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


Thursday, July 13, 2023

AI Summary. Manufacturing's share of global economic output has fallen from 19% in 1997 to 16%, with the steepest declines in rich countries, and industry's share has slipped in recent years even in China and India. Among OECD countries in recent decades, there has been next to no relationship between economic growth and manufacturing's share of the economy.

Economist Staff The Economist
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.@TheEconomist argues that policymakers are overestimating the importance of manufacturing. In recent years, there has been no significant relationship between economic growth and manufacturing’s share of the economy in OECD countries.

Does a larger manufacturing sector drive faster economic growth?

Core argument: Manufacturing's share of global economic output fell from 19% in 1997 to 16% today, with the steepest declines in rich countries.

As a share of global economic output, manufacturing has dropped from 19% in 1997 to 16% today, with the fall steepest in rich countries. In China and India industry’s share of economic output appears to be roughly where it was three decades ago, but even in these countries, it has slipped in recent years. In recent decades there has been next to no relationship between economic growth and manufacturing’s share of the economy among countries in the OECD.

Takeaways by Macro Roundup® AI

  1. Manufacturing's share of global economic output fell from 19% in 1997 to 16% today, with the steepest declines in rich countries.
  2. In China and India, industry's share of economic output appears to be roughly where it was three decades ago, though it has slipped in both countries recently.
  3. Among OECD countries, there has been next to no relationship between economic growth and manufacturing's share of the economy in recent decades.

Related Articles:

  • Why Laws Meant To Create Jobs Can Be So Destructive For Our Cities — State audits and independent evaluations of corporate tax incentive programs have found poor targeting, weak oversight, and excessive costs that harmed rather than benefited local governments. Examples include $5.5bn in New York tax credits for a Micron facility and up to $1.75bn in Michigan incentives for a Ford electric vehicle plant.
  • New York State Built Elon Musk a $1 Billion Factory. ‘It Was a Bad Deal.’ — New York state spent about $1bn building a 1.2m-square-foot Buffalo factory it owns and leases to Tesla for $1 a year, plus $240m of solar-panel manufacturing equipment. A state comptroller's audit found 54 cents of economic benefit per subsidy dollar, and external auditors have written down nearly all of the investment.

AI Summary. Investment in manufacturing structures has grown at an average annualized rate of 43% over three quarters, driven by battery and semiconductor facilities, partly offsetting headwinds to overall structures investment. Companies have pledged $365bn of such investments, of which only about $90bn has been tallied in construction spending, suggesting elevated spending can persist.

Ronnie Walker Goldman Sachs
Date Posted:

Ronnie Walker of @GoldmanSachs estimates that only 25% of $365B in pledged new semiconductor and battery investments has been spent.

Will factory construction spending stay elevated for years to come?

Core argument: Manufacturing structures investment has grown at an average annualized rate of 43% over the last three quarters on the back of battery and semiconductor facilities, which should at least partly offset headwinds to structures investment.

Continued strength in manufacturing structures investment—which has grown at an average annualized rate of 43% over the last three quarters on the back of investment in battery and semiconductor facilities—should at least partly offset these headwinds to structures investment. The White House reports that companies have pledged $365bn of new battery and semiconductor investments over the last two years. So far, only $90bn of investment has been tallied in the relevant construction spending category for battery and semiconductor facilities since the start of 2021, suggesting that the level of spending could remain elevated for quite some time (the current monthly annualized rate stands at $112bn vs. ~$10bn two years ago, or 0.40% of annual GDP vs. 0.05% of GDP).

Takeaways by Macro Roundup® AI

  1. Manufacturing structures investment has grown at an average annualized rate of 43% over the last three quarters on the back of battery and semiconductor facilities, which should at least partly offset headwinds to structures investment.
  2. The White House reports companies have pledged $365bn of new battery and semiconductor investments over the last two years, while only $90bn has been tallied in the relevant construction spending category since the start of 2021.
  3. Construction spending on battery and semiconductor facilities runs at a monthly annualized rate of $112bn, or 0.40% of annual GDP, versus roughly $10bn, or 0.05% of GDP, two years ago.

