Edward Conard

Top Ten New York Times Bestselling Author

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  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Friday, 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
Date Posted:

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
Date Posted:

.@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
Date Posted:

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
Date Posted:
Is Database:
Database

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
Date Posted:
Is Database:
Database

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.

Related Articles:

  • The U.S. China Rare Earths Battle — Most rare earth elements are relatively abundant but not always easy to extract, and China accounts for an estimated 70% of global output according to the United States Geological Survey. China also holds the world's largest reserves at 44m tonnes of rare-earth-oxide equivalent, roughly double those of Vietnam, Brazil, or Russia.
  • China’s Curb On Metal Exports Reverberates Across Chip Sector — China announced export curbs on gallium and germanium, metals used in chipmaking that the US government classifies among dozens of minerals critical to economic and national security.

Monday, July 17, 2023

AI Summary. In East Asia and Europe, growing numbers of retirees will depend on a shrinking working-age population, and some Asian countries are aging before becoming rich — China hit its peak working-age population at 20% of US income levels at the same point, Vietnam at 14%.

Lauren Leatherby New York Times
Date Posted:

In 27 years, people aged 65+ will make up 40% of the population in some parts of East Asia and Europe, almost 2X the share of 65+ adults currently living in FL.

Will aging populations weigh less on the US than Asia and Europe?

Core argument: China reached its peak working-age population at 20 percent of the income level the United States had at the same point, and Vietnam at 14 percent, illustrating that some Asian countries are becoming old before they become rich.

In East Asia and Europe, extraordinary numbers of retirees will be dependent on a shrinking number of working-age people to support them. Not only are Asian countries aging much faster, but some are also becoming old before they become rich. While Japan, South Korea, and Singapore have relatively high income levels, China reached its peak working-age population at 20 percent the income level that the United States had at the same point. Vietnam reached the same peak at 14 percent the same level. Slightly higher fertility rates and more immigration mean the United States and Australia, for example, will be younger than most other rich countries in 2050. In both the United States and Australia, just under 24 percent of the population is projected to be 65 or older in 2050, according to U.N. projections — far higher than today, but lower than in most of Europe and East Asia, which will top 30 percent.

Takeaways by Macro Roundup® AI

  1. China reached its peak working-age population at 20 percent of the income level the United States had at the same point, and Vietnam at 14 percent, illustrating that some Asian countries are becoming old before they become rich.
  2. U.N. projections show just under 24 percent of the population in both the United States and Australia will be 65 or older in 2050, below most of Europe and East Asia, which will top 30 percent.
  3. Slightly higher fertility rates and more immigration mean the United States and Australia will be younger than most other rich countries in 2050, while East Asia and Europe face extraordinary numbers of retirees dependent on shrinking working-age populations.

Related Articles:

  • The Forever Labour Shortage — Research from the Bank for International Settlements finds that the young and the old are inflationary while the working-age population is disinflationary, because prime-age workers produce more supply than demand and dependents do the opposite. On this view, an ageing population and rising dependency will constrain supply and add to inflation.
  • Fully Grown – European Vacation! — Europe's growth slowdown reflects a widespread drop in productivity growth rather than changes in physical capital accumulation, with human capital growth also mattering but varying by country. The productivity decline is larger than in the US: in countries such as the UK and France, productivity growth fell from about 2% to near zero or negative.

AI Summary. Nominal consumer spending has slowed only modestly, from roughly 7% annualized to about 6%, a negligible change compared with the slowdown in inflation. The author argues most disinflation so far reflects improvements in businesses' ability to produce the real goods and services consumers want rather than a shift in monetary policy.

Matt Klein The Overshoot
Date Posted:

.@M_C_Klein notes the credit contraction hasn’t slowed down the real economy as it’s been offset by strong nominal income growth.

Is disinflation driven by improved production rather than tighter monetary policy?

Core argument: Nominal consumer spending is rising about 6% annualized so far this year, down modestly from roughly 7% annualized at the end of 2021 and start of 2022.

