Edward Conard

Top Ten New York Times Bestselling Author

  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…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
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…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
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


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.

Related Articles:

  • 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.

Related Articles:

  • Despite An Explosion, Elon Musk Is Closer to His New Space Age — SpaceX says it is producing Super Heavy boosters and Starships at a healthy pace, though damage to the launch support structure may require a significant redesign and cause delays. A Starship launched by a Super Heavy would lift 100-150 tonnes to orbit, against 64 tonnes for Falcon Heavy and 24 for the space shuttle.
  • 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.

Thursday, August 10, 2023

AI Summary. The authors project US debt to reach 134% of national income in 2032 and 263% in 2052, above Congressional Budget Office estimates of 115% and 189%. They attribute higher projected health spending, 29.6% of national income by 2072, to labor shortages in an aging economy's low-productivity healthcare sector.

John Mantus, Gaobo Pang, and Mark Warshawsky American Enterprise Institute
Date Posted:

A new @AEIecon analysis suggests that, as a result of the low-productivity healthcare sector’s growing share of the economy, America’s debt-to-GDP ratio will be 134% in 2032 relative to CBO’s 115% projection.

Will an aging population push health spending and debt above official projections?

Core argument: The authors project U.S. debt-to-GDP at 134% in 2032 and 263% in 2052, above CBO's 115% and 189%, with the federal deficit relative to national income growing significantly beyond historical experience within ten years.

Within the next ten years, the federal government budget deficit relative to national income will grow significantly beyond historical experience. We project that debt-to-GDP will be 134% in 2032 and 263% in 2052, compared to CBO’s 115% and 189%, respectively. Real interest rates rise in the long run in a ratcheting cycle of higher interest payments and growing deficits and debt. Our projection of national health expenditures relative to GDP in 2072 is 29.6%, compared to 28.4% by the Centers for Medicare & Medicaid Services used by the Medicare Trustees. These higher rates of healthcare inflation arise from labor shortage effects in an aging economy because healthcare is produced in a low productivity, labor-dependent sector. This rise in healthcare expenditures further deteriorates the federal budget and lowers consumer welfare.

Takeaways by Macro Roundup® AI

  1. The authors project U.S. debt-to-GDP at 134% in 2032 and 263% in 2052, above CBO's 115% and 189%, with the federal deficit relative to national income growing significantly beyond historical experience within ten years.
  2. The authors project national health expenditures at 29.6% of GDP in 2072, compared with 28.4% from the Centers for Medicare & Medicaid Services used by the Medicare Trustees.
  3. The authors attribute higher healthcare inflation to labor shortage effects in an aging economy, since healthcare is produced in a low-productivity, labor-dependent sector, and project that rising health expenditures further deteriorate the federal budget and lower consumer welfare.

Related Articles:

  • The 2023 Long-Term Budget Outlook — The Congressional Budget Office projects the federal deficit falls from 5.8% of gross domestic product to 5.0% before rising every year to 10% of GDP over three decades, a level exceeded only during World War II and the pandemic. Federal debt held by the public is projected to reach 181% of GDP.
  • US Fiscal Alarm Bells Are Drowning Out a Deeper Problem — The Congressional Budget Office projects US federal debt held by the public at 98% of national income, within 7.6 percentage points of its 1946 wartime peak and on track to exceed it by 2028. International Monetary Fund forecasts show US debt surpassing Italy's by 2028 and Greece's by the end of the decade.
  • 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. A model estimates that the short-run neutral real interest rate — the rate consistent with the economy operating at potential — has increased notably, to some extent outpacing the large increase in the policy rate. The model attributes this change mainly to financial shocks, reflecting financial conditions such as corporate spreads remaining resilient despite the higher policy rate.

Katie Baker, Logan Casey, Marco Del Negro, Aidan Gleich and Ramya Nallamotu Federal Reserve Bank of New York
Date Posted:

Despite the Fed funds rate rising by 500bps in just over a year, the tightening may have been offset by an increase in the natural rate helping to limit the impact of tightening. @NYFedResearch

Has the short-run neutral real interest rate risen faster than policy rates?

Core argument: The model estimates that short-run r* has increased notably over the past year, to some extent outpacing the large increase in the policy rate.

From the model’s perspective, short-run r* has increased notably over the past year, to some extent outpacing the large increase in the policy rate. The chart decomposes the change in real r* (black line) and its forecast (red line) between June 2022 and March 2023. Note that these are changes in the real variable. The chart shows that “financial’’ shocks (yellow) are the key driver of this change. These shocks capture the fact that financial conditions, as measured for instance by corporate spreads, have remained very resilient in spite of the increase in the policy rate (and of the recent banking turmoil).

