Edward Conard

Top Ten New York Times Bestselling Author

  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “…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 fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Monday, June 5, 2023

AI Summary. Among top scorers on India's Joint Entrance Exam for the Indian Institutes of Technology, 62% of the top 100 and 36% of the top 1,000 migrated abroad within eight years, primarily to the U.S. for graduate school. The authors argue elite schools shape migration by signaling ability and providing access to networks.

Prithwiraj Choudhury, Ina Ganguli and Patrick Gaulé National Bureau of Economic Research
Date Posted:

36% of the top 1,000 scorers on the Indian Institutes of Technology entrance exam move overseas after graduation, and 62% of the top 100 scorers migrate. Of top-scoring graduates who emigrated, 65% came to the US. @prithwic @inaganguli

How do elite colleges shape migration of top-scoring students abroad?

Core argument: Among the top 100 scorers on India's Joint Entrance Exam, 62% migrated abroad, primarily to the U.S. for graduate school, compared with 36% of the top 1,000 scorers.

We document a salient correlation between an individual’s score on the Joint Entrance Exam and migration up to eight years later among the top exam takers. Among the top 100 scorers, for instance, 62% have migrated abroad, primarily to the U.S. and for graduate school. Among the top 1,000 scorers, 36% have migrated abroad, which is still sizeable but much lower. Our results suggest that elite schools play a key role in shaping migration outcomes, both in terms of the overall propensity and the particular migration destination. Our evidence supports the view of elite education as mainly signaling a potential migrant’s ability or quality of their human capital, and providing access to valuable networks. U.S. graduate programs—a key pathway for migration—are especially keen to recruit the best and brightest. However, to identify the best and brightest, they must rely on external information and signals, and elite home universities may provide these.

Takeaways by Macro Roundup® AI

  1. Among the top 100 scorers on India's Joint Entrance Exam, 62% migrated abroad, primarily to the U.S. for graduate school, compared with 36% of the top 1,000 scorers.
  2. A correlation appears between Joint Entrance Exam scores and migration up to eight years later, and the findings suggest elite schools shape both the propensity to migrate and the destination chosen.
  3. The evidence supports the view that elite education mainly signals a potential migrant's ability or human capital quality and provides access to networks, with U.S. graduate programs relying on such external signals to recruit.

AI Summary. An annual reshoring index from management consulting firm Kearney finds China's share of US manufactured imports from low-cost Asian countries fell to 50.7% from nearly 70% a decade earlier, with one of the report's authors projecting it will drop below 50%. US efforts to reduce reliance on China and price-sensitive buyers are shifting trade to lower-cost Asian alternatives.

Primrose Riordan, Chan Ho-him, Andy Lin, and Joe Leahy Financial Times
Date Posted:

For the first time in a decade China will account for less than half of US low-cost imports, according to new research from Kearney.

Is China's share of US low-cost Asian imports falling?

Core argument: Chinese goods made up 50.7% of US manufactured imports from Asian countries last year, down from nearly 70% in 2013, according to the Kearney Reshoring Index, which is based on US trade data.

According to an annual reshoring index from Kearney, the Chicago-based management consulting firm, US efforts to reduce reliance on China, as well as price-sensitive American buyers, are driving trade towards lower-cost alternatives in Asia. “By the end of 2023, China’s portion of US imports” from low-cost Asian countries, which excludes Japan and South Korea, “will definitely have dropped below 50%”, said Patrick Van den Bossche, one of the report’s authors. The US and China are each other’s largest respective trading partners. Last year, Chinese goods made up 50.7% of US manufactured imports from Asian countries, according to the Kearney Reshoring Index, which is based on US trade data. That was down from nearly 70% in 2013.