At the end of 2021 and the beginning of 2022, nominal consumer spending was rising about 7% annualized. So far this year, nominal PCE is rising about 6% annualized. The change in spending has been negligible compared to the slowdown in inflation, which suggests that improvements in the match between real production and demand have been more important than any shift in monetary policy. None of this is to suggest that interest rates should have stayed at zero, but it does suggest that the bulk of the disinflation that we have experienced so far can be attributed to benign developments in businesses’ ability to produce the real goods and services that consumers want.

Takeaways by Macro Roundup® AI

  1. Nominal consumer spending is rising about 6% annualized so far this year, down modestly from roughly 7% annualized at the end of 2021 and start of 2022.
  2. The negligible change in nominal spending relative to the slowdown in inflation suggests improvements in the match between real production and demand mattered more than any shift in monetary policy.
  3. The bulk of the disinflation so far can be attributed to benign developments in businesses' ability to produce the real goods and services consumers want, which does not imply interest rates should have stayed at zero.

AI Summary. The New Tenant Repeat Rent Index tracks price changes only for units where new tenants have signed leases, using the same underlying data as the Consumer Price Index, and tends to lead official rent measures by about a year. It currently points to significant rent disinflation over the next three quarters.

Joseph Politano Apricitas Economics
Date Posted:

.@JosephPolitano argues that newly-signed rents show rapidly declining rent inflation which suggests significant disinflation over the next three quarters.

Do new tenant rents signal significant rent disinflation ahead?

Core argument: The New Tenant Repeat Rent Index, built from the same microdata as the CPI but limited to units with newly signed leases, tends to lead official CPI rent components by one year and currently points to significant disinflation over the next three quarters.

The New Tenant Repeat Rent (NTRR) Index uses the same underlying microdata as the CPI to look at price changes for only the subset of units where new tenants have signed leases. That gives a much better picture of where the housing market is right now, and by proxy where official rent inflation is headed. Critically, the NTRR tends to lead the official CPI rent components by one year—and right now, it is saying we should expect significant disinflation over the next three quarters. Inflation is now mostly a housing phenomenon—rising rents are the single-largest contributor to the CPI by a wide margin, and outside of shelter headline inflation has completely flatlined over the last year.

Takeaways by Macro Roundup® AI

  1. The New Tenant Repeat Rent Index, built from the same microdata as the CPI but limited to units with newly signed leases, tends to lead official CPI rent components by one year and currently points to significant disinflation over the next three quarters.
  2. Rising rents are the single-largest contributor to the CPI by a wide margin, making inflation mostly a housing phenomenon.
  3. Excluding shelter, headline inflation has flatlined over the last year.

Related Articles:

  • New Tenant Repeat Rent Index — Immigrants represent 16% of US inventors but produced 23% of total innovation output as measured by patent counts, citations, and the economic value of patents. The authors estimate immigrants account for 36% of aggregate innovation, two-thirds of which comes from their spillover effects on native-born collaborators.

AI Summary. Measured in dollars, the eurozone economy grew about 6% over 15 years versus 82% for the U.S., leaving the average European Union country poorer per person than every U.S. state except Idaho and Mississippi. Inflation-adjusted private consumption fell about 1% in the eurozone since late 2019 while rising nearly 9% in the U.S.

Tom Fairless Wall Street Journal
Date Posted:

Since 2019, adjusted for PPP and inflation, wages are down 3% in Germany, 3.5% in Italy and Spain, and 6% in Greece. Over that same period, US wages were up 6%.

How far have European living standards fallen behind America's?

Core argument: The eurozone economy grew about 6% over the past 15 years measured in dollars versus 82% for the U.S., according to IMF data, leaving the average EU country poorer per head than every U.S. state except Idaho and Mississippi.

The eurozone economy grew about 6% over the past 15 years, measured in dollars, compared with 82% for the U.S., according to International Monetary Fund data. That has left the average EU country poorer per head than every U.S. state except Idaho and Mississippi. Private consumption has declined by about 1% in the 20-nation eurozone since the end of 2019 after adjusting for inflation. In the U.S., where households enjoy a strong labor market and rising incomes, it has increased by nearly 9%. The European Union now accounts for about 18% of all global consumption spending, compared with 28% for America. Fifteen years ago, the EU and the U.S. each represented about a quarter of that total.