Takeaways by Macro Roundup® AI

  1. The model estimates that short-run r* has increased notably over the past year, to some extent outpacing the large increase in the policy rate.
  2. A decomposition of the change in real short-run r* and its forecast between June 2022 and March 2023 identifies "financial" shocks as the key driver.
  3. The financial shocks capture that financial conditions, measured for instance by corporate spreads, have remained resilient despite the increase in the policy rate and the recent banking turmoil.

Related Articles:

  • What Have We Learned About the Neutral Rate? — Analysts estimate that if inflation is brought down without a recession, the Federal Reserve's policy rate will stabilize nearer 3–3.25% than the 2.5% longer-run median projection of Federal Reserve officials. Projected shifts in government debt and demographics imply a roughly 0.5 percentage point net increase in the neutral rate over the next decade.
  • Measuring the Natural Rate of Interest After COVID-19 — Model estimates for the United States, Canada, and the Euro Area place the natural rate of interest within a few tenths of a percentage point of pre-pandemic estimates, with the main longer-term consequence of the pandemic a reduction in the natural rate of output. The authors find no evidence that the era of historically low natural rates has ended.
  • The Case for “Higher for Longer”: Prices are Disinflating, But Not Wages (Yet) — Occupations with the fastest pay gains have seen wage growth normalize while pay growth elsewhere remains persistently faster, with only modest deceleration from the peak. The author argues the neutral policy rate has risen as an investment drought ends, making 5.5% short-term rates unremarkable and 4% 10-year Treasury yields potentially too low.

AI Summary. The median center of the US population has been moving southwest, but the author argues that trend will slow or reverse without more water supply, more affordable housing policies, and progress on climate change. Areas from Missouri to West Virginia and the Great Lakes could become more attractive.

Bill McBride Calculated Risk
Date Posted:

.@calculatedrisk argues that the shift of the American population’s center of gravity to the southwest is likely to slow if not reverse due to climate change and water supply issues.

Will the southwestward shift of the US population slow or reverse?

Core argument: Most projections have the median center of US population continuing to move southwest, but the author argues that trend will slow or reverse without additional water supplies, progress on climate change, and housing policy changes that make housing more affordable.

Although most projections are for the southwestward trend for the median center of US population to continue, without additional sources of water, changes in housing policy, and progress on climate change the southwestward trend will slow - or maybe even reverse. Climate change might make some areas further north more desirable. Perhaps the Carolinas (away from the coast), TN, and KY will see more growth. And maybe even areas further north that have more affordable housing will experience new growth. Climate change might make those areas - from MO to WV on up to the Great Lakes - more attractive over the next 50 years. For the southwestward trend to continue, there will have to be an increase in water supply, progress on global warming, and changes to housing policies (to make housing more affordable).

Takeaways by Macro Roundup® AI

  1. Most projections have the median center of US population continuing to move southwest, but the author argues that trend will slow or reverse without additional water supplies, progress on climate change, and housing policy changes that make housing more affordable.
  2. The author suggests climate change could make areas farther north more desirable, with the inland Carolinas, Tennessee, and Kentucky seeing more growth.
  3. The author suggests areas from Missouri to West Virginia and up to the Great Lakes, where housing is more affordable, could attract new growth over the next 50 years as climate change shifts regional desirability.

Related Articles:

  • What’s the Matter With Miami? — A significant share of Florida's population inflow is retirees, and while the overall U.S. population grew 7.4% from 2010 to 2020, the population aged 65 and older grew 38.6%. Because retirees spend money on local services, the influx of seniors creates jobs for younger adults as well.
  • Climate Change and the Geography of the U.S. Economy — The positive association between extreme heat and U.S. county population growth weakened over recent decades and disappeared entirely in the 2010s, as hot counties grew hotter. Projected climate change is predicted to shift population from the Southeast and parts of the Southwest toward the North, Mountain West, and Pacific coast.
  • A $100 Billion Wealth Migration Tilts US Economy’s Center of Gravity South — Six fast-growing Southern states — Florida, Texas, Georgia, North and South Carolina, and Tennessee — now contribute more to US GDP than the Northeast, including the Washington-New York-Boston corridor. The Southeast accounted for more than two-thirds of US job growth since the pandemic began, nearly double its pre-pandemic share, and housed 10 of the 15 fastest-growing large American cities.

AI Summary. Two-month annualized consumer price inflation rose from 3.0% to 3.2%, while real average hourly earnings continued to rise yet remained 4% below their pre-pandemic trend overall and 3% below for non-managerial workers. The author argues this gives the Federal Reserve no reason to raise rates, absent signs the good news is transitory.