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.
  • Unpacking the Boom in U.S. Construction of Manufacturing Facilities — 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.

AI Summary. The labor force participation rate of partnered women with children rose 1.06 percentage points in a six-month span, and the authors estimate that rising child care worker wages held back an even larger increase. They suggest the greater availability of telecommuting jobs, which this group strongly prefers, may explain the rise despite higher child care prices.

Alexander Bick, Victoria Gregory, and Oksana Leukhina Federal Reserve Bank of St. Louis
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Higher child care costs do not explain the labor force participation sluggishness. @stlouisfed @oksana_leukhina

Do rising child care wages restrain mothers' labor force participation?

Core argument: The labor force participation rate of partnered women with children rose 1.06 percentage points during the first half of 2022.

During the first half of 2022, the LFP rate of partnered women with children increased by 1.06 percentage points. Our results suggest that had it not been for rising child care worker wages, we would have likely seen an even stronger LFP rate of partnered women with children today. One reason why this group dramatically increased their market work, despite the rising child care prices, may be related to the rise in the prevalence of telecommuting jobs for which this particular group has a high preference.

Takeaways by Macro Roundup® AI

  1. The labor force participation rate of partnered women with children rose 1.06 percentage points during the first half of 2022.
  2. The authors' results suggest that absent rising child care worker wages, the labor force participation rate of partnered women with children would likely be even stronger today.
  3. The authors point to the rising prevalence of telecommuting jobs, for which partnered women with children have a high preference, as one possible reason this group increased market work despite rising child care prices.

Related Articles:

  • How Child Care Impacts Parents’ Labor Force Participation — The number of U.S. child care workers was about 6% below pre-pandemic levels while child care costs were up 14%, and the share of parents of young children citing child care as the main reason for low work hours rose from about 15% to 18%. Even so, labor force participation among partnered women with young children surpassed its pre-pandemic level.

AI Summary. Farmers Insurance is limiting homeowners policy sales in Florida and California, hurricane- and wildfire-prone states, joining other large insurers in pulling back. In Florida it is ending sales of home, auto, and umbrella policies under its own brand — about 30% of the policies it sells there, affecting roughly 89,000 policies.

Jean Eaglesham Wall Street Journal
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Farmers Insurance is pulling out of Florida ending home, auto, and umbrella insurance policies. Farmers is also limiting sales in California.

Farmers Insurance is pulling out of Florida ending home, auto, and umbrella insurance policies. Farmers is also limiting...

Are insurers pulling back from disaster-prone states?

Core argument: Farmers Insurance is ending sales of Farmers-branded home, auto, and umbrella policies in Florida, about 30% of the policies it sells in the state, affecting roughly 89,000 policies, according to a person familiar with the matter.

Farmers Insurance is limiting sales of homeowners policies in Florida and California, becoming the latest big insurer to pull back from the hurricane- and wildfire-prone states. In Florida, Farmers is ending sales of home, auto, and umbrella insurance policies under its own brand, representing about 30% of the policies it sells in the state, the company said. It will continue offering insurance through other brands, including those for high-risk drivers, according to the statement. The ending of Farmers-branded sales in Florida affects around 89,000 policies, a person familiar with the matter said.

Takeaways by Macro Roundup® AI

  1. Farmers Insurance is ending sales of Farmers-branded home, auto, and umbrella policies in Florida, about 30% of the policies it sells in the state, affecting roughly 89,000 policies, according to a person familiar with the matter.
  2. Farmers Insurance is limiting homeowners policy sales in Florida and California, becoming the latest large insurer to pull back from states prone to hurricanes and wildfires.
  3. Farmers Insurance said it will continue offering insurance in Florida through other brands, including those serving high-risk drivers.