Takeaways by Macro Roundup® AI

  1. The eurozone economy grew about 6% over the past 15 years measured in dollars versus 82% for the U.S., according to IMF data, leaving the average EU country poorer per head than every U.S. state except Idaho and Mississippi.
  2. Inflation-adjusted private consumption in the 20-nation eurozone has fallen about 1% since the end of 2019, while U.S. consumption rose nearly 9% amid a strong labor market and rising incomes.
  3. The EU accounts for about 18% of global consumption spending compared with 28% for the U.S., after each represented about a quarter of that total 15 years ago.

Related Articles:

  • From Strength To Strength — The US produced $25.5tn in GDP, about 25% of the world total—roughly its 1990 share—while China's share stands at 18%; the US share of the G7's nominal GDP rose from 40% in 1990 to 58%. Income per person is now about 30% above western Europe and 54% above Japan, adjusted for purchasing power.
  • The Economics Of Inequality In High-Wage Economies — United States Income, Wealth, Consumption, and Inequality Diana Furchtgott-Roth

AI Summary. Inflation-adjusted average hourly wages in the US rose 1.2% year over year, a second straight month of seasonally adjusted gains after two years in which price increases erased workers' elevated raises. Wage gains outpacing inflation complicate the Federal Reserve's efforts to tame price increases.

Amara Omeokwe and Megan Tagami Wall Street Journal
Date Posted:

As inflation comes down, American workers have seen real wage gains since May.

Are wage gains now outpacing inflation?

Core argument: Inflation-adjusted average hourly wages rose 1.2% in June from a year earlier, according to the Labor Department, the first time in two years that growing paychecks surpassed inflation.

Americans’ growing paychecks surpassed inflation for the first time in two years, providing some financial relief to workers, while complicating the Federal Reserve’s efforts to tame price increases. Inflation-adjusted average hourly wages rose 1.2% in June from a year earlier, according to the Labor Department. That marked the second straight month of seasonally adjusted gains after two years when workers’ historically elevated raises were erased by price increases.

Takeaways by Macro Roundup® AI

  1. Inflation-adjusted average hourly wages rose 1.2% in June from a year earlier, according to the Labor Department, the first time in two years that growing paychecks surpassed inflation.
  2. The June figure marked the second straight month of seasonally adjusted real wage gains, following two years in which workers' historically elevated raises were erased by price increases.
  3. Real pay gains provide some financial relief to American workers while complicating the Federal Reserve's efforts to tame price increases.

Related Articles:

  • US Job and Wage Growth Beat Expectations, Making the Fed’s Job Harder — Most US workers are seeing their real wages decline as wage growth falls short of consumer price increases. Wages are growing fastest in leisure and hospitality, information, and transportation and warehousing—between 6.5% and 9% over 12 months, above inflation—sectors representing about 20% of employment.
  • Low Earners in the US Enjoy Fastest Wage Growth — Inflation-adjusted wages for the lowest-earning 10% of US workers rose 6.4% and have returned to pre-pandemic levels, outpacing wage growth for top and middle earners, who have lost ground once price growth is taken into account.

AI Summary. Money market funds buying Treasury bills lets bank reserves be replenished as cash moves from the Federal Reserve's overnight reverse repo facility into the Treasury's account and back out through government spending. The author argues reserves should stay abundant, allowing the Federal Reserve's balance sheet runoff to continue about two more years.

Joseph Wang Fed Guy Blog
Date Posted:

Money market funds are once again the marginal buyer of Treasuries. The replenishment of the Treasury General Account allows further quantitative tightening. @FedGuy12

Can bank reserves stay abundant while balance sheet runoff continues?

Core argument: Money funds' return as major buyers of Treasury bills provides a mechanism to replenish banking system reserves, removing a significant obstacle to quantitative tightening.

