Edward Conard

Top Ten New York Times Bestselling Author

  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…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
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…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
  • “…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
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


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:
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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.

Monday, May 15, 2023

AI Summary. Changes in asset prices affect welfare only for those who buy or sell, so changes in wealth are not a good proxy for changes in welfare. The authors find middle-aged individuals benefited from asset-price movements, driven by declining equity prices, while retirees were hurt — even though middle-aged and older households saw sharp wealth declines.

Edmund Crawley and William Gamber Federal Reserve Board
Date Posted:

A @federalreserve analysis finds the recent changes in asset prices have benefited middle aged workers, who can now buy assets at lower prices, compared to retirees, who are primarily asset sellers.

Do changes in wealth accurately measure changes in welfare?

Core argument: The analysis finds that individuals near age 40 benefited most in welfare terms from asset-price changes during this tightening cycle, primarily because of the decline in equity prices, even though that age group saw large declines in wealth.

A change in asset prices affects an individual's welfare only if they buy or sell the asset. Otherwise, the change in wealth implied by a change in the price of an asset is only "on paper." For example, a family who faces no financial constraints and lives in the same house for its entire life is not affected by changes in the value of that house.  A key takeaway from our analysis is that the change in wealth is not a good proxy for the change in welfare. The top panel in figure 3 shows that the age group that has benefited the most from the asset-price changes in this tightening cycle are those near age 40. By contrast, this age group has seen large declines in wealth. We find that middle-aged individuals benefited significantly from these asset price movements, primarily driven by the decline in the price of equities. Retirees, on the other hand, were hurt by these asset price movements. These welfare results sharply contrast with the changes in wealth these groups have experienced: young people, whose few assets are concentrated in housing, have seen their wealth rise a little; people in middle age and older, who hold more equities than any other age group, have seen sharp declines in their wealth.

Takeaways by Macro Roundup® AI

  1. The analysis finds that individuals near age 40 benefited most in welfare terms from asset-price changes during this tightening cycle, primarily because of the decline in equity prices, even though that age group saw large declines in wealth.
  2. Changes in wealth are not a good proxy for changes in welfare, since an asset price change affects an individual only if they buy or sell the asset; a financially unconstrained family living in the same house for life is unaffected by changes in its value.
  3. Retirees were hurt by these asset price movements, while young people, whose few assets are concentrated in housing, saw wealth rise a little and middle-aged and older individuals, who hold more equities than any other age group, saw sharp wealth declines.

AI Summary. Total US family wealth rose from about $38tn in 1989 to $140tn in 2022, adjusted for inflation, and $84tn is projected to pass from older Americans to millennial and Gen X heirs through 2045. Households holding at least $5m in liquid assets, 1.5% of all households, account for 42% of expected transfers.

Talmon Joseph Smith New York Times
Date Posted:

As the baby boomers start to die their children are poised to inherit $16T over the next decade.

Will a small share of wealthy households receive most inherited wealth?

Core argument: Of the $84 trillion projected to pass from older Americans to millennial and Gen X heirs through 2045, $16 trillion is set to transfer within a decade.

Of the 73 million baby boomers, the youngest are turning 60. The oldest boomers are nearing 80. In 1989, total family wealth in the United States was about $38 trillion, adjusted for inflation. By 2022, that wealth had more than tripled, reaching $140 trillion. Of the $84 trillion projected to be passed down from older Americans to millennial and Gen X heirs through 2045, $16 trillion will be transferred within the next decade. Individuals with at least $5 million and $20 million in cash or easily cashable assets make up 1.5 percent of all households. Together, they constitute 42 percent of the volume of expected transfers through 2045, according to the financial research firm Cerulli Associates. That’s about $36 trillion as of 2020—numbers that have most likely increased since.

Takeaways by Macro Roundup® AI

  1. Of the $84 trillion projected to pass from older Americans to millennial and Gen X heirs through 2045, $16 trillion is set to transfer within a decade.
  2. Households holding at least $5 million and $20 million in cash or easily cashable assets make up 1.5 percent of all households but account for 42 percent of expected transfers through 2045, about $36 trillion as of 2020, according to Cerulli Associates.
  3. Total U.S. family wealth more than tripled from about $38 trillion in 1989 to $140 trillion in 2022, adjusted for inflation.

