Edward Conard

Top Ten New York Times Bestselling Author

  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…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
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “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
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
  • “…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


Thursday, June 29, 2023

AI Summary. The Congressional Budget Office projects the federal deficit falls from 5.8% of gross domestic product to 5.0% before rising every year to 10% of GDP over three decades, a level exceeded only during World War II and the pandemic. Federal debt held by the public is projected to reach 181% of GDP.

CBO Staff Congressional Budget Office
Date Posted:

.@USCBO projects a deficit of 5.8% of GDP in 2023 which will decline to 5% by 2027 and then accelerate to 10% of GDP by 2053 when federal debt will be 181% of GDP.

How high are federal deficits and debt projected to rise?

Core argument: CBO projects the federal deficit falls from 5.8% of GDP in 2023 to 5.0% by 2027, then grows every year to 10% of GDP in 2053, a level exceeded over the past century only during World War II and the coronavirus pandemic.

In CBO’s projections, the deficit equals 5.8% of gross domestic product (GDP) in 2023, declines to 5.0% by 2027, and then grows in every year, reaching 10% of GDP in 2053. Over the past century, that level has been exceeded only during World War II and the coronavirus pandemic. The increase in the total deficit results from faster growth in spending than in revenues. The primary deficit, which excludes interest costs, equals 3.3% of GDP in both 2023 and 2053, but the total deficit is boosted by rising interest costs. By the end of 2023, federal debt held by the public equals 98% of GDP. Debt then rises in relation to GDP: It surpasses its historical high in 2029, when it reaches 107% of GDP, and climbs to 181%% of GDP by 2053.

Takeaways by Macro Roundup® AI

  1. CBO projects the federal deficit falls from 5.8% of GDP in 2023 to 5.0% by 2027, then grows every year to 10% of GDP in 2053, a level exceeded over the past century only during World War II and the coronavirus pandemic.
  2. CBO projects federal debt held by the public rises from 98% of GDP at the end of 2023 to 107% in 2029, surpassing its historical high, and reaches 181% of GDP by 2053.
  3. The primary deficit, which excludes interest costs, equals 3.3% of GDP in both 2023 and 2053 in CBO's projections, with rising interest costs boosting the total deficit as spending grows faster than revenues.

Related Articles:

  • The Return of Quantitative Easing — 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.

AI Summary. Annual inflation running near 5%, well above the Federal Reserve's 2% target, is expected to keep interest rates and the cost of capital elevated. Rising bank borrowing costs correspond to the equivalent of a 200 basis-point rate hike for regional banks and 50 basis points for large banks, or a bit more than 100 basis points economy-wide.

Torsten Sløk Apollo
Date Posted:

Torsten Sløk writes that the failure of SVB and First Republic led to tightening financial conditions, and the full impact of those tighter conditions has not been felt. He forecasts a 60% chance of a hard landing. @apolloglobal

Will inflation above target keep the cost of capital elevated?

Core argument: Annual inflation running near 5%, still well above the Federal Reserve's 2% target, is expected to keep rates higher for longer and the cost of capital elevated through the remainder of 2023 and well into 2024.

While we may have turned the corner on inflation, it continues to prove much “stickier” than most market watchers expected. As of this writing, inflation was around 5% annually, still way above the Fed’s 2% target. In our view, that means higher rates for longer, and an elevated cost of capital through the remainder of 2023 and well into 2024. The increase in borrowing costs since SVB failed corresponds to a 200-basis-point Fed hike for regional banks and a 50-basis-point increase for large banks. Weighing these estimates together using the shares of loans and leases accounted for by small and large banks, respectively, gives an economy-wide Fed tightening equivalent of a bit more than 100 basis points for the entire banking sector.

Takeaways by Macro Roundup® AI

  1. Annual inflation running near 5%, still well above the Federal Reserve's 2% target, is expected to keep rates higher for longer and the cost of capital elevated through the remainder of 2023 and well into 2024.
  2. The rise in borrowing costs since Silicon Valley Bank's failure corresponds to an estimated 200-basis-point Fed hike for regional banks and a 50-basis-point increase for large banks.
  3. Weighing those estimates by the shares of loans and leases accounted for by small and large banks yields an economy-wide Fed tightening equivalent of a bit more than 100 basis points for the entire banking sector.

AI Summary. An investment framework holds that markets and economies are driven by three equilibriums — spending in line with output and capacity, incomes in line with debts, and normal risk premiums across assets — interacting with two policy levers, monetary and fiscal policy. When these conditions are absent, the resulting social, political, and business strains produce changes until equilibrium is restored.

