Edward Conard

Top Ten New York Times Bestselling Author

  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Friday, August 25, 2023

AI Summary. Decomposing U.S. debt-to-GDP movements, the authors find the post-World War II decline from 106% to a trough of 23% was explained mostly by primary budget surpluses and interest-rate distortions from surprise inflation and pegged nominal rates; absent those, the ratio would have fallen only to 74%.

Julien Acalin and Laurence Ball National Bureau of Economic Research
Date Posted:

Improvement in the US debt-GDP ratio from 1946-1974 was driven primarily by primary government surpluses and distortions of real interest rates from surprise inflation and from pegged nominal rates, not overall economic growth. @AcalinJulien

Did economic growth alone shrink postwar U.S. debt-to-GDP?

Core argument: Absent primary surpluses and interest-rate distortions, with the path set entirely by r⋆ − g, the U.S. debt/GDP ratio would have fallen only from 106% in 1946 to 74% in 1974, rather than the actual trough of 23%.

We decompose the movements of debt/GDP into the effects of primary surpluses and deficits; distortions of real interest rates from surprise inflation and from pegged nominal rates; and the difference between the undistorted real interest rate and the growth rate of output (r⋆ − g). For the period up to 1974, we find that the fall in the debt-GDP ratio is explained mostly by primary surpluse and interest-rate distortions. Absent those factors, with the path of the ratio determined entirely by r⋆ − g, the ratio of 106% in 1946 would have fallen only to 74% in 1974 rather than the actual trough of 23%. As of the end of fiscal year 2022, the actual debt/GDP ratio stands at 102%, close to its peak of 106% in 1946. Over the last 76 years, however, g > r⋆ has contributed only modestly to debt reduction. History should not make us optimistic that the U.S. will grow out of its debt.

Takeaways by Macro Roundup® AI

  1. Absent primary surpluses and interest-rate distortions, with the path set entirely by r⋆ − g, the U.S. debt/GDP ratio would have fallen only from 106% in 1946 to 74% in 1974, rather than the actual trough of 23%.
  2. The decomposition attributes the fall in U.S. debt/GDP through 1974 mostly to primary surpluses and to real-interest-rate distortions from surprise inflation and pegged nominal rates, with g exceeding r⋆ contributing only modestly over 76 years.
  3. U.S. debt stood at 102% of GDP at the end of fiscal year 2022, close to its 1946 peak of 106%, and the authors argue history gives little reason for optimism that the U.S. will grow out of its debt.

Related Articles:

  • 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.
  • Interest Costs Will Grow the Fastest Over the Next 30 Years — The Congressional Budget Office projects federal spending will reach 29.1% of GDP over three decades, with net interest on the national debt rising from 1.9% of GDP to 6.7%, or $5.4tn. Under that projection, interest becomes the largest single federal budget line item, surpassing Social Security, Medicare, and Medicaid.
  • American Gothic — US tax increases since 1950 of 2% of GDP or more occurred when overall tax receipts were a much smaller share of GDP than today. Restoring the ratio of entitlement to non-defense discretionary spending to its earlier level of 2.2x would require tax increases larger than those historical precedents.

AI Summary. New motorway bridges in the UK cost more than 3x as much per lane mile as in France, Denmark, or Norway, and adding lanes to existing British roads costs twice as much as in Germany. In both comparisons, only the US has higher costs.

John Burn-Murdoch Financial Times
Date Posted:

.@jburnmurdoch notes that American and British infrastructure costs are far higher than other advanced economies. He cites research that attributes this to “Nimbyism” such as environmental reviews.

Do Britain and America pay far more to build roads?

Core argument: New motorway bridges in the UK cost more than three times as much per lane mile as in France, Denmark, or Norway.

New motorway bridges in the UK cost more than three times as much per lane mile than in France, Denmark, or Norway, and additional lanes on existing British roads are twice as expensive as in Germany. In both cases, only the US faces even higher costs.

