Edward Conard

Top Ten New York Times Bestselling Author

  • “…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 must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…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
  • “…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
  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Wednesday, July 26, 2023

AI Summary. The real (inflation-adjusted) policy interest rate is around 1.5%, about one percentage point above the Federal Reserve's estimate of the neutral rate but lower than levels that preceded past recessions. Persistent underlying inflation, financial conditions that are not tightening, and those relatively low real rates argue for more rate increases than markets expect, which would raise recession risk.

Michael Strain Project Syndicate
Date Posted:

.@MichaelRStrain highlights the fact that monetary policy slows the economy by tightening overall financial conditions, and yet financial conditions have not tightened much in 2023. He predicts more rate increases and a recession.

.@MichaelRStrain highlights the fact that monetary policy slows the economy by tightening overall financial conditions, and...

Do low real interest rates point to more rate hikes ahead?

Core argument: The author calculates the real policy interest rate at roughly 1.5%, one percentage point above the Fed's estimate of the neutral real rate but below levels that prevailed before previous US recessions.

According to my calculations, the real (inflation-adjusted) interest rate is around 1.5%, which is one percentage point higher than the Fed’s estimate of the neutral real policy rate (which neither stimulates nor reduces economic activity). Prior to previous recessions, the real rate has been higher. While current market pricing suggests that the Fed will increase the federal funds rate once more this cycle, I think that is optimistic. Between stubborn and high underlying inflation, financial conditions that aren’t tightening, and real interest rates that are lower than is typical before a significant economic slowdown, there are ample reasons for the Fed to raise rates more than economists and investors currently seem to expect. If that happens, the risk of recession will increase.

Takeaways by Macro Roundup® AI

  1. The author calculates the real policy interest rate at roughly 1.5%, one percentage point above the Fed's estimate of the neutral real rate but below levels that prevailed before previous US recessions.
  2. Market pricing implies one more federal funds rate increase this cycle, which the author considers optimistic given stubborn, high underlying inflation and financial conditions that are not tightening.
  3. The author argues that if the Fed raises rates more than economists and investors expect, the risk of a US recession will increase.

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.
  • A Default Cycle Has Started — Default rates on high-yield bonds and leveraged loans are rising as more companies default under a higher cost of capital, with the Federal Reserve signaling interest rates will stay at these levels for a couple of years. Tighter financing conditions are the channel through which monetary policy restrains the economy and capital markets.

AI Summary. New research projects that the Atlantic Meridional Overturning Circulation, the network of ocean currents shaping North Atlantic climate, could collapse around midcentury as human-driven warming slows it. A much weaker circulation could cool much of the Northern Hemisphere, speed sea-level rise along North American and European coasts, and reduce rainfall in Africa's Sahel and Asian monsoon regions.

Raymond Zhong New York Times
Date Posted:

New research projects that the Atlantic Meridional Overturning Circulation current will weaken this century which could have a cooling effect on the Northern Hemisphere and reduce rainfall in the monsoon regions of Asia.

New research projects that the Atlantic Meridional Overturning Circulation current will weaken this century which could have...

Will warming cause Atlantic ocean currents to collapse this century?

Core argument: Research published in Nature Communications projects that the Atlantic Meridional Overturning Circulation could collapse around midcentury, with human-driven warming possibly slowing the current network in recent decades.

The last time there was a major slowdown in the mighty network of ocean currents that shapes the climate around the North Atlantic, it seems to have plunged Europe into a deep cold for over a millennium. That was roughly 12,800 years ago when not many people were around to experience it. But in recent decades, human-driven warming could be causing the currents to slow once more. New research published in Nature Communications [projects] the Atlantic Meridional Overturning Circulation, or AMOC could collapse around midcentury. Were the circulation to tip into a much weaker state, the effects on the climate would be far-reaching, though scientists are still examining their potential magnitude. Much of the Northern Hemisphere could cool. The coastlines of North America and Europe could see faster sea-level rise. Northern Europe could experience stormier winters, while the Sahel in Africa and the monsoon regions of Asia would most likely get less rain.

