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


Tuesday, June 27, 2023

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.

Yu-Ting Chiang and Jesse LaBelle Federal Reserve Bank of St. Louis
Date Posted:

.@YuTingChiang4 and @JesseLaBelle11 find that overall households in the top quintile of net worth, who tend to be older, have taken the biggest hit from inflation due to their Treasury holdings.

Which households are most exposed to the 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.

Takeaways by Macro Roundup® AI

  1. Treasury holdings peak at 6% of net worth for the oldest and wealthiest households, in the fifth wealth quintile.
  2. For households in the second through fourth wealth quintiles, Treasuries as a share of net worth rise from the 20s age group to middle age and then decline gradually, a pattern likely reflecting life-cycle changes in asset holdings.
  3. Older, wealthiest households and middle-aged, middle-wealth households appear most exposed to the implicit inflation tax through their Treasury holdings.

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.

Henry Farrell and Cosma Shalizi The Economist
Date Posted:
Is Database:
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.@henryfarrell and Cosma Shalizi argue that free markets and institutional hierarchies were revolutions in human information-processing, and AI can be seen along the same lines.

.@henryfarrell and Cosma Shalizi argue that free markets and institutional hierarchies were revolutions in human...

Are large language models just another impersonal information-processing system like markets?

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.

Takeaways by Macro Roundup® AI

  1. 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.
  2. Farrell and Shalizi describe markets and bureaucracies as enormous, impersonal distributed information-processing systems with minds of their own, incapable of caring if they crush the powerless or devour the virtuous.
  3. Friedrich Hayek argued that any complex economy must make use of a terrifyingly large body of disorganised, informal "tacit knowledge" that no individual brain or government can comprehend, according to Farrell and Shalizi.

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.

Gizem Koşar, Davide Melcangi, Laura Pilossoph et al. Federal Reserve Bank of New York
Date Posted:

.@gizemkosar @davide_melc and @DavidWiczer present evidence that lower wealth households used pandemic period transfers to pay down debt.

How much of stimulus transfers do households use to repay debt?

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.

Takeaways by Macro Roundup® AI

  1. 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.
  2. 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.
  3. Households with lower net liquid wealth-to-income ratios have lower marginal propensities to consume, with net liquid wealth defined as liquid assets minus non-housing debt and income measured as 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.

Reade Pickert Bloomberg
Date Posted:

Core capital goods orders increased 0.7% in May as American firms continue to invest in manufacturing.

Are businesses still investing in equipment despite high borrowing costs?

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.

Takeaways by Macro Roundup® AI

  1. 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.
  2. Orders placed with US factories for business equipment increased for a second consecutive month, indicating companies continue to make longer-term investments despite high borrowing costs and economic uncertainty.
  3. The Commerce Department's core capital goods orders figures measure the value of orders and are not adjusted for inflation.

Related Articles:

  • An American Investment Boom Would Be Good for the World — A substantial rise in U.S. investment would likely require greater output from existing labor and capital plus higher imports, since there is little appetite to cut current consumption and little scope to export less. Foreign producers stand to benefit even where investment subsidies carry local-content restrictions.
  • America Is Back in the Factory Business — U.S. construction spending on manufacturing facilities reached $108bn in a single year, a record annual total and more than was spent building schools, healthcare centers or office buildings. Much of the growth is in electric-vehicle batteries and semiconductors, national priorities backed by billions of dollars in government incentives.

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.

Naureen Malik Bloomberg
Date Posted:

Natural gas now makes up 41% of American power generation, more than solar, wind, hydro and coal combined, but accounts for 47% of outages. @markets

Is the largest US electricity source vulnerable to extreme weather?

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.

Takeaways by Macro Roundup® AI

  1. 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.
  2. Natural gas accounted for about 47% of power outages, stemming from plant malfunctions and fuel shortages.
  3. The US network of gas plants, pipelines and governing regulations was largely built without extreme weather in mind, with facilities not uniformly winterized and some relying on a single gas pipeline for supply.

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.

Minnie Chan South China Morning Post
Date Posted:

The Chinese military is drawing more heavily on recent high school and college graduates, in an effort to raise military capability and offset persistent youth unemployment. Recruiters are particularly targeting science and engineering talent. @SCMPNews

The Chinese military is drawing more heavily on recent high school and college graduates, in an effort to raise military...

