Edward Conard

Top Ten New York Times Bestselling Author

  • “…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
  • “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
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Friday, September 8, 2023

AI Summary. The real annual cost of U.S. weather and climate disasters has risen from about $20bn per year in the 1980s to nearly $95bn per year in 2010–19, reaching roughly $153bn in one year. Property insurers absorbed 48% of these costs, uninsured or underinsured homeowners, businesses and farms 37%, the federal government 11%, and state and local governments 4%.

Celso Brunetti, Benjamin Dennis, Gurubala Kotta and Adam Smith Federal Reserve Board
Date Posted:

Damages from US weather events that cost >$1B have risen from $20B annually during the 1980s to $95B a year between 2010-2019, and $153B in 2021. Property insurers, who bear 48% of these costs, are beginning to reduce coverage. @FedResearch

How much have weather disaster costs risen, and who pays them?

Core argument: The real cost of U.S. weather and climate disasters rose from $20bn per year in the 1980s to nearly $95bn per year in 2010–19, with damages reaching about $153bn in 2021.

Nationally, the real cost of [weather and climate] disasters has risen from $20B per year in the 1980s to nearly $95B per year during the period 2010–19. In 2021, damages increased to about $153B. Costs were absorbed by four entities: property insurers (48%), uninsured or underinsured homeowners, businesses, and agricultural entities (37%), the federal government (11%), and state and local governments (4%). If property insurers were to exit certain markets or decrease coverage in states with greater exposure to physical risks due to decreased profitability, a larger share of damages would not be fully insured. Two major insurers recently announced that they will no longer accept new applications for business and personal property insurance coverage in California, citing increasing wildfire risk as a key factor in that decision. In addition, several major hurricanes during 2020-22 forced numerous insurance companies into bankruptcy in Louisiana and Florida.

Takeaways by Macro Roundup® AI

  1. The real cost of U.S. weather and climate disasters rose from $20bn per year in the 1980s to nearly $95bn per year in 2010–19, with damages reaching about $153bn in 2021.
  2. Disaster costs were absorbed by property insurers (48%), uninsured or underinsured homeowners, businesses and agricultural entities (37%), the federal government (11%), and state and local governments (4%).
  3. Two major insurers announced they will no longer accept new business and personal property insurance applications in California, citing increasing wildfire risk, while major hurricanes during 2020–22 forced numerous insurers in Louisiana and Florida into bankruptcy.

Related Articles:

  • Home Insurers Are Charging More and Insuring Less — Arizona, Texas, North Carolina, Oregon, Illinois and Utah approved the largest home-insurance rate increases, ranging from 20% to 30%, while some insurers have stopped selling new policies in states such as California and pulled back from disaster-prone areas. Reinsurance premiums, which insurers buy to offload risk, rose 33% to 50% at recent renewals.
  • 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. Modelling of a global net-zero emissions scenario projects slower growth than a baseline scenario, with average global GDP growth of 2.0% a year rather than 2.3% through 2030 and 1.9% rather than 2.1% thereafter. Global GDP is projected to be 2.6% below baseline in 2030 and 5.6% below in 2050.

Jean Fouré, Rob Dellink, Elisa Lanzi and Filippo Pavanello Organisation for Economic Co-operation and Development
Date Posted:

OECD analysis projects that achieving net zero carbon emissions by 2050 will reduce global GDP by 5.6% relative to the current baseline.

Does reaching net-zero emissions slow global GDP growth?

Core argument: The net-zero emissions (NZE) Ambition scenario reduces global GDP relative to the Baseline by 2.6% in 2030 and 5.6% in 2050, even as the global economy continues to grow over time.

While the global economy keeps growing over time, the NZE Ambition [net zero emissions] scenario results in a slowdown of GDP growth, both between 2019 and 2030 and between 2030 and 2050. The average global GDP growth rate goes from 2.3% per annum in the Baseline between 2019 and 2030 to 2.0% and decreases from 2.1% between 2030 and 2050 in the Baseline scenario to 1.9% in the NZE Ambition scenario. This leads to a reduction of global GDP compared to Baseline by 2.6% in 2030 and 5.6% in 2050.