Takeaways by Macro Roundup® AI

  1. Research published in Nature Communications projects that the Atlantic Meridional Overturning Circulation could collapse around midcentury, with human-driven warming possibly slowing the current network in recent decades.
  2. The last major slowdown of the Atlantic current network, roughly 12,800 years ago, appears to have plunged Europe into a deep cold lasting more than a millennium.
  3. A tip into a much weaker Atlantic circulation could cool much of the Northern Hemisphere, speed sea-level rise along North American and European coastlines, bring stormier northern European winters, and most likely reduce rainfall in the Sahel and Asian monsoon regions.

Related Articles:

  • Antarctic Sea Ice Has Shrunk By An Area Nine Times The Size Of Britain — 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.
  • 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. China has become the world's largest exporter of vehicles by volume, a position previously held by Germany or Japan, and has moved into a motor vehicle trade surplus. Its net exports still remain below Japanese and German levels, and Chinese vehicles tend to carry a lower value per car than foreign competitors.

Joseph Politano Apricitas Economics
Date Posted:

China is now the leader in car export volume, but the value of its net exports remains lower than Germany and Japan. @JosephPolitano

How has China become the world's largest vehicle exporter by volume?

Core argument: Ford CEO James Farley said on an earnings call that China became the world's number one exporter of vehicles, a position previously held by Germany or Japan.

“No one noticed—but we noticed,” said Ford CEO James Farley on an earnings call last month, “something monumental happened in our industry, where China became the number one exporter of vehicles globally. It had always been the Germans or the Japanese.” Despite the record-setting rise in gross exports and China’s newfound motor vehicle trade surplus, net exports still remain below Japanese and German levels. The per-car value of Chinese vehicles still tends to be lower than their foreign competitors, and a lot of the rise in exports has been matched by a rise in imports.

Takeaways by Macro Roundup® AI

  1. Ford CEO James Farley said on an earnings call that China became the world's number one exporter of vehicles, a position previously held by Germany or Japan.
  2. Despite record gross vehicle exports and a new motor vehicle trade surplus, China's net vehicle exports remain below Japanese and German levels, with much of the export rise matched by rising imports.
  3. The per-car value of Chinese vehicles tends to be lower than that of their foreign competitors.

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.
  • The Chinese Carmakers Planning to Shake Up The European Market — 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.

AI Summary. Using French firm data, the authors estimate that a 10% rise in electricity prices lowers production by 1.6% and employment by 1.5%, while firm-level energy efficiency rises and profits fall modestly or only among the most gas-intensive firms. These negative effects diminish over time as firms adapt.

Lionel Fontagné, Philippe Martin and Gianluca Orefice Center for Economic and Policy Research
Date Posted:

Between 1996-2019 French firms responded to energy shocks by initially reducing exports and employment but over time they increased their energy efficiency and the negative effects faded. @martinph01

How do firms adjust production, employment, and efficiency to higher energy prices?

Core argument: A 10% increase in electricity prices translates into a 1.6% fall in production and a 1.5% fall in employment at French firms, while energy efficiency at the firm level increases.

The energy price shock also generates a fall in production and employment: a 10% increase in electricity price translates into a 1.6% fall in production and a 1.5% fall in employment. Energy efficiency increases at the firm level. Profits fall but modestly or only for the most gas-intensive firms. However, these negative impacts wane over time. Our interpretation is that during 1995–2019, firms adapted their technology and production processes to higher energy prices and a selection process eliminated those not able to adjust. All in all, these results suggest that firms are able to adjust and adapt strongly to energy shocks but that the competitiveness impact is significant.

Takeaways by Macro Roundup® AI

  1. A 10% increase in electricity prices translates into a 1.6% fall in production and a 1.5% fall in employment at French firms, while energy efficiency at the firm level increases.
  2. Profits fall modestly in response to the energy price shock, or only for the most gas-intensive firms, and these negative impacts wane over time.

AI Summary. Seven automakers—BMW, General Motors, Honda, Hyundai, Kia, Mercedes-Benz and Stellantis—will invest at least $1bn in a joint venture to build 30,000 fast electric-vehicle chargers in the US and Canada, nearly doubling the roughly 32,000 fast chargers in the US. The chargers will accommodate both Tesla's connector standard and the one used by most other carmakers.