Takeaways by Macro Roundup® AI

  1. New motorway bridges in the UK cost more than three times as much per lane mile as in France, Denmark, or Norway.
  2. Adding lanes to existing British roads costs twice as much as in Germany, with the United States the only country facing higher costs than the UK on both bridges and road widening.

Related Articles:

AI Summary. A survey of house builders found that 31% in Florida and 29% in Southern California said buyers' home insurance concerns were somewhat slowing sales, versus 9% nationally. Researchers estimate that pricing in flood risk would reduce U.S. residential property values by at least $121bn, including over $50bn of overvaluation in Florida flood zones.

Jean Eaglesham Wall Street Journal
Date Posted:

The average home insurance cost for Floridians has tripled in the past five years. Homebuilders in California and Florida are reporting insurance costs are “somewhat slowing sales.”

Are rising home insurance costs slowing home sales in disaster-prone states?

Core argument: Almost a third of Florida house builders and 29% in Southern California said buyers' home insurance concerns were "somewhat slowing sales," versus 9% of builders nationally, according to a survey by John Burns Research & Consulting.

Almost a third of house builders in Florida said buyers’ concerns about home insurance were “somewhat slowing sales.” The proportion in Southern California was very similar, at 29%, the survey by John Burns Research & Consulting found. That is much higher than the national figure of 9% of builders reporting sales affected by insurance concerns. The risks of disasters haven’t been fully priced into property markets, partly because of flaws in the way federal flood insurance was priced, researchers say. If flood risks were taken into account, U.S. residential properties would be worth at least $121 billion less, according to a study earlier this year by nonprofit the First Street Foundation, the Federal Reserve and others. In Florida alone, properties in flood zones are overvalued by more than $50 billion.

Takeaways by Macro Roundup® AI

  1. Almost a third of Florida house builders and 29% in Southern California said buyers' home insurance concerns were "somewhat slowing sales," versus 9% of builders nationally, according to a survey by John Burns Research & Consulting.
  2. A study by the nonprofit First Street Foundation, the Federal Reserve and others estimated that U.S. residential properties would be worth at least $121 billion less if flood risks were taken into account, with Florida flood-zone properties overvalued by more than $50 billion.
  3. Researchers say disaster risks have not been fully priced into property markets, partly because of flaws in the way federal flood insurance was priced.

Related Articles:

  • Your Homeowners’ Insurance Bill Is the Canary in the Climate Coal Mine — Average annual homeowners insurance costs about $1,900 nationwide but roughly $4,000 in New Orleans and $5,000 in Miami, with US premiums up 12% in a year and expected to keep rising. Insurers, facing about 20 billion-dollar disasters a year, are adopting pricing models that incorporate warming-climate costs and withdrawing from risky areas, shifting exposure to state-backed plans.
  • Why California and Florida Have Become Almost Uninsurable — Wildfires in California and hurricanes in Florida have generated large volumes of insurance claims, while higher housing prices and construction and repair costs have made each claim more expensive. Insurers have also faced costlier reinsurance, with worldwide average reinsurance rates up about a quarter in one year and another third the next, according to reinsurance broker Howden Tiger.
  • How a Small Group of Firms Changed the Math for Insuring Against Natural Disasters — Reinsurance prices rose as much as 40% year over year, according to a report by brokerage Gallagher Re, prompting insurers to change where and what they cover. State Farm and Allstate cited reinsurance market conditions and costs in curtailing some California business, and agricultural reinsurers announced exits from Iowa.

AI Summary. Chinese customs data show semiconductor production tool imports reached nearly $5bn over two months, up 70% from $2.9bn a year earlier, a record high. Most of the equipment came from the Netherlands and Japan, which have imposed export restrictions on chipmaking equipment alongside the US.

Andy Lin and Qianer Liu Financial Times
Date Posted:

Chinese imports of chipmaking equipment in June and July were up 70% vs. 2022, potentially in anticipation of additional export controls by Japan and the Netherlands.