Takeaways by Macro Roundup® AI

  1. The net-zero emissions (NZE) Ambition scenario reduces global GDP relative to the Baseline by 2.6% in 2030 and 5.6% in 2050, even as the global economy continues to grow over time.
  2. Average global GDP growth under the NZE Ambition scenario falls to 2.0% per annum over 2019–2030, versus 2.3% in the Baseline scenario.
  3. Between 2030 and 2050, global GDP growth declines from 2.1% per annum in the Baseline to 1.9% in the NZE Ambition scenario.

Related Articles:

  • Growing Pains: The Renewable Transition in Adolescence — In an illustrative scenario, a California system with 20 GW of wind, 150 GW of solar and 75 GW of storage would provide only 50 GW of reliable capacity, since each added renewable unit contributes less to reliability. Levelized cost measures ignore this, so grid operators and utilities instead assess effective load-carrying capability.
  • 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.

AI Summary. High interest rates have discouraged homeowners from moving and taking on more expensive mortgages, leaving an unusually low inventory of homes for sale. Sales of previously owned homes are down about 36% from their earlier peak, while prices are generally holding firm outside a few trouble spots.

Nicole Friedman Wall Street Journal
Date Posted:

Home prices rose in July after declining for five consecutive months. High interest rates have kept inventories very low across all markets.

Are home prices holding firm despite falling sales?

Core argument: Sales of previously owned U.S. homes are down about 36% from January 2022, yet home prices are generally holding firm outside a few trouble spots.

High interest rates have prompted homeowners to stay put rather than buy new homes and take on more expensive mortgages, resulting in an unusually low inventory of homes for sale. Sales of previously owned homes are now down about 36% from January 2022. But prices are generally holding firm outside of a few trouble spots.

Takeaways by Macro Roundup® AI

  1. Sales of previously owned U.S. homes are down about 36% from January 2022, yet home prices are generally holding firm outside a few trouble spots.
  2. High interest rates have prompted homeowners to stay put rather than buy new homes and take on more expensive mortgages, leaving an unusually low inventory of homes for sale.

Related Articles:

  • The “New Normal” Mortgage Rate Range — Goldman Sachs economists expect the federal funds rate to eventually stabilize at 3–3.25%, above what the Federal Reserve currently projects for the neutral rate. With a funds rate near 3.25% and a 10-year Treasury yield of 4.45%, 30-year fixed mortgage rates would sit in the low-to-mid 6% range.
  • The Great Pandemic Mortgage Refinance Boom — Fourteen million mortgages were refinanced during the COVID-era refinance boom: roughly 5m borrowers extracted a total of $430bn in home equity, while 9m refinanced without extracting equity and cut their aggregate annual housing costs by $24bn.
  • Have Rising Mortgage Rates Frozen the Housing Market? — 42% of American homeowners own their homes outright with no mortgage, and among those with mortgages the median housing debt is 52% of the home's value. Homeowners with large equity cushions should be less affected by "lock-in" from low pandemic-era mortgage rates.

AI Summary. Since 1980, the gap between white and Black voter turnout has been related to the share of Black registered voters backing Democrats in pre-election polls, meaning Black voters who don't support Democrats tend not to vote. Polls showing weaker Democratic support among Black voters may therefore signal a smaller Black share of the electorate.

Nate Cohn New York Times
Date Posted:
Is Database:
Database

.@Nate_Cohn argues that current polling suggests a significant decline in black turnout in 2024 relative to 2020.

Does weaker Democratic polling among Black voters signal lower Black turnout?

Core argument: Since 1980, the racial turnout gap between white and Black voters has tracked with the share of Black registered voters backing Democrats in pre-election polls, suggesting that when Black voters do not support Democrats, they tend not to vote.

Looking back over the last few decades, there’s a clear relationship between the racial turnout gap — the difference between white and Black turnout — and the proportion of Black registered voters who back Democrats in pre-election polls since 1980. Or put differently: When Black voters don’t support Democrats, they tend not to vote. It’s possible that the Black voters who back Mr. Trump in the polls today will ultimately show up for him next November. But for now, when I see Mr. Biden’s share among Black voters slip into the 60s and 70s in the polls, I mostly see yet another decline in the Black share of the electorate, at least “if the election were held today.” If there’s any good news for Mr. Biden here, it’s that the election is still 14 months away.

Takeaways by Macro Roundup® AI

  1. Since 1980, the racial turnout gap between white and Black voters has tracked with the share of Black registered voters backing Democrats in pre-election polls, suggesting that when Black voters do not support Democrats, they tend not to vote.
  2. Biden's polling share among Black voters slipping into the 60s and 70s points mainly to a further decline in the Black share of the electorate if the election were held today.
  3. Black voters who back Trump in current polls may ultimately turn out for him, and the election remains 14 months away.