Jack Ewing New York Times
Date Posted:

Seven major automakers are investing $1 billion in a joint venture that will almost double the number of EV chargers in the United States.

Seven major automakers are investing $1 billion in a joint venture that will almost double the number of EV chargers in the...

Are automakers teaming up to double US fast-charging capacity?

Core argument: Seven automakers — BMW Group, General Motors, Honda, Hyundai, Kia, Mercedes-Benz Group and Stellantis — will invest at least $1 billion initially in a joint venture to build 30,000 chargers on major highways and other locations in the United States and Canada.

Seven major automakers announced a plan on Wednesday to nearly double the number of fast chargers in the United States in an effort to address one of the main reasons that people hesitate to buy electric cars. The carmakers — BMW Group, General Motors, Honda, Hyundai, Kia, Mercedes-Benz Group,, and Stellantis — will initially invest at least $1 billion in a joint venture that will build 30,000 chargers on major highways and other locations in the United States and Canada. The United States has about 32,000 fast chargers — those that can replenish a drained battery in 10 to 30 minutes. The chargers will have plugs designed to use the connections used by most carmakers other than Tesla, as well as the standard developed by Tesla that Ford, G.M.,, and other companies have said they intend to switch to in 2025.

Takeaways by Macro Roundup® AI

  1. Seven automakers — BMW Group, General Motors, Honda, Hyundai, Kia, Mercedes-Benz Group and Stellantis — will invest at least $1 billion initially in a joint venture to build 30,000 chargers on major highways and other locations in the United States and Canada.
  2. The plan would nearly double the number of fast chargers in the United States, which stands at about 32,000 units capable of replenishing a drained battery in 10 to 30 minutes.
  3. The joint venture's chargers will carry both the plugs used by most carmakers other than Tesla and the standard developed by Tesla, which Ford, G.M. and other companies have said they intend to switch to in 2025.

Thursday, July 27, 2023

AI Summary. Because high earners save a larger share of their income and consume less of it than workers and the middle class, rising income inequality shifts income toward savers and reduces overall consumption. Unless offset by higher investment, the argument holds that maintaining total demand requires either policies encouraging household borrowing or government borrowing to replace lost consumption.

Michael Pettis Financial Times
Date Posted:

.@michaelxpettis argues that high US income inequality leads to structurally low US demand, as the wealthy are prone to save. As a result, the US is forced to choose between more debt and more unemployment.

.@michaelxpettis argues that high US income inequality leads to structurally low US demand, as the wealthy are prone to...

Does rising income inequality push up household and government borrowing?

Core argument: Because the wealthy save a much larger share of their income than workers and the middle class, rising income inequality reduces overall consumption and forces up savings by transferring income from high consumers to high savers.

The wealthy save a much larger part of their income than do workers or the middle class, and use a much smaller part for consumption, rising income inequality automatically reduces overall consumption and forces up savings by effectively transferring income from high consumers to high savers. If lower consumption is not balanced by higher investment, total demand must decline. To prevent this from happening, Washington typically does one of two things. First, the Federal Reserve can implement policies that encourage household borrowing to fund additional consumption. In that case, the reduction in the income share of ordinary Americans is balanced by an increase in their borrowing, so the same level of consumption can be maintained. Second, Washington can itself borrow and use the proceeds to replace the demand lost by the reduction in household consumption.

Takeaways by Macro Roundup® AI

  1. Because the wealthy save a much larger share of their income than workers and the middle class, rising income inequality reduces overall consumption and forces up savings by transferring income from high consumers to high savers.
  2. If the lower consumption caused by rising inequality is not balanced by higher investment, total demand must decline.
  3. Washington typically responds in one of two ways: the Federal Reserve encourages household borrowing to sustain consumption, or the government borrows to replace the demand lost from reduced household consumption.

