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, June 23, 2023

AI Summary. The share of U.S. adults who are retired rose above its predicted trend during the COVID-19 pandemic, with excess retirees peaking at an estimated 2.95m and standing at roughly 2.4m thereafter. The authors suggest these excess retirements may be contributing to continued labor market tightness and a low unemployment rate.

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

.@mfariacastro @stlouisfed finds that, despite a decline in excess retirements that was driven by the market decline in 2022, there are still 2.4mm excess retirements relative to the pre-pandemic trend.

Are excess retirements keeping the labor market tight?

Core argument: Excess U.S. retirees peaked at an estimated 2.95 million in December 2022 and stood at roughly 2.4 million as of April 2023, still well above the predicted trend.

The actual share of retirements roughly tracked the predicted share from January 2000 through February 2020, when the actual share was 18.1%. In the first three months of the pandemic, however, actual share quickly increased to 18.6% versus a predicted share of 18.2%, implying just over one million excess retirees in May 2020. The gap between actual and predicted shares of retirements continued to grow throughout the COVID-19 pandemic and peaked in December 2022, implying an estimated 2.95 million excess retirees in that month. Starting in 2023, the model line begins to flatten out. As of April 2023, we estimate that there were approximately 2.4 million excess retirees in the U.S. Excess retirements are still well above our predicted trend, which may be contributing to a continued tightness in the labor market and low unemployment rate since the recovery from the pandemic recession.

Takeaways by Macro Roundup® AI

  1. Excess U.S. retirees peaked at an estimated 2.95 million in December 2022 and stood at roughly 2.4 million as of April 2023, still well above the predicted trend.
  2. The actual share of retirements roughly tracked the predicted share from January 2000 through February 2020, when it was 18.1%, then rose to 18.6% versus a predicted 18.2% in the pandemic's first three months, implying just over 1 million excess retirees in May 2020.
  3. Excess retirements above the predicted trend may be contributing to continued labor market tightness and a low unemployment rate since the recovery from the pandemic recession.

Related Articles:

  • Pandemic Labor Force Participation and Net Worth Fluctuations — 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.
  • 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 US and India announced defense and technology agreements including an Indian purchase of armed MQ-9B SeaGuardian drones from General Atomics, a $2.75bn Micron semiconductor assembly and test facility in India with $800mn from the company, and General Electric co-producing fighter jet engines in India.

Demetri Sevastopulo and John Reed Financial Times
Date Posted:

India and the US announced a series of agreements that would significantly deepen the relationship between the Indian and American defense industrial bases, including co-production of GE jet engines in India.

India and the US announced a series of agreements that would significantly deepen the relationship between the Indian and...

Are the US and India deepening defense and technology ties?

Core argument: Micron will open a $2.75bn semiconductor assembly and test facility in India, including $800mn of investment from the US company, under agreements announced during Narendra Modi's visit.

Ahead of the visit, US officials said India would commit to buying armed MQ-9B SeaGuardian drones, which are produced by US defence contractor General Atomics. The leaders will also announce that memory chipmaker Micron will open a $2.75bn semiconductor assembly and test facility in India, which will include $800mn in investment from the US company. Biden and Modi also signed an agreement that will result in General Electric co-producing fighter jet engines in India. The agreements, which also include efforts to boost co-operation in space, mark a big push by Washington to draw New Delhi into its orbit as part of a strategy to work with allies and partners to counter China.

Takeaways by Macro Roundup® AI

  1. Micron will open a $2.75bn semiconductor assembly and test facility in India, including $800mn of investment from the US company, under agreements announced during Narendra Modi's visit.
  2. India will commit to buying armed MQ-9B SeaGuardian drones produced by General Atomics, and Biden and Modi signed an agreement for General Electric to co-produce fighter jet engines in India.
  3. The US-India agreements, which also cover space co-operation, mark a push by Washington to draw New Delhi into its orbit as part of a strategy of working with allies and partners to counter China.

Related Articles:

  • Indian Stock Market Surges as Foreign Funds Buy Into National Growth Story — Indian equities rose $440bn to more than $3.5tn in value, making India the world's fifth-largest stock market after the US, China, Japan, and Hong Kong, ahead of France and the UK. Foreign portfolio investors added a net $9.4bn to Indian shares in the quarter, with analysts attributing the bulk of this year's inflows to passive index buying.