Takeaways by Macro Roundup® AI

  1. Chinese goods made up 50.7% of US manufactured imports from Asian countries last year, down from nearly 70% in 2013, according to the Kearney Reshoring Index, which is based on US trade data.
  2. Patrick Van den Bossche, a co-author of Kearney's annual reshoring index, said China's share of US imports from low-cost Asian countries, excluding Japan and South Korea, will have dropped below 50% by the end of 2023.
  3. Kearney attributes the shift toward lower-cost Asian alternatives to US efforts to reduce reliance on China and to price-sensitive American buyers, while the US and China remain each other's largest trading partners.

Related Articles:

  • Sester On Kearney Reshoring Index — US imports from Southeast Asia have risen, but China's reported exports to the US exceed recorded US imports from China by about 10%, reflecting incentives to shift final assembly and to avoid tariffs. Trade data cannot show how much Chinese content is embedded in rising Southeast Asian imports.

AI Summary. US imports from Southeast Asia have risen, but China's reported exports to the US exceed recorded US imports from China by about 10%, reflecting incentives to shift final assembly and to avoid tariffs. Trade data cannot show how much Chinese content is embedded in rising Southeast Asian imports.

Brad Setser @Brad_Setser
Date Posted:

.@Brad_Setser notes that the fall in the US dependence on China has been overstated for two reasons: 1) US import data fail to reflect the value of small shipments from China, and 2) many US imports from SE Asia likely embed a lot of Chinese components.

Do rising Southeast Asian imports show less US dependence on China?

Core argument: China's reported exports to the US exceed recorded US imports from China by about 10%, which Setser attributes in part to tariff-avoidance incentives, including de minimis small-value shipments.

US imports from southeast Asia are clearly up. But how much has that really reduced US dependence on China? The Trump tariffs clearly had two effects a) they created an incentive to move final assembly to SE Asia; b) they created an incentive to avoid the US tariff (small value shipments/ de minimus) being the most obvious case. As a result, China's reported exports to the US now exceed recorded US imports from China by a significant margin (about 10%). China has lost a bit of market share over the last 12 months, so there is some evidence of a shift in the location of final assembly. In the Chinese data though the shift comes only after a rise in China's market share during the pandemic (lots of imported electronics). The bigger question (unanswerable by the trade data) is how much Chinese content is embedded in the United States rising imports from SE Asia? The US bilateral deficit with China was exaggerated in the past because China relied on a lot of imported chips and high-end components from Korea, Taiwan, and Japan. The same argument now applies to SE Asia. Chinese components don't just appear in the data for China.

Takeaways by Macro Roundup® AI

  1. China's reported exports to the US exceed recorded US imports from China by about 10%, which Setser attributes in part to tariff-avoidance incentives, including de minimis small-value shipments.
  2. Setser argues the Trump tariffs created an incentive to move final assembly to Southeast Asia, and China has lost some market share, though in Chinese data that decline follows a pandemic-era rise tied to imported electronics.
  3. Trade data cannot show how much Chinese content is embedded in rising US imports from Southeast Asia, much as the US bilateral deficit with China was exaggerated by China's reliance on imported chips and high-end components from Korea, Taiwan, and Japan.

Related Articles:

  • China Set to Account for Less Than Half of US’s Low-Cost Imports from Asia — An annual reshoring index from management consulting firm Kearney finds China's share of US manufactured imports from low-cost Asian countries fell to 50.7% from nearly 70% a decade earlier, with one of the report's authors projecting it will drop below 50%. US efforts to reduce reliance on China and price-sensitive buyers are shifting trade to lower-cost Asian alternatives.

AI Summary. Card-swipe data indicate that only about half the office space in major U.S. cities is in use, with little sign of a return to pre-pandemic levels. Among the biggest beneficiaries of remote work may be previously declining small cities near larger metros, which stay affordable because housing is durable and long-lasting.

Paul Krugman Krugman Wonks Out
Date Posted:

.@paulkrugman argues that small cities with cheap housing and easy access to major cities like New York will be beneficiaries of new work patterns

Does remote work benefit declining small cities near big metros?

Core argument: Card-swipe evidence suggests only about half the office space in major U.S. cities is in use, with little sign of a return to pre-pandemic occupancy.

