Edward Conard

Top Ten New York Times Bestselling Author

  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “…a 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 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
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “…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
  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Tuesday, August 8, 2023

AI Summary. A model forecast based on metro-area data projects that year-over-year shelter inflation will continue to slow and may turn negative, which would be the most severe contraction in shelter inflation since the 2007-09 financial crisis. Shelter is a major component of overall inflation, so such a turnaround would have important implications for headline inflation.

Augustus Kmetz, Schuyler Louie and John Mondragon Federal Reserve Bank of San Francisco
Date Posted:

A model from the @sffed forecasts “year-over-year shelter inflation will continue to slow through late 2024 and may even turn negative by mid-2024.”

Will shelter inflation keep slowing and turn negative?

Core argument: The baseline forecast, built from the average of cumulative shelter inflation forecasts at the CBSA level, projects year-over-year shelter inflation slowing through late 2024 and potentially turning negative by mid-2024.

The dashed line presents our baseline forecast of year-over-year shelter inflation over the next 18 months based on the average of cumulative shelter inflation forecasts at the CBSA level. Blue shading shows the area in which 95% of the model’s out-of-sample forecast errors fall, indicating the range of confidence regarding the accuracy of our model estimates. The solid line plots actual year-over-year shelter inflation. Our baseline forecast suggests that year-over-year shelter inflation will continue to slow through late 2024 and may even turn negative by mid-2024. This would represent a sharp turnaround in shelter inflation, with important implications for the behavior of overall inflation. The deflationary component of this forecast would be the most severe contraction in shelter inflation since the Global Financial Crisis of 2007-09.

Takeaways by Macro Roundup® AI

  1. The baseline forecast, built from the average of cumulative shelter inflation forecasts at the CBSA level, projects year-over-year shelter inflation slowing through late 2024 and potentially turning negative by mid-2024.
  2. The forecast's deflationary component would mark the most severe contraction in shelter inflation since the Global Financial Crisis of 2007–09, with implications for the behavior of overall inflation.
  3. Blue shading on the forecast chart shows the area in which 95% of the model's out-of-sample forecast errors fall, indicating the range of confidence regarding the accuracy of the model estimates.

Related Articles:

  • Rangvid On Housing Inflation — US core inflation measures include the cost of owner-occupied housing by imputing what homeowners would pay to rent from themselves, while Europe's core measure leaves owner-occupied housing out entirely. Measured the European way, US inflation is already back to 2%, while European inflation remains well above target.
  • 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. Internal Revenue Service migration data show net migration subtracted more than $68bn of taxable income from large urban counties in a single year, about 2% of their total, while adding to taxable income in all other county types. Manhattan lost over $16bn and San Francisco over $8bn, or 20%.

Connor O’Brien Economic Innovation Group
Date Posted:

Since the start of the pandemic major urban counties’ federal tax base has declined by at least $68B, with large declines in San Francisco and New York City. @cojobrien

How much taxable income did large urban counties lose to migration?

Core argument: IRS data show net migration subtracted more than $68 billion of Adjusted Gross Income from large urban counties' aggregate taxable income between 2020 and 2021, equivalent to nearly 2% of those counties' total taxable incomes.

The country’s large urban areas were hit hard by the pandemic and subsequent economic recovery on a number of fronts. Between 2020 and 2021, IRS data shows that net migration subtracted more than $68 billion (Adjusted Gross Income, or AGI) from large urban counties’ aggregate taxable income. Meanwhile migration added to taxable income in all other types of counties, even smaller urban peers. The scale of decline in large urban areas was equivalent to nearly two percent of total taxable incomes in such counties. In contrast, newcomers to rural counties have added more than 1.5% to taxable income in each of 2020 and 2021. Manhattan alone lost more than $16 billion in federally-taxable income (spread across more than 37,000 returns) through net migration, equivalent to more than 13% of remaining residents’ combined taxable incomes. Net migration out of San Francisco left that city’s federal income tax base more than $8 billion—or 20% —smaller between 2020 and 2021 alone.

Takeaways by Macro Roundup® AI

  1. IRS data show net migration subtracted more than $68 billion of Adjusted Gross Income from large urban counties' aggregate taxable income between 2020 and 2021, equivalent to nearly 2% of those counties' total taxable incomes.
  2. Manhattan lost more than $16 billion in federally-taxable income across more than 37,000 returns through net migration, equivalent to more than 13% of remaining residents' combined taxable incomes.
  3. Net migration left San Francisco's federal income tax base more than $8 billion, or 20%, smaller between 2020 and 2021, while newcomers added more than 1.5% to rural counties' taxable income in each of 2020 and 2021.

Related Articles:

  • Young Families Have Not Returned to Large Cities Post-Pandemic — The under-five population in large urban U.S. counties fell 6.1% while overall population in those counties fell 0.9%, with declines exceeding 10% in the largest counties including New York, Cook County, Illinois, and Los Angeles. Losses of young families were more severe in the Mid-Atlantic and West Coast, while the under-five population grew in Southeastern urban counties.
  • Sunbelt Cities Nashville and Austin Are Nation’s Hottest Job Markets — An assessment of about 380 U.S. metro areas ranked Nashville, Tennessee as the country's hottest job market, followed by Austin, Texas and Jacksonville, Florida. The rankings were based on five factors: the unemployment rate, labor-force participation rate, changes in employment levels, labor-force size, and wages.
  • Taxing Billionaires: Estate Taxes and the Geographical Location of the Ultra-Wealthy — The authors estimate that US billionaires move to states without estate taxes as they age, with $80.7bn of Forbes 400 wealth escaping estate taxation as a result. They find that for the average state the added estate tax revenue exceeds forgone income tax revenue by 31%, with California a notable exception.