AI Summary. Projections see the US share of global equity market value falling from 42% to 35% by 2030, 27% by 2050 and 22% by 2075, while India's share rises from about 2.5-3% to 8% by 2050 and 12% by 2075. China's share is projected to rise from 10% to 15% by 2050 before easing to about 13.5% by 2075.

Kevin Daly and Tadas Gedminas Goldman Sachs
Date Posted:

Goldman Sachs forecast the US’s relative share of global equity market cap to decline to 27% by 2050 from 42% last year. They expect China’s share to grow from 5% to 15% over that time period. They expect India’s share to increase from 2% to 8%.

Will the US share of global equity market cap decline?

Core argument: The US share of global equity market cap is projected to fall from 42% in 2022 to 35% in 2030, 27% in 2050, and 22% in 2075.

Looking at this at a more granular level, we expect the relative share of the US in global equity market cap to decline from 42% in 2022 to 35% in 2030, 27% in 2050, and 22% in 2075. By contrast, we expect China’s share in global market cap to rise from 10% to 15% by 2050, but decline to around 13.5% by 2075. We see the biggest scope for global market cap share increase in India, where our projections imply that India’s global equity market cap share will rise from around 2.5-3% in 2022 to 8% in 2050, and 12% in 2075. Likewise, we project the rest of EMs' share to rise, from 13.5% in 2022 to 17% in 2030, to 24% in 2050, and to 30% in 2075.

Takeaways by Macro Roundup® AI

  1. The US share of global equity market cap is projected to fall from 42% in 2022 to 35% in 2030, 27% in 2050, and 22% in 2075.
  2. India's share of global equity market cap is projected to rise from roughly 2.5–3% in 2022 to 8% in 2050 and 12% in 2075, the biggest scope for increase among markets.
  3. China's share of global market cap is projected to rise from 10% to 15% by 2050 before declining to about 13.5% by 2075, while the rest of emerging markets climb from 13.5% in 2022 to 30% in 2075.

AI Summary. Model estimates for the United States, Canada, and the Euro Area place the natural rate of interest within a few tenths of a percentage point of pre-pandemic estimates, with the main longer-term consequence of the pandemic a reduction in the natural rate of output. The authors find no evidence that the era of historically low natural rates has ended.

Kathryn Holston, Thomas Laubach, and John Williams Federal Reserve Bank of New York
Date Posted:

.@NewYorkFed suggests we will return to a low inflation environment, noting that their estimate of the natural interest rate in the US, Canada and Euro Area in 2022 is close to their 2019 estimate.

Has the pandemic ended the era of historically low natural interest rates?

Core argument: Estimates of the natural rate of interest for the United States, Canada, and the Euro Area in 2022 sit within a few tenths of a percentage point of the corresponding 2019 estimates, based on a modified model estimated through 2022:Q4.

Figure 5 compares the estimates for the United States, Canada, and the Euro Area, respectively, from the modified model estimated through 2022:Q4 with estimates from the model with parameter values fixed their 2019:Q4 values. In all three economies, the estimates of the natural rate of interest in 2022 are within a few tenths of a percentage point of the corresponding estimates in 2019. According to the model estimates, the main longer-term consequence from the pandemic period is a reduction in the natural rate of output, but the imprint on the natural rate of interest appears to be relatively modest. We do not find evidence that the era of historically low estimated natural rates of interest has come to an end.

Takeaways by Macro Roundup® AI

  1. Estimates of the natural rate of interest for the United States, Canada, and the Euro Area in 2022 sit within a few tenths of a percentage point of the corresponding 2019 estimates, based on a modified model estimated through 2022:Q4.
  2. The model estimates identify a reduction in the natural rate of output as the main longer-term consequence of the pandemic period, with a relatively modest imprint on the natural rate of interest.
  3. The authors find no evidence that the era of historically low estimated natural rates of interest has come to an end.

Related Articles:

  • What Have We Learned About the Neutral Rate? — Analysts estimate that if inflation is brought down without a recession, the Federal Reserve's policy rate will stabilize nearer 3–3.25% than the 2.5% longer-run median projection of Federal Reserve officials. Projected shifts in government debt and demographics imply a roughly 0.5 percentage point net increase in the neutral rate over the next decade.

AI Summary. U.S. Census Bureau estimates indicate Black residents are continuing to leave urban centers in the North and West, including Chicago, Detroit, Cleveland and Oakland, adding to decades of decline. The share of the Black population living in metropolitan-area suburbs rose to 44% from 33% over two decades, while the share in central cities fell to 47% from 53%.