Bob Prince, Aaron Goone, Shane Murphy, and Gurchit Chatha Bridgewater Associates
Date Posted:

Bridgewater argues the United States is in a bearish disequilibrium which is associated with a -2.4% return on equities in the subsequent 12 months.

Are most economies out of equilibrium, requiring policy action?

Core argument: The authors argue most global economies remain in disequilibrium on three conditions: spending in line with output and capacity, incomes in line with debts, and normal risk premiums across assets.

We believe that there are three major equilibriums and two major policy levers that interact to drive markets and economies: 1) Spending in line with output, which is in line with capacity. 2) Incomes in line with debts. 3) Normal risk premiums across assets If these conditions don’t exist, intolerable circumstances will ensue that will drive changes toward these equilibriums being reached. For example, if an economy’s usage of capacity (e.g., labor and capital) remains low for an extended period of time, that will lead to social and political problems as well as business losses, which will produce further changes until these equilibriums are reached. The two levers are monetary policy and fiscal policy.

Takeaways by Macro Roundup® AI

  1. The authors argue most global economies remain in disequilibrium on three conditions: spending in line with output and capacity, incomes in line with debts, and normal risk premiums across assets.
  2. Monetary policy and fiscal policy are the two levers that interact with the three equilibriums to drive markets and economies.
  3. The authors contend that prolonged low usage of capacity such as labor and capital leads to social and political problems as well as business losses, producing further changes until the equilibriums are reached.

AI Summary. The U.S. was missing an average of about 1.39m foreign workers relative to the pre-pandemic trend, a shortfall that has since recovered. Across industries and states, the authors find no statistically significant relationship between the number of missing foreign workers as a share of employment and changes in job vacancy rates.

Hannah Rubinton and Maggie Isaacson Federal Reserve Bank of St. Louis
Date Posted:

.@hannahrubinton @stlouisfed found only limited support for the hypothesis that the recent labor market tightness was driven by the shortfall in immigration.

Did missing foreign workers tighten the U.S. labor market?

Core argument: The U.S. was missing an average of about 1.39 million foreign workers in 2021 relative to the level expected from the pre-pandemic trend, and the number of foreign workers recovered in 2023.

The U.S. was missing an average of about 1.39 million foreign workers in 2021 relative to the expected level based on the pre-pandemic trend. The number of foreign workers has recovered in 2023. The percentage point change in vacancy rates between 2019 and 2021 versus the number of missing workers as a share of employment for industries and states. In neither case is there a statistically significant relationship between the change in vacancy rates and the number of missing workers. (Though the line of best fit is upward sloping for the industries case, it is not statistically significant, meaning that, on average, the industries with more missing workers did not see larger increases in the vacancy rate.)

Takeaways by Macro Roundup® AI

  1. The U.S. was missing an average of about 1.39 million foreign workers in 2021 relative to the level expected from the pre-pandemic trend, and the number of foreign workers recovered in 2023.
  2. Comparing the change in vacancy rates between 2019 and 2021 with missing workers as a share of employment shows no statistically significant relationship, for either industries or states.
  3. For industries, the line of best fit relating missing workers to vacancy-rate changes slopes upward but is not statistically significant, meaning industries with more missing workers did not on average see larger vacancy-rate increases.

Related Articles:

AI Summary. Institutions reporting to China's central government likely hold closer to $6tn in foreign assets than the $3.12tn officially reported as reserves, with the state banking system the main vehicle for holding these uncounted foreign currency assets. China remains a massive global creditor whose foreign exchange accumulation is felt worldwide.

Brad Setser The China Project
Date Posted:

.@Brad_Setser finds China has been parking foreign assets off the PBoC’s balance sheet. He estimates China has close to $6 trillion in foreign assets.

Does China hold far more foreign reserves than officially reported?

Core argument: Institutions reporting to China's central government probably hold closer to $6 trillion in foreign assets than the $3.12 trillion in reserves SAFE reported in December 2022.

All told, institutions that report to China’s central government probably have closer to $6 trillion in foreign assets than the $3.12 trillion SAFE reported in December 2022. The scale of these hidden reserves — foreign current currency assets that aren’t formally counted as “reserves” — also highlights an important fact that is often forgotten amid all the talk of China’s domestic debt problems. The main way China has hid its reserves has been its big state banking system. Globally China is still a massive creditor, and the weight of China’s massive accumulation of foreign exchange is still felt around the globe.