AI Summary. The US Treasury plans to issue somewhat more debt at each auction and use part of the proceeds to buy back older securities, tilting the outstanding stock toward more liquid new issues. Such a program could later be used to influence financial conditions, for example by issuing short-dated debt to buy longer-dated debt.

Joseph Wang Fed Guy Blog
Date Posted:

Treasury’s new buyback program will allow the Treasury to “add and remove duration into the market,” an ability previously only held by the Fed. @FedGuy12

Can Treasury buybacks become a tool for influencing financial conditions?

Core argument: Treasury plans to issue slightly more debt at each auction and use a portion of the proceeds to buy back older securities, tilting the composition of outstanding Treasuries toward more liquid new issues.

Treasury plans to issue a bit more debt at each auction with the understanding a portion of the proceeds would be used to purchase old debt. In effect, the composition of Treasuries outstanding would be tilted towards the more liquid new issues. The program could one day be deployed to influence monetary conditions. For example, Treasury could effectively ease financial conditions by issuing short dated debt to purchase longer dated debt. There is no indication of this today, but treasuries and the central banks do not always have the same goal, and conflicts between the two are common in history.

Takeaways by Macro Roundup® AI

  1. Treasury plans to issue slightly more debt at each auction and use a portion of the proceeds to buy back older securities, tilting the composition of outstanding Treasuries toward more liquid new issues.

AI Summary. Denying Trump the Republican presidential nomination could alienate the roughly one-third of Republican voters who strongly support him and depress their turnout in Senate races, while the quarter who vehemently oppose him would likely still back Republicans down ballot. A different nominee might improve presidential odds but imperil Republican hopes of retaking the Senate.

Chris Stirewalt American Enterprise Institute
Date Posted:

.@ChrisStirewalt argues that MAGA base turnout may be key to 10 competitive 2024 Senate races: only 2 are currently held by Republicans and half are in states Trump won in 2020.

Does changing the presidential nominee threaten a party's Senate chances?

Core argument: Denying Trump the Republican nomination risks alienating the one-third of Republican voters who strongly support him, who might not turn out for Senate races with Trump off the ballot.

To deny Trump the nomination, even if unsuccessful, could alienate the 1/3 of Republican voters who are strong supporters of Trump. They might not show up for Senate races without Trump on the ballot. Even if the quarter of Republicans who vehemently opposed Trump vote against Trump, they will [likely] revert to the GOP down ballot. That’s what happened in 2020. A nominee other than Trump might have a better chance of winning the presidency but could imperil hopes of winning back the Senate. A lot of Republicans would be okay with that outcome: Trump gets his comeback shot, loses, but does so with enough clout in Congress to rein in the Democratic president. And if Trump pulls off an upset, he does so with a Republican Senate and probably the House. But, given the narrowness of the current GOP House majority, if Trump gets thrashed in the general election, it could deliver both chambers of Congress and the White House for Democrats.

Takeaways by Macro Roundup® AI

  1. Denying Trump the Republican nomination risks alienating the one-third of Republican voters who strongly support him, who might not turn out for Senate races with Trump off the ballot.
  2. The quarter of Republicans who vehemently oppose Trump would likely vote against him but revert to the GOP down ballot, as happened in 2020.
  3. A non-Trump nominee might have a better chance of winning the presidency but could imperil Republican hopes of retaking the Senate, while a lopsided Trump defeat could hand Democrats both chambers and the White House given the narrow GOP House majority.

Related Articles:

  • For Some Key Voters, Trump Has Become Toxic — The number of white Americans without college degrees, a group that backed Donald Trump by 67% to 32%, has fallen by 2.1m, while the number of white college graduates, a constituency that narrowly favored Joe Biden, has grown by 13.3m. These demographic shifts work against Republican candidates.
  • The Road to A Political Realignment in American Politics — College-educated voters are now more likely to identify as Democrats while those without degrees back Republicans, with educational attainment increasingly correlated with views on abortion, LGBTQ+ rights, and religion's relationship to government. This sorting leaves most states politically uncompetitive, with eight states near the national average in education levels holding 97 electoral votes in play.
  • 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.

AI Summary. Chipmakers have announced more than $200bn of investments in America, including $40bn from TSMC in Arizona, $17bn from Samsung in Texas, and $40bn from Intel in Arizona and Ohio. Even if all planned investments materialize, American output of cutting-edge chips would meet barely a third of domestic demand.

Economist Staff The Economist
Date Posted:

If all planned investment in domestic chipmaking comes online, by 2025 the US will produce enough cutting-edge chips to meet only 1/3 of domestic demand.

Will billions in new chip plants cover America's advanced chip demand?

Core argument: Chipmakers have announced more than $200bn of investments in the United States, with American factories set to produce 18% of the world's leading-edge chips by 2025.

Chipmakers have announced more than $200bn-worth of investments in America. By 2025 American chip factories will be churning out 18% of the world’s leading-edge chips. TSMC is splurging $40bn on two fabs in Arizona. Samsung of South Korea is investing $17bn in Texas. Intel, America’s chipmaking champion, will spend $40bn on four fabs in Arizona and Ohio. If all the planned investments materialise, America will produce enough cutting-edge chips to meet barely a third of domestic demand for these. Apple will keep sourcing high-end processors for its iPhones from Taiwan. So, in all likelihood, will America’s nascent AI-industrial complex.