Evidence from card swipes suggests that only about half the office space in major U.S. cities is currently in use, with little indication of a return to pre-pandemic norms. Some of the biggest beneficiaries of the change in how and where we work may be heretofore declining small cities that aren’t too far from bigger metros. One of my favorite papers in urban economics was an old piece, also co-written by Ed Glaeser, this time with Joseph Gyourko, which pointed out that even cities that have lost much of their original economic rationale tend to decline only slowly. Why? Because housing is durable, and declining old cities offer would-be residents a cheap place to live. Historically, these declining cities tended to attract less educated workers, often immigrants.

Takeaways by Macro Roundup® AI

  1. Card-swipe evidence suggests only about half the office space in major U.S. cities is in use, with little sign of a return to pre-pandemic occupancy.
  2. Among the biggest beneficiaries of the shift in how and where people work may be previously declining small cities located not too far from larger metros.
  3. Ed Glaeser and Joseph Gyourko argued that cities losing their original economic rationale decline only slowly because durable housing makes them cheap places to live, historically attracting less educated workers and immigrants.

AI Summary. Some US banks are selling commercial real estate loans at a discount to face value even when borrowers are current on payments, in an effort to reduce exposure to the commercial property market. Recent sales include a $2.6bn block of construction loans sold at 92 cents on the dollar.

Stephen Gandel, Joshua Chaffin, Eric Platt, and Joshua Oliver Financial Times
Date Posted:

Some American banks are selling real estate loans at a loss to reduce their expose to commercial real estate markets.

Some American banks are selling real estate loans at a loss to reduce their expose to commercial real estate markets.

Are US banks accepting losses to shed commercial property loans?

Core argument: PacWest sold $2.6bn of construction loans at a loss, with Kennedy-Wilson agreeing to pay $2.4bn, or 92 cents on the dollar, and PacWest shares surged nearly 20% after the announcement.

Some US banks are preparing to sell off property loans at a discount even when borrowers are up to date on repayments, a sign of their determination to reduce exposure to the teetering commercial real estate market. HSBC USA is in the process of selling off hundreds of millions of dollars of commercial real estate loans, potentially at a discount, as part of an effort to wind down direct lending to US property developers, according to three people familiar with the matter. Meanwhile, PacWest last month sold $2.6bn of construction loans at a loss. Real estate investment group Kennedy-Wilson, for instance, agreed to pay $2.4bn, or 92 cents on the dollar, for the block of PacWest loans that had an aggregate principal value of $2.6bn. Shares of PacWest surged nearly 20% after it announced the transaction. According to two of the people briefed on the HSBC sales process, the loans are fetching bids that would price the loans in the mid-90s as a percentage of their face value — meaning the bank would have to take a loss of as much as 5%.

Takeaways by Macro Roundup® AI

  1. PacWest sold $2.6bn of construction loans at a loss, with Kennedy-Wilson agreeing to pay $2.4bn, or 92 cents on the dollar, and PacWest shares surged nearly 20% after the announcement.
  2. HSBC USA is selling hundreds of millions of dollars of commercial real estate loans, potentially at a discount, as part of winding down direct lending to US property developers, according to three people familiar with the matter.
  3. Bids on the HSBC loans would price them in the mid-90s as a percentage of face value, meaning a loss of as much as 5%, according to two people briefed on the sales process.

AI Summary. New York City's cash welfare rolls fell from 1.1m to about 360,000 even as its population grew, after shifting from signing people up for benefits to helping them into work; labor-force participation among never-married single mothers rose from roughly 50% to 65-70%. Polling shows about two-thirds of Americans back work requirements.

Kate Bachelder Odell and Robert Doar Wall Street Journal
Date Posted:

.@AEI @RobertDoar notes that 2/3 of American’s support work requirements and argues that “Work matters, and when paired with public assistance it’s a powerful ‘path out of poverty.’”