Is China stockpiling chipmaking equipment ahead of export restrictions?

Core argument: China's imports of chip production tools totaled nearly $5bn in June and July, up 70% from $2.9bn in the same period a year earlier, according to Chinese customs data.

China’s imports of semiconductor equipment have surged to record highs ahead of the implementation of export curbs by US allies. Chinese customs data shows the country’s chip production tool imports in June and July totalled nearly $5bn, up 70% from $2.9bn in the same period last year. Most of the imports came from the Netherlands and Japan, two countries that have imposed export restrictions on chipmaking equipment as they work with the US to slow China’s technological advancement.

Takeaways by Macro Roundup® AI

  1. China's imports of chip production tools totaled nearly $5bn in June and July, up 70% from $2.9bn in the same period a year earlier, according to Chinese customs data.
  2. Most of China's semiconductor equipment imports came from the Netherlands and Japan, two countries that have imposed export restrictions on chipmaking equipment while working with the US to slow China's technological advancement.
  3. China's semiconductor equipment imports surged to record highs ahead of the implementation of export curbs by US allies.

Related Articles:

  • 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.
  • Huawei Building Secret Network for Chips, Trade Group Warns — Huawei has entered chip production, acquiring at least two existing plants and building at least three more, part of at least 23 fabrication facilities underway in China with planned investments of more than $100bn by 2030, according to the Semiconductor Industry Association. China is on track to hold more than half of global capacity in older-generation semiconductors by around 2030.

Monday, August 28, 2023

AI Summary. Fiscal dominance requires governments to fund deficits at the margin with non-interest-bearing debt, and the revenue from inflation taxation—both expected and unexpected—is limited. The authors argue a US fiscal dominance episode could end the payment of interest on bank reserves and restore requirements that banks hold large zero-interest reserves against deposits.

Charles Calomiris Federal Reserve Bank of St. Louis
Date Posted:
Is Database:
Database

.@cwcalomiris argues high American public debt levels and chronic deficits may lead toward an era of “fiscal dominance,” in which the government forces banks to hold non-interest-bearing debt.

.@cwcalomiris argues high American public debt levels and chronic deficits may lead toward an era of “fiscal...

How would fiscal dominance change interest payments on bank reserves?

Core argument: Fiscal dominance, defined as the government's need to fund deficits at the margin with non-interest-bearing debts, relies on inflation taxation composed of expected and unexpected components, both limited in their capacity to fund real government expenditures.

The essence of fiscal dominance is the need for the government to fund its deficits on the margin with non-interest-bearing debts. Inflation taxation has two components: expected and unexpected inflation taxation. Both are limited in their ability to fund real government expenditures. The expected component of inflation taxation (per period) is the product of the nominal interest rate and the inflation tax base, which consists of all non-interest bearing government debt. Unexpected inflation taxation occurs when the nominal value of outstanding government debt falls unexpectedly (thereby taxing government debtholders), and this component is also limited by the ability of government to surprise markets by creating unanticipated inflation. It is quite possible that a fiscal dominance episode in the US would result in not only the end of the policy of paying interest on reserves, but also a return to requiring banks to hold a large fraction of their deposit liabilities as zero-interest reserves.

Takeaways by Macro Roundup® AI

  1. Fiscal dominance, defined as the government's need to fund deficits at the margin with non-interest-bearing debts, relies on inflation taxation composed of expected and unexpected components, both limited in their capacity to fund real government expenditures.
  2. The expected component of inflation taxation per period equals the nominal interest rate multiplied by the inflation tax base, which consists of all non-interest-bearing government debt.
  3. A fiscal dominance episode in the US could end the policy of paying interest on reserves and bring back requirements that banks hold a large fraction of their deposit liabilities as zero-interest reserves.