Jason Furman @jasonfurman
Date Posted:

.@jasonfurman argues today’s CPI print which leaves core 12-month CPI at 4.7% leaves the Fed room to skip a rate hike in September, though more might be needed.

Does the latest inflation reading give the Fed reason to raise rates?

Core argument: Two-month CPI inflation rose from 3.0% in June to 3.2% in July, according to Jason Furman.

2-month CPI rose from 3.0% in June to 3.2% in July. Overall real average hourly earnings (both private and production and non-supervisory which excludes managers) continue to rise. But they are 4% and 3% below their immediate pre-pandemic trend respectively. Overall, assuming August is relatively moderate as well there is no reason for the Fed to raise rates at their September meeting. I outlined my views on this earlier. If some of the good news proves transitory, however, they'll need to go back & do more.

Takeaways by Macro Roundup® AI

  1. Two-month CPI inflation rose from 3.0% in June to 3.2% in July, according to Jason Furman.
  2. Real average hourly earnings continue to rise for both overall private workers and production and non-supervisory workers, yet stand 4% and 3% below their immediate pre-pandemic trend respectively.
  3. Jason Furman argues that if August proves relatively moderate as well, the Fed has no reason to raise rates at its September meeting, though it would need to do more should some of the good news prove transitory.

Related Articles:

  • 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.
  • What We’ve Learned About Inflation — Fiscal theory holds that a one-time $5tn fiscal expansion produces a one-time rise in the price level sufficient to inflate away $5tn of debt value, after which inflation stops even if the Federal Reserve does nothing. Raising interest rates lowers current inflation at the cost of more-persistent inflation, a beneficial smoothing.
  • The Second Great Experiment Update — Newer macroeconomic theory using forward-looking rather than adaptive expectations holds that inflation is stable under an interest rate target and can fade on its own even when interest rates sit below the inflation rate. Under the fiscal theory of the price level, a burst of inflation devalues government debt and ends once the real value of that debt is restored.

AI Summary. Japan's National Institute of Population and Social Security Research projects that up to 42% of Japanese women may never have children, with a midpoint estimate of one-third and a more optimistic scenario of a quarter of women born in 2005. The institute projects childlessness as high as 50% among men.

Reed Stevenson Bloomberg
Date Posted:

Japan’s National Institute of Population and Social Security Research projects that 42% of adult Japanese women may never have children at the higher end of their range.

How many Japanese women are projected to never have children?

Core argument: Japan's National Institute of Population and Social Security Research projects that as many as 42% of adult Japanese women may never have children, with a midpoint estimate of one third remaining childless.

42% of adult Japanese women may end up never having children. In a more optimistic scenario, a quarter of women born in 2005 may end up not having offspring. The midpoint estimate by Japan’s National Institute of Population and Social Security Research calls for a third of them not having children. The percentage of childlessness is even higher for men, with as many as 50% never seen having children, according to the report.

Takeaways by Macro Roundup® AI

  1. Japan's National Institute of Population and Social Security Research projects that as many as 42% of adult Japanese women may never have children, with a midpoint estimate of one third remaining childless.
  2. In a more optimistic scenario, a quarter of Japanese women born in 2005 may end up without offspring.
  3. Childlessness is higher among Japanese men, with as many as 50% projected never to have children, according to the institute's report.

Related Articles:

  • Japan Demographic Woes Deepen as Birthrate Hits Record Low — Japan's fertility rate fell for a seventh consecutive year to a record low of about 1.26 children per woman, far below the 2.07 rate considered necessary to maintain a stable population. Births fell 5% to 770,747, a record low, while deaths rose 9% to a record 1.57m.
  • How a Vast Demographic Shift Will Reshape the World — 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%.
  • Inflation in The *Very* Long Run — Japan's experience indicates an aging society is not inherently inflationary: despite decades of a shrinking working-age population, its total number of workers has risen as women entered paid employment and people in their 60s and 70s stayed in or returned to work. The US is projected to have more favorable demographics than most other rich countries and China.

AI Summary. The US will ban certain American investments in China's quantum computing, advanced chips, and artificial intelligence sectors, and require companies to notify the government of other investments in those areas, aiming to block the Chinese military's access to US technology and capital. Private equity and venture capital firms are most affected.

Demetri Sevastopulo Financial Times
Date Posted:

The Biden administration is limiting American investment in China’s quantum computing, advanced chips, and artificial intelligence sectors.