Can military recruitment ease record youth unemployment and modernize China's forces?

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.”

Takeaways by Macro Roundup® AI

  1. 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.
  2. Analysts said the push to recruit educated young people likely serves a twin purpose, with Beijing targeting a world-class military by 2050 and more than 11 million graduates expected to enter the job market this year.

Related Articles:

  • China Youth Jobless Rate Hits Record 20.8% in Challenge for Policymakers — China's unemployment rate among 16- to 24-year-olds reached a record 20.8%, up from 20.4% the prior month, according to the National Bureau of Statistics. That is 4x the overall surveyed jobless rate of 5.2%.
  • Why Has Youth Unemployment Risen So Much in China? — Young workers aged 15-24 are particularly vulnerable when economic growth slows, and China's youth unemployment rate does not appear to be an outlier relative to its income level among global peers. Mismatches between the skills graduates acquire in higher education and those employers demand may add to labor market frictions.

Wednesday, June 28, 2023

AI Summary. The Congressional Budget Office projects the US government will need to sell an average of $2tn of Treasuries annually over the next decade, with Federal Reserve holdings of Treasuries rising to $7.5tn by 2033 from nearly $5tn. The author argues those spending projections are too low, implying holdings of at least $10tn.

Michael Howell Financial Times
Date Posted:

.@crossbordercap argues that quantitative easing will soon return as central banks in advanced economies will be needed to help fund deteriorating fiscal positions that will be driven by defense spending, demographics, and entitlements.

Will rising Treasury issuance force the Fed to expand its balance sheet?

Core argument: The US government will need to sell an average of $2tn of Treasuries annually over the next decade, and the Congressional Budget Office estimates Fed holdings of Treasuries must rise to $7.5tn by 2033 from nearly $5tn currently.

Quantitative easing is coming back. The US government will need to sell an average of $2T of Treasuries each year over the next decade. And according to latest Congressional Budget Office forecasts the Fed will be required to chip in. The CBO estimates that Fed holdings of US Treasuries will have to rise to $7.5T by 2033 from current levels of nearly $5T. No QT here, but worse, these CBO spending projections are likely too low — especially for defence outlays. More realistic numbers point to required Fed Treasury holdings of at least $10T. That translates pro rata into a doubling of its current $8.5T balance sheet size and will mean several years of double-digit growth in Fed liquidity.

Takeaways by Macro Roundup® AI

  1. The US government will need to sell an average of $2tn of Treasuries annually over the next decade, and the Congressional Budget Office estimates Fed holdings of Treasuries must rise to $7.5tn by 2033 from nearly $5tn currently.
  2. CBO spending projections are likely too low, especially for defence outlays, and more realistic numbers point to required Fed Treasury holdings of at least $10tn.
  3. Holdings of $10tn would translate pro rata into a doubling of the Fed's current $8.5tn balance sheet and mean several years of double-digit growth in Fed liquidity rather than quantitative tightening.

Related Articles:

  • Government Debt and Debt Servicing Costs Rising — 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.
  • American Gothic — US tax increases since 1950 of 2% of GDP or more occurred when overall tax receipts were a much smaller share of GDP than today. Restoring the ratio of entitlement to non-defense discretionary spending to its earlier level of 2.2x would require tax increases larger than those historical precedents.

AI Summary. Harmonized inflation measures use the same consumer basket across countries, allowing closer apples-to-apples international comparisons. On this basis, U.S. inflation rose and peaked earlier in the pandemic than in the rest of the Group of Seven, and the U.S. has the lowest 12-month harmonized inflation in the group for both overall and core measures.

CEA Staff Council of Economic Advisors
Date Posted:

.@ernietedeschi @WhiteHouseCea argues that on the basis of “harmonized inflation” that uses the same consumer basket in all countries, the US now has the lowest 12-month inflation in the G7 advanced economies, both overall and by core.

Does the U.S. have the lowest inflation in the G7?

Core argument: The U.S. has the lowest 12-month harmonized inflation in the G7, for both overall and core inflation, though inflation remains elevated across all countries in the analysis.