.@AEI @RobertDoar notes that 2/3 of American’s support work requirements and argues that “Work matters, and when paired with...

Do work requirements reduce welfare rolls and raise labor-force participation?

Core argument: Robert Doar says New York City's cash welfare rolls fell from 1.1 million people in 1996 to roughly 360,000 even as the city's population grew, after the system shifted from signing people up for benefits to helping them get into work.

Mr. Doar is unequivocal: Work matters, and when paired with public assistance it’s a powerful “path out of poverty,” In 1996, Mr. Doar says, “the number of men, women and children on cash welfare was 1.1 million, in [New York] of less than eight million.” Yet … that figure plummeted to about 360,000, even as the city’s population grew. New York “transformed a system that was focused on signing people up for benefits to a system that help them get into work.” “The labor-force participation rate in New York City and around the country went from roughly 50% for never-married single mothers to roughly 65% or 70%.” A May opinion poll showed roughly two-thirds of Americans, including half of Democrats, support work requirements on food stamps and Medicaid. In April, an advisory ballot referendum asked Wisconsin voters whether they support work requirements on welfare. It won with nearly 80% of the vote. A May opinion poll showed roughly two-thirds of Americans, including half of Democrats, support work requirements on food stamps and Medicaid.

Takeaways by Macro Roundup® AI

  1. Robert Doar says New York City's cash welfare rolls fell from 1.1 million people in 1996 to roughly 360,000 even as the city's population grew, after the system shifted from signing people up for benefits to helping them get into work.
  2. Labor-force participation among never-married single mothers rose from roughly 50% to roughly 65% or 70% in New York City and around the country, according to Robert Doar, who argues work paired with public assistance is a path out of poverty.
  3. A May opinion poll found roughly two-thirds of Americans, including half of Democrats, support work requirements on food stamps and Medicaid, and an April advisory referendum in Wisconsin on welfare work requirements won with nearly 80% of the vote.

AI Summary. The shift from petroleum-fueled internal combustion vehicles to electric vehicles moves resource leverage from Persian Gulf oil producers to critical minerals, with China holding more than half of global processing capacity for lithium, cobalt, and graphite and about a third for nickel. Chinese companies have spent $4.5bn acquiring stakes in nearly 20 lithium mines, mostly in Latin America and Africa.

Niall Ferguson Bloomberg
Date Posted:

.@nfergus argues that the end of the “ICE Age” (internal combustion engine) and the start of “EV Era” will reshape geopolitics and mark the return of the auto trade wars of the 1980s as cheap Chinese EV increasingly come to Western markets.

Does the shift to electric vehicles move resource leverage to China?

Core argument: China accounts for more than half of global processing capacity for three of the critical minerals used in EV batteries — lithium, cobalt, and graphite — and around a third for nickel.

Motivated by a desire to save the planet, we are ending the ICE Age and embarking on the EV Era. By itself, I doubt this new transportation revolution will much affect the Earth’s climate. But it will certainly unleash new and surprising trade conflicts, unexpected social and political changes, and novel geopolitical shifts. ICEs run on petroleum, and the swing producers with the power to set the oil price still reside in the Persian Gulf region. EV batteries, by contrast, require a combination of critical minerals, particularly lithium, nickel, cobalt, and graphite. China accounts for more than half the global processing capacity for three of those. (In the case of nickel, it is only around a third.) Moreover, China is scrambling to increase its control of lithium, nickel, and cobalt mining. (It already dominates graphite mining.) In the past two years, according to the Wall Street Journal, Chinese companies have spent $4.5 billion acquiring stakes in nearly 20 lithium mines, most of them in Latin America (for example, Bolivia) or Africa (Zimbabwe).