AI Summary. Japan's experience indicates an aging society is not inherently inflationary: despite decades of a shrinking working-age population, its total number of workers has risen as women entered paid employment and people in their 60s and 70s stayed in or returned to work. The US is projected to have more favorable demographics than most other rich countries and China.

Matt Klein The Overshoot
Date Posted:

.@M_C_Klein notes that the experience of Japan suggests that fewer workers supporting more dependents does not necessarily lead to inflation.

Does an aging society inevitably drive inflation higher?

Core argument: Japan shows that an aging society is not inherently prone to inflation, having instead been maligned as the singular example of deflation attributable to macroeconomic mismanagement after the end of the 1980s debt bubble.

Japan—which has gone through the gray transition first—shows that an aging society is not inherently prone to inflation. In fact, Japan was once maligned as the singular example of deflation attributable to macroeconomic mismanagement following the end of the 1980s debt bubble. Encouragingly, Japan also shows how to minimize the challenges associated with massive demographic changes. Even though the working-age population of Japan has been shrinking for decades, the number of Japanese workers has been rising as women have entered paid employment in size. Japan’s “young elderly” (60s and 70s) have also increasingly remained in employment, or re-entered employment, to help take care of the “old elderly”. Japan may be an extreme case, but it could also be a model for others. The U.S. is projected to have much more favorable demographics than most of the other rich countries (and China), but it too has a large untapped supply of would-be workers who could help reduce the burden of providing for retirees and other dependents.

Takeaways by Macro Roundup® AI

  1. Japan shows that an aging society is not inherently prone to inflation, having instead been maligned as the singular example of deflation attributable to macroeconomic mismanagement after the end of the 1980s debt bubble.
  2. Japan's working-age population has been shrinking for decades, yet the number of Japanese workers has risen as women entered paid employment in size and "young elderly" in their 60s and 70s stayed in or re-entered work.
  3. The U.S. is projected to have much more favorable demographics than most other rich countries and China, and also has a large untapped supply of would-be workers who could reduce the burden of providing for retirees and other dependents.

AI Summary. Fourteen million mortgages were refinanced during the COVID-era refinance boom: roughly 5m borrowers extracted a total of $430bn in home equity, while 9m refinanced without extracting equity and cut their aggregate annual housing costs by $24bn.

Andrew Haughwout, Donghoon Lee, Daniel Mangrum, Joelle Scally, and Wilbert van der Klaauw Federal Reserve Bank of New York
Date Posted:

1/3 of outstanding mortgage balances were refinanced during the pandemic housing boom, including $430B in home equity extraction. @NewYorkFed argues this “will potentially provide significant support to future consumption.”

How much did homeowners gain from the pandemic refinancing boom?

Core argument: Fourteen million mortgages were refinanced during the COVID refinance boom, with effects on the mortgage market expected to last for years.

In the end, fourteen million mortgages were refinanced during the COVID refinance boom, and these refinances will have effects on the mortgage market for years to come. Many borrowers who refinanced during the boom have improved either their cash flow, through a reduction in payments on their existing properties, or their liquidity by extracting equity from those properties. Approximately five million borrowers extracted a total of $430 billion in home equity from their refinancing. Meanwhile, nine million refinanced their loans without equity extraction and lowered their monthly payments, resulting in an aggregate reduction of $24 billion annually in their annual housing costs.

Takeaways by Macro Roundup® AI

  1. Fourteen million mortgages were refinanced during the COVID refinance boom, with effects on the mortgage market expected to last for years.
  2. Approximately five million borrowers extracted a total of $430 billion in home equity through refinancing, improving their liquidity.
  3. Nine million borrowers refinanced without extracting equity and lowered their monthly payments, reducing aggregate annual housing costs by $24 billion a year.

AI Summary. Domestic migration data indicate that the dozen most expensive large US metros, nearly all coastal, previously gained college-educated workers while losing large numbers of workers without degrees, but are now losing both groups. For most of this century, metros of a million or more residents captured all net gains from college-educated migrants.