Related Articles:

  • Climate Shocks Are Making Parts of America Uninsurable. It Just Got Worse — State Farm, California's largest homeowner insurer, stopped accepting applications for most new home insurance policies statewide, citing rapidly growing catastrophe exposure. Florida faced a similar retreat by national carriers after Hurricane Andrew and responded with a market of small insurers backed by a state-mandated company providing windstorm coverage to homeowners who cannot obtain private insurance.
  • Florida Ocean Temperatures At ‘Downright Shocking’ Levels — Much of Florida is recording its warmest year on record, with temperatures 3–5 degrees above normal and coastal waters in the Florida Keys reaching 92–96 degrees versus the more typical upper 80s. The National Oceanic and Atmospheric Administration reports about 40% of the world's oceans face a marine heat wave, the highest share on record.

AI Summary. An ultra-white paint developed at Purdue University can make surfaces up to 8°F cooler than surrounding air at midday and up to 19°F cooler at night, cutting air-conditioning needs by as much as 40% without using energy or warming outside air. One researcher calculates that coating 1–2% of Earth's surface with such materials would halt the rise in global temperatures.

Cara Buckley New York Times
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A team at Purdue University has created a white paint that reflects the sun’s rays. The paint can make surfaces as much as 8° cooler than ambient air temperatures during the day and up to 19° cooler at night.

A team at Purdue University has created a white paint that reflects the sun’s rays. The paint can make surfaces as...

Can ultra-white paint cool buildings and slow global warming?

Core argument: Purdue's ultra-white paint makes surfaces up to 8°F cooler than ambient air at midday and up to 19°F cooler at night, reducing indoor temperatures and air-conditioning needs by as much as 40%.

The paint’s properties are almost superheroic. It can make surfaces as much as eight degrees Fahrenheit cooler than ambient air temperatures at midday, and up to 19° cooler at night, reducing temperatures inside buildings and decreasing air-conditioning needs by as much as 40%. It is cool to the touch, even under a blazing sun, Dr. Ruan said. Unlike air-conditioners, the paint doesn’t need any energy to work, and it doesn’t warm the outside air. Jeremy Munday, a professor of electrical and computer engineering at the University of California, Davis, calculated that if materials such as Purdue’s ultra-white paint were to coat between 1% and 2% of the Earth’s surface, slightly more than half the size of the Sahara, the planet would no longer absorb more heat than it was emitting, and global temperatures would stop rising.

Takeaways by Macro Roundup® AI

  1. Purdue's ultra-white paint makes surfaces up to 8°F cooler than ambient air at midday and up to 19°F cooler at night, reducing indoor temperatures and air-conditioning needs by as much as 40%.
  2. Jeremy Munday, a professor of electrical and computer engineering at the University of California, Davis, calculated that coating 1% to 2% of the Earth's surface — slightly more than half the size of the Sahara — with materials such as the paint would stop global temperatures from rising.
  3. Unlike air-conditioners, the ultra-white paint requires no energy to operate and does not warm the outside air, and Dr. Ruan said it is cool to the touch even under a blazing sun.

AI Summary. New York state spent about $1bn building a 1.2m-square-foot Buffalo factory it owns and leases to Tesla for $1 a year, plus $240m of solar-panel manufacturing equipment. A state comptroller's audit found 54 cents of economic benefit per subsidy dollar, and external auditors have written down nearly all of the investment.

Julie Bykowicz and Ted Mann Wall Street Journal
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New York state’s foray into industrial policy was a white elephant; $1 billion investment in a Tesla facility earned 0.54 cents on the dollar. External auditors have written down nearly all of New York’s investment.

New York state’s foray into industrial policy was a white elephant; $1 billion investment in a Tesla facility earned 0.54...

Do state-funded factory subsidies deliver returns for taxpayers?

Core argument: A New York state comptroller's audit found just 54 cents of economic benefit for every subsidy dollar spent on the $1 billion Buffalo factory the state built and now leases to Tesla for $1 a year.