Related Articles:

  • Pettis On CBO Numbers — Rising US income inequality is argued to be a main driver of the surge in US debt, because the rich save a larger share of their income, pushing up savings without a matching rise in investment. Unless offset by higher investment or smaller trade deficits, these savings must be balanced by household borrowing or larger fiscal deficits.

AI Summary. After adjusting for population aging and gender composition, the U.S. employment-to-population ratio has returned to its pre-pandemic trend and the age-adjusted labor force participation rate matches rates last seen in 2001. The authors argue that on this basis the labor market is historically strong, with elevated and even record participation and employment measures.

Ernie Tedeschi Council of Economic Advisors
Date Posted:

After adjusting for population aging, the employment-to-population ratio is within .1% of its Feb 2020 level and labor force participation ratio is at its highest level since 2001. @ernietedeschi

Is the labor market historically strong after adjusting for population aging?

Core argument: The age- and gender-adjusted employment-to-population ratio has returned to its prepandemic trend.

The employment-to-population ratio (EPOP) has returned to its age (and gender)-adjusted prepandemic trend. The labor force participation rate (LFPR) age-adjusted in June 2023 was consistent with rates last seen in 2001. When looking over extended periods of time, labor market indicators should be age-adjusted to distinguish between secular demographic trends versus other cyclical economic effects. Second, after accounting for demographic shifts in labor supply and demand, the current U.S. labor market is unusually strong from a historical perspective, posting elevated and even record measures of participation and employment.

Takeaways by Macro Roundup® AI

  1. The age- and gender-adjusted employment-to-population ratio has returned to its prepandemic trend.
  2. The age-adjusted labor force participation rate in June 2023 was consistent with rates last seen in 2001, with participation and employment measures elevated and in some cases at record levels.
  3. Labor market indicators compared over extended periods should be age-adjusted to separate secular demographic trends from cyclical economic effects.

Related Articles:

  • Unions’ Inflation Warning? — The share of people aged 16 and over working or looking for work fell when the pandemic hit and has only partly recovered, with population aging accounting for most of the remaining shortfall. That implies economic activity must run at a lower level to avoid persistent wage and price inflation.

AI Summary. Household debt and housing booms in China and Korea are comparable to those in the United States and United Kingdom from 2001 to 2007, and consumer spending in both countries could be quite weak. Korea's debt service ratio has risen substantially to an exceptionally high level, a pattern historically associated with slower growth.

Amir Sufi National Bureau of Economic Research
Date Posted:

The rapid rise of China and South Korea’s household debt to GDP ratio has strong parallels to EU and North American real-estate boom-bust cycles in 2007. @profsufi

Do housing and household debt booms point to weaker consumer spending ahead?

Core argument: The housing and household debt booms in China and Korea are comparable to those in the United States and United Kingdom from 2001 to 2007, and consumer spending in both countries could be quite weak.

The Chinese and Korean booms are comparable with the booms that occurred in the United States and United Kingdom from 2001 to 2007. [Going forward] in both countries, consumer spending could be quite weak. This is an especially pronounced problem in Korea, where the debt service ratio has risen substantially and is now at an exceptionally high level. A rise in the debt service ratio during a household debt boom portends slower growth in the historical data, and Korea appears likely to follow that historical pattern. The allocation of production to real estate and construction activities over the past decade in China is historically unprecedented. It is difficult to imagine that the rate of activity in the real estate sector is sustainable, and it is difficult to see what sectors can take up the production slack if there is a continued decline in real estate activity.

Takeaways by Macro Roundup® AI

  1. The housing and household debt booms in China and Korea are comparable to those in the United States and United Kingdom from 2001 to 2007, and consumer spending in both countries could be quite weak.
  2. Korea's debt service ratio has risen substantially to an exceptionally high level, and since rising debt service ratios during household debt booms portend slower growth in the historical data, Korea appears likely to follow that pattern.
  3. China's allocation of production to real estate and construction over the past decade is historically unprecedented, and it is difficult to see which sectors could absorb the production slack from a continued decline in real estate activity.

Related Articles:

AI Summary. A major physics journal is retracting a paper on how a chemical compound transforms when compressed between diamonds, co-led by a University of Rochester physicist who also claimed to have discovered a room-temperature superconductor. While the researcher defends the work, some scientists who reviewed reports on it say the data submitted were falsified.

