Edward Conard

Top Ten New York Times Bestselling Author

  • “…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
  • “…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
  • “…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
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…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
  • “…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
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Thursday, May 11, 2023

AI Summary. Bank credit has not been a significant source of financing for consumer or business spending, apart from the temporary Paycheck Protection Program emergency loans, in contrast with pre-2007 cycles. Americans borrowed little relative to income compared with previous expansions, and household borrowing had already been retrenching with little impact on economic activity.

Matt Klein The Overshoot
Date Posted:

The post pandemic expansion was much less dependent on consumer and business borrowing than previous expansions. @M_C_Klein argues this should insulate the economy from tightening US bank credit standards.

Does bank credit still drive consumer and business spending?

Core argument: Bank credit, apart from the temporary Paycheck Protection Program emergency loans, has not been a significant source of financing for U.S. consumer or business spending, a contrast with pre-2007 cycles that should help insulate the real economy from banking-sector disruptions.

With the temporary exception of the Paycheck Protection Program (PPP) emergency loans, bank credit has not been a significant source of financing for either consumer or business spending. That is a notable contrast from pre-2007 cycles—and should help insulate the real economy from the disruptions in the banking sector. Despite the housing boomlet, Americans borrowed remarkably little over the past few years relative to their income, especially when compared to previous expansions—and only some of that borrowing came from banks. Moreover, household borrowing had already been retrenching in the second half of 2022 as mortgage rates normalized, with little impact on overall economic activity.

Takeaways by Macro Roundup® AI

  1. Bank credit, apart from the temporary Paycheck Protection Program emergency loans, has not been a significant source of financing for U.S. consumer or business spending, a contrast with pre-2007 cycles that should help insulate the real economy from banking-sector disruptions.
  2. Despite the housing boomlet, Americans borrowed little relative to their income in recent years compared with previous expansions, and only some of that borrowing came from banks.
  3. Household borrowing was already retrenching in the second half of 2022 as mortgage rates normalized, with little impact on overall economic activity.

AI Summary. The banking system's deposit funding declined considerably after monetary policy tightening began, with the most acute outflows concentrated among super-regional banks holding $50bn–$250bn in assets, while banks under $50bn were relatively stable and banks above $250bn received inflows. Banks replaced deposit outflows using alternative funding sources.

Stephan Luck, Matthew Plosser, and Josh Younger Federal Reserve Bank of New York
Date Posted:

In the aftermath of SVB collapse, bank deposit outflows have been concentrated in a relatively narrow segment of “super-regional” banks with assets between $50-$250B. @NewYorkFed

How did monetary tightening affect bank deposits across bank sizes?

Core argument: Deposit outflows during March 2023, following the run on SVB, were most acute at super-regional banks with $50 to $250 billion in total assets, while the banking system's deposit funding had already declined considerably since tightening began in March 2022.

The banking system has seen a considerable decline in deposit funding since the start of the current monetary policy tightening cycle in March 2022. The speed of deposit outflows increased during March 2023, following the run on SVB, with the most acute outflows concentrated in a relatively narrow segment of the banking system, super-regional banks (those with $50 to $250 billion in total assets). Notably, deposit funding amongst the cohort often referred to as community and smaller regional banks (that is, institutions with less than $50 billion in assets) were relatively stable by comparison. Large banks (those with more than $250 billion in assets), which had been subject to the largest deposit outflows before March 2023, received deposit inflows throughout March 2023. Throughout, banks were able to replace deposit outflows by making use of alternative funding sources.

Takeaways by Macro Roundup® AI

  1. Deposit outflows during March 2023, following the run on SVB, were most acute at super-regional banks with $50 to $250 billion in total assets, while the banking system's deposit funding had already declined considerably since tightening began in March 2022.
  2. Community and smaller regional banks, those with less than $50 billion in assets, held deposit funding relatively stable by comparison.
  3. Large banks with more than $250 billion in assets, which had been subject to the largest deposit outflows before March 2023, received deposit inflows throughout March 2023, and banks were able to replace deposit outflows with alternative funding sources.