New York state paid to build a quarter-mile-long facility with 1.2 million square feet of industrial space, which it now owns and leases to Tesla for $1 a year. It bought $240 million worth of solar-panel manufacturing equipment. Musk had said that by 2020 the Buffalo plant each week would churn out enough solar-panel shingles to cover 1,000 roofs. A state comptroller’s audit found just 54 cents of economic benefit for every subsidy dollar spent on the factory, which rose on the site of an old steel mill. External auditors have written down nearly all of New York’s investment.

Takeaways by Macro Roundup® AI

  1. A New York state comptroller's audit found just 54 cents of economic benefit for every subsidy dollar spent on the $1 billion Buffalo factory the state built and now leases to Tesla for $1 a year.
  2. New York owns the quarter-mile-long Buffalo plant with 1.2 million square feet of industrial space and bought $240 million of solar-panel manufacturing equipment, and external auditors have written down nearly all of the state's investment.
  3. Elon Musk had said the Buffalo plant would churn out enough solar-panel shingles each week by 2020 to cover 1,000 roofs.

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.
  • Why Laws Meant To Create Jobs Can Be So Destructive For Our Cities — State audits and independent evaluations of corporate tax incentive programs have found poor targeting, weak oversight, and excessive costs that harmed rather than benefited local governments. Examples include $5.5bn in New York tax credits for a Micron facility and up to $1.75bn in Michigan incentives for a Ford electric vehicle plant.

AI Summary. The US holds net external debt of about 50% of its GDP but earns roughly 4% on its foreign lending while paying about 3% on its borrowing, leaving an implied net interest rate of 2.4%. This slows, without eliminating, the balance-of-payments adjustment to higher interest rates as net interest payments rise further.

Brad Setser @Brad_Setser
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.@Brad_Setser argues that net interest payments will top their pre-crisis level of 1.5% of GDP.

Do favorable interest rates on foreign assets slow US balance-of-payments adjustment?

Core argument: The US carries net external debt of around 50% of GDP as the world's big net debtor, earning 4% on average on its foreign loans while paying 3% on its borrowing, mostly bonds.

The US is the world's big net debtor -- with net external debt of around 50% of its GDP. The US is now getting 4% on average on its loans, while only paying 3% on its borrowing (mostly bonds) the implied net interest rate on US external debt works out to be 2.4% -- well below any current US interest rate. And as a result, net interest payments as a share of US GDP are only up 15 bps of US GDP or so (not much really). These predictable dynamics slow the adjustment in the U.S. balance of payments to higher interest rates, but they don't eliminate it. Net interest payments have a lot further to rise. They certainly will top their pre-GFC peak as a share of US GDP (1.5% or so).

Takeaways by Macro Roundup® AI

  1. The US carries net external debt of around 50% of GDP as the world's big net debtor, earning 4% on average on its foreign loans while paying 3% on its borrowing, mostly bonds.
  2. The implied net interest rate on US external debt works out to 2.4%, below any current US interest rate, leaving net interest payments up only about 15 basis points of GDP.
  3. These dynamics slow the adjustment in the US balance of payments to higher interest rates without eliminating it, and net interest payments are expected to rise further and exceed their pre-GFC peak of roughly 1.5% of US GDP.

Related Articles:

  • Interest Costs Will Grow The Fastest Over The Next 30 Years — The Congressional Budget Office projects federal spending will reach 29.1% of GDP over three decades, with net interest on the national debt rising from 1.9% of GDP to 6.7%, or $5.4tn. Under that projection, interest becomes the largest single federal budget line item, surpassing Social Security, Medicare, and Medicaid.
  • 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.

Friday, July 14, 2023

AI Summary. US federal debt-servicing costs rose 25% to $652bn over the first nine months of the fiscal year, while the deficit reached $1.39tn, up about 170% from the same period a year earlier. As lower-yielding securities mature, the Treasury's weighted average interest rate on outstanding debt rose to 2.76% from 1.80%.

Viktoria Dendrinou Bloomberg
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The cost of servicing American government debt jumped by 25% in the first nine months of this fiscal year as the Treasury rolled into higher rate debt.

The cost of servicing American government debt jumped by 25% in the first nine months of this fiscal year as the Treasury...