Takeaways by Macro Roundup® AI

  1. Chipmakers have announced more than $200bn of investments in the United States, with American factories set to produce 18% of the world's leading-edge chips by 2025.
  2. TSMC is spending $40bn on two Arizona fabs, Intel $40bn on four fabs in Arizona and Ohio, and Samsung of South Korea $17bn in Texas.
  3. If all planned investments materialise, America will produce enough cutting-edge chips to meet barely a third of domestic demand, with Apple continuing to source high-end iPhone processors from Taiwan.

Related Articles:

  • Can Intel Become The Chip Champion The US Needs? — The US Chips Act committed $52bn in direct semiconductor manufacturing and research subsidies plus an estimated $24bn in tax credits over eight years, with Intel potentially receiving up to $12bn for new US facilities. Intel's planned plants in Arizona, Ohio and Germany have already reached around $60bn in first-phase costs.
  • TSMC Delays Start of First Arizona Chip Factory, Citing Worker Shortage — Taiwan Semiconductor Manufacturing Company said a shortage of skilled workers is hampering construction of its first Arizona chip factory, pushing mass production of 4-nanometer chips to 2025 from a previously stated 2024, and may require temporarily bringing in experienced technicians from Taiwan. The company expects to invest $40bn in Arizona.
  • The Extreme Shortage of High IQ Workers — Semiconductor manufacturing requires workers of above-average intelligence, with the most demanding roles needing IQs in the top 1 in 1,000 — a pool of about 164,000 people in the US, of whom perhaps 100,000 can be placed in such professions. The author argues this scarcity explains reliance on high-IQ workers abroad and on smarter tools and non-human intelligence.

AI Summary. Average global sea surface temperatures have risen by just over 0.1C (0.2F) per decade since 1970, about half the pace of the atmosphere, with the increase over the past year closer to 0.2C (0.4F) and far more intense marine heatwaves in some regions. Europe's Copernicus Climate Change Service reported a record average sea surface temperature just short of 21C (70F).

Clive Cookson Financial Times
Date Posted:

Heatwaves are currently impacting 44% of the oceans up from a 10% mean. NOAA forecasts 50% of the oceans will be experiencing heatwave conditions during September and October.

Are ocean temperatures rising faster than their long-term trend?

Core argument: Global average sea surface temperatures have risen by just over 0.1C/0.2F per decade since 1970, about half the pace of atmospheric warming, with the increase over the past year closer to 0.2C/0.4F.

Average sea surface temperatures across the globe have been rising by just over 0.1C/0.2F per decade since 1970 — about half as fast as the atmosphere. The overall increase in the past year is closer to 0.2C/0.4F, with much more intense marine heatwaves in some regions. On August 1, average global sea surface temperatures reached an all-time high just short of 21C/70F, Europe’s Copernicus Climate Change Service says. This record is particularly disconcerting because March is usually the hottest month for the world’s oceans.

Takeaways by Macro Roundup® AI

  1. Global average sea surface temperatures have risen by just over 0.1C/0.2F per decade since 1970, about half the pace of atmospheric warming, with the increase over the past year closer to 0.2C/0.4F.
  2. Europe's Copernicus Climate Change Service reports that average global sea surface temperatures hit an all-time high just short of 21C/70F on August 1, a record made more disconcerting because March is usually the oceans' hottest month.
  3. Marine heatwaves have been much more intense in some regions than the global rise in sea surface temperatures.

Related Articles:

  • What This Year’s ‘Astonishing’ Ocean Heat Means for the Planet — The planet's average sea surface temperature reached a record high and the ocean has stayed exceptionally warm, with North Atlantic readings running more than 2°F above typical levels and one buoy recording 101.1°F, possibly a world record. Scientists expect warm ocean conditions to continue as El Niño intensifies.
  • Warming Could Push the Atlantic Past a ‘Tipping Point’ This Century — 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.
  • The Rapid Loss Of Antarctic Sea Ice Brings Grim Scenarios Into View — Unusual wind and wave patterns are a leading short-term explanation for the loss of Antarctic sea ice, which holds the continent's coastal ice shelves in place. If those shelves collapsed, continental ice could flow rapidly into the oceans; the West Antarctic ice sheet alone holds enough water to raise global sea level by 11 feet.

AI Summary. A volcanic eruption that injected large amounts of water vapor — a strong greenhouse gas — into the stratosphere is estimated to have raised surface temperatures by more than 1.5°C across large regions for several years, while cooling some areas by close to 1°C. The authors suggest a possible link to tropical Pacific sea surface temperatures that warrants further investigation.

Martin Jucker, Chris Lucas and Deepashree Dutta Preprint
Date Posted:

New research suggests water vapor from a recent volcanic eruption is a major factor in the recent uptick in global temperature. The research suggests the impact will persist over a decade.

Can a volcanic water vapor injection warm surface temperatures for years?

Core argument: The study finds that a Hunga Tonga-Hunga Ha'apai-like injection of water vapor into the stratosphere raised surface temperatures by over 1.5°C across large regions for several years, while some areas cooled by close to 1°C.

Volcanic eruptions typically cool the Earth's surface by releasing aerosols which reflect sunlight. However, a recent eruption released a significant amount of water vapor-a strong greenhouse gas-into the stratosphere with unknown consequences. This study examines the aftermath of the eruption and reveals that surface temperatures across large regions of the world increased by over 1.5°C for several years, although some areas experience cooling close to 1°C. Additionally, the research suggests a potential connection between the eruption and sea surface temperatures in the tropical Pacific, which warrants further investigation.

Takeaways by Macro Roundup® AI

  1. The study finds that a Hunga Tonga-Hunga Ha'apai-like injection of water vapor into the stratosphere raised surface temperatures by over 1.5°C across large regions for several years, while some areas cooled by close to 1°C.
  2. Unlike volcanic eruptions that typically cool the surface by releasing sunlight-reflecting aerosols, the Hunga Tonga-Hunga Ha'apai eruption released a significant amount of water vapor, a strong greenhouse gas, into the stratosphere.
  3. The research suggests a potential connection between the Hunga Tonga-Hunga Ha'apai eruption and sea surface temperatures in the tropical Pacific that warrants further investigation.