Related Articles:

  • Consistent Signs of Erosion in Black and Hispanic Support for Biden — Polling shows the Democratic presidential candidate's support among nonwhite voters running well below his prior election standing across racial groups, with leads of 72-11 among Black voters, 47-35 among Hispanic registrants, and 40-39 among other nonwhite voters. About 5% of his former nonwhite voters now back the Republican candidate, including 8% of Hispanic voters.

AI Summary. India's military has commissioned a study of how a war over Taiwan involving the US and its allies would affect India and how it could respond. Options under study include serving as a logistics hub for allied warships, aircraft and armies, or engaging China directly along their shared northern border.

Sudhi Ranjan Sen Bloomberg
Date Posted:

India’s military has started high-level planning for how India would manage a Taiwan contingency; ranging from serving as a logistics hub to opening a new theater of war along the India-China border.

How would India respond to a war over Taiwan?

Core argument: India's Defense Chief General Anil Chauhan has commissioned a study of the wider impact of any war over Taiwan involving the US and its allies, and what action India could take in response.

Defense Chief General Anil Chauhan — India’s top military commander — commissioned a study to examine the wider impact of any war over the island that also involves the US and its allies, and what action India could take in response. One option the Indian military will study involves serving as a logistics hub to provide repair and maintenance facilities for allied warships and aircraft, as well as food, fuel and medical equipment for armies resisting China. A more extreme scenario would assess the potential for India to get directly involved along their northern border, opening a new theater of war for China. While no deadline has been set to complete the study, the Indian military is under orders to finish it as soon as possible, one of the officials said.

Takeaways by Macro Roundup® AI

  1. India's Defense Chief General Anil Chauhan has commissioned a study of the wider impact of any war over Taiwan involving the US and its allies, and what action India could take in response.
  2. One option under study would have India serve as a logistics hub providing repair and maintenance for allied warships and aircraft, plus food, fuel and medical equipment for armies resisting China.
  3. A more extreme scenario would assess India getting directly involved along the northern border with China, opening a new theater of war; no deadline has been set, though the Indian military is under orders to finish the study as soon as possible.

Related Articles:

  • US and India Announce Defence and Technology Deals During Visit By Narendra Modi — The US and India announced defense and technology agreements including an Indian purchase of armed MQ-9B SeaGuardian drones from General Atomics, a $2.75bn Micron semiconductor assembly and test facility in India with $800mn from the company, and General Electric co-producing fighter jet engines in India.
  • Indian Stock Market Surges as Foreign Funds Buy Into National Growth Story — Indian equities rose $440bn to more than $3.5tn in value, making India the world's fifth-largest stock market after the US, China, Japan, and Hong Kong, ahead of France and the UK. Foreign portfolio investors added a net $9.4bn to Indian shares in the quarter, with analysts attributing the bulk of this year's inflows to passive index buying.
  • 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.

Monday, September 11, 2023

AI Summary. The widening federal deficit reflected a sharp fall in tax receipts as a windfall from stock prices and inflation faded, plus rising interest payments, rather than new spending programs. The U.S. collects a lower share of income in taxes than other major economies, making higher revenue a reasonable alternative to cutting essential spending.

Paul Krugman Krugman Wonks Out
Date Posted:

.@paulkrugman acknowledges that “we’re going to keep running deficits bigger than even fiscal doves like myself would like.” He advocates raising taxes on the rich and middle class.

Is the widening deficit driven by falling revenue rather than new spending?

Core argument: The U.S. federal deficit for the first three quarters of fiscal 2023 ran nearly three times its year-earlier level, driven mainly by a sharp fall in tax receipts and rising interest payments rather than new spending programs.

The federal deficit for the first 3/4 of the fiscal year 2023 was almost 3x as high as a year before. Very little of it was the result of new spending programs (although money is starting to flow out the door under the Biden administration’s industrial policies). It was mainly about two things: a sharp fall in tax receipts and rising interest payments. What’s happening on taxes is that the federal government in effect got a windfall from stock prices and inflation, which is now going away. We’re not looking at any fundamental deterioration. The U.S. government really shouldn’t be running budget deficits this big at full employment. Yet we don’t want to reduce deficits by cutting essential spending. America collects a lower share of its income in taxes than other major economies, so more revenue — partly from the rich, but also from the middle class — would be a reasonable policy.