Takeaways by Macro Roundup® AI

  1. Institutions reporting to China's central government probably hold closer to $6 trillion in foreign assets than the $3.12 trillion in reserves SAFE reported in December 2022.
  2. China's large state banking system has been the main vehicle for holding foreign currency assets not formally counted as official reserves.
  3. Despite attention to China's domestic debt problems, China remains a massive global creditor whose accumulated foreign exchange is felt around the globe.

AI Summary. Astronomers have detected a low-frequency gravitational wave "hum" pervading the universe, showing that very large ripples in space-time are constantly reshaping space, with single waves taking years or decades to pass rather than vibrating hundreds of times a second. The finding opens a new observational window on phenomena such as orbiting black holes with the mass of billions of suns.

Jonathan O'Callaghan Quanta Magazine
Date Posted:

The shape of space-time is in constant flux due to gravitational waves. The most likely cause is supermassive black holes, but some scientists argue that these waves represent the first empirical observations of cosmic strings. @QuantaMagazine

Have astronomers detected a low-frequency gravitational wave hum across the universe?

Core argument: Astronomers announced the detection of an extra-low gravitational "hum" pervading the universe, showing that extra-large ripples in space-time are constantly squashing and changing the shape of space.

Astronomers have found an extra-low hum rumbling through the universe. The discovery, announced today, shows that extra-large ripples in space-time are constantly squashing and changing the shape of space. These gravitational waves are cousins to the echoes from black hole collisions first picked up by the Laser Interferometer Gravitational-Wave Observatory (LIGO) experiment in 2015. But whereas LIGO’s waves might vibrate a few hundred times a second, it might take years or decades for a single one of these gravitational waves to pass by at the speed of light. The finding has opened a wholly new window on the universe, one that promises to reveal previously hidden phenomena such as the cosmic whirling of black holes that have the mass of billions of suns, or possibly even more exotic (and still hypothetical) celestial specters.

Takeaways by Macro Roundup® AI

  1. Astronomers announced the detection of an extra-low gravitational "hum" pervading the universe, showing that extra-large ripples in space-time are constantly squashing and changing the shape of space.
  2. A single one of these gravitational waves might take years or decades to pass by at the speed of light, whereas the waves LIGO first detected from black hole collisions in 2015 might vibrate a few hundred times a second.
  3. The finding opens a new window on the universe that promises to reveal previously hidden phenomena such as the cosmic whirling of black holes with the mass of billions of suns, or more exotic hypothetical objects.

Friday, June 30, 2023

AI Summary. An aggregate index of international currency usage — weighting official reserves, foreign exchange transaction volume, foreign currency debt outstanding, and cross-border deposits and loans — puts the US dollar at about 70, far ahead of the euro at about 23. The Chinese renminbi has risen to about 3, behind the Japanese yen and British pound.

Carol Bertaut, Bastian von Beschwitz, and Stephanie Curcuru Federal Reserve Board
Date Posted:

The dollar’s dominant international role has remained steady over the past two decades, as measured by share of official currency reserves, FX transaction volume, foreign currency debt, cross-border deposits, and cross-border loans. @federalreserve

Does the US dollar still dominate international currency usage?

Core argument: The dollar's aggregate index of international currency usage has held stable at about 70 since 2010, well ahead of all other currencies, with the euro next at about 23 and likewise fairly stable.

A review of the use of the dollar globally over the last two decades suggests a dominant and relatively stable role. To illustrate this stability, we construct an aggregate index of international currency usage. This index is computed as the weighted average of five measures of currency usage for which time series data are available: Official currency reserves, FX transaction volume, foreign currency debt instruments outstanding, cross-border deposits, and cross-border loans. The dollar index level has remained stable at a value of about 70 since 2010, well ahead of all other currencies. The euro has the next-highest value at about 23, and its value has remained fairly stable as well. While international usage of the Chinese renminbi has increased over the past 20 years, it has only reached an index level of about 3, remaining even behind the Japanese yen and British pound, which are at about 7 and 6, respectively.

Takeaways by Macro Roundup® AI

  1. The dollar's aggregate index of international currency usage has held stable at about 70 since 2010, well ahead of all other currencies, with the euro next at about 23 and likewise fairly stable.
  2. The Chinese renminbi's international usage index has risen over two decades but reached only about 3, behind the Japanese yen at about 7 and the British pound at about 6.
  3. The index is a weighted average of five measures of currency usage with available time series: official currency reserves, FX transaction volume, foreign currency debt instruments outstanding, cross-border deposits, and cross-border loans.