Related Articles:

  • What This Year’s ‘Astonishing’ Ocean Heat Means for the Planet — The planet's average sea surface temperature reached a record high and the ocean has stayed exceptionally warm, with North Atlantic readings running more than 2°F above typical levels and one buoy recording 101.1°F, possibly a world record. Scientists expect warm ocean conditions to continue as El Niño intensifies.
  • Warming Could Push the Atlantic Past a ‘Tipping Point’ This Century — 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.
  • The Rapid Loss Of Antarctic Sea Ice Brings Grim Scenarios Into View — Unusual wind and wave patterns are a leading short-term explanation for the loss of Antarctic sea ice, which holds the continent's coastal ice shelves in place. If those shelves collapsed, continental ice could flow rapidly into the oceans; the West Antarctic ice sheet alone holds enough water to raise global sea level by 11 feet.

Wednesday, August 9, 2023

AI Summary. Net foreign direct investment into China has been negative for four consecutive quarters, as foreign investors shifted from reinvesting earnings from their Chinese operations to repatriating them. Whether this reflects cash management or signals a future slowdown in foreign direct investment is unclear, but the repatriation of profits is negative for China's currency.

Jens Nordvig, Alex Etra and Lynge Rasmussen Money: Inside and Out
Date Posted:

Over the last year, FDI flows into China have turned negative, as foreign multinationals have repatriated Chinese earnings they had previously reinvested. @jnordvig @EtraAlex @martin_lynge

Are foreign investors repatriating rather than reinvesting their profits from China?

Core argument: Net foreign direct investment into China was negative for four consecutive quarters from Q3 2022 to Q2 2023, as foreign investors shifted from reinvesting earnings in their Chinese operations to repatriating them.

Net FDI into China has been negative for four consecutive quarters (from Q3 2022 to Q2 2023). The bottom line is that foreign investors have shifted in recent quarters from reinvesting their earnings on their Chinese operations to repatriating those earnings. Whether this simply reflects cash management and carry considerations or is a harbinger of a slowdown in future foreign direct investment in China is too soon to say. If the recent trend to repatriate earnings is a signal about future investment intentions, it could have implications for future Chinese production and export capacity and economic growth. Either way, the repatriation of foreign investors’ profits from their Chinese operations is negative for the CNY.

Takeaways by Macro Roundup® AI

  1. Net foreign direct investment into China was negative for four consecutive quarters from Q3 2022 to Q2 2023, as foreign investors shifted from reinvesting earnings in their Chinese operations to repatriating them.
  2. Whether the shift to repatriating earnings reflects cash management and carry considerations or signals a slowdown in future foreign direct investment in China is too soon to determine.
  3. If the repatriation trend signals future investment intentions, it could have implications for Chinese production and export capacity and economic growth, and either way the repatriation of profits is negative for the CNY.

Related Articles:

  • The Mysterious $300 Billion Flow Out of China — Unexplained financial flows in China's balance of payments, which generally correspond to capital flight and other surreptitious efforts to move money abroad, have been relatively low in recent years, but that may be an illusion created by official reporting. Corresponding flows are hard to locate elsewhere, though the UK has experienced a surge in such unexplained flows.
  • NYC Becomes One Billionaire Family’s Haven From China Property Crash — The founders of Chinese developer Soho China built a family office holding stakes in two Manhattan office towers, whose combined equity value of about $500m roughly matches their stake in the Beijing-based company that made their fortune. Their strategy of moving wealth abroad shielded it from China's property collapse.
  • Singapore Asks Banks to Keep Quiet on Wealth Inflows During China Boom — Singapore's central bank has asked major banks to minimize public discussion of the origins of large inflows of money into the city-state, much of it from wealthy Chinese, an issue that has become politically sensitive domestically. Lawyers and industry groups estimate Singapore hosts roughly 1,500 family offices, a large share of them Chinese.

AI Summary. The inflation-adjusted 10-year Treasury yield stands at 1.7%, near its highest since 2009, after being around zero a decade ago, indicating the global saving glut that once held yields down is gone. One estimate holds private investors will absorb government debt worth 7.7% of developed economies' GDP this year and 9.2% next, more than double 2011's 4.3%.

Greg Ip Wall Street Journal
Date Posted:

.@greg_ip notes that the US will spend 10% of federal revenue on interest by 2025, compared with just 1% for the average triple-A-rated country and 4.8% for double-A rated.

Has the global saving glut that once suppressed real yields disappeared?

Core argument: The real 10-year Treasury yield stands at 1.7%, near its highest since 2009, versus roughly zero in August 2011, when it was soon to turn negative.

The variable that best captures the change in circumstances is the real Treasury yield—what investors expect to earn on a 10-year note after inflation. It was around zero in August 2011, soon to go negative. Today, it is 1.7%, near the highest since 2009. One takeaway is that the global saving glut—the wall of money in search of safe assets that kept yields down a decade ago—is no more. independent economist Phil Suttle estimates private investors will be asked to absorb government debt worth 7.7% of developed economies’ GDP this year and 9.2% next, more than double the 4.3% of 2011. Private borrowers thus face competition from governments for capital, which in the long run hurts investment and growth. We got a taste of that last week when yields jumped on news of larger-than-expected quarterly Treasury auctions.