Related Articles:

  • The Return of Quantitative Easing — The Congressional Budget Office projects the US government will need to sell an average of $2tn of Treasuries annually over the next decade, with Federal Reserve holdings of Treasuries rising to $7.5tn by 2033 from nearly $5tn. The author argues those spending projections are too low, implying holdings of at least $10tn.
  • 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.
  • 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.

AI Summary. High public debt ratios are likely to persist because large sustained primary budget surpluses are politically unrealistic, real interest rates are already very low, faster global growth is hard to engineer, inflation is not a sustainable route to reducing debt, and financial repression is less feasible amid liberalized markets.

Serkan Arslanalp and Barry Eichengreen Federal Reserve Bank of Kansas City
Date Posted:
Is Database:
Database

.@B_Eichengreen argues that high public debt levels are here to stay and that methods to suppress interest rates are “less feasible than in the past.” This means chronic fiscal deficits will need to be reduced even in countries that issue safe assets.

Are high public debt levels here to stay?

Core argument: High public debts are here to stay, the author argues, because large, persistent primary budget surpluses are not in the political cards and the other routes to reducing debt ratios are each implausible.

Large, persistent primary budget surpluses are not in the political cards. It is difficult to imagine more favorable interest-rate-growth-rate differentials (favorable interest-rate-growth-rate differentials reducing debt ratios in an accounting sense). Real interest rates have trended downward to very low levels. It is hard to foresee them falling still lower. Faster global growth is pleasant to imagine but difficult to engineer. Inflation is not a sustainable route to reducing high public debts. Statutory ceilings on interest rates and related measures of financial repression are less feasible than in the past. Investors opposed to the widespread application of repressive policies are a more powerful lobby. Financial liberalization, internal and external, is an economic fact of life. The genie is out of the bottle. All of which is to say that, for better or worse, high public debts are here to stay.

Takeaways by Macro Roundup® AI

  1. High public debts are here to stay, the author argues, because large, persistent primary budget surpluses are not in the political cards and the other routes to reducing debt ratios are each implausible.
  2. Real interest rates have trended downward to very low levels and are hard to foresee falling still lower, while faster global growth is pleasant to imagine but difficult to engineer.
  3. Inflation is not a sustainable route to reducing high public debts, and statutory interest-rate ceilings and related financial repression are less feasible than in the past given financial liberalization and a more powerful investor lobby opposed to repressive policies.

Related Articles:

  • 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.
  • Did the U.S. Really Grow Out of Its World War II Debt? — Decomposing U.S. debt-to-GDP movements, the authors find the post-World War II decline from 106% to a trough of 23% was explained mostly by primary budget surpluses and interest-rate distortions from surprise inflation and pegged nominal rates; absent those, the ratio would have fallen only to 74%.

AI Summary. The neutral interest rate is argued to be low because investment demand tracks expected growth, and U.S. growth prospects are held down by stalled working-age population growth and slow productivity gains. Larger budget deficits and an industrial-policy-driven manufacturing investment boom could have raised it, though manufacturing is a small share of overall investment.

Paul Krugman Krugman Wonks Out
Date Posted:

.@PaulKrugman notes that after a long period of general agreement that r* was very low, there is now active disagreement about the level of r*, with some, including the Richmond Fed, believing that r* has increased substantially.

Why does the neutral interest rate remain low?

Core argument: Pre-Covid explanations for low r* rested on weak investment demand tied to stalled growth in the working-age population and slow productivity growth since the mid-2000s, and the demographic piece of that story is unchanged.

Many of us thought we had a pretty good understanding of the forces behind low r* before Covid struck. Investment demand is largely driven by expectations about future economic growth, and prospects for U.S. growth seemed low in part because of demography — growth in the working-age population has stalled — and in part because, despite all the hype about technology, productivity has grown slowly since the mid-2000s. The demographic story hasn’t changed. There are a couple of other forces that might have increased r*. Budget deficits have gotten bigger, which could be providing a fiscal boost. The Biden administration’s industrial policies seem to be catalyzing a boom in manufacturing investment. But manufacturing investment isn’t that big a part of overall investment spending, so it’s not clear how much this matters for interest rates. One possible reason to think that r* may have risen is the surprising resilience of the economy in the face of Fed rate hikes.