AI Summary. Six fast-growing Southern states — Florida, Texas, Georgia, North and South Carolina, and Tennessee — now contribute more to US GDP than the Northeast, including the Washington-New York-Boston corridor. The Southeast accounted for more than two-thirds of US job growth since the pandemic began, nearly double its pre-pandemic share, and housed 10 of the 15 fastest-growing large American cities.

Michael Sasso and Alexandre Tanzi Bloomberg
Date Posted:

With just under 24% of US GDP Florida, Texas, Georgia, the Carolinas, and Tennessee now have a greater share of the American economy than the Northeast with just over 22%.

Is the South overtaking the Northeast as the US economy's center?

Core argument: Florida, Texas, Georgia, North and South Carolina, and Tennessee together contribute more to US GDP than the Northeast and its Washington–New York–Boston corridor, in government figures going back to the 1990s.

Six fast-growing states in the South — Florida, Texas, Georgia, the Carolinas and Tennessee — are contributing more to the national GDP than the Northeast, with its Washington-New York-Boston corridor, in government figures going back to the 1990s. The Southeast accounted for more than two-thirds of all job growth across the US since early 2020, almost doubling its pre-pandemic share. And it was home to 10 of the 15 fastest-growing American large cities.

Takeaways by Macro Roundup® AI

  1. Florida, Texas, Georgia, North and South Carolina, and Tennessee together contribute more to US GDP than the Northeast and its Washington–New York–Boston corridor, in government figures going back to the 1990s.
  2. The Southeast accounted for more than two-thirds of all US job growth since early 2020, almost double its pre-pandemic share.
  3. Ten of the 15 fastest-growing large American cities are in the Southeast.

Related Articles:

  • Small Towns Chase America’s $3 Trillion Climate Gold Rush — About $1tn in US federal tax incentives and loans for green energy is drawing a flood of corporate investment into rural counties and reshaping local economies. Estimates of the total private and public spending driven over the next decade range from several hundred billion dollars to roughly $3tn.
  • Black Americans Are Leaving Cities in the North and West — 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%.

AI Summary. Chinese carmakers are expanding in Europe, with Chery planning up to 15,000 UK car sales and 50 UK showrooms, and Germany's largest car rental company agreeing to buy 100,000 BYD vehicles for its European operations. KPMG estimates Chinese groups could take a 15% share of new car sales in Europe, exceeding Renault's.

Peter Campbell, Edward White, Gloria Li and Patricia Nilsson Financial Times
Date Posted:

Chinese auto exports are surging. KPMG estimates Chinese automakers could grab 15% of new car sales in Europe in the next two years. @FT

How large a share of Europe's car market will Chinese automakers take?

Core argument: Chery, China's biggest car exporter, plans to sell up to 15,000 vehicles in the UK next year from a standing start, a level that would place it ahead of Jeep, Jaguar and Suzuki.

Chery, currently China’s biggest exporter of cars, plans to sell up to 15,000 vehicles next year in the UK alone, a level that would see it overtake Jeep, Jaguar and Suzuki from a standing start. According to KPMG, Chinese groups could snatch a 15 percent market share of new car sales in Europe — larger than France’s Renault — within the next two years. Already, Chinese companies are establishing a presence. Chery expects to open 50 showrooms in the UK alone next year, doubling by 2025. Last October, when BYD announced it had entered a partnership with Sixt. By 2028, Germany’s largest car rental company has agreed to buy 100,000 BYD vehicles for its European operations, focusing initially on the Atto 3, a compact sport utility vehicle.

Takeaways by Macro Roundup® AI

  1. Chery, China's biggest car exporter, plans to sell up to 15,000 vehicles in the UK next year from a standing start, a level that would place it ahead of Jeep, Jaguar and Suzuki.
  2. KPMG estimates Chinese groups could take a 15 percent share of new car sales in Europe within two years, larger than the share held by France's Renault.
  3. Sixt, Germany's largest car rental company, agreed to buy 100,000 BYD vehicles for its European operations by 2028, focusing initially on the Atto 3 compact sport utility vehicle.

Related Articles:

  • China’s Auto Export Wave Echoes Japan’s in the ’70s — 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.
  • 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.

AI Summary. Antarctic sea ice cover fell to 10.7m square km, 1.15m square km below the prior record low for that date and 2.3m square km below the 1981–2010 average. Scientists have not established why sea ice around the continent dropped so steeply after an earlier period of growth.

