source of inflationary pressure. Inflation may normalize without policymakers pushing the economy into a downturn.

Matt Klein The Overshoot
Date Posted:

.@M_C_Klein notes a broad-based slowdown in wage growth. He highlights that “12-month median wage change is now back to where it was in the second half of the 1990s” He thinks a soft landing is “increasingly likely.”

Can inflation normalize without pushing the economy into a downturn?

Core argument: The 12-month median wage change has returned to its level in the second half of the 1990s, a period that did not feature excessive price increases outside of Beanie Babies and stocks.

The 12-month median wage change is now back to where it was in the second half of the 1990s—not exactly a period of excessive price increases outside of Beanie Babies and stocks. That could soon be corroborated by the Employment Cost Index (ECI), which Fed officials and others regularly view as the single best indicator of wages. The ECI only comes out once a quarter, and the latest data right now are from 2022Q3. If the Q4 number were to move in line with the most recent hourly earnings numbers and the Atlanta Fed’s median wage change tracker, then the job market would no longer a worrying source of inflationary pressure. This could be noise, but it is looking increasingly likely that inflation may in fact normalize without policymakers having to push the economy into a downturn.

Takeaways by Macro Roundup® AI

  1. The 12-month median wage change has returned to its level in the second half of the 1990s, a period that did not feature excessive price increases outside of Beanie Babies and stocks.
  2. The Employment Cost Index, which Fed officials and others regularly view as the single best indicator of wages, is reported only quarterly, with the latest data from 2022Q3.
  3. If the Q4 Employment Cost Index moves in line with recent hourly earnings and the Atlanta Fed's median wage change tracker, the job market would no longer be a worrying source of inflationary pressure.

AI Summary. Even if much wage and price growth proves temporary, the underlying determinants of inflation—supply, demand, and expectations—no longer justify a sanguine outlook, with unemployment at 3.5% and consumers expecting 4.6% inflation over the coming year. This argues the Federal Reserve cannot yet signal an end to interest-rate increases.

Greg Ip Wall Street Journal
Date Posted:

.@greg_ip argues yesterday’s CPI release is consistent with recent inflation being largely transitory in nature, but with consumer expectations of 4.6% inflation in the coming year, “the Fed can’t signal an end to interest rate increases yet.”

Can the Fed signal an end to rate increases yet?

Core argument: Unemployment stands at 3.5% and consumers expect 4.6% inflation over the coming year, according to the University of Michigan, versus 6% unemployment and about 3% expected inflation when Fed officials began calling inflation "transitory" in March 2021.

Still, even if a lot of wage and price growth does prove tran­si­tory, that won’t nec­es­sar­ily com­fort the Fed. When of­fi­cials be­gan us­ing the term “tran­si­tory” in March 2021, the un­em­ploy­ment rate was 6% and con­sumers ex­pected about 3% in­fla­tion in the com­ing year. In other words, the main de­ter­mi­nants of un­der­ly­ing in­fla­tion—ag­gre­gate sup­ply and de­mand and ex­pec­ta­tions—jus­ti­fied a san­guine out­look. Not anymore. Un­em­ployment is now 3.5% and con­sumers ex­pect 4.6% in­fla­tion in the com­ing year, ac­cord­ing to the Uni­ver­sity of Mi­chigan. This is why the Fed can’t sig­nal an end to in­ter­est rate in­creases yet and the risk of a re­ces­sion can’t be dis­missed.

Takeaways by Macro Roundup® AI

  1. Unemployment stands at 3.5% and consumers expect 4.6% inflation over the coming year, according to the University of Michigan, versus 6% unemployment and about 3% expected inflation when Fed officials began calling inflation "transitory" in March 2021.
  2. The main determinants of underlying inflation—aggregate supply and demand and expectations—justified a sanguine outlook in March 2021 but no longer do, even if much wage and price growth proves transitory.
  3. The Federal Reserve cannot yet signal an end to interest rate increases, and the risk of a recession cannot be dismissed.

AI Summary. The decline in the world real interest rate over roughly three decades suggests global demand for financial assets outpaced growth in their supply, driven by faster emerging-market growth, changes in financial structure, and shifts in advanced-economy public debt. Advanced economies' net foreign assets fell from near zero to about -20% of their combined GDP.

Enrique Mendoza and Vincenzo Quadrini National Bureau of Economic Research
Date Posted:
Is Database:
Database

New @nberpubs notes that the demand for safe assets from 1990-2020 grew even faster than the supply of safe assets, as rapidly growing emerging economies increasing desired to hold safe assets as FX reserves.

Why has the world real interest rate declined for three decades?

Core argument: Net foreign assets of advanced economies fell from near zero at the start of the 1990s to about -20 percent of their collective GDP by 2020, a massive growth in net foreign liabilities.

The sharp, secular decline in the world real interest rate of the past thirty years suggests that the surge in global demand for financial assets outpaced the growth in their supply. This phenomenon was driven by faster growth in emerging markets, changes in the financial structure of both emerging and advanced economies, and changes in demand and supply of public debt issued by advanced economies. The net foreign liabilities of advanced economies grew massively.  The net foreign assets of advanced economies, as a share of their collective GDP, fell from close to zero at the beginning of the 1990s to about -20 percent in 2020.

Takeaways by Macro Roundup® AI

  1. Net foreign assets of advanced economies fell from near zero at the start of the 1990s to about -20 percent of their collective GDP by 2020, a massive growth in net foreign liabilities.
  2. The sharp, secular decline in the world real interest rate over the past thirty years suggests global demand for financial assets outpaced growth in their supply.
  3. Faster emerging-market growth, changes in the financial structure of emerging and advanced economies, and shifts in the demand and supply of advanced-economy public debt drove the surge in demand for financial assets.

AI Summary. Tree-ring records from 572 juniper shrub series at high elevation in the Italian Alps indicate that current snowpack duration is 36 days shorter than the long-term mean, a decline the authors describe as unprecedented over the last six centuries. Snow cover duration in the Alps fell 5.6% per decade over the last 50 years.

Marco Carrer, Raffaella Dibona, et al Nature
Date Posted:

A new @nature study finds that over the past 50 years the snowpack in the Alps has been drawing back 5.6% per decade. The current snowpack cover is 36 days shorter than the long-term mean, a decline that is unprecedented over the last six centuries.

How does current Alpine snowpack duration compare with the last six centuries?

Core argument: Snowpack cover duration in the Alps is 36 days shorter than the long-term mean, a decline the authors find unprecedented over the last six centuries.

Over the last 50 years, the Alps experienced a 5.6% reduction per decade in snow cover duration, which already affects a region where economy and culture revolve, to a large extent, around winter. Here we present evidence from 572 ring-width series extracted from a prostrate shrub (Juniperus communis) growing at high elevation in the Val Ventina, Italy. These ring-width records show that the duration of current snowpack cover is 36 days shorter than the long-term mean, a decline that is unprecedented over the last six centuries.

Takeaways by Macro Roundup® AI

  1. Snowpack cover duration in the Alps is 36 days shorter than the long-term mean, a decline the authors find unprecedented over the last six centuries.
  2. The Alps lost 5.6% of snow cover duration per decade over the last 50 years, in a region whose economy and culture revolve largely around winter.
  3. The evidence comes from 572 ring-width series taken from the prostrate shrub Juniperus communis growing at high elevation in Val Ventina, Italy.