Emily Badger, Robert Gebeloff and Josh Katz New York Times
Date Posted:

Prime age (here 21-64) college educated workers are now moving out of the 12 most expensive metropolitan areas in the US.

Are expensive coastal metros now losing college graduates too?

Core argument: Domestic migration data show the 12 large U.S. metros with the highest living costs, nearly all coastal, are now losing both college-educated workers and workers without degrees, after years of gaining graduates while shedding non-degree workers.

It appears in domestic migration data that, years after lower-wage residents have been priced out of expensive coastal metros, higher-paid workers are now turning away from them, too. For most of this century, large metros with a million residents or more have received all of the net gains from college-educated workers migrating around the country, at the expense of smaller places. But among those large urban areas, the dozen metros with the highest living costs — nearly all of them coastal — have had a uniquely bifurcated migration pattern: As they saw net gains from college graduates, they lost large numbers of workers without degrees. At least, that was true until recently. Now, large, expensive metros are shedding both kinds of workers.

Takeaways by Macro Roundup® AI

  1. Domestic migration data show the 12 large U.S. metros with the highest living costs, nearly all coastal, are now losing both college-educated workers and workers without degrees, after years of gaining graduates while shedding non-degree workers.
  2. For most of this century, U.S. metros with a million or more residents captured all of the net gains from college-educated workers migrating across the country, at the expense of smaller places.

AI Summary. Bank reserves stand around $3.2t versus a common Federal Reserve estimate of roughly $2.2t (8% of GDP) for the lowest comfortable level, and reserves are on track to approach that level within months. Growth in reverse repo balances and rebuilding of the Treasury's cash account would draw reserves down.

Joseph Wang Fed Guy Blog
Date Posted:

.@FedGuy12 notes that the replenishment of the Treasury General Account will likely come from households, who are now the marginal buyer of Treasuries. This will possibly drive bank reserves below the Fed’s Lowest Comfortable Level of Reserves.

Are bank reserves approaching the lowest comfortable level within months?

Core argument: Bank reserves stand near $3.2t against a common Fed estimate of the Lowest Comfortable Level of Reserves of about $2.2t (8% of GDP), a level reserves are on track to approach within a few months.

Bank reserves are on track to approach a common estimate of the Lowest Comfortable Level of Reserves (“LCLoR”) within a few months. At the moment, reserves sit around $3.2t and a common Fed estimate places LCLoR at around $2.2t (8% of GDP). In addition to quantitative tightening, two events may soon reduce bank reserves to around $2.2t. First, Reverse Repo (RRP) is likely to steadily increase as Money Market Fund (MMF) assets continue to rise and Federal Home Loan Bank (FHLB) debt issuance declines. Second, the Treasury General Account’s eventual replenishment will likely be financed largely from reserves. The decline in reserves may only be temporary, as persistent bill issuance would eventually redirect liquidity out of the RRP and back into the banking system.

Takeaways by Macro Roundup® AI

  1. Bank reserves stand near $3.2t against a common Fed estimate of the Lowest Comfortable Level of Reserves of about $2.2t (8% of GDP), a level reserves are on track to approach within a few months.
  2. Beyond quantitative tightening, two forces may pull reserves toward $2.2t: a steady rise in Reverse Repo balances as Money Market Fund assets grow and Federal Home Loan Bank debt issuance declines, and the Treasury General Account's replenishment financed largely from reserves.
  3. The decline in reserves may prove temporary, since persistent bill issuance would eventually redirect liquidity out of the Reverse Repo facility and back into the banking system.

AI Summary. Bank funding-cost spreads stepped up to successively higher levels after two regional bank failures, which the author argues is a lasting drag on the economy. The author estimates the rise in borrowing costs equals a permanent Federal Reserve rate hike of 200bps for regional banks and 50bps for large banks, or a bit more than 100bps economy-wide.

Torsten Sløk Apollo
Date Posted:

The increase in borrowing costs since the SVB collapse so far is equivalent to ~ 100bps for the banking sector, putting pressure on net interest margins. Torsten Sløk @apolloglobal

How much do higher bank funding costs tighten the economy?