Economist Staff The Economist
Date Posted:

Antarctic sea ice is at its lowest recorded level for June, and is currently 2.3m square km below the 1981-2010 mean. @TheEconomist

Has Antarctic sea ice fallen to a record low?

Core argument: Antarctic sea ice covered just 10.7m square km on June 12th, 1.15m square km below the previous record minimum for that date, set in 2019—an area a little larger than Colombia.

Antarctica currently has exceptionally little ice—the lowest ever seen in June. On June 12th the continent’s sea ice covered just 10.7m square km. That is 1.15m square km below the previous minimum record for that date, from 2019, and 2.3m square km below the average for 1981-2010. The first difference represents an area a little larger than Colombia; the second an area the size of Mongolia—with three Britains tacked on. It is not yet clear why there has recently been such a precipitous drop in Antarctica’s sea ice, nor why it rose somewhat before that.

Takeaways by Macro Roundup® AI

  1. Antarctic sea ice covered just 10.7m square km on June 12th, 1.15m square km below the previous record minimum for that date, set in 2019—an area a little larger than Colombia.
  2. Antarctic sea ice extent stands 2.3m square km below the 1981-2010 average, equivalent to the area of Mongolia plus three Britains.
  3. The causes of the drop in Antarctic sea ice, and of the increase that preceded it, are not yet clear.

AI Summary. Survey research finds more Americans disapprove than approve of colleges considering race and ethnicity in admissions: half of U.S. adults said they disapprove of selective colleges weighing race and ethnicity to increase diversity, a third approved, and 16% were unsure. In another survey, 82% said colleges should not consider race or ethnicity, versus 17% who said they should.

John Gramlich Pew Research Center
Date Posted:

.@pewresearch in 2023 has found that 50% of Americans oppose the use of race in higher education admission decisions, while 33% approve and 16% are unsure.

How do Americans view race considerations in college admissions?

Core argument: In a Pew Research Center survey conducted in spring 2023, half of U.S. adults said they disapprove of selective colleges and universities considering race and ethnicity in admissions to increase racial and ethnic diversity, while a third approved and 16% were not sure.

A larger share of Americans disapprove than approve of higher education institutions taking race and ethnicity into account when admitting students, according to several recent Center surveys. In a survey conducted in spring 2023, half of U.S. adults said they disapprove of selective colleges and universities taking race and ethnicity into account in admissions decisions in order to increase racial and ethnic diversity. A third of adults approved of this, while 16% were not sure. Other Center surveys have also found more opposition than support for the consideration of race and ethnicity in college admissions decisions. In the December 2022 survey, for example, 82% of U.S. adults said colleges should not consider race or ethnicity when deciding which students to accept, while only 17% said colleges should take this into account.

Takeaways by Macro Roundup® AI

  1. In a Pew Research Center survey conducted in spring 2023, half of U.S. adults said they disapprove of selective colleges and universities considering race and ethnicity in admissions to increase racial and ethnic diversity, while a third approved and 16% were not sure.
  2. In a Pew Research Center survey from December 2022, 82% of U.S. adults said colleges should not consider race or ethnicity when deciding which students to accept, compared with 17% who said colleges should.
  3. Across several Pew Research Center surveys, a larger share of Americans disapprove than approve of higher education institutions taking race and ethnicity into account in admissions decisions.

AI Summary. Global house prices are 3% below their recent peak, or 8-10% lower adjusted for inflation, a correction in line with the average since the late 19th century, leaving real prices well above 2019 levels. Migration, household finances, and people's preferences explain the rich world's housing resilience.

Economist Staff The Economist
Date Posted:

While global housing prices are 3% off their recent peak they are ~ 60% higher than January 2006.

Why have global house prices held up better than expected?

Core argument: Global house prices sit 3% below their recent peak, or 8–10% lower adjusted for inflation, in line with the average correction since the late 19th century.

Global house prices have certainly come off the boil. They are 3% below their recent peak, or 8-10% lower once adjusted for inflation. This is in line with the average correction since the late 19th century. Yet this slump should have been different because it followed a boom when prices rose at their fastest rate of all time. The upshot is that real house prices remain miles above the level of 2019. Three factors explain the rich world’s surprising housing resilience: migration, household finances, and people’s preferences.

Takeaways by Macro Roundup® AI

  1. Global house prices sit 3% below their recent peak, or 8–10% lower adjusted for inflation, in line with the average correction since the late 19th century.
  2. The correction followed a boom in which house prices rose at their fastest rate of all time, leaving real house prices far above their 2019 level.
  3. Migration, household finances and people's preferences are the three factors explaining the rich world's housing resilience.