Takeaways by Macro Roundup® AI

  1. The U.S. federal deficit for the first three quarters of fiscal 2023 ran nearly three times its year-earlier level, driven mainly by a sharp fall in tax receipts and rising interest payments rather than new spending programs.
  2. The drop in tax receipts reflects the unwinding of a windfall from stock prices and inflation rather than a fundamental fiscal deterioration, though money is beginning to flow out under the Biden administration's industrial policies.
  3. The U.S. should not run deficits this large at full employment, and rather than cutting essential spending should raise more revenue from both the rich and the middle class, since America collects a lower share of income in taxes than other major economies.

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.
  • 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.
  • Living with High Public Debt — 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.

AI Summary. Seven large technology stocks account for nearly 30% of the S&P 500's total value, but the rise of both hyped stocks and the broader market was more extreme during the dot-com era. Historically, only a few stocks have generated most of the stock market's value creation in the US and internationally.

Jesper Rangvid Rangvid's Blog
Date Posted:
Is Database:
Database

Seven stocks made up 70% of S&P 500 value creation in 2023, but Jesper Rangvid argues that this isn’t without historical precedent. In the Dot.com period, Cisco, Dell, Intel, Lucent, and Microsoft had an even more extreme run-up.

Is market concentration in a few large stocks unusual historically?

Core argument: The "Magnificent 7" — Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla — account for nearly 30% of the total value of the S&P 500, a concentration the author calls exceptional.

The hype around the “Magnificent 7” stocks [Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla] that have driven the stock market this year is reminiscent of the dot.com era, which ended with a spectacular crash. However, there are two reasons why today’s developments seem less worrying: The rise of hyped stocks was more extreme in the Dot.com era, as was the rise of the rest of the market. While today’s situation is exceptional, with seven stocks accounting for nearly 30% of the total value of the S&P 500, the rule in the past has been that only a few stocks generated most of the value creation of the stock market in the US and internationally.

Takeaways by Macro Roundup® AI

  1. The "Magnificent 7" — Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla — account for nearly 30% of the total value of the S&P 500, a concentration the author calls exceptional.
  2. The author argues today's market is less worrying than the dot.com era because the rise of hyped stocks was more extreme then, as was the rise of the rest of the market.
  3. Historically, only a few stocks have generated most of the stock market's value creation in the US and internationally.

Related Articles:

  • 7 or 493 Stocks: What Matters for the S&P 500? — The combined market value of the S&P 500's 500 companies rose $5tn, or 15.3%, while the 493 stocks outside the "Magnificent Seven" — Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla — returned only 4.5%. Those seven stocks accounted for about 71% of the index's return.
  • Birth, Death, and Wealth Creation — The median age at which US companies went public rose from 7.9 years in 1976–2000 to 9.5 years in 2001–2022, implying that more wealth creation now occurs in private markets. Research on more than 28,000 US-listed companies since 1926 finds that just under 60% destroyed $9.1tn of wealth while about 2% created $50tn.
  • Mr. Toad’s Wild Ride: The Impact Of Underperforming 2020 and 2021 US IPOs — Between 40% and 60% of US initial public offerings generate negative returns even in favorable periods, so average IPO returns far exceed median returns and depend on a small set of large winners. Excluding just the top 3% of IPOs turns average net returns negative and cuts average absolute returns by more than half.

AI Summary. A study of about 64,000 global stocks estimates net global stock market wealth creation of $75.7tn, with returns highly concentrated: the top 159 firms (0.25%) account for half of net wealth creation and the top 1,526 (2.39%) account for all of it. Fewer than half of stocks beat one-month US Treasury bills, 42.6% of non-US and 44.8% of US stocks.

Hendrik Bessembinder, Te-Feng Chen, Goeun Choi and K.C. John Wei Financial Analysts Journal
Date Posted:
Is Database:
Database
Is Important:
Important

Hendrik Bessembinder finds that the best-performing 1,526 global firms (2.4% of total) accounted for all of the $75.7T in net global stock market wealth creation between 1990 and 2020.

How concentrated is global stock market wealth creation among firms?

Core argument: Global stock market net wealth creation totaled $75.7 trillion between January 1990 and December 2020, with the best-performing 1,526 firms (2.39% of the sample) accounting for all of it.