Kenneth Chang New York Times
Date Posted:

Earlier work by Ranga Dias, the researcher who claimed a breakthrough on room-temperature superconductors, has been retracted due to willfully submitted false data.

Earlier work by Ranga Dias, the researcher who claimed a breakthrough on room-temperature superconductors, has been...

Does falsified data undermine a high-profile superconductivity research claim?

Core argument: A major physics journal is retracting a two-year-old paper co-authored by University of Rochester professor Ranga Dias that described the transformations of a chemical compound squeezed between two pieces of diamond.

A major physics journal is retracting a two-year-old scientific paper that described the transformations of a chemical compound as it was squeezed between two pieces of diamond. Such an esoteric finding — and retraction — would not typically garner much attention. But one of the leaders of this research is Ranga Dias, a professor at the University of Rochester in New York who made a much bigger scientific splash earlier this year, touting the discovery of a room-temperature superconductor. While Dr. Dias continues to defend the work, to some scientists, there is now clear evidence of misconduct. “There’s no plausible deniability left,” said N. Peter Armitage, a professor of physics and astronomy at Johns Hopkins University in Baltimore who is among the scientists who have seen the reports. “They submitted falsified data. There’s no ambiguity there at all.”

Takeaways by Macro Roundup® AI

  1. A major physics journal is retracting a two-year-old paper co-authored by University of Rochester professor Ranga Dias that described the transformations of a chemical compound squeezed between two pieces of diamond.
  2. Ranga Dias, who touted the discovery of a room-temperature superconductor, continues to defend the work, while some scientists who have seen the reports say there is clear evidence of misconduct.
  3. N. Peter Armitage, a physics and astronomy professor at Johns Hopkins University who has seen the reports, said, "They submitted falsified data. There's no ambiguity there at all.".

Related Articles:

  • The Scientific Breakthrough That Could Make Batteries Last Longer — Researchers at the University of Rochester report creating a superconductor that operates at 69 degrees Fahrenheit and 145,000 pounds per square inch of pressure, roughly 1/360th of the pressure at Earth's core. The authors say this is about 10 degrees warmer and about 1/1000th the pressure of their earlier material.
  • Room-Temperature Superconductor Discovery Meets with Resistance — A claim of superconductivity at everyday temperatures and comparatively low pressures in a lutetium-based material has met resistance within the high-pressure physics community, and the researcher behind it denies all allegations of wrongdoing. He states the paper underwent multiple rounds of peer review over the better part of a year, with raw data shared and published alongside the result.

AI Summary. A South Korean research team claims to have created a superconductor that works at room temperature and ambient pressure, reporting that electrical resistance in their LK-99 samples fell to near zero and that the material showed the magnetic levitation effect characteristic of superconductivity. The team says levitation was only partial, which they attribute to impurities in the material.

Bob Yirka Phys.org
Date Posted:

In a preprint a team in South Korea claims to have created a room-temperature/ambient-pressure superconducting material.

Has a room-temperature, ambient-pressure superconductor been created?

Core argument: A Korean team claims to have created LK-99, described as the first room-temperature, ambient-pressure superconductor, reporting that its measured sensitivity fell to near zero when electricity was applied.

In their papers, the team claims to have measured samples of LK-99 as electricity was applied and found its sensitivity fell to near zero. They also claim that in testing its magnetism, it exhibited the Meissner effect—another test of superconductivity. In such a test, a sample should levitate when placed on a magnet. The team has provided a video of the material partially levitating. They claim that the levitation was only partial because of impurities in their material.

Takeaways by Macro Roundup® AI

  1. A Korean team claims to have created LK-99, described as the first room-temperature, ambient-pressure superconductor, reporting that its measured sensitivity fell to near zero when electricity was applied.
  2. The Korean team claims LK-99 exhibited the Meissner effect in magnetism testing, a test of superconductivity in which a sample should levitate when placed on a magnet.
  3. The Korean team provided a video showing LK-99 partially levitating and attributes the partial levitation to impurities in the material.