Put simply, “harmonizing” means using the same consumer basket in all countries. The result is close to a truly apples-to-apples inflation concept that allows for international comparisons. Harmonized inflation generally rose and peaked earlier in the pandemic than the rest of the G7, measured on a 12-month basis. Though inflation remains elevated across all countries in this analysis, the U.S. now has the lowest 12-month harmonized inflation in the G7, both for overall and core inflation. That said, inflation going forward remains considerably uncertain across all G7 nations, including the U.S.

Takeaways by Macro Roundup® AI

  1. The U.S. has the lowest 12-month harmonized inflation in the G7, for both overall and core inflation, though inflation remains elevated across all countries in the analysis.
  2. Harmonizing inflation measures by applying the same consumer basket across countries yields a near apples-to-apples concept that allows international comparisons of inflation rates.
  3. U.S. harmonized inflation generally rose and peaked earlier in the pandemic than in the rest of the G7 on a 12-month basis, and inflation going forward remains considerably uncertain across all G7 nations.

AI Summary. Inflation has negated many benefits of a tight US labor market, rising from 2% before the pandemic to a 9.1% peak before retreating to 4%, though underlying inflation persists around 4% to 5%. Polling identifies inflation as the main reason voters disapprove of the president's handling of the economy by two-to-one.

Greg Ip Wall Street Journal
Date Posted:

.@greg_ip argues that despite recent declines in inflation, private wage and salary growth has failed to keep up with rising consumer prices.

Does inflation explain voter disapproval despite a tight labor market?

Core argument: U.S. inflation rose from 2% just before the pandemic to a 9.1% peak last year as gasoline prices leapt after Russia's invasion of Ukraine, and has since retreated to 4% as gasoline prices dropped.

Many of the benefits of that tight labor market have been negated by inflation. It soared from 2% just before the pandemic to a peak of 9.1% last year as gasoline prices leapt in the wake of Russia’s invasion of Ukraine. It has since retreated to 4% as gasoline prices dropped, but underlying inflation persists around 4% to 5%. Inflation is the main reason voters disapprove of Biden’s handling of the economy by a two-to-one ratio, according to a May poll by the Associated Press and NORC Center for Public Affairs Research. If inflation doesn’t fade of its own accord, the Federal Reserve might have to raise interest rates further and push the economy into recession, which won’t help Biden’s approval ratings.

Takeaways by Macro Roundup® AI

  1. U.S. inflation rose from 2% just before the pandemic to a 9.1% peak last year as gasoline prices leapt after Russia's invasion of Ukraine, and has since retreated to 4% as gasoline prices dropped.
  2. Underlying inflation persists around 4% to 5%, and inflation has negated many of the benefits of the tight labor market.
  3. Inflation is the main reason voters disapprove of Biden's handling of the economy by a two-to-one ratio, according to a May poll by the Associated Press and NORC Center for Public Affairs Research.

Related Articles:

  • Jason Furman On Employment Cost Index — The Employment Cost Index shows private wages and compensation rising at annual rates of roughly 4.7%–5.1%, higher than any point in the previous cycle, supporting the argument that wage growth is not slowing and that the measured slowdown in average hourly earnings reflected shifts in workforce composition. Real wages and salaries remain 5% below their pre-pandemic trend.
  • Real Wage Growth at the Individual Level In 2022 — Both the mean and median worker saw wages fail to keep pace with prices in their consumption baskets, a decline in real wages affecting 54% of workers. Workers under 25 saw real wage growth of 4.3%, while older age groups saw declines that grew larger with age.

AI Summary. Cross-border lending and investment involving the U.S., China, and the euro area have contracted, with the gross value of such transactions falling from about $7.9tn to roughly $2.8tn in a single year. Relative to the three economies' combined output, international financial transaction volumes are smaller than at any point other than the trough of the financial crisis.

Matt Klein The Overshoot
Date Posted:

International financial transactions among the US, China and Euro Area are smaller relative to their combined output then at any point other than the trough of the financial crisis. @M_C_Klein

Are cross-border lending and investment among the largest economies shrinking?

Core argument: The gross value of cross-border financial transactions involving the U.S., China, and the euro area fell from about $7.9 trillion in 2021 to $2.8 trillion in 2022.