The return of money funds as major investors in bills provides a mechanism where banking system reserves can be replenished and removes a significant obstacle to QT. While the recent bout of bill issuance was largely used to replenish the Treasury General Account (TGA), future bill issuance will be used to finance ongoing government spending. This means that money will flow out of the RRP, into the TGA, and then be spent into the banking system through fiscal spending. Bank reserves can remain abundant for an extended period of time, and net deposit outflows will be smaller than expected. QT can continue for the expected two more years given that bank reserves are likely to remain abundant.

Takeaways by Macro Roundup® AI

  1. Money funds' return as major buyers of Treasury bills provides a mechanism to replenish banking system reserves, removing a significant obstacle to quantitative tightening.
  2. Future bill issuance will finance ongoing government spending rather than rebuild the Treasury General Account, moving money out of the reverse repo facility, into the TGA, and then into the banking system through fiscal spending.
  3. Bank reserves are likely to remain abundant for an extended period, keeping net deposit outflows smaller than expected and allowing quantitative tightening to continue for the expected two more years.

Related Articles:

  • Probing LCLoR — Bank reserves stand around $3.2t versus a common Federal Reserve estimate of roughly $2.2t (8% of GDP) for the lowest comfortable level, and reserves are on track to approach that level within months. Growth in reverse repo balances and rebuilding of the Treasury's cash account would draw reserves down.
  • How Was the U.S. Current Account Deficit Financed In 2022? — As the Federal Reserve allowed some bonds to mature under quantitative tightening, new buyers of Treasury debt were needed, and money-market funds shifted from Treasury bills and coupons into reverse repurchase agreements with the Federal Reserve. The entire net issuance was absorbed by two opaque sectors: households and nonprofit organizations, and the rest of the world.

AI Summary. A Pew Research Center analysis of verified voters finds that partisan differences in turnout, rather than voters switching parties, account for most Republican gains in House voting. 71% of Trump's 2020 voters turned out in the midterms versus 67% of Biden's, and just 6% crossed party lines.

Hannah Hartig, Andrew Daniller, Scott Keeter, and Ted Van Green Pew Research Center
Date Posted:

.@pewresearch reports people who voted for Trump in 2020 turned out for the 2022 midterms at a 71% rate in 2022, vs. 67% for 2020 Biden voters.

Are midterm election gains driven by turnout rather than vote switching?

Core argument: Pew Research Center's analysis of verified voters finds that partisan differences in turnout, rather than vote switching between parties, account for most Republican gains in 2022 House voting.

A new Pew Research Center analysis of verified voters and nonvoters in 2022, 2020, 2018, and 2016 finds that partisan differences in turnout – rather than vote switching between parties – account for most of the Republican gains in voting for the House last year. Overall, 68% of those who voted in the 2020 presidential election turned out to vote in the 2022 midterms. Former President Donald Trump’s voters turned out at a higher rate in 2022 (71%) than did President Joe Biden’s voters (67%). Relatively small shares of voters defected from their partisan affiliation or 2020 presidential vote. Among those who voted for both president in 2020 and for a House representative in 2022, just 6% crossed party lines between elections or voted for third-party candidates in either election.

Takeaways by Macro Roundup® AI

  1. Pew Research Center's analysis of verified voters finds that partisan differences in turnout, rather than vote switching between parties, account for most Republican gains in 2022 House voting.
  2. Trump's 2020 voters turned out at 71% in the 2022 midterms versus 67% of Biden's voters, against an overall 68% turnout rate among 2020 presidential voters.
  3. Among those who voted for president in 2020 and for a House representative in 2022, just 6% crossed party lines or voted for third-party candidates in either election, according to Pew Research Center.

Related Articles:

  • What Happened In 2022 — Young voters aged 18–29 backed Democrats by 65%, and in heavily contested states turnout among those eligible in two consecutive elections rose 6%. Women voters, for whom abortion rights were often the top issue, favored Democrats in close races, while "MAGA" Republicans underperformed in contested Senate, gubernatorial, and congressional contests.
  • Millennials Are Not an Exception. They’ve Moved to the Right — Millennials have shifted toward the Republican party, with the move largest among the oldest millennials, who came of age in a different political era. The issues that drew young voters to Democrats, such as the Iraq War and same-sex marriage, may no longer be live issues.