Takeaways by Macro Roundup® AI

  1. The real 10-year Treasury yield stands at 1.7%, near its highest since 2009, versus roughly zero in August 2011, when it was soon to turn negative.
  2. Independent economist Phil Suttle estimates private investors will be asked to absorb government debt worth 7.7% of developed economies' GDP this year and 9.2% next, more than double the 4.3% of 2011.
  3. Private borrowers face competition from governments for capital, which in the long run hurts investment and growth, as seen when yields jumped on news of larger-than-expected quarterly Treasury auctions.

Related Articles:

  • Raising Anchor — The Bank of Japan's low interest rate policy anchors global bond yields, and that anchor is set to move higher, making U.S. Treasury bonds less attractive to Japanese investors. With this marginal source of demand fading as Treasury supply is set to increase, U.S. yields are likely to drift higher.
  • 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.
  • Is a U.S. Debt Crisis Looming? Is it Even Possible? — A debt spiral requires the interest rate on government debt to exceed the economy's growth rate; with inflation-protected 10-year U.S. bond yields near 1.83%, close to most estimates of sustainable growth, any spiral would be slow-moving. Stabilizing debt at 100% of GDP would require a 2% primary surplus.

AI Summary. Only three of the 15 most affluent US metro areas in 1949 remain in the top 15, while several former leaders now rank among the least affluent, indicating more persistence at the bottom than the top. Regional incomes converged from 1929 into the 1970s, then stopped, leaving the Southeast and Southwest poorest.

Justin Fox Bloomberg
Date Posted:

.@foxjust notes that the poorest regions of the US in 1949 largely remain poorest, even though their real median household income has doubled.

How persistent are income rankings among US metro areas over time?

Core argument: Only 3 of the 15 most affluent US metro areas in 1949 — San Francisco, New York and Washington — remain in the top 15, while Buffalo and Cleveland have fallen into the bottom 15.

Only three of the 15 most affluent metro areas in 1949 (San Francisco, New York and Washington) are still in the top 15, two (Buffalo and Cleveland) have fallen into the bottom 15 and four (Toledo, Dayton, Akron and Youngstown) have median incomes low enough to make the bottom 15 but not enough inhabitants to qualify. So there seems to be a lot more persistence at the bottom than the top. There’s also regional persistence, with Southern metros in the majority on the least affluent list in 1949 and now. On a regional level, things weren’t always so static — from 1929 until the 1970s, there was a lot of convergence in the BEA's estimates of state and regional per-capita personal income (that is, average income, as opposed to the median incomes). But they stopped coming together after that, and the Southeast and Southwest were the country’s poorest regions in 2022 just as they were in 1929.

Takeaways by Macro Roundup® AI

  1. Only 3 of the 15 most affluent US metro areas in 1949 — San Francisco, New York and Washington — remain in the top 15, while Buffalo and Cleveland have fallen into the bottom 15.
  2. Toledo, Dayton, Akron and Youngstown have median incomes low enough for the bottom 15 but too few inhabitants to qualify, and Southern metros made up the majority of the least affluent list both in 1949 and now.
  3. BEA estimates of state and regional per-capita personal income converged from 1929 until the 1970s and then stopped coming together, with the Southeast and Southwest the poorest regions in 2022 as in 1929.

Related Articles:

  • The Economics of Inequality in High-Wage Economies — United States Income, Wealth, Consumption, and Inequality Diana Furchtgott-Roth
  • Young Families Have Not Returned to Large Cities Post-Pandemic — The under-five population in large urban U.S. counties fell 6.1% while overall population in those counties fell 0.9%, with declines exceeding 10% in the largest counties including New York, Cook County, Illinois, and Los Angeles. Losses of young families were more severe in the Mid-Atlantic and West Coast, while the under-five population grew in Southeastern urban counties.
  • Sunbelt Cities Nashville and Austin Are Nation’s Hottest Job Markets — An assessment of about 380 U.S. metro areas ranked Nashville, Tennessee as the country's hottest job market, followed by Austin, Texas and Jacksonville, Florida. The rankings were based on five factors: the unemployment rate, labor-force participation rate, changes in employment levels, labor-force size, and wages.

AI Summary. The argument holds that Trump broke with a 40-year pro-globalization consensus by making great-power competition with China central to US policy, withdrawing from the Trans-Pacific Partnership trade pact, hobbling the World Trade Organization, imposing tariffs on China, and renegotiating the North American trade deal. The Biden administration retained most of these policies and shares the goal of reindustrializing America.

Gideon Rachman Financial Times
Date Posted:

.@gideonrachman argues Trump started a “lasting revolution” in America’s China, trade, and industrial policies, all of which Biden is building out in a more systematic way.

.@gideonrachman argues Trump started a “lasting revolution” in America’s China, trade, and industrial...

Has the break with the pro-globalization consensus carried across administrations?

Core argument: Trump repudiated a 40-year pro-globalization consensus, making great-power competition with China the centerpiece of US foreign policy, pulling America out of the TPP, working to hobble the WTO, imposing tariffs on China, and renegotiating NAFTA.

For many, Trump’s legacy will be his assault on the American democratic system. But, in important respects, Trump brought about a lasting revolution in US foreign and domestic policy. Trump repudiated the previous 40-yr pro-globalization consensus, argued that US policy towards China has failed, and that the Communist party will never be a “responsible stakeholder” in the int’l system. He made “great-power competition” with China the centerpiece of his approach to the world, pulled America out of the TPP, made a deliberate effort to hobble the WTO, imposed a raft of tariffs on China, and renegotiated NAFTA. The Biden administration has retained most of these Trump-era policies. Biden made no attempt to rejoin the TPP and continues to block the WTO's appellate court. Trump’s victory in 2016 also forced Democrats to take the plight and anger of US workers more seriously. “Bidenomics” are driven by a Trump-like desire to reindustrialize America and rebuild the middle class.