AI Summary. Goldman Sachs now projects China's economy will not overtake America's until 2035 and will peak at only 14% larger, down from an earlier projection of surpassing the US in 2026 and being over 50% larger by mid-century. Capital Economics argues China will reach 90% of America's size in 2035 and then lose ground.

Economist Staff The Economist
Date Posted:

China and the United States economies are likely to be near parity going forward. Goldman Sachs estimates at peak China will be 14% larger than the US whereas Capital Economics estimates China’s economy will peak at 90% of the US. @TheEconomist

Will China's economy overtake America's, and by how much?

Core argument: Goldman Sachs now projects China's GDP will overtake America's in 2035 and peak at only 14% larger, revising its 2011 forecast of a 2026 crossover and a lead of over 50% by mid-century.

In 2011 Goldman Sachs projected that China’s GDP would surpass America’s in 2026 and become over 50% larger by mid-century. No peak was in sight. At the end of last year, the bank revisited its calculations. It now thinks China’s economy will not overtake America’s until 2035 and at its high point will be only 14% bigger. Capital Economics, a research firm, argues that China’s economy will never be number one. It will reach 90% of America’s size in 2035 and then lose ground. Even if China’s economy does become the biggest in the world, its lead is likely to remain small. It is unlikely to establish an edge over America equivalent to the 40% lead America now enjoys over it. It also seems safe to say that China and America will remain in a position of near-parity for decades.

Takeaways by Macro Roundup® AI

  1. Goldman Sachs now projects China's GDP will overtake America's in 2035 and peak at only 14% larger, revising its 2011 forecast of a 2026 crossover and a lead of over 50% by mid-century.
  2. Capital Economics argues China's economy will never be the world's largest, reaching 90% of America's size in 2035 before losing ground.
  3. China is unlikely to establish an edge over America equivalent to the 40% lead America now holds, leaving the two economies near parity for decades.

AI Summary. New York office occupancy remains near 50% of pre-pandemic levels while the city drew 56m visitors last year, a shift the authors describe as a move from a city organized around work to one organized around leisure. They argue cities must replace single-use zoning with mixed-use, mixed-income neighborhoods to remain vibrant.

Edward Glaeser and Carlo Ratti New York Times
Date Posted:

Ed Glaser argues that New York needs to transition from “a city dedicated to productivity to one built around pleasure” by changing zoning to create mixed use neighborhoods that are less dependent on daily commuting crowds.

How should cities adapt as offices empty and visitors surge?

Core argument: New York's office occupancy stands at roughly 50% of prepandemic levels, with enough empty office space to fit 26 Empire State Buildings, harming landlords and the local economy.

New York is undergoing a metamorphosis from a city dedicated to productivity to one built around pleasure. Many office buildings still feel eerily empty, with occupancy around 50%of prepandemic levels, harming landlords and the local economy. But 56 million people visited New York last year, making Fifth Avenue in December feel as crowded as Ipanema Beach during Carnival. The economic future of the city that never sleeps depends on embracing this shift from vocation to recreation and ensuring that New Yorkers with a wide range of talents want to spend their nights downtown, even if they are spending their days on Zoom. We are witnessing the dawn of a new kind of urban area: the Playground City. To create a city vibrant enough to compete with the convenience of the internet, we need to end the era of single-use zoning and create mixed-use, mixed-income neighborhoods that bring libraries, offices, movie theaters, grocery stores, schools, parks, restaurants and bars closer together. We must reconfigure the city into an experience worth leaving the house for.

Takeaways by Macro Roundup® AI

  1. New York's office occupancy stands at roughly 50% of prepandemic levels, with enough empty office space to fit 26 Empire State Buildings, harming landlords and the local economy.
  2. New York drew 56 million visitors last year, making Fifth Avenue in December feel as crowded as Ipanema Beach during Carnival.
  3. New York's economic future depends on ending single-use zoning and building mixed-use, mixed-income neighborhoods that bring libraries, offices, movie theaters, grocery stores, schools, parks, restaurants and bars closer together.

AI Summary. The authors calculate that the average student fell half a year behind in math and a third of a year behind in reading. Students in the poorest 10% of districts lost three-quarters of a year in math, more than double the decline in the richest districts, with reading declines half as large.