AI Summary. US energy exports of $420bn accounted for 13.5% of total US exports of $3,108bn. Energy's $143bn increase comprised more than 25% of the $541bn rise in total US exports.

Gregor MacDonald The Gregor Letter
Date Posted:

Energy exports were $420 billion in 2022 (13.5% of American exports). It is the fifth year in a row the US has been a net energy exporter. @GregorMacdonald

How large a share of US export growth is energy?

Core argument: US energy exports totaled $420 billion last year, 13.5% of the $3,108 billion in total US exports.

The value of US energy exports is now a significant component of total US exports. US exports last year hit $3,108 billion, making energy’s $420 billion 13.5% of the total. The growth contribution from energy is even more impressive. US exports jumped $541 billion last year from 2021’s level of $2,567 billion, which means the energy export advance of $143 billion easily comprised more than 25% of total export growth.

Takeaways by Macro Roundup® AI

  1. US energy exports totaled $420 billion last year, 13.5% of the $3,108 billion in total US exports.
  2. Total US exports rose $541 billion last year from 2021's $2,567 billion, with energy's $143 billion advance comprising more than 25% of that growth.

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  • Portfolio Nuclear — The US is in its fifth year of net energy independence, with domestic oil and gas production at all-time highs across four consecutive administrations. Wind and solar now supply 15% of the grid, allowing more coal and liquefied natural gas to be exported.
  • Energy and the Presidents — US coal production fell from about 775m short tons to 535m short tons and coal consumption fell over 33%, from roughly 717m to 477m short tons, despite expectations of support for the industry. No major federal legislation has curtailed US oil and gas output, both of which have reached all-time highs.

AI Summary. The authors estimate that U.S. life insurers' aggregate climate transition risk exposure rose by more than $150bn, about 28% of their market value, during a fossil fuel price collapse, with more than $85bn attributable solely to climate stress. The ten largest U.S. property and casualty insurers mostly showed excess reserves, indicating no sign of undercapitalization under physical climate stress.

Hyeyoon Jung, Robert Engle, Shan Ge, and Xuran Zeng Federal Reserve Bank of New York
Date Posted:

As of 2020, @NewYorkFed finds life and property and casualty insurance firms were well capitalized for the climate risk they are bearing.

How large is insurers' climate risk exposure?

Core argument: Aggregate transition climate risk exposure (CRISK) for U.S. life insurers rose by more than $150bn during the 2019–20 fossil fuel price collapse, equivalent to about 28% of their market capitalization.

Insurance companies can be exposed to climate-related physical risk through their operations and to transition risk through their $12T of financial asset holdings. We assess the climate risk [CRISK] exposure of property and casualty [P&C] and life insurance companies in the U.S. In terms of transition risk for life insurers, we observe a notable increase in their transition climate beta during the 2019-20 fossil fuel price collapse. The aggregate transition CRISK for life insurers in the U.S. also significantly rose by more than $ 150B, equivalent to around 28% of their market cap. Excluding concurrent undercapitalization, the marginal CRISK attributed solely to climate stress increased by more than $ 85B during the same period. In terms of physical risk for P&C insurers, we find that the top ten P&C insurers mostly had negative CRISK values [excess reserves], indicating no sign of potential systemic under-capitalization under physical climate stress. As of the end of 2020, their aggregate marginal CRISK stood at $15B, equivalent to approximately 7% of their market cap.

Takeaways by Macro Roundup® AI

  1. Aggregate transition climate risk exposure (CRISK) for U.S. life insurers rose by more than $150bn during the 2019–20 fossil fuel price collapse, equivalent to about 28% of their market capitalization.
  2. Excluding concurrent undercapitalization, the marginal CRISK attributed solely to climate stress for U.S. life insurers increased by more than $85bn over the same period, alongside a notable rise in their transition climate beta.
  3. The top ten U.S. property and casualty insurers mostly showed negative CRISK values, or excess reserves, with aggregate marginal CRISK of $15bn at the end of 2020, roughly 7% of their market capitalization.

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