Takeaways by Macro Roundup® AI

  1. China accounts for more than half of global processing capacity for three of the critical minerals used in EV batteries — lithium, cobalt, and graphite — and around a third for nickel.
  2. Chinese companies spent $4.5 billion over the past two years acquiring stakes in nearly 20 lithium mines, most in Latin America or Africa, including Bolivia and Zimbabwe, according to the Wall Street Journal.
  3. The author argues the shift from internal combustion engines to EVs will unleash trade conflicts, social and political changes, and geopolitical shifts while doing little to affect the Earth's climate.

Related Articles:

  • Can Volkswagen Win Back China? — Volkswagen relies on China for at least half its annual profits, but its flagship VW brand has been displaced as China's best-selling car by BYD and holds just 2% of the electric vehicle market, ninth place, versus nearly 40% for BYD and over 10% for Tesla.
  • Your Next Electric Vehicle Could Be Made in China — China has overtaken Japan as the world's largest auto exporter, shipping 1.07m vehicles in a quarter, a 58% year-over-year increase, versus Japan's 950,000. China is also the largest exporter of electric vehicles, accounting for about 35% of global electric vehicle exports, up from 25% two years earlier.

Tuesday, June 6, 2023

AI Summary. The authors estimate that borrowers whose student loan payments were frozen ended with about $1,500 more in student loan balances and $1,200 (3%) more in other household debt, including mortgage, auto, and credit card borrowing, than borrowers without a payment stoppage. The findings suggest the pause raised short-term consumption and overall leverage, with effects concentrated among borrowers never previously delinquent.

Michael Dinerstein, Constantine Yannelis and Ching-Tse Chen University of Chicago
Date Posted:
Is Database:
Database

The 2020 student loan moratorium failed to reduce student loan balances and increased borrowers’ net leverage by 3% as borrowers took on additional student loans, mortgage, auto, and credit card debt. @mikedinerstein

Do frozen student loan payments increase borrowers' overall household debt?

Core argument: Borrowers subject to the student loan payment freeze held an additional $1,500 in outstanding student loan balances by the end of 2021 relative to borrowers whose payments were not paused.

By the end of 2021, borrowers subject to the payment freeze had an additional $1,500 in outstanding student loan balances relative to those that did not see a payment stoppage. Despite having higher cash on hand, borrowers do not use their additional liquidity to pay down other debt. In fact, household leverage rises as borrowers make higher payments on other loans, and mortgage, auto, and credit card debt rise. Overall, excluding student loans, household leverage increases by $1,200 (3%) for households subject to the pause. Student loan balances increase by a similar amount. The results suggest that the payment pause led to higher durable and non-durable consumption in the short term, but higher overall leverage, consistent with binding liquidity constraints. We find that the effects are concentrated among borrowers who have not previously been delinquent on a loan. These borrowers likely had no change in their supply of credit. Instead, their increased use of credit implies that their demand for credit increases as they have more liquidity.

Takeaways by Macro Roundup® AI

  1. Borrowers subject to the student loan payment freeze held an additional $1,500 in outstanding student loan balances by the end of 2021 relative to borrowers whose payments were not paused.
  2. Excluding student loans, household leverage rose by $1,200 (3%) for households subject to the pause, as mortgage, auto, and credit card debt increased rather than being paid down with the added liquidity.
  3. The effects concentrate among borrowers with no prior loan delinquency, whose credit supply likely did not change, suggesting their demand for credit rose as liquidity increased.

AI Summary. The number of US banks exceeding federal regulators' guidelines for commercial real estate loan concentration has risen from about 300 to nearly 700, leaving banks more vulnerable to a decline in commercial real estate prices.

Torsten Sløk Apollo
Date Posted:

Torsten Sløk @apolloglobal notes over the past two years the number of banks exceeding the FDIC’s CRE loan concentration guidelines has more than doubled from 300 to 700.

Are US banks growing more exposed to commercial real estate prices?

Core argument: The number of US banks exceeding the FDIC's commercial real estate loan concentration guidelines has risen from about 300 two years ago to nearly 700, leaving US banks more vulnerable to a decline in commercial real estate prices.