Tom Kane and Sean Reardon New York Times
Date Posted:
Is Database:
Database

From 2019-2022 students in the mean school district fell half a year behind in math and a third of a year behind in reading. The learning losses were more significant in poorer school districts.

How far behind are students, and did poorer districts lose more?

Core argument: The authors calculate that the average U.S. student was half a year behind in math and a third of a year behind in reading.

According to our calculations, the average student was half a year behind in math and a third of a year behind in reading. In 2019, the typical student in the poorest 10 percent of districts scored one and a half years behind the national average for his or her year – and almost four years behind students in the richest 10 percent of districts – in both math and reading. By 2022, the typical student in the poorest districts had lost three-quarters of a year in math, more than double the decline of students in the richest districts. The declines in reading scores were half as large as in math and were similarly much larger in poor districts than rich districts. The pandemic left students in low-income and predominantly minority communities even further behind their peers in richer, whiter districts than they were.

Takeaways by Macro Roundup® AI

  1. The authors calculate that the average U.S. student was half a year behind in math and a third of a year behind in reading.
  2. By 2022, the typical student in the poorest 10 percent of districts had lost three-quarters of a year in math, more than double the decline among students in the richest 10 percent of districts.
  3. In 2019, the typical student in the poorest 10 percent of districts scored one and a half years behind the national average and almost four years behind students in the richest 10 percent of districts in both math and reading.

AI Summary. Survey data show most U.S. teens share their parents' politics and religion: 81% of Republican or Republican-leaning parents had teens identifying the same way, as did 89% of Democratic or Democratic-leaning parents. Similar alignment held for religion, with 82% of Protestant parents, 81% of Catholic parents, and 86% of religiously unaffiliated parents having teens who identified likewise.

Alan Cooperman Pew Research Center
Date Posted:

Most American parents pass along both their religious beliefs and politics to their children. @pewresearch

Do most teens share their parents' politics and religion?

Core argument: 89% of Democratic or Democratic-leaning U.S. parents had teens who identified the same way, compared with 81% of Republican or Republican-leaning parents whose teens also identified as Republicans or leaned Republican.

Roughly eight-in-ten parents who were Republican or leaned toward the Republican Party (81%) had teens who also identified as Republicans or leaned that way. And about nine-in-ten parents who were Democratic or leaned Democratic (89%) had teens who described themselves the same way. 82% of Protestant parents had teens who also identified as Protestant, 81% of Catholic parents had Catholic teens, and 86% of religiously unaffiliated parents – those who described themselves as atheist, agnostic or nothing in particular – had teens who were also “nones.”

Takeaways by Macro Roundup® AI

  1. 89% of Democratic or Democratic-leaning U.S. parents had teens who identified the same way, compared with 81% of Republican or Republican-leaning parents whose teens also identified as Republicans or leaned Republican.
  2. Among Protestant parents, 82% had teens who also identified as Protestant, and 81% of Catholic parents had Catholic teens.
  3. 86% of religiously unaffiliated parents — those describing themselves as atheist, agnostic or nothing in particular — had teens who were also "nones.".

Friday, May 12, 2023

AI Summary. The shortfall in U.S. labor force participation relative to its pre-pandemic peak is attributed mostly to a decline in participation among workers older than 55. The authors estimate that wealth effects from rising net worth can explain between 20% and 36% of the 3.3m excess retirements over the full period studied.

Miguel Faria e Castro and Samuel Jordan-Wood Federal Reserve Bank of St. Louis
Date Posted:

A wealth effect from the rise in asset prices during the pandemic period can explain over 80% of the 2.2M “excess retirements” from 2019-21 among US workers aged 55+. @mfariacastro

Do rising net worth gains explain excess retirements among older workers?

Core argument: The U.S. labor force participation rate recovered to 62.2% as of December 2022 but remained 1.41 percentage points below its pre-pandemic peak, a gap explained mostly by a permanent decline in participation among workers older than 55.