Takeaways by Macro Roundup® AI

  1. Trump repudiated a 40-year pro-globalization consensus, making great-power competition with China the centerpiece of US foreign policy, pulling America out of the TPP, working to hobble the WTO, imposing tariffs on China, and renegotiating NAFTA.
  2. The Biden administration has retained most Trump-era policies, making no attempt to rejoin the TPP and continuing to block the WTO's appellate court.
  3. Trump's 2016 victory forced Democrats to take the plight and anger of US workers more seriously, and "Bidenomics" is driven by a Trump-like desire to reindustrialize America and rebuild the middle class.

Related Articles:

  • Bidenomics and Its Contradictions — Bidenomics rests on the claims that growth's quality matters more than its quantity, that industrial policy should replace laissez-faire, and that trade policy should favor workers over consumers. Defining market failure that broadly—covering regional, racial and gender inequities, rural internet access and child care costs—leaves no limiting principle on government intervention.
  • Aukus Allies Unveil Plan to Supply Australia With Nuclear-Powered Submarines — The US, UK and Australia have unveiled a decades-long plan to supply Australia with nuclear-powered submarines, with the UK and Australia co-building a new design and each planning at least eight boats. Australia will also invest in US and UK shipyards to boost strained manufacturing capacity.
  • US and India Launch Ambitious Tech and Defence Initiatives — The US and India launched technology, space, and defense initiatives spanning quantum computing, artificial intelligence, 5G wireless networks, and semiconductors, along with a mechanism to facilitate joint weapons production. The effort is designed to counter China in the Indo-Pacific and reduce India's reliance on Russia for weapons.

AI Summary. UPS lowered its full-year profit forecast, citing the volume impact from labor negotiations and costs tied to its tentative labor agreement. Under the five-year contract, full-time drivers are set to earn about $170,000 in annual pay and benefits by its end, while part-time union employees earn at least $25.75 an hour plus full health care and pension benefits.

Azul Cibils Blaquier Bloomberg
Date Posted:

Under the UPS-Teamsters deal full-time drivers will make $170,000 in annual pay and benefits by the end of the five year contract. UPS lowered its profit forecast due to the higher labor costs.

Under the UPS-Teamsters deal full-time drivers will make $170,000 in annual pay and benefits by the end of the five year...

Does a new labor contract raise wages and cut profit forecasts?

Core argument: UPS full-time drivers will earn roughly $170,000 in annual pay and benefits by the end of the five-year contract, according to details UPS shared on its earnings call.

UPS lowered its full-year profit forecast, in part due to rising costs after the tentative labor agreement. UPS said the guidance change was “primarily to reflect the volume impact from labor negotiations and the costs associated with the tentative agreement.” UPS shared some details of the new labor contract on its earnings call. Full-time drivers will make around $170,000 in annual pay and benefits by the end of the five year contract. Part-time union employees will earn at least $25.75 per hour and receive full health care and pension benefits.

Takeaways by Macro Roundup® AI

  1. UPS full-time drivers will earn roughly $170,000 in annual pay and benefits by the end of the five-year contract, according to details UPS shared on its earnings call.
  2. UPS lowered its full-year profit forecast, saying the change was "primarily to reflect the volume impact from labor negotiations and the costs associated with the tentative agreement.".
  3. Part-time union employees at UPS will earn at least $25.75 per hour and receive full health care and pension benefits.

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  • Settling Into 4% Inflation? — Job churn has been declining while nominal wage growth has remained around 5% a year. Based on the historical relationship between wages, output, and prices, this implies trend nominal gross domestic product growth of roughly 5–6% a year and trend inflation of about 4% a year.
  • The ‘Summer of Strikes’ Isn’t Living Up to the Hype — Recent strike waves differ in composition: earlier ones were dominated by teachers and other state and local government workers, while current strikers are mostly private-sector employees, often organizing location-by-location in stoppages too small to appear in Bureau of Labor Statistics counts. The Cornell-ILR Labor Action Tracker recorded 224,000 workers in stoppages versus the Bureau's 120,600.
  • The Unexpected Compression: Competition at Work in the Low Wage Labor Market — The authors estimate that post-pandemic labor market tightness compressed the US wage distribution, reducing the college wage premium and offsetting roughly one-quarter of the four-decade rise in 90-10 wage inequality. They attribute this in part to greater labor supply elasticity facing firms in low-wage markets, which reduced employer market power as young non-college workers moved to higher-paying jobs.

AI Summary. China's market share approaches 100% in some battery materials and niche clean-tech products, and analysts estimate it can build an electric-vehicle factory in about a third of the time required elsewhere, with a US battery factory costing nearly 80% more than in China. Rivals face limited resource access, upfront technology costs, labour shortages, wage inflation and higher environmental standards.

Edward White Financial Times
Date Posted:

China has massive economies of scale that have helped it corner the market on “clean tech.” China has 90% of rare earth production, 80% of all stages of solar panel construction, and 60% of wind turbines and electric-car battery production.

How has China come to dominate clean-tech manufacturing?

Core argument: China's market share in some battery materials and more niche clean-tech products is close to 100%.

In some of the materials used in batteries and more niche products, China’s market share is close to 100%. Goldman data suggests that China can build an EV factory in about a 1/3 of the time it takes in other countries while a battery factory in the US will cost nearly 80% more than in China. Bernstein says the cost of some manufacturing in the US can be three times more than in China. This highlights how China’s rivals must grapple with not only limited access to resources and upfront technology costs, but also labour shortages, wage inflation and higher environmental standards.