The Biden administration is limiting American investment in China’s quantum computing, advanced chips, and artificial...

Will the US ban investment in Chinese quantum, chip, and AI sectors?

Core argument: President Biden's executive order will ban some US investment into China's quantum computing, advanced chips, and artificial intelligence sectors, as part of efforts to stop the Chinese military from accessing American technology and capital.

The Biden administration will ban some US investment into China’s quantum computing, advanced chips, and artificial intelligence sectors, as it boosts efforts to stop the Chinese military from accessing American technology and capital. The new executive order unveiled by President Joe Biden on Wednesday will come into force next year and will also require companies to notify the government of other investments in the three Chinese sectors. The action will largely affect private equity and venture capital firms as well as US investors in joint ventures with Chinese groups.

Takeaways by Macro Roundup® AI

  1. President Biden's executive order will ban some US investment into China's quantum computing, advanced chips, and artificial intelligence sectors, as part of efforts to stop the Chinese military from accessing American technology and capital.
  2. The executive order takes effect next year and will require companies to notify the US government of other investments in the three Chinese sectors.
  3. The investment restrictions will largely affect private equity and venture capital firms along with US investors in joint ventures with Chinese groups.

Related Articles:

  • US Adds 36 Chinese Companies to Trade Blacklist — The US Commerce Department added 36 Chinese companies to its "entity list" trade blacklist, requiring American firms to obtain hard-to-get licenses to export critical technologies to them. The move extends US efforts to slow China's development of advanced chips and military technologies such as hypersonic weapons.
  • China Fears Japan’s Chipmaking Curbs Go Further Than US Restrictions — Japan has said it intends to restrict exports of 23 types of chipmaking equipment, aligning with US and Dutch export controls that could limit China's access to cutting-edge chips. Chinese industry executives who reviewed the draft rules say they could restrict China's semiconductor manufacturing more than US measures do.
  • The Rise & Fall of Foreign Direct Investment in China — 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.

AI Summary. China never mastered internal-combustion engines, but the shift to mechanically simpler battery-powered vehicles — backed by an estimated $100bn of state investment over a decade — helped it become a major car exporter, shipping more than 10,000 cars a day. Battery-powered vehicles account for a third of Chinese car exports, versus 4% in Japan and 20% in Germany.

Economist Staff The Economist
Date Posted:

Chinese car exports are surging; China is now exporting more than 10,000 cars a day.

How did China become a major car exporter?

Core argument: China's car exports rose from nearly 1.6m in 2021 to 2.7m in 2022, and customs data show nearly 2m shipped in the first six months of 2023, more than 10,000 a day.

In 2021 China exported nearly 1.6m cars. By 2022 it hit 2.7m. International sales are set to rev up further in 2023. Customs data show that the country shipped nearly 2m cars in the first six months of the year, or more than 10,000 a day. For all its manufacturing might, China never mastered internal-combustion engines, which have hundreds of moving parts and are tricky to assemble. The arrival of battery-powered vehicles, which are mechanically simpler and easier to build, helped China catch up. State investment in the EV technology, an estimated $100bn between 2009 and 2019, put the country in pole position. Today battery-powered vehicles account for a fifth of car sales in China and a third of exports. In Japan and Germany only 4% and 20% of exports, respectively, are electric.

Takeaways by Macro Roundup® AI

  1. China's car exports rose from nearly 1.6m in 2021 to 2.7m in 2022, and customs data show nearly 2m shipped in the first six months of 2023, more than 10,000 a day.
  2. China never mastered internal-combustion engines, which have hundreds of moving parts and are tricky to assemble, and the arrival of mechanically simpler battery-powered vehicles helped the country catch up.
  3. State investment in EV technology, estimated at $100bn between 2009 and 2019, put China in pole position, with battery-powered vehicles accounting for a fifth of its car sales and a third of its exports, versus 4% of exports in Japan and 20% in Germany.

Related Articles:

  • China’s Auto Export Wave Echoes Japan’s in the ’70s — The shift from petroleum-fueled internal combustion vehicles to electric vehicles moves resource leverage from Persian Gulf oil producers to critical minerals, with China holding more than half of global processing capacity for lithium, cobalt, and graphite and about a third for nickel. Chinese companies have spent $4.5bn acquiring stakes in nearly 20 lithium mines, mostly in Latin America and Africa.
  • Can Volkswagen Win Back China? — Volkswagen relies on China for at least half its annual profits, but its flagship VW brand has been displaced as China's best-selling car by BYD and holds just 2% of the electric vehicle market, ninth place, versus nearly 40% for BYD and over 10% for Tesla.
  • 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.