We calculate net global stock market wealth creation of $US 75.7 trillion btw 1990 and 2020. Wealth creation is highly concentrated. Five firms (0.008% of the total) with the largest wealth creation during the January 1990 to December 2020 period (Apple, Microsoft, Amazon, Alphabet, and Tencent) accounted for 10.3% of global net wealth creation. The best-performing 159 firms (0.25% of total) accounted for half of global net wealth creation. The best-performing 1,526 firms (2.39% of the total) can account for all net global wealth creation. Skewness in compound returns is even stronger outside the U.S. The present sample includes 46,723 non-U.S. stocks. Of these, 42.6% generated buy-and-hold returns measured in U.S. dollars that exceed one-month U.S. Treasury bill returns over matched horizons. By comparison, 44.8% of the 17,776 U.S. stocks in the present sample outperformed Treasury bills.

Takeaways by Macro Roundup® AI

  1. Global stock market net wealth creation totaled $75.7 trillion between January 1990 and December 2020, with the best-performing 1,526 firms (2.39% of the sample) accounting for all of it.
  2. Five firms — Apple, Microsoft, Amazon, Alphabet, and Tencent — representing 0.008% of the sample, accounted for 10.3% of global net wealth creation, and the best-performing 159 firms (0.25%) accounted for half.
  3. Of 46,723 non-U.S. stocks, 42.6% generated U.S. dollar buy-and-hold returns exceeding one-month U.S. Treasury bill returns over matched horizons, compared with 44.8% of 17,776 U.S. stocks.

Related Articles:

  • Birth, Death, and Wealth Creation — The median age at which US companies went public rose from 7.9 years in 1976–2000 to 9.5 years in 2001–2022, implying that more wealth creation now occurs in private markets. Research on more than 28,000 US-listed companies since 1926 finds that just under 60% destroyed $9.1tn of wealth while about 2% created $50tn.
  • More Bang for Your Buck — Among firms trading at a discount to book value, European companies show a gross profit-to-assets ratio of 18.5%, 1.5x that of North American value firms, and earnings-to-assets of 6.4%, nearly 3x North America's. The authors argue wide valuation spreads plus higher profitability strengthen the case for European and Japanese value stocks.
  • The Economics of Inequality in High-Wage Economies — United States Income, Wealth, Consumption, and Inequality Diana Furchtgott-Roth

AI Summary. Strong demand for the weight-loss and diabetes drugs Ozempic and Wegovy has kept Denmark out of recession: GDP is up about 1.1% over the past year but down 0.9% excluding pharmaceuticals, meaning drugmakers added roughly 2% to growth. Booming exports let Denmark's central bank hold rates lower while maintaining its euro peg.

Joseph Politano Apricitas Economics
Date Posted:

US demand for Ozempic stopped a Danish recession. Excluding the pharmaceutical sector, Danish Q2 2023 GDP would have been down 0.9% vs. up 1.1% year-over-year. @josephpolitano

Can a single drugmaker keep a national economy out of recession?

Core argument: Danish GDP rose roughly 1.1% over the past year but fell 0.9% excluding pharmaceuticals, meaning drugmakers alone added roughly 2% to Danish growth and functionally prevented a recession.

Demand for Ozempic (a diabetes drug often sought for weight loss—though not FDA-approved for that purpose) and Wegovy (the new drug explicitly approved for treating obesity), is so strong that it functionally prevented a recession in Denmark—headline GDP is up roughly 1.1% over the last year, but excluding the pharmaceutical industry it’s down -0.9%, meaning drugmakers alone have added roughly 2% to Danish economic growth. Booming exports and high dollar earnings are allowing Danmarks Nationalbank—the Danish Central Bank—to keep rates lower than they otherwise would in order to maintain their currency peg to the Euro. Novo Nordisk, the Danish pharmaceutical giant has rapidly become the most valuable publicly traded company in Europe. Sales have risen 30% in the first half of this year, profits are up 40%, and the company is having to ration supply as production struggles to keep up with growth in orders.