Are rising interest rates pushing federal debt costs and deficits higher?

Core argument: US interest costs on federal debt rose 25% to $652 billion in the first nine months of the fiscal year, contributing to a major widening in the budget deficit, according to Treasury Department data.

The cost of servicing US government debt jumped by 25% in the first nine months of the fiscal year, reaching $652 billion and contributing to a major widening in the budget deficit. For the nine months through June, the federal deficit hit $1.39 trillion, up some 170% from the same period the year before, according to Treasury Department data released on Thursday. As lower-yielding securities mature, the Treasury faces steady increases in the rates it pays on outstanding debt. The weighted average interest for total outstanding debt by the end of June was 2.76%, the highest level since February 2012, according to the Treasury. That’s up from 1.80% a year before, the department’s data show.

Takeaways by Macro Roundup® AI

  1. US interest costs on federal debt rose 25% to $652 billion in the first nine months of the fiscal year, contributing to a major widening in the budget deficit, according to Treasury Department data.
  2. The federal deficit reached $1.39 trillion for the nine months through June, up roughly 170% from the same period a year earlier, according to Treasury Department data.
  3. The weighted average interest rate on total outstanding US debt was 2.76% at the end of June, up from 1.80% a year before and the highest since February 2012, as lower-yielding securities mature.

Related Articles:

  • Net Interest Payments On External US Debt — The US holds net external debt of about 50% of its GDP but earns roughly 4% on its foreign lending while paying about 3% on its borrowing, leaving an implied net interest rate of 2.4%. This slows, without eliminating, the balance-of-payments adjustment to higher interest rates as net interest payments rise further.
  • Interest Costs Will Grow the Fastest Over the Next 30 Years — The Congressional Budget Office projects federal spending will reach 29.1% of GDP over three decades, with net interest on the national debt rising from 1.9% of GDP to 6.7%, or $5.4tn. Under that projection, interest becomes the largest single federal budget line item, surpassing Social Security, Medicare, and Medicaid.

AI Summary. Nominal wages have been rising about 5%-6% a year, and neither the lower share of workers quitting for better opportunities nor the smaller pay premium for job switchers has slowed that pace. Broad price inflation cannot stay disconnected from nominal income growth over any meaningful time horizon.

Matt Klein The Overshoot
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.@M_C_Klein notes that robust nominal wage growth is not consistent with inflation returning to target.

Can price inflation fall while nominal wage growth stays near 5%-6%?

Core argument: Nominal wages have risen roughly 5%–6% a year since last summer, which the author identifies as the main reason to worry about the durability of the disinflation.

The main reason to worry is that nominal wages have consistently been rising about 5%-6% a year since last summer. The drop in the share of workers quitting their jobs for better opportunities elsewhere and the declining wage premium for workers switching jobs do not seem to be having an impact (yet). Regardless of what I want to happen, the experience of the past three years makes me reluctant to conclude that something fundamental has changed after only a few months of somewhat encouraging data. Broad price inflation cannot remain disconnected from nominal income growth by very much over any meaningful time horizon. At this point, the hope is that the current bout of disinflation buys time for wage growth to (somehow) slow down on its own without the need for any active measures to hurt the economy. The alternative does not seem to be priced in.

Takeaways by Macro Roundup® AI

  1. Nominal wages have risen roughly 5%–6% a year since last summer, which the author identifies as the main reason to worry about the durability of the disinflation.
  2. The falling share of workers quitting for better opportunities and the declining wage premium for job switchers do not yet appear to be affecting wage growth, according to the author.
  3. The author argues broad price inflation cannot stay disconnected from nominal income growth over any meaningful horizon, and hopes the disinflation buys time for wage growth to slow without active measures that hurt the economy.

Related Articles:

  • Furman On CPI Report — Headline consumer price inflation fell to 3.0%, largely reflecting a 17% drop in energy prices over the past year, while core inflation registered its lowest reading of the inflationary period as service price growth gradually slowed and goods price growth turned back down.