Jimmy Vielkind, Jon Kamp, Paul Overberg and Jack Gillum Wall Street Journal
Date Posted:

The Great Migration is reversing as Black American are increasingly migrating from the Midwest and Northeast to the South. @WSJ

Are Black Americans moving out of northern and western cities?

Core argument: The share of the U.S. Black population living in metropolitan-area suburbs rose to 44% by 2020 from 33% two decades earlier, while the share in central cities fell to 47% from 53%.

The latest U.S. Census Bureau estimates, released Thursday, indicate Black residents are continuing to leave many urban centers in the North and elsewhere, adding to decades of decline. These losses have hit many major cities with historically large Black populations, including Chicago, Detroit, Cleveland and Oakland, Calif. Much of the current shift is driven by younger, college-educated Black people who are relocating from northern and western places to the South, said William Frey, a demographer at the Brookings Institution. Nationwide, Black people haven’t suburbanized at the same level as the broader population, but the share of the Black population living in metropolitan-area suburbs reached 44% by 2020 from 33% two decades earlier. Over the same period, the percentage of the Black population living in central cities declined to 47% from 53%.

Takeaways by Macro Roundup® AI

  1. The share of the U.S. Black population living in metropolitan-area suburbs rose to 44% by 2020 from 33% two decades earlier, while the share in central cities fell to 47% from 53%.
  2. Census Bureau estimates indicate Black residents are continuing to leave urban centers in the North and elsewhere, including Chicago, Detroit, Cleveland and Oakland, Calif., adding to decades of decline in cities with historically large Black populations.
  3. Brookings Institution demographer William Frey attributes much of the shift to younger, college-educated Black people relocating from northern and western places to the South.

Monday, June 26, 2023

AI Summary. 25% of all outstanding US government debt has been added since the start of 2020, and with higher debt levels and higher interest rates, debt servicing costs have risen from about $1bn per day to nearly $2bn per day.

Torsten Sløk Apollo
Date Posted:

Torsten Sløk @apolloglobal notes that 25% of American government debt outstanding has been added since the start of 2020. Federal debt servicing costs have almost doubled in that period because of higher interest rates.

Have rising debt levels and interest rates doubled daily debt servicing costs?

Core argument: Twenty-five percent of all outstanding US government debt has been added since the beginning of 2020.

Twenty-five percent of all US government debt outstanding has been added since the beginning of 2020. And with higher debt levels and higher interest rates, debt servicing costs have increased from $1 billion per day in 2020 to almost $2 billion per day in 2023, see charts below.

Takeaways by Macro Roundup® AI

  1. Twenty-five percent of all outstanding US government debt has been added since the beginning of 2020.
  2. US debt servicing costs have risen from $1 billion per day in 2020 to almost $2 billion per day in 2023, with higher debt levels and higher interest rates.

AI Summary. Net purchases of U.S. Treasury securities by the "households and nonprofits" category have soared, more than offsetting sales and redemptions by money market funds, the Federal Reserve, and banks; much of this buying likely reflects hedge funds. The composition of Treasury financing has shifted dramatically as bond prices fell.

Matt Klein The Overshoot
Date Posted:

.@M_C_Klein argues that hedge funds have replaced the Federal Reserve as the marginal buyer of Treasuries as interest rates have risen.

Who is buying U.S. Treasury debt as other holders pull back?

Core argument: Net purchases of marketable Treasury securities by "households and nonprofits" have soared, more than offsetting sales and redemptions by money market funds, the Federal Reserve, and banks, with much of that buying likely reflecting hedge funds.

Net purchases of marketable securities by “households and nonprofits” have soared, more than offsetting sales and redemptions by money market funds, the Federal Reserve, and banks. In practice, much of this buying likely reflected purchases by hedge funds. The U.S. Treasury borrowed about as much in 2022Q2-2023Q1 ($1.02 trillion) as it did in 2018 ($1.13 trillion) and 2019 ($1.06 trillion). The sources of financing have changed dramatically as bond prices plunged. Compared to 2019 or the first years of the pandemic, the newest crop of buyers most closely resembles those who stepped up in 2018, when rising interest rates encouraged relative value hedge funds and securities dealers to fill in for the Federal Reserve as it ran down its bond portfolio.