Americans, Chinese, and Europeans have curtailed their lending and investing abroad—while also selling commensurately fewer financial claims to foreigners. In 2021, the gross value of cross-border financial transactions involving the U.S., China, and the euro area was worth about $7.9 trillion. In 2022, that figure was just $2.8 trillion. U.S. data for the first three months of this year suggest that cross-border transactions volumes have continued to shrink. International financial transactions involving the world’s three largest economies are smaller relative to their combined output than at any point other than the trough of the financial crisis.

Takeaways by Macro Roundup® AI

  1. The gross value of cross-border financial transactions involving the U.S., China, and the euro area fell from about $7.9 trillion in 2021 to $2.8 trillion in 2022.
  2. Americans, Chinese, and Europeans have curtailed lending and investing abroad while selling commensurately fewer financial claims to foreigners.
  3. International financial transactions involving the world's three largest economies are smaller relative to their combined output than at any point other than the trough of the financial crisis, and U.S. data suggest volumes have continued to shrink.

AI Summary. Goldman Sachs forecasts that China's energy policies open up energy storage as part of a more than $7tn infrastructure investment opportunity through 2040, with China requiring about 520 gigawatts of storage by 2030, up to 410GW of it from batteries. The number of Chinese registered energy storage companies has more than doubled to nearly 109,000.

Edward White and Gloria Li Financial Times
Date Posted:

Goldman Sachs forecasts there will be $7T of energy infrastructure investment in China through 2040 with a growing share related to energy storage.

Is China's energy overhaul driving a battery storage investment boom?

Core argument: Goldman Sachs forecasts that energy storage, opened up by China's energy policies, will form part of a more than $7tn infrastructure investment opportunity through 2040.

Goldman Sachs forecasts that energy storage, opened up by China’s energy policies, will be part of a more than $7tn infrastructure investment opportunity through to 2040. Goldman forecasts that China requires about 520 gigawatts of energy storage by 2030, with as much as 410GW coming from batteries. That reflects a 70-fold increase from battery storage levels in 2021.  The number of Chinese enterprises registered as energy storage companies has more than doubled in the past three years to nearly 109,000, according to data from Chinese companies information provider Aiqicha.

Takeaways by Macro Roundup® AI

  1. Goldman Sachs forecasts that energy storage, opened up by China's energy policies, will form part of a more than $7tn infrastructure investment opportunity through 2040.
  2. Goldman Sachs forecasts China will require about 520GW of energy storage by 2030, with as much as 410GW from batteries — a 70-fold increase from 2021 battery storage levels.
  3. The number of Chinese enterprises registered as energy storage companies has more than doubled in three years to nearly 109,000, according to Chinese company information provider Aiqicha.

AI Summary. The computer and electronics segment is the dominant component of U.S. manufacturing facility construction, and its boom has not come at the expense of other segments, with chemical, transportation, and food and beverage construction also up, though by much less. Roughly comparable data show no similar surge in other advanced economies.

Eric Van Nostrand, Tara Sinclair and Samarth Gupta U.S. Department of the Treasury
Date Posted:

Biden’s Treasury Department notes that the US is experiencing a much larger surge in real manufacturing construction than other advanced economies.

What is driving the surge in US manufacturing facility construction?

Core argument: The computer/electronic segment is the dominant component of U.S. manufacturing construction, and its boom has not been offset by declines elsewhere, with other segments largely consistent with long-term levels.

Today, the computer/electronic segment is the dominant component of U.S. manufacturing construction. Importantly, the boom in this segment has not been offset by reduced spending on other manufacturing construction segments, which are largely consistent with long-term levels. In fact, construction for chemical, transportation, and food/beverage manufacturing is also up from 2022, albeit much less than the computer/electronic sector. The same surge in manufacturing construction is not apparent in other advanced economies. No harmonized data series provides an exact comparison to the United States, but comparable data indicators help unveil the relevant trends. Other advanced economies have not experienced similar increases, according to roughly analogous data sets measuring some concept of real construction for manufacturing purposes.