The U.S. labor force participation rate (LFPR) experienced a record drop during the early pandemic. While it has since recovered to 62.2% as of December 2022, it was still 1.41 pp below its pre-pandemic peak. This gap is explained mostly by a permanent decline in the LFPR for workers older than 55. Table 2 shows that between 45% and 82% of the 2.2 million excess retirements can be explained by wealth effects for those aged 55-70 or 55 and older. For the entire 2019-2022 period, between 20% and 36% of the 3.3 million excess retirements can be explained by wealth effects.

Takeaways by Macro Roundup® AI

  1. The U.S. labor force participation rate recovered to 62.2% as of December 2022 but remained 1.41 percentage points below its pre-pandemic peak, a gap explained mostly by a permanent decline in participation among workers older than 55.
  2. Wealth effects can explain between 45% and 82% of the 2.2 million excess retirements among workers aged 55–70 or 55 and older.
  3. Across the 2019–2022 period, wealth effects can explain between 20% and 36% of the 3.3 million excess retirements.

Related Articles:

  • Retirements, Net Worth, and the Fall and Rise of Labor Force Participation — Households aged 55–74 lost an average of over $100,000 in net worth amid falling asset returns, reversing part of their earlier gains, reflecting their large holdings of stocks and bonds. The authors estimate this decline in asset values may have drawn an extra 170,000 people aged 51–65 back into the labor force.

AI Summary. The Congressional Budget Office projects US federal debt held by the public at 98% of national income, within 7.6 percentage points of its 1946 wartime peak and on track to exceed it by 2028. International Monetary Fund forecasts show US debt surpassing Italy's by 2028 and Greece's by the end of the decade.

Chris Giles Financial Times
Date Posted:

American public debt as a % of GDP is now higher than Portugal and Spain and on track to be higher than Italy by 2028 and Greece by 2030 @ChrisGiles_

Is US federal debt on track to exceed its wartime peak?

Core argument: The Congressional Budget Office calculates that in the first seven months of fiscal 2023, underlying US federal revenues fell 10% while spending rose 12%, leaving the deficit more than three times larger than in the same months of fiscal 2022.

The US federal budget is haemorrhaging money. The non-partisan Congressional Budget Office calculates that in the first seven months of the 2023 fiscal year, underlying government revenues are down 10% with spending up 12%. This leaves the federal budget deficit more than three times larger than in the same months of the 2022 fiscal year. The CBO’s latest forecasts show the level of federal debt held by the public as a share of national income to be 98% in 2023, just 7.6% below its wartime peak in 1946 and on track to exceed it in 2028. For comparison, UK public debt, also at a multi-decade high relative to gross domestic product, is still less than half the level it was at the end of the second world war.  To make a comparison with eurozone countries that required support in the 2010s, Portugal, Ireland and Spain already have lower gross debt levels than the US, IMF forecasts show US debt set to exceed that in Italy by 2028 and Greece by the end of the decade.

Takeaways by Macro Roundup® AI

  1. The Congressional Budget Office calculates that in the first seven months of fiscal 2023, underlying US federal revenues fell 10% while spending rose 12%, leaving the deficit more than three times larger than in the same months of fiscal 2022.
  2. The Congressional Budget Office forecasts US federal debt held by the public at 98% of national income in 2023, 7.6 percentage points below its 1946 wartime peak and on track to exceed that peak in 2028.
  3. Portugal, Ireland and Spain already carry lower gross debt levels than the US, and IMF forecasts show US debt exceeding Italy's by 2028 and Greece's by the end of the decade.

AI Summary. The historical positive correlation between bank stocks and long-term interest rates has broken down, with higher rates now weighing on banks rather than helping them. Higher rates reduce the value of bank assets, while elevated rates and an inverted yield curve raise recession risk and potential credit losses.

Torsten Sløk Apollo
Date Posted:

Higher interest rates were historically positive for bank stocks but that relationship has broken down as higher rates have negatively impacted bank assets according to Torsten Sløk @apolloglobal

Are higher long-term rates now hurting bank stocks instead of helping?

Core argument: The historically positive correlation between banks and long-term interest rates has broken down since the Federal Reserve began hiking rates.