Takeaways by Macro Roundup® AI

  1. Pre-Covid explanations for low r* rested on weak investment demand tied to stalled growth in the working-age population and slow productivity growth since the mid-2000s, and the demographic piece of that story is unchanged.
  2. Larger budget deficits and the Biden administration's industrial policies, which appear to be catalyzing a boom in manufacturing investment, are candidate forces pushing r* higher, though manufacturing is not a large share of overall investment spending.
  3. The economy's surprising resilience in the face of Federal Reserve rate hikes is one possible reason to think r* has risen.

Related Articles:

  • 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.
  • 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.
  • 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. Nearly half the world's oceans are experiencing a marine heatwave, defined as warmer than 90% of previous temperature observations for the same date. Beyond climate change and the El Niño/La Niña cycle, researchers are investigating whether rules cutting ships' sulfur particle pollution and water vapor from an underwater volcanic eruption are contributing, with the magnitude disputed.

Eric Niiler Wall Street Journal
Date Posted:

Half the world’s oceans are experiencing a marine heatwave. As the Gulf of Maine warms, the lobster catch has fallen by 26% since 2016 and is now “162 miles northward and nearly 70 feet deeper.”

What is driving marine heatwaves across half the world's oceans?

Core argument: Nearly half the world's oceans are experiencing a marine heatwave, defined as water warmer than 90% of previous temperature observations recorded on the same date.

This summer, nearly half the world’s oceans are experiencing a marine heatwave, defined as warmer than 90% of previous temperature observations on the same date. There are other possible explanations in addition to climate change and the El Niño/La Niña cycle. New pollution rules have cut airborne sulfur aerosol particles released by commercial ships over parts of the ocean, clearing the air and allowing more sunlight to reach the ocean surface. That in turn might be heating the water along some shipping routes, although the amount is in dispute. In January 2022, an underwater volcano near Tonga blasted 50 million tons of water vapor into the stratosphere. Some researchers believe that vapor might be acting as a planet-warming greenhouse gas and nudging up ocean temperatures. Both theories are still under investigation, and their overall impact is up for debate.

Takeaways by Macro Roundup® AI

  1. Nearly half the world's oceans are experiencing a marine heatwave, defined as water warmer than 90% of previous temperature observations recorded on the same date.
  2. Pollution rules that cut sulfur aerosol particles from commercial ships have cleared the air over parts of the ocean, allowing more sunlight to reach the surface and possibly heating water along some shipping routes, though the magnitude is disputed.
  3. An underwater volcano near Tonga blasted 50 million tons of water vapor into the stratosphere in January 2022, and some researchers believe that vapor might be acting as a planet-warming greenhouse gas that nudges up ocean temperatures.

Related Articles:

  • Long-term Surface Impact of Hunga Tonga-Hunga Ha’apai-like Stratospheric Water Vapor Injection — 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.
  • 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.
  • 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.

AI Summary. The United Auto Workers union has demanded a 46% raise, a return to traditional pensions, and a 32-hour work week from the three Detroit automakers. The companies say meeting those demands would raise labor costs by $80bn and lift total pay and benefit expenses to more than $150 an hour from about $64.

Keith Naughton, Gabrielle Coppola and David Welch Bloomberg
Date Posted:

The UAW is making demands of the Big Three that would cost an additional $80 billion over the course of the contract. Bloomberg notes total hourly pay and benefits expenses would rise from about $64 now to $150.

Would union demands more than double automakers' hourly labor costs?

Core argument: United Auto Workers president Shawn Fain has declared "war" on the Detroit Three automakers with contract demands he himself calls "audacious," including a 46% raise, a return to traditional pensions and a 32-hour work week.