Takeaways by Macro Roundup® AI

  1. The computer/electronic segment is the dominant component of U.S. manufacturing construction, and its boom has not been offset by declines elsewhere, with other segments largely consistent with long-term levels.
  2. Construction for chemical, transportation, and food/beverage manufacturing is also up from 2022, though by much less than in the computer/electronic sector.
  3. Other advanced economies have not experienced similar increases, according to roughly analogous data sets measuring some concept of real construction for manufacturing purposes, as no harmonized series permits an exact comparison with the United States.

Related Articles:

  • Making Manufacturing Great Again — US manufacturing construction spending has more than doubled over the past year and risen as a share of gross domestic product, a surge attributed to two laws: the Inflation Reduction Act, whose core is green energy subsidies, and the CHIPS Act, which promotes domestic semiconductor production.

AI Summary. US artificial intelligence venture investment totaled $26.6bn in a year, versus about $4bn in China, according to data collated by consultancy Preqin. By deal count the gap is narrowing: Chinese AI venture deals equaled more than two-thirds of the US total of about 447, up from roughly 50% in the prior two years.

Jane Zhang and Sarah Zheng Bloomberg
Date Posted:

China’s government is mobilizing their tech sector in an effort to keep pace and eclipse the US in the artificial intelligence race. American investment in AI in 2023 was $26.6 billion in mid-June relative to China’s $4 billion.

Is China closing the gap with US AI venture investment?

Core argument: US AI investment totaled $26.6 billion in the year to mid-June versus China's $4 billion, according to previously unreported data collated by consultancy Preqin.

AI investments in the US dwarf that of China, totaling $26.6 billion in the year to mid-June versus China’s $4 billion, according to previously unreported data collated by consultancy Preqin. Yet that gap is already gradually narrowing, at least in terms of deal flow. The number of Chinese venture deals in AI comprised more than two-thirds of the US total of about 447 in the year to mid-June, versus about 50% over the previous two years. China-based AI venture deals also outpaced consumer tech in 2022 and early 2023, according to Preqin.

Takeaways by Macro Roundup® AI

  1. US AI investment totaled $26.6 billion in the year to mid-June versus China's $4 billion, according to previously unreported data collated by consultancy Preqin.
  2. Chinese venture deals in AI numbered more than two-thirds of the US total of about 447 in the year to mid-June, up from about 50% over the previous two years.
  3. China-based AI venture deals outpaced consumer tech deals in 2022 and early 2023, according to Preqin.

Related Articles:

  • The Race of the AI Labs Heats Up — Almost all recent artificial intelligence breakthroughs have come from large companies, largely because they hold the computing power. Amazon and Meta each produce two-thirds and four-fifths as much AI research as Stanford University respectively, while Alphabet and Microsoft produce considerably more, excluding their affiliated labs DeepMind and OpenAI.

AI Summary. Inflation-adjusted US house prices are 3.8% below their peak. Historically, periods of poor affordability were followed by strong 5-year real returns on home purchases, while the weakest 5-year real returns came in the runup to and during the housing bubble; unaffordability and low inventory now push prices in opposite directions.

Bill McBride Calculated Risk
Date Posted:

.@calculatedrisk notes affordability is low, which has been associated with low returns going forward. However, in this cycle many owners have low interest mortgages, restricting available inventory.

Does poor housing affordability predict strong future real returns?

Core argument: Inflation-adjusted U.S. house prices stand 3.8% below their peak.

Here is a graph showing affordability, and the 5-year real return (red) on the house purchase (annualized). The 5-year real return is the future return on the Case-Shiller index, adjusted for inflation. When affordability was poor in the early ‘80s, it was actually a good time to buy (and that was before refinancing!). Another good time to buy was in the mid-to-late ‘90s. And another good time was around 2011 or 2012 and also the next several years. The worst time to buy (using a 5 year real return) was in the runup to and during the housing bubble. Since the real return is based on 5 years, we don’t know the return after April 2018. Unaffordability and the low level of inventory are pushing prices in opposite directions!

Takeaways by Macro Roundup® AI

  1. Inflation-adjusted U.S. house prices stand 3.8% below their peak.
  2. Unaffordability and low inventory are pushing house prices in opposite directions, and because the real return is measured over five years, returns after April 2018 are unknown.