Takeaways by Macro Roundup® AI

  1. Net purchases of marketable Treasury securities by "households and nonprofits" have soared, more than offsetting sales and redemptions by money market funds, the Federal Reserve, and banks, with much of that buying likely reflecting hedge funds.
  2. The U.S. Treasury borrowed about $1.02 trillion in 2022Q2–2023Q1, roughly matching the $1.13 trillion borrowed in 2018 and $1.06 trillion in 2019, while the sources of financing changed dramatically as bond prices plunged.
  3. The newest crop of Treasury buyers most closely resembles those of 2018, when rising interest rates encouraged relative value hedge funds and securities dealers to fill in for the Federal Reserve as it ran down its bond portfolio.

AI Summary. Broker JLL estimates New York office buildings have lost $76bn in value from their most recent sales prices, with 73 worth less than their loan balances. One broker estimates only the top 10% of New York offices are not distressed by debt levels or occupancy, though low sales volumes may mask the damage.

Joshua Oliver and Joshua Chaffin Financial Times
Date Posted:

Real estate broker @JLL estimates that office buildings in New York have lost at least $76B in value from their most recent sales prices, and estimates that 90% of office buildings are distressed, either in terms of debt or occupancy.

How much value have office buildings lost since their last sales?

Core argument: JLL estimates New York office buildings have lost $76bn in value from their most recent sales prices, with 73 now worth less than their outstanding loan balances.

Broker JLL estimates that office buildings in New York have lost $76B in value from their most recent sales prices. Seventy-three were now worth less than their loan balances. An exception is a new group of the most modern and luxurious offices, such as SL Green’s One Vanderbilt, which are fetching record rents. More common are buildings like 1330 Avenue of the Americas, recently sold by Blackstone and RXR for $320M, a 1/3 less than the price it commanded in 2006. One broker estimated that only the top 10% of office buildings in New York were not distressed — either in terms of the level of debt or occupancy. “I think we are on the front edge of forced sales,” this person said.  The financial damage may be masked because so few buildings have been sold in the past year, with deal volumes for commercial real estate down by more than half year on year in the first quarter.

Takeaways by Macro Roundup® AI

  1. JLL estimates New York office buildings have lost $76bn in value from their most recent sales prices, with 73 now worth less than their outstanding loan balances.
  2. Blackstone and RXR sold 1330 Avenue of the Americas for $320m, a third less than its 2006 price, while first-quarter commercial real estate deal volumes fell by more than half year on year, which may mask the financial damage.

AI Summary. The authors construct measures of excess household savings accumulated during the COVID-19 pandemic and find they have been unwound in the United States, declined in advanced foreign economies, and slowed in emerging market economies. Past recessions featured smaller increases in excess savings and greater persistence in the accumulated stock.

Francois de Soyres, Dylan Moore and Julio Ortiz Federal Reserve Board
Date Posted:

.@FSoyres @FedResearch estimates that excess savings have come down much faster in the United States than in other advanced economies.

Have households spent down the excess savings built up during the pandemic?

Core argument: Excess savings accumulated during the COVID-19 pandemic were unprecedented in size but have been unwound in the United States, declined in advanced foreign economies, and slowed in emerging market economies, according to the authors' constructed measure.

Household savings rates spiked across several countries following the onset of the COVID-19 pandemic. We construct a measure of excess savings for the United States, advanced foreign economies, and emerging market economies, and compare the COVID-19 recession to past recessionary episodes. While accumulated excess savings during COVID-19 were unprecedented in size, they have been unwound in the United States, declined in the advanced foreign economies, and slowed in the emerging market economies. Relative to COVID-19, past episodes are characterized by smaller increases in excess savings and greater persistence in the stock of excess savings. Absent any further shocks to disposable income or savings behavior, our analysis suggests that the accumulated average AFE excess savings should be unwound by the end of the year.

Takeaways by Macro Roundup® AI

  1. Excess savings accumulated during the COVID-19 pandemic were unprecedented in size but have been unwound in the United States, declined in advanced foreign economies, and slowed in emerging market economies, according to the authors' constructed measure.
  2. Past recessionary episodes featured smaller increases in excess savings and greater persistence in the stock of excess savings than the COVID-19 recession.
  3. The authors' analysis suggests accumulated average advanced-foreign-economy excess savings should be unwound by the end of the year, absent further shocks to disposable income or savings behavior.