Shawn Fain, president of the United Auto Workers union since March, has declared “war” on the Detroit Three automakers, with contract demands that even he calls “audacious,” including proposals for a 46% raise, a return to traditional pensions and a 32-hour work week. The automakers counter that meeting those demands would threaten their existence, driving up labor costs by $80 billion and increasing total pay and benefit expenses to more than $150 an hour, from about $64 now, Bloomberg has reported. Higher labor costs contributed to Chrysler, Ford and GM’s lack of price competitiveness against foreign brands in the 1990s and 2000s.

Takeaways by Macro Roundup® AI

  1. United Auto Workers president Shawn Fain has declared "war" on the Detroit Three automakers with contract demands he himself calls "audacious," including a 46% raise, a return to traditional pensions and a 32-hour work week.
  2. The Detroit automakers say meeting the union's demands would drive up labor costs by $80 billion and raise total pay and benefit expenses to more than $150 an hour, from about $64 now, threatening their existence, according to Bloomberg.
  3. Higher labor costs contributed to Chrysler, Ford and GM's lack of price competitiveness against foreign brands in the 1990s and 2000s.

Related Articles:

  • UAW Warns Contract Talks With Big Three Carmakers Are Moving ‘Too Slow’ — The United Auto Workers union sought authorization to call a strike, arguing contract talks with the three major Detroit carmakers are moving too slowly. Its demands include pay raises of more than 40%, inflation protection, and equal wages across jobs, which Bloomberg has reported would cost carmakers $80bn over four years.
  • 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.
  • Everyone Wants to Work at UPS After Teamsters Deal — 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.

AI Summary. Data on more than 370 Apple suppliers and their factory locations show the company's manufacturing network spreading across the developing world, with Vietnam and India the biggest gainers. US and Japanese producers have reduced their China footprint as Chinese firms join the supplier list, though China still houses most Apple device factories.

Bloomberg Staff Bloomberg
Date Posted:

According to a Bloomberg analysis, Apple’s suppliers are following Apple out of China with Vietnam and India being the biggest winners. 7% of iPhones were manufactured in India last year.

Is smartphone manufacturing shifting away from China to other countries?

Core argument: Bloomberg's data on more than 370 Apple suppliers and their factory locations shows Vietnam and India as the biggest winners from the company's shifting production, with smaller manufacturing hot spots emerging elsewhere in Asia.

Data compiled by Bloomberg on more than 370 suppliers and their factory locations reveals which of Apple’s manufacturing partners are building new capacity and where. The result is the clearest picture yet of all the ways the Cupertino, California-based company’s network of producers increasingly crisscrosses the developing world. Vietnam and India are the biggest winners, with smaller production hot spots appearing elsewhere in Asia. Producers from the US and Japan have reduced their footprint in China, even as Chinese firms join the supplier list at a rapid clip. China still houses the majority of Apple’s device-making factories, and will remain an integral part of the company’s supply chain. But the shift to a more diffuse production network is undeniable and accelerating.

Takeaways by Macro Roundup® AI

  1. Bloomberg's data on more than 370 Apple suppliers and their factory locations shows Vietnam and India as the biggest winners from the company's shifting production, with smaller manufacturing hot spots emerging elsewhere in Asia.
  2. US and Japanese producers have reduced their manufacturing footprint in China, while Chinese firms are joining Apple's supplier list at a rapid clip.
  3. China still houses the majority of Apple's device-making factories and will remain an integral part of the company's supply chain, even as the shift to a more diffuse production network accelerates.