Takeaways by Macro Roundup® AI

  1. China's market share in some battery materials and more niche clean-tech products is close to 100%.
  2. Goldman data suggest China can build an EV factory in about one-third the time required in other countries, while a battery factory in the US would cost nearly 80% more than in China.
  3. Bernstein says some manufacturing in the US can cost three times more than in China, with China's rivals also facing limited resource access, upfront technology costs, labour shortages, wage inflation and higher environmental standards.

Related Articles:

  • Can the World Make an Electric Car Battery Without China? — China dominates electric-vehicle battery supply chains, controlling 41% of global cobalt mining and the most lithium mining, and is projected to produce more than twice as many batteries as all other countries combined by 2030. It can build battery factories at nearly half the cost of North America or Europe.
  • Why China Could Dominate the Next Big Advance in Batteries — China is leading commercialization of sodium-ion batteries, which replace lithium with sodium, a chemically similar material selling for 1–3% of lithium's price; 16 of 20 sodium battery factories planned or under construction worldwide are in China. Consultancy Benchmark Minerals projects China will hold nearly 95% of global sodium battery capacity within two years.
  • 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.

AI Summary. Under three scenarios — maintaining current import levels, a historically cold winter, or non-Russian imports falling back to their 2015–2021 average — Europe is projected to get through the coming winter without major natural gas shortages.

Gisela Rua Federal Reserve Board
Date Posted:

Even if Europe has a colder winter than 2022-2023 the continent is in a good position to get through this winter without major gas shortages according to a @federalreserve analysis.

Can Europe get through next winter without major gas shortages?

Core argument: Europe is well-positioned to get through next winter without major gas shortages, based on three scenarios modeled for the one-year period spanning 2023:H2 and 2024:H1.

We consider three scenarios for the one-year period spanning 2023:H2 and 2024:H1. The first scenario ("Baseline") assumes that Europe maintains gas imports from Russia and all other sources at the same average level as in 2022:H2 and that gas consumption in each month is the same as its 2015–2021 average level.4 The second scenario ("Harsh Winter") is the same as the baseline, except that it assumes that next winter will be historically cold and, as a result, gas consumption in each month reaches its maximum 2015–2021 level. The third scenario ("Adverse Scenario") is the same as the baseline, except that it assumes that Europe's imports from non-Russian sources fall back to their 2015–2021 average in each month, while natural gas imports from Russia are the same as in the baseline.

Takeaways by Macro Roundup® AI

  1. Europe is well-positioned to get through next winter without major gas shortages, based on three scenarios modeled for the one-year period spanning 2023:H2 and 2024:H1.
  2. The baseline scenario assumes Europe holds gas imports from Russia and all other sources at their average 2022:H2 level while monthly consumption matches its 2015–2021 average.
  3. The "Harsh Winter" scenario assumes a historically cold winter pushing monthly gas consumption to its maximum 2015–2021 level, while the "Adverse Scenario" assumes non-Russian imports fall back to their 2015–2021 monthly average with Russian imports unchanged from the baseline.

Related Articles:

  • How Europe is Decoupling from Russian Energy — The European Union now imports more natural gas — and slightly more total energy by value, including oil, petroleum products and coal — from the United States than from Russia, following a buildout of US liquefied natural gas export capacity and a collapse in Russian gas supplies to Europe. The US became the world's largest exporter of liquefied natural gas.
  • Germany Opens Floating Gas Terminal at North Sea Port — Germany has opened a floating liquefied natural gas terminal at the North Sea port of Wilhelmshaven as part of its effort to end energy dependence on Russia. The government has contracted five floating storage and regasification units, each able to handle 5bn cubic meters of gas a year, and approved new permanent import terminals.
  • War in Ukraine Drives New Surge of U.S. Oil Exports to Europe — Average monthly seaborne U.S. crude cargoes to Europe rose 38% after Russia's invasion of Ukraine compared with the prior 12-month period, according to ship-tracking data, with Spain alone increasing purchases about 88%. U.S. natural gas shipments to Europe more than doubled, cushioning households and manufacturers after Russia throttled supplies.

AI Summary. Research finds that countries with the strongest existing trade ties to China in a given industry have gained the most as direct Chinese exports to the US are redirected, suggesting Chinese supply chains remain central to American imports even in advanced-manufacturing goods officials most want to shield from China.

Economist Staff The Economist
Date Posted:

While there is evidence American firms are “decoupling” from mainland China, many of the alternatives are still Chinese-owned firms with production shifting to countries that have deep links with the PRC.

Do Chinese supply chains still dominate American imports despite trade redirection?

Core argument: China's share of American imports of advanced-manufacturing goods fell 14 percentage points between 2017 and 2022, while Taiwan and Vietnam—both heavy importers from China—gained the greatest market share in those categories.

Look at the countries that benefit from reduced direct Chinese trade with America. Caroline Freund of the University of California, San Diego found that countries which had the strongest trade relationships with China in a given industry have been the greatest beneficiaries of the redirection of trade, suggesting that deep Chinese supply chains still matter enormously to America. This is even truer in categories that include the advanced-manufacturing products where American officials are keenest to limit China’s presence. When it comes to these goods, China’s share of American imports declined by 14pp between 2017 and 2022, whereas those from Taiwan and Vietnam—countries that import heavily from China—gained the greatest market share. In short, Chinese activity is still vital to the production of even the most sensitive products.