Related Articles:

  • The Rise and Fall of Pandemic Excess Savings — Researchers estimate US households accumulated about $2.1tn in excess savings above the pre-pandemic trend before drawing them down, with cumulative drawdowns of $1.6tn leaving roughly $500bn remaining. If recent drawdown rates persist, the authors project remaining excess savings would continue supporting household spending for several more months.
  • America’s “Excess” Household Savings Are Going Away — Americans drew down more than $1tn of "excess" savings accumulated since the pandemic began, eliminating over half the surplus, and at that pace the entire stock would be exhausted within a year. The drawdown is attributed to weak dividend and interest income, as companies favored buybacks, and to large capital gains tax bills owed by wealthy households.

AI Summary. China's per capita GDP growth path closely tracks those of Japan, South Korea, and Taiwan from similar starting income levels, indicating nothing unusual about its growth rate. The authors' model projects China's per capita GDP will level off at about 41% of the US level, reflecting a slowdown in productivity catch-up.

Jesús Fernández-Villaverde, Lee Ohanian and Wen Yao National Bureau of Economic Research
Date Posted:

.@lee_ohanian @AEIEcon finds that China’s pattern of growth in per capita GDP matches that of Japan, South Korea and Taiwan at earlier stages of their development. He forecasts that China’s per capita GDP will asymptote at 41% of the US level ~2050.

Is China's growth path typical of other East Asian economies?

Core argument: A model with a fitted total factor productivity catch-up process predicts China's per capita GDP will asymptote to about 41% of the U.S. level around 2050, reflecting a substantial slowdown in China's observed TFP catch-up.

Figure 3.1 shows real GDP for China, Japan, South Korea, and Taiwan, in which each economy begins at approximately the same per capita income level. The most striking aspect of these data is that the time path of China’s per capita GDP is remarkably similar to those of the three other East Asian miracle economies. After 25 years of becoming middle-income economies, China, Japan, and Taiwan achieved nearly the same per capita real GDP level. The one exception is Korea, which was somewhat ahead of the other three at that point in time. These data show that there is nothing unusual about China’s real GDP growth rate relative to the experiences of these other economies. We use the model and the fitted TFP catch-up process to predict that China’s relative per capita GDP level will asymptote to about 41% of the U.S. level around 2050, reflecting a substantial slowdown in China’s observed TFP catch-up in recent years.

Takeaways by Macro Roundup® AI

  1. A model with a fitted total factor productivity catch-up process predicts China's per capita GDP will asymptote to about 41% of the U.S. level around 2050, reflecting a substantial slowdown in China's observed TFP catch-up.
  2. China's per capita GDP time path closely resembles those of Japan, South Korea, and Taiwan when each economy is aligned from approximately the same starting income level, showing nothing unusual about China's real GDP growth rate.
  3. China, Japan, and Taiwan reached nearly the same per capita real GDP level 25 years after becoming middle-income economies, with Korea somewhat ahead of the other three at that point.

Related Articles:

  • How Soon and At What Height Will China’s Economy Peak? — 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.

AI Summary. The US is in its fifth year of net energy independence, with domestic oil and gas production at all-time highs across four consecutive administrations. Wind and solar now supply 15% of the grid, allowing more coal and liquefied natural gas to be exported.

Gregor MacDonald The Gregor Letter
Date Posted:

The United States is now likely on its fifth year of net energy independence @GregorMacdonald

Has US energy independence persisted across four consecutive administrations?

Core argument: The US is in its fifth year of net energy independence, a trend that began late in the Bush administration, strengthened under Obama, and has continued through the Trump and Biden administrations.

The US is now working on its fifth year of (net) energy independence. The trend began late in the Bush administration, got going more strongly during the Obama administration, and has stayed on trend through the Trump and now Biden administrations. None of these four administrations undertook any policies at all that crimped, suppressed, or held back US domestic production of oil and gas, which are now once again at all time highs. The big game changer came under Obama, when wind and solar ignited. Today, the 15% share of wind and solar on the grid means the US can export even more coal, and more natural gas, through LNG. That too—the LNG export approval wave—also started under Obama in 2014, and it has gone from strength to strength.

Takeaways by Macro Roundup® AI

  1. The US is in its fifth year of net energy independence, a trend that began late in the Bush administration, strengthened under Obama, and has continued through the Trump and Biden administrations.
  2. Wind and solar supply 15% of the US grid, which the author argues frees the US to export more coal and more natural gas as LNG.
  3. US oil and gas production stands at all-time highs, and the author states that none of the four administrations since Bush enacted policies suppressing domestic output, with the LNG export approval wave beginning under Obama in 2014.