AI Summary. The author argues the inflationary episode stemmed from excessive fiscal spending and requires spending cuts, but demographics are pushing up mandatory spending while geopolitical pressures demand more military spending. The conclusion drawn is that central banks will ultimately have to buy more government debt, creating monetary inflation that tracks consumer inflation over the long term.

Michael Howell Capital Wars
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Michael Howell @crossbordercap argues that a 2% point fall in trend inflation is equivalent to a 60% jump in global liquidity which is bullish for risk assets.

Will rising government spending force central banks to buy more debt?

Core argument: The authors' analysis holds that a 2 percentage point fall in trend inflation is equivalent to a 60% jump in Global Liquidity, their two key criteria being rising Global Liquidity and falling underlying inflation.

This inflationary crisis was caused by excessive fiscal spending and it needs to be corrected by reducing fiscal spending. Demographic forces now act in the other direction [vs. the 1970s] and they are pushing up the pace of mandatory spending, even as growing geopolitical pressures demand ever more military spending. The inevitable conclusion is that Central Banks will ultimately have to purchase more and more government debt, or in other words create monetary inflation. Monetary inflation may not be the same thing as high street inflation, but over the long term, it runs close. Our two key criteria are: (1) rising Global Liquidity and (2) falling underlying inflation. Our analysis shows that a 2% point fall in trend inflation is equivalent to a 60% jump in Global Liquidity.

Takeaways by Macro Roundup® AI

  1. The authors' analysis holds that a 2 percentage point fall in trend inflation is equivalent to a 60% jump in Global Liquidity, their two key criteria being rising Global Liquidity and falling underlying inflation.
  2. The authors attribute the inflationary crisis to excessive fiscal spending and argue it must be corrected by reducing such spending, while demographic forces push up mandatory spending and geopolitical pressures demand more military spending.
  3. The authors conclude that central banks will ultimately have to purchase more and more government debt, creating monetary inflation, which over the long term runs close to high street inflation.

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. 23% of outstanding US mortgages carry an interest rate below 3%, 38% are between 3% and 4%, and only 9% were originated above 6%. With mortgage rates at 7.25%, homeowners lack incentive to move and take on a new mortgage, a key reason housing supply remains low.

Torsten Sløk Apollo
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Torsten Sløk notes that low-interest mortgages constrain housing inventory: 23% of mortgages outstanding have an interest rate of less than 3% and 38% are at 3-4%. @apolloglobal

Do low existing mortgage rates keep housing supply constrained?

Core argument: 23% of all outstanding U.S. mortgages carry an interest rate below 3% and 38% fall between 3% and 4%, while only 9% were originated above 6%.

23% percent of all mortgages outstanding have an interest rate below 3%, 38% are between 3% and 4%, and only 9% of all mortgages outstanding were originated with an interest rate above 6%. The bottom line is that homeowners across America do not have any incentive to move and get a new mortgage with mortgage rates currently at 7.25%. This is a key reason why the supply in the housing market continues to be so low.

Takeaways by Macro Roundup® AI

  1. 23% of all outstanding U.S. mortgages carry an interest rate below 3% and 38% fall between 3% and 4%, while only 9% were originated above 6%.
  2. With mortgage rates at 7.25%, homeowners across America have no incentive to move and take on a new mortgage.
  3. The low rates on existing mortgages are a key reason housing market supply remains so low.

Related Articles:

  • Inflation Adjusted House Prices 3.8% Below Peak — 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.
  • The Great Pandemic Mortgage Refinance Boom — Fourteen million mortgages were refinanced during the COVID-era refinance boom: roughly 5m borrowers extracted a total of $430bn in home equity, while 9m refinanced without extracting equity and cut their aggregate annual housing costs by $24bn.

AI Summary. Mexico is the top U.S. trading partner, accounting for 15.4% of all U.S. goods trade versus 15.2% for Canada and 12.0% for China, with four-month bilateral trade of $263bn. Manufactured goods made up $234.2bn of that total, with $157bn of Mexican imports and $107bn of U.S. exports.

