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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.
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.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.
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.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.
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.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.
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.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.
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.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.
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.AI Summary. Treasury holdings as a share of net worth reach 6% among the oldest and wealthiest households, while for middle wealth quintiles the share rises from young adulthood to middle age and then declines. On this measure, older, wealthiest households and middle-aged, middle-wealth households are the most exposed to the implicit inflation tax.
Core argument: Treasury holdings peak at 6% of net worth for the oldest and wealthiest households, in the fifth wealth quintile.
For households in the top wealth quintile, Treasuries become a more important element of their balance sheets, topping at 6% for the oldest and wealthiest group (the fifth quintile). However, for the second to fourth wealth quintiles, holdings of Treasuries as a share of net worth tend to fluctuate with age: increasing from the 20s age group to middle age, but then decreasing gradually. This transition likely reflects the change in household asset holdings over the life cycle. We can interpret the numbers in the second figure as showing how much households’ wealth in each group is exposed to the implicit inflation tax through their Treasury holdings. Overall, the older, wealthiest households and the groups that are both middle-aged and middle wealth seem to be the most exposed.AI Summary. Markets and bureaucracies are enormous impersonal distributed systems of information-processing that make use of tacit knowledge no individual brain or government can comprehend, and large language models are another such system rather than something new. The authors argue individual freedom is preserved by setting these systems against one another.
Core argument: Henry Farrell and Cosma Shalizi argue that artificial intelligence is a familiar-looking monster whose lineage began at least two centuries ago with the industrial revolution, when vast inhuman forces transformed human society.
Artificial intelligence is a familiar-looking monster, say Henry Farrell and Cosma Shalizi [that] began at least two centuries ago with the industrial revolution, when human society was transformed by vast inhuman forces. Markets and bureaucracies seem familiar, but they are actually enormous, impersonal distributed systems of information-processing [with minds of their own]. Economist Friedrich Hayek argued, any complex economy has to somehow make use of a terrifyingly large body of disorganised and informal “tacit knowledge” … [that] no individual brain or government can possibly comprehend. These vast machineries are simply incapable of caring if they crush the powerless or devour the virtuous. The modern world has been built by and within monsters, which crush individuals without remorse or hesitation. We eke out freedom by setting one against another, deploying bureaucracy to limit market excesses, democracy to hold bureaucrats accountable, and markets and bureaucracies to limit democracy’s monstrous tendencies.AI Summary. Households used about one third of stimulus transfers to pay down debt, a larger share than the average portion spent on consumption. Households with lower net liquid wealth relative to income are more likely to repay debt and adjust their net wealth positions, and spend a smaller share of transfers.
Core argument: Households used about one third of their stimulus transfers to pay down debt, a marginal propensity to repay debt higher than the average marginal propensity to consume that usually takes center stage.
We define marginal propensity to consume (MPC) as the share of the stimulus payment a household spent, marginal propensity to save (MPS) as the share a household saved, and marginal propensity to repay debt (MPRD) as the share used to pay down their debt. With these measures we document three main facts. First, households used one third of their transfers to pay down debt. This is higher than the average marginal propensity to consume (MPC), which usually takes center stage. Second, households with low net liquid wealth-to-income ratios are more likely to pay down debt and more likely to adjust their net wealth positions. Third, and relatedly, households with lower net liquid wealth-to-income ratios have lower MPCs. We show these two latter facts in the chart below. Note that we define net liquid wealth as the sum of liquid assets minus non-housing debt. For income, we use annual household income.AI Summary. US orders for core capital goods — a proxy for business equipment investment that excludes aircraft and military hardware — rose 0.7% for a second consecutive monthly gain, following a 0.6% increase, according to Commerce Department figures not adjusted for inflation. The data indicate companies are continuing longer-term investments despite high borrowing costs and economic uncertainty.
Core argument: US core capital goods orders, which exclude aircraft and military hardware, rose 0.7% in May after a downwardly revised 0.6% gain in April, according to Commerce Department figures.
Orders placed with US factories for business equipment rose in May for a second month, indicating companies continue to make longer-term investments despite high borrowing costs and economic uncertainty. The value of core capital goods orders, a proxy for investment in equipment that excludes aircraft and military hardware, increased 0.7% last month after a downwardly revised 0.6% gain in April, Commerce Department figures showed Tuesday. The data aren’t adjusted for inflation.AI Summary. Natural gas surpassed coal as the largest US electricity source and accounts for a record 41% of power production, more than solar, wind, hydro and coal combined. Gas plants, pipelines and their regulations were largely built without extreme weather in mind, with uneven winterization and some plants dependent on a single pipeline; gas accounted for about 47% of outages.
Core argument: Natural gas will make up a record 41% of US power production this year, more than solar, wind, hydro and coal combined, after overtaking coal as the top electricity source in 2016.
Given its reputation for low-cost, clean and stable generation, gas dethroned coal in 2016 as the US’s No. 1 source of electricity. This year, it will make up a record 41% of power production, more than solar, wind, hydro and coal combined. Although natural gas is often promoted as a “bridge fuel” to span the transition from coal power to renewable energy, the country’s vast network of gas plants, pipelines and the regulations that govern them were largely built without the realities of extreme weather in mind. Facilities aren’t uniformly winterized, and some rely on a single gas pipeline for supply. Between plant malfunctions and fuel shortages, natural gas accounted for about 47% of outages.AI Summary. More than 90% of China's military recruitment this year could come from recent graduates and high school students, which analysts say serves both the People's Liberation Army's modernisation targets and the country's record youth unemployment. Military academies remain less attractive to top students than leading public universities.
Core argument: More than 90% of China's military recruitment this year could be drawn from fresh graduates and high school students, aimed at meeting the People's Liberation Army's modernisation targets while easing record youth unemployment.
More than 90% of this year’s recruitment to the Chinese military could be drawn from fresh graduates and high school students, in a bid to meet the People’s Liberation Army’s modernisation targets and ease the country’s record youth unemployment. Analysts said that a drive to encourage educated young people to join the PLA was likely to have a twin purpose, with Beijing determined to achieve a world-class military by 2050 and more than 11 million graduates expected to swell the job market this year. The army is still finding it difficult to attract the country’s most outstanding young people, according to Zhou Chenming, a researcher with the Beijing-based Yuan Wang military science and technology think tank “Compared with top public universities like Peking and Tsinghua, military academies are less attractive to outstanding high school students in first-tier cities like Beijing and Shanghai.”