It used to be the case that higher long-term interest rates were positive for banks because higher long rates meant wider net interest margins. But since the Fed started hiking rates last year, this correlation has broken down, see chart above. Now higher rates are negative for banks because it has a negative impact on their assets, and higher rates and an inverted yield curve increase the risks of a recession and hence credit losses.

Takeaways by Macro Roundup® AI

  1. The historically positive correlation between banks and long-term interest rates has broken down since the Federal Reserve began hiking rates.
  2. Higher long-term rates previously benefited banks by widening net interest margins, but now weigh on banks through a negative impact on their assets.
  3. Higher rates and an inverted yield curve increase the risks of a recession and hence credit losses for banks.

AI Summary. Countries that fall into a cycle of shrinking populations and higher taxes may struggle to attract migrants, who could prefer lower-tax destinations with established expatriate communities and younger populations. The argument is that nations with restrictionist immigration traditions risk becoming locked into low-migration outcomes regardless of their preferences.

Tyler Cowen Bloomberg
Date Posted:

.@tylercowen argues that countries will increasingly find themselves competing for immigrants as global fertility rates fall.

.@tylercowen argues that countries will increasingly find themselves competing for immigrants as global fertility rates fall.

Will shrinking populations and higher taxes make countries unable to attract migrants?

Core argument: Falling fertility rates push countries into a cycle of smaller populations and higher tax rates, which the author argues will make those countries less able to attract migrants.

A less obvious problem is that once nations enter the lower-population-higher-tax cycle, it may be very difficult for them to attract new migrants. If you were thinking of leaving your country, would you rather go to a wealthy country with higher tax rates, or one with lower tax rates? Especially if the country with higher taxes has a long tradition of not welcoming migrants, and you would be less likely to find any expatriates there? Besides which, due to their aging population, those countries may simply be boring, at least for young people. The danger is that countries with more restrictionist immigration policies will get locked into low-migration outcomes for the foreseeable future, whether they like it or not.

Takeaways by Macro Roundup® AI

  1. Falling fertility rates push countries into a cycle of smaller populations and higher tax rates, which the author argues will make those countries less able to attract migrants.
  2. Prospective migrants choosing a destination may favor lower-tax countries over wealthy high-tax ones, especially where there is a long tradition of not welcoming migrants and few expatriates already settled.
  3. Countries with more restrictionist immigration policies risk being locked into low-migration outcomes for the foreseeable future, and their aging populations may make them boring to young people.

AI Summary. The statistical link between gun availability and gun deaths across countries and US states is driven largely by suicides, which account for the vast majority of gun deaths, while the link to gun homicides alone is much weaker. Adding interpersonal trust alongside gun ownership restores the relationship with homicides.

John Burn-Murdoch Financial Times
Date Posted:
Is Database:
Database

Gun homicides in the US are being driven not by an increase in gun ownership but a decline in local trust levels. @jburnmurdoch

Does declining social trust explain the link between guns and homicides?

Core argument: The share of Americans who say they do not trust people in their neighbourhood is roughly double what US socio-economic development would predict, following decades of eroding trust.

Levels of trust in the US have been eroding for decades and the share of Americans who say they do not trust other people in their neighbourhood is now roughly double what you would expect based on US socio-economic development. Few appreciate that at country and state level, the statistical relationship between gun availability and gun deaths is driven almost entirely by suicides. The more people who have access to guns, the more who use them to take their own lives. And since the vast majority of all gun deaths are suicides, this dynamic dominates the overall guns-deaths link. Look only at gun homicides instead, and the link with the number of guns is much weaker, whether the unit of analysis is different countries or US states. But add in interpersonal trust as well as gun ownership, and the relationship returns. In other words, it’s the interplay between guns and fear that sends homicide rates climbing.

Takeaways by Macro Roundup® AI

  1. The share of Americans who say they do not trust people in their neighbourhood is roughly double what US socio-economic development would predict, following decades of eroding trust.
  2. The statistical link between gun availability and gun deaths across countries and US states is driven almost entirely by suicides, which account for the vast majority of all gun deaths.
  3. Gun homicides show a much weaker link to gun ownership across countries and US states, but the relationship returns once interpersonal trust is considered alongside gun ownership.