Takeaways by Macro Roundup® AI

  1. China's share of American imports of advanced-manufacturing goods fell 14 percentage points between 2017 and 2022, while Taiwan and Vietnam—both heavy importers from China—gained the greatest market share in those categories.
  2. Caroline Freund of the University of California, San Diego finds that countries with the strongest trade ties to China in a given industry have been the greatest beneficiaries of redirected trade.
  3. The pattern of trade redirection suggests that deep Chinese supply chains remain vital to American imports, including the advanced-manufacturing products where American officials are keenest to limit China's presence.

Related Articles:

  • Setser On Rumors Of Decoupling — Chinese data show US imports from China as a share of GDP slightly higher than before the trade war, and G-7 imports from China have boomed, indicating little shift of global supply chains out of China. Decoupling is a forecast rather than a current reality.
  • US-China Trade is Close to a Record, Defying Talk of Decoupling — US-China trade is on track to set a record, indicating resilient commercial ties between the two economies despite national security rhetoric in Washington and concerns about "decoupling." China's own full-year figures show record trade of roughly $760bn.
  • Global Firms Are Eyeing Asian Alternatives to Chinese Manufacturing — Chinese manufacturing wages doubled between 2013 and 2022 to an average of $8.27 an hour, while hourly manufacturing wages in India, Malaysia, the Philippines, Thailand, and Vietnam remain below $3. This alternative Asian supply chain has a combined working-age population of 1.4bn versus China's 980m, and 154m tertiary-educated people aged 25–54 versus China's 145m.

AI Summary. The University of Maryland's Condensed Matter Theory Center challenged a Seoul-based research group's claim to have synthesized LK-99, a material said to conduct electricity with zero resistance at room temperature and ordinary pressure. The rebuttal weighed on Korean stocks tied to the claim.

Sangmi Cha and Youkyung Lee Bloomberg
Date Posted:

The University of Maryland’s Condensed Matter Theory Center reported that in their opinion “LK-99 is NOT a superconductor.” @condensed_the

The University of Maryland’s Condensed Matter Theory Center reported that in their opinion “LK-99 is NOT a...

Does a scientific rebuttal of a superconductor claim move related stocks?

Core argument: The University of Maryland's Condensed Matter Theory Center challenged the Seoul-based Quantum Energy Research Centre's claim that it synthesized LK-99, a material said to conduct electricity with zero resistance at room temperature and ambient pressure.

A US-based research center rebutted claims of a sensational breakthrough in the technology, heaping pressure on scientists to validate those findings as soon as possible. The University of Maryland’s Condensed Matter Theory Center challenged claims made by the Seoul-based Quantum Energy Research Centre that it synthesized a material capable of conducting electricity with zero-resistance at room temperature and ambient pressure, known as LK-99.

Takeaways by Macro Roundup® AI

  1. The University of Maryland's Condensed Matter Theory Center challenged the Seoul-based Quantum Energy Research Centre's claim that it synthesized LK-99, a material said to conduct electricity with zero resistance at room temperature and ambient pressure.
  2. Korean stocks fell amid doubts about the LK-99 superconductor claim, adding pressure on scientists to validate the findings as soon as possible.

Related Articles:

  • Korean Team Claims To Have Created The First Room-Temperature, Ambient-Pressure Superconductor — 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.
  • Origin Of Correlated Isolated Flat Bands In Copper-Substituted Lead Phosphate Apatite — Density functional theory calculations on copper-substituted lead phosphate apatite ("LK99") identify correlated isolated flat bands at the Fermi level, a common signature of high transition temperatures in established superconductor families. The author attributes these bands to a structural distortion induced by the copper ions and a chiral charge density wave from lead lone pairs.

AI Summary. SpaceX launched 15 more Starlink internet satellites aboard a Falcon 9 rocket from California's Vandenberg Space Force Base, with the rocket's first stage landing on a drone ship at sea about 9.5 minutes after liftoff. SpaceX has launched 4,918 Starlink spacecraft to date, more than 4,500 of which are currently functional.

Mike Wall Space.com
Date Posted:

.@SpaceX has launched just shy of 5,000 Starlink internet satellites since 2019, and more than 4,500 are currently working.

.@SpaceX has launched just shy of 5,000 Starlink internet satellites since 2019, and more than 4,500 are currently working.

How large has the Starlink satellite constellation grown?

Core argument: SpaceX has launched 4,918 Starlink satellites to date, with more than 4,500 currently functional, after sending up 15 more from Vandenberg Space Force Base in California.

SpaceX launched 15 more of its Starlink internet satellites Monday night and landed the returning rocket on a ship at sea. A Falcon 9 rocket topped with the Starlink spacecraft lifted off from California's Vandenberg Space Force Base. The Falcon 9's first stage came back to Earth as planned, landing on the SpaceX drone ship Of Course I Still Love You about 9.5 minutes after launch. This was the second Starlink launch for SpaceX in as many days. A Falcon 9 lofted 22 of the satellites from Cape Canaveral Space Force Station in Florida on Sunday night. SpaceX has now launched 4,918 Starlink spacecraft to date, and more than 4,500 of them are currently functional.

Takeaways by Macro Roundup® AI

  1. SpaceX has launched 4,918 Starlink satellites to date, with more than 4,500 currently functional, after sending up 15 more from Vandenberg Space Force Base in California.
  2. The Falcon 9 first stage landed on the SpaceX drone ship Of Course I Still Love You about 9.5 minutes after liftoff.
  3. The Vandenberg flight was SpaceX's second Starlink launch in as many days, following a Falcon 9 that lofted 22 satellites from Cape Canaveral Space Force Station in Florida.

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  • SpaceX Rocket Explodes Before Reaching Orbit — SpaceX's Starship, a nearly 400-foot rocket described as the most powerful ever launched, exploded after reaching an altitude of nearly 40km on its first launch, setting back the company's effort to build a spacecraft capable of flying to Mars.