Luis Torres Federal Reserve Bank Of Dallas
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Mexico became the top US trading partner earlier this year with 15.4% share of all the goods exported and imported, vs. Canada’s 15.2% and China’s 12%. @DallasFed

Has Mexico surpassed China as the top U.S. trading partner?

Core argument: Mexico became the top U.S. trading partner at the start of 2023, with bilateral trade totaling $263 billion during the first four months of the year.

Mexico became the top U.S. trading partner at the beginning of 2023, with total bilateral trade between the two countries totaling $263 billion during the first four months of this year. Mexico’s gains mirror its rise in manufacturing, a key component of goods moving between it and the U.S. During the first four months of 2023, total trade of manufactured goods between Mexico and the U.S. reached $234.2 billion. Overall, Mexican imports to the U.S. totaled $157 billion; U.S. exports to Mexico reached $107 billion. Mexico–U.S. trade during the first four months of 2023 represented 15.4 percent of all the goods exported and imported by the U.S.; the Canada–U.S. share followed at 15.2 percent and then the China–U.S. share at 12.0 percent.

Takeaways by Macro Roundup® AI

  1. Mexico became the top U.S. trading partner at the start of 2023, with bilateral trade totaling $263 billion during the first four months of the year.
  2. Mexico–U.S. trade accounted for 15.4 percent of all U.S. goods exports and imports in the first four months of 2023, followed by Canada at 15.2 percent and China at 12.0 percent.
  3. Manufactured goods accounted for $234.2 billion of Mexico–U.S. trade in the first four months of 2023, while overall Mexican imports to the U.S. totaled $157 billion and U.S. exports to Mexico reached $107 billion.

Related Articles:

  • Pettis on “Friend-Shoring” — Shifting US production to countries with balanced or deficit trade, such as Mexico, is likely to raise US exports to those countries because wages and household income make up a higher share of their output. Relocating to large-surplus countries instead converts part of export revenues into savings, since workers there receive a smaller share of what they produce.
  • Global Trade Is Shifting, Not Reversing — Mexico is positioned to gain from shifting U.S.-China trade, with lower wages than China, an established manufacturing base anchored by autos, and proximity to the U.S. market. Bank of America analysts note U.S. imports of Mexican manufactured goods are roughly 60% above pre-pandemic levels, with Mexico gaining U.S. import share in plastics and textiles as China loses share.

AI Summary. Production of 13 minerals critical to weapons is highly concentrated, with the top three exporters supplying over 60% of each, China the largest producer of eight, Congo of two, and Brazil of nine-tenths of the world's niobium, most of which is shipped to China. Many lack near-term substitutes.

Economist Staff The Economist
Date Posted:

The US is racing to find new suppliers of minerals needed for weapons. Concentrated production, complex refining, and low volumes complicate new supply chains.

Does China dominate global supply of minerals critical to weapons?

Core argument: For each of 13 war minerals, the top three exporters account for more than 60% of global supply, with China the biggest producer by far for eight of them.

The production of war minerals is extremely concentrated. For each of our 13 war materials, the top three exporters account for more than 60% of global supply. China is the biggest producer, by far, for eight of these minerals; Congo, a troubled mining country, tops the ranking for another two; Brazil, a more reliable trading partner, produces nine-tenths of the world’s niobium, though most of it is sent to China. Many minerals are impossible to replace in the near term, especially for cutting-edge military uses. When substitution is possible, performance usually suffers. The combination of concentrated production, complex refining, and critical uses means trading happens under the radar. All this makes building new supply chains much more difficult.

Takeaways by Macro Roundup® AI

  1. For each of 13 war minerals, the top three exporters account for more than 60% of global supply, with China the biggest producer by far for eight of them.
  2. Congo, a troubled mining country, tops the production ranking for two war minerals, while Brazil produces nine-tenths of the world's niobium, most of which is sent to China.
  3. Many war minerals cannot be replaced in the near term, especially for cutting-edge military uses, and where substitution is possible performance usually suffers, making new supply chains much harder to build.

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