Two years ago, the number of banks exceeding the FDIC’s CRE loan concentration guidelines was about 300. Today there are almost 700, see chart. In other words, US banks have become much more vulnerable to a decline in commercial real estate prices. [Note: blue segment on chart shows banks with construction and development (C&D) loans of at least 100% of risk-based capital. Green segment shows banks with commercial real estate (CRE) loans at least 300% of risk-based capital and 36-month CRE growth of 50% or higher.]

Takeaways by Macro Roundup® AI

  1. The number of US banks exceeding the FDIC's commercial real estate loan concentration guidelines has risen from about 300 two years ago to nearly 700, leaving US banks more vulnerable to a decline in commercial real estate prices.
  2. The FDIC concentration measures capture banks with construction and development loans of at least 100% of risk-based capital, and banks with commercial real estate loans of at least 300% of risk-based capital combined with 36-month CRE growth of 50% or higher.

AI Summary. American banks have tightened lending standards and reduced credit availability for both business and household loans, amid a weaker macroeconomic environment, limited liquidity, and elevated financial risks. The degree of tightening matches levels previously seen only during the 2008 recession and the onset of the COVID-19 pandemic.

Joseph Politano Apricitas Economics
Date Posted:

In the wake of SVB’s collapse, banks have tightened both business and household lending standards to levels not seen since the 2008 recession or the initial COVID pandemic. @JosephPolitano

Have banks tightened lending standards to levels seen only in past recessions?

Core argument: American banks have tightened lending standards and credit availability following the collapse of Silicon Valley Bank, with the tightening spanning both business and household loans.

The deteriorating macro environment, relative lack of liquidity, and elevated financial risks have caused American banks to further tighten lending standards and credit availability in the wake of SVB’s collapse. That’s true for both business and household loans, where banks are tightening at levels not seen since the 2008 Recession or the initial COVID pandemic.

Takeaways by Macro Roundup® AI

  1. American banks have tightened lending standards and credit availability following the collapse of Silicon Valley Bank, with the tightening spanning both business and household loans.
  2. Bank tightening for business and household credit has reached levels not seen since the 2008 recession or the onset of the COVID pandemic.
  3. A deteriorating macro environment, a relative lack of liquidity, and elevated financial risks are cited as the drivers of banks' pullback in lending.

AI Summary. US manufacturers' construction spending has more than doubled over the past year to an annual rate of nearly $190bn, according to the Census Bureau. Manufacturing now makes up about 13% of all non-government construction, the highest share in a data series going back to the early 1990s.

Ben Holland and Alexandre Tanzi Bloomberg
Date Posted:
Is Database:
Database

Year-over-year domestic construction spending by US manufacturers has doubled in the last year to $190B or 13% of private construction spending, the highest on record since the series started in the 1990s. @bloomberg

Is US factory construction spending reaching record highs?

Core argument: US manufacturing construction spending reached an annual rate of almost $190 billion in April, more than double the level of a year earlier, according to the Census Bureau.

Construction spending by manufacturers in the US has more than doubled in the past year, reaching an annual rate of almost $190 billion in April, according to the Census Bureau. Manufacturing now accounts for about 13% of all non-government construction, the highest share on record in a data series stretching back to the early 1990s. As part of the most ambitious US industrial policy in decades, the government is offering subsidies worth tens of billions of dollars for companies to make all kinds of key products — from semiconductors to electric cars and their components — at home.

Takeaways by Macro Roundup® AI

  1. US manufacturing construction spending reached an annual rate of almost $190 billion in April, more than double the level of a year earlier, according to the Census Bureau.
  2. Manufacturing accounts for about 13% of all non-government US construction, the highest share in a data series going back to the early 1990s.
  3. The US government is offering subsidies worth tens of billions of dollars for domestic production of semiconductors, electric cars and their components, as part of the most ambitious US industrial policy in decades.

Related Articles:

  • Why Laws Meant to Create Jobs Can Be So Destructive for Our Cities — 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.