Core argument: The rise in bank borrowing costs since Silicon Valley Bank's failure corresponds to a permanent Fed hike of 200bps for regional banks and 50bps for large banks, according to the author's estimates.

Spreads first moved up to a higher level after SVB and then another higher level after FRC, showing that the ongoing banking crisis is having a permanent negative effect on the economy.  Put differently, the increase in borrowing costs since SVB failed corresponds to a 200bps permanent Fed hike for regional banks and 50bps permanent Fed hike for large banks. Weighing these estimates together using the shares of loans and leases accounted for by small and large banks, respectively, gives an economy-wide Fed tightening of a bit more than 100bps for the entire banking sector. In short, the jump in funding costs for banks is permanent, and it has become a lot more expensive for many banks to run their business, and the banking crisis is not over.

Takeaways by Macro Roundup® AI

  1. The rise in bank borrowing costs since Silicon Valley Bank's failure corresponds to a permanent Fed hike of 200bps for regional banks and 50bps for large banks, according to the author's estimates.
  2. Weighting the regional and large-bank estimates by their shares of loans and leases yields an economy-wide tightening of a bit more than 100bps for the entire banking sector.
  3. Bank spreads stepped up to a higher level after Silicon Valley Bank failed and to a further higher level after First Republic, which the author reads as a permanent negative effect on the economy.

AI Summary. Greece's economy shrank by almost a quarter from peak to trough and output remains substantially below pre-crisis levels, though reforms have stabilised it and produced real improvements. Greek goods exports rose 90% between 2010 and 2021, compared with 42% for the euro area as a whole.

Martin Arnold and Mary McDougall Financial Times
Date Posted:

Greek internal devaluation is working. While Greek GDP is still 20% under pre-crisis levels Greek exports were up 90% between 2010-2021 relative to 42% for the Eurozone.

Have reforms delivered real improvements to Greece's economy after its collapse?

Core argument: Greece's goods exports rose 90 per cent between 2010 and 2021, compared with 42 per cent for the euro area as a whole, the chief real improvement credited to the country's reforms.

After shrinking by almost a quarter from peak to nadir, Greece’s output remains substantially below pre-crisis levels. Reforms have not only stabilised an economy in freefall but also led to some real improvements. Chief among them is trade: between 2010 and 2021, the country’s goods exports soared 90 per cent, compared with 42 per cent in the euro area as a whole.

Takeaways by Macro Roundup® AI

  1. Greece's goods exports rose 90 per cent between 2010 and 2021, compared with 42 per cent for the euro area as a whole, the chief real improvement credited to the country's reforms.
  2. Greek output shrank by almost a quarter from peak to nadir and remains substantially below pre-crisis levels, even as reforms stabilised an economy in freefall.
  3. Greece's move from junk to investment grade follows reforms that halted the economy's freefall and produced real improvements, most notably in trade.

AI Summary. Average Greek wages are down more than 25% in real terms and real GDP down 20% since the crisis, with Greece now among the European Union's highest rates of relative poverty. The argument is that Greece's export growth reflects repressed domestic wages and demand rather than higher productivity, which weakens global demand and pressures trading partners' wages.

Michael Pettis @michaelxpettis
Date Posted:

.@michaelxpettis notes the rise in Greek exports is coming at the expense of its trading partners, “there is a real problem with our global trade system when export prowess is mainly a function of the repression of domestic demand.”

Does export growth driven by wage suppression weaken global demand?

Core argument: Average Greek real wages are down more than 25% since 2008 and real GDP is down 20%, which Pettis argues is the source of Greece's export "success," as crushed domestic demand forces more of a shrinking output abroad.

The article also notes that average Greek wages are down more than 25% in real terms since 2008. GDP in real terms is down 20%. This, it turns out, is the secret to export "success". By lowering wages and crushing domestic demand, Greece must export more of what it produces, even as total production has fallen. Its export "success" is mainly the obverse of a brutal drop in wages, and Greece "now has one of the highest rates of relative poverty in the EU." There is a real problem with our global trade system when export prowess is mainly a function of the repression of domestic demand. Countries become successful exporters not by boosting domestic productivity but rather by cutting back on domestic wages. The result is that expanding trade means weaker global demand, which in turn can only be countered by rising debt. And because Greece's export "success" is driven by lower wages, its success also puts downward wage pressure on its trading partners.