Related Articles:

  • What it Would Take for Apple to Disentangle itself from China — Some supply chain experts argue India's phone manufacturing growth is overstated, noting the 200M phones made there last year are mostly models selling for $250 or less, while iPhones average near $1,000 and require more sophisticated automation and labor. One analyst projects Apple shifts just 10% of iPhone production outside China by 2030, or at most 20%.
  • Apple’s Complex, Secretive Gamble to Move Beyond China — Apple is shifting some production out of China—iPhones and accessories to India, AirPods and Mac assembly to Vietnam, some Mac output to Malaysia, and simpler products to Ireland—while planning to retain extensive Chinese operations. Its leadership is concerned that moving too much capacity too quickly could prompt Chinese retaliation or nationalist consumer backlash.
  • India Equity: An Unsung Long-Term Performance Story — Cumulative total returns for Indian equities have been comparable to or better than US equities over roughly three decades, while Chinese equities have lagged both, according to index data for the MSCI India, S&P 500, and MSCI China indexes.

AI Summary. China's leadership objects to Western-style consumption-driven growth, viewing it as wasteful and at odds with the goal of making China a world-leading industrial and technological power, according to people familiar with decision-making in Beijing. Chinese officials also emphasized avoiding a current-account deficit, which would signal greater dependence on the outside world.

Lingling Wei and Stella Yifan Xie Wall Street Journal
Date Posted:
Is Database:
Database

Xi Jinping is opposed to domestic consumption growth, according to well-sourced reporters @Lingling_Wei and @yifanxie. This implies that persistent imbalances with the West are a goal of the central government.

Do Communist Party priorities block a shift toward consumption-driven growth?

Core argument: Xi Jinping holds deep-rooted philosophical objections to Western-style consumption-driven growth, viewing it as wasteful and at odds with his goal of making China a world-leading industrial and technological powerhouse, according to people familiar with decision-making in Beijing.

Xi Jinping has deep-rooted philosophical objections to Western-style consumption-driven growth, people familiar with decision-making in Beijing say. Xi sees such growth as wasteful and at odds with his goal of making China a world-leading industrial and technological powerhouse. Chinese officials also emphasized avoiding a current-account deficit, which would signal greater dependence on the outside world at a time of simmering tensions between Beijing and the West. Chinese officials told their counterparts at multinational institutions that the many hardships Xi survived during the Cultural Revolution—when he lived in a cave and dug ditches—helped shape his view that austerity breeds prosperity, the people said. “The message from the Chinese is that Western-style social support would only encourage laziness,” one person familiar with the meetings said.

Takeaways by Macro Roundup® AI

  1. Xi Jinping holds deep-rooted philosophical objections to Western-style consumption-driven growth, viewing it as wasteful and at odds with his goal of making China a world-leading industrial and technological powerhouse, according to people familiar with decision-making in Beijing.
  2. Chinese officials emphasized avoiding a current-account deficit, which would signal greater dependence on the outside world at a time of simmering tensions between Beijing and the West.
  3. Chinese officials told counterparts at multinational institutions that the hardships Xi survived during the Cultural Revolution, when he lived in a cave and dug ditches, helped shape his view that austerity breeds prosperity, according to people familiar with the meetings.

Related Articles:

  • Can China’s Long-Term Growth Rate Exceed 2–3 Percent? — China invests roughly 42–44% of its GDP, while more mature, capital-intensive economies typically invest about 15–20%. Modeling a ten-year path that lowers China's investment share to 30% of GDP, the author argues the resulting growth rate depends mainly on how fast consumption grows.
  • China’s Defeated Youth — Urban Chinese unemployment among those aged 16 to 24 has run above 20%, about double the pre-pandemic level for that age group, with over 70% of unemployed youth in one year calculated to be graduates. Sentiment analysis of social media indicates the mood of young Chinese is growing darker.
  • China Is Now Growing Slower Than the U.S. — China's central bank and other banks sold more foreign currency and foreign-exchange forwards in a single month than in any month since January 2017. Because Chinese entities have been large buyers of mortgage-backed securities backed by Fannie Mae, Freddie Mac, and Ginnie Mae, a shift toward selling or buying less could affect those spreads and interest rate volatility.