Takeaways by Macro Roundup® AI

  1. Average Greek real wages are down more than 25% since 2008 and real GDP is down 20%, which Pettis argues is the source of Greece's export "success," as crushed domestic demand forces more of a shrinking output abroad.
  2. Pettis argues Greece's export gains reflect repression of domestic demand rather than rising productivity, and notes Greece now has one of the highest rates of relative poverty in the EU.
  3. Pettis contends that when export prowess comes from wage cuts rather than productivity, expanding trade weakens global demand, counterable only by rising debt, and exerts downward wage pressure on trading partners.

AI Summary. State audits and independent evaluations of corporate tax incentive programs have found poor targeting, weak oversight, and excessive costs that harmed rather than benefited local governments. Examples include $5.5bn in New York tax credits for a Micron facility and up to $1.75bn in Michigan incentives for a Ford electric vehicle plant.

Nathan Jensen and Steven Pedigo New York Times
Date Posted:
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.@iamstevenpedigo and @NateMJensen write that the CHIPS Act, which requires state and local subsidies to access federal dollars, has thus far been gamed by corporations to the detriment of state and local governments.

Do corporate tax incentives harm the local governments that offer them?

Core argument: New York offered Micron $5.5 billion in tax credits over the life of the project, costing local and state governments upward of $95 million annually, far more than they are likely to gain from hosting the new facilities.

Offering tax breaks and other incentives to corporations has been proved to be one of the least effective ways for localities and states to grow their economies. State audits and independent evaluations of these programs found poor targeting of incentives, weak oversight and excessive costs that harmed rather than benefited local governments. The CHIPS Act and the Inflation Reduction Act are threatening to give [unproductive tax incentives] an enormous infusion of steroids. Micron chose to build in upstate New York [after] the state offered a staggering $5.5 billion in tax credits over the life of the project … costing local and state governments upward of $95 million annually, far more than they are likely to gain from hosting the new facilities.  In February, Ford agreed to build its new electric vehicle plant in Michigan, but only after extracting a promise of as much $1.75 billion in state and local incentives...enough money to pay all the new workers’ salaries for around 15 years.

Takeaways by Macro Roundup® AI

  1. New York offered Micron $5.5 billion in tax credits over the life of the project, costing local and state governments upward of $95 million annually, far more than they are likely to gain from hosting the new facilities.
  2. Ford agreed to build its new electric vehicle plant in Michigan only after extracting a promise of as much as $1.75 billion in state and local incentives, enough to pay all the new workers' salaries for around 15 years.
  3. State audits and independent evaluations of corporate tax-break programs found poor targeting of incentives, weak oversight and excessive costs that harmed rather than benefited local governments, with the CHIPS Act and the Inflation Reduction Act threatening to expand such incentives.

AI Summary. Federal tax collections for the fiscal year through April came in roughly $250bn below projections made months earlier, according to the Congressional Budget Office. The shortfall moved up the date at which the U.S. Treasury could become unable to pay all its bills, raising the prospect of default unless Congress raises the debt ceiling.

Richard Rubin Wall Street Journal
Date Posted:

US federal tax collections are running $250 billion short of recent CBO projections.

Does a shortfall in tax collections move up the debt-ceiling deadline?

Core argument: Congressional Budget Office analysis found tax collections for the current fiscal year through April fell roughly $250 billion short of projections made a few months earlier.

Wall Street and Washington got jolted this month by government warnings that the U.S. could become unable to pay all its bills as soon as June 1. That crunch came months sooner than expected, raising the specter of a default on federal obligations unless Congress increases the debt ceiling.  The reason: the expected annual gusher of tax-season payments didn’t flood into the Treasury. When the Congressional Budget Office analyzed tax collections for the current fiscal year through April, the tally fell about $250 billion short of predictions from just a few months ago.

Takeaways by Macro Roundup® AI

  1. Congressional Budget Office analysis found tax collections for the current fiscal year through April fell roughly $250 billion short of projections made a few months earlier.
  2. The shortfall stems from the expected annual surge of tax-season payments failing to flow into the Treasury.