Takeaways by Macro Roundup® AI

  1. Danish GDP rose roughly 1.1% over the past year but fell 0.9% excluding pharmaceuticals, meaning drugmakers alone added roughly 2% to Danish growth and functionally prevented a recession.
  2. Booming pharmaceutical exports and high dollar earnings allow Danmarks Nationalbank to hold rates lower than it otherwise would while maintaining Denmark's currency peg to the euro.
  3. Novo Nordisk has become Europe's most valuable publicly traded company, with sales up 30% and profits up 40% in the first half of the year, and is rationing supply as production struggles to keep up with orders.

Related Articles:

  • More Bang for Your Buck — Among firms trading at a discount to book value, European companies show a gross profit-to-assets ratio of 18.5%, 1.5x that of North American value firms, and earnings-to-assets of 6.4%, nearly 3x North America's. The authors argue wide valuation spreads plus higher profitability strengthen the case for European and Japanese value stocks.

AI Summary. A statistical model using 13 economic variables including inflation, unemployment, and petrol prices explained 86% of the variation in the monthly US consumer-sentiment index between 1980 and 2016, but the correlation between sentiment and both current and future spending has vanished since the pandemic began. The same variables retain their power to forecast consumer spending.

Economist Staff The Economist
Date Posted:

Since the pandemic, the University of Michigan’s consumer sentiment survey has been much lower than expected based on strong economic indicators. Gloomy sentiment has not yet impacted consumer spending.

Has consumer sentiment lost its link to spending?

Core argument: A statistical model using 13 economic variables, including inflation, unemployment and petrol prices, explained 86% of the variation in the monthly consumer-sentiment index between 1980 and 2016, a very good fit.

We built a statistical model to predict the monthly consumer-sentiment index between 1980 and 2016 using a broad battery of economic data. A combination of 13 variables, including inflation, unemployment and petrol prices explained 86% of the variation in the index in this period, a very good fit. Before the pandemic, the relationships between these indicators and consumer sentiment were relatively stable. Although Americans report being worried about their finances, they are behaving as flush as ever—and in economic forecasting, actions speak louder than words. When used to project future spending rather than consumer sentiment, the same battery of economic variables has fully maintained its forecasting power since 2020. In contrast, since covid began, the correlation between sentiment and both current and future spending has vanished.

Takeaways by Macro Roundup® AI

  1. A statistical model using 13 economic variables, including inflation, unemployment and petrol prices, explained 86% of the variation in the monthly consumer-sentiment index between 1980 and 2016, a very good fit.
  2. Since covid began, the correlation between consumer sentiment and both current and future consumer spending has vanished, even as the same battery of economic variables has fully maintained its power to forecast spending.
  3. Americans report being worried about their finances while behaving as flush as ever, and in economic forecasting actions speak louder than words.

AI Summary. A decomposition of price and quantity growth across items indicates that most of the decline in inflation came from supply-side expansion, where price increases slowed while quantity growth picked up. The author argues that resolving supply shocks combined with a modest easing of demand brought inflation down without a cost to the level of employment.

Mike Konczal Roosevelt Institute
Date Posted:

Disinflation has been driven by expanded supply, not decreased demand. @mtkonczal finds of 123 core PCE items 73% of goods and 66% of services see “prices falling with quantities increasing,” consistent with expanded supply.

Did supply-side expansion drive most of the decline in inflation?

Core argument: Categories where price growth decelerated while quantity growth accelerated — for example from 5% price and 1% quantity growth at end-2022 to 3% price and 2% quantity growth through July 2023 — are classified as supply-increasing in this exercise.

Note that this is a deceleration of the rate of increase. So if an item had 5% price growth and 1% quantity growth at the end of 2022, and then it had a 3% price growth and 2% quantity growth ending July 2023, it would show up as (-2,+1), or on the bottom right quadrant. It would be categorized as supply-increasing in this exercise, as the rate of price increases fell while the rate of quantity increases picked up. At the moment, the inflation story is exactly what a “soft landing” would have predicted. A combination of resolving supply shocks and a subtle decrease in demand has driven inflation down dramatically, with no cost to the level of employment.

Takeaways by Macro Roundup® AI

  1. Categories where price growth decelerated while quantity growth accelerated — for example from 5% price and 1% quantity growth at end-2022 to 3% price and 2% quantity growth through July 2023 — are classified as supply-increasing in this exercise.
  2. A combination of resolving supply shocks and a subtle decrease in demand has driven inflation down dramatically with no cost to the level of employment, matching what a "soft landing" would have predicted.

Related Articles:

  • The Relationship between Consumption Growth and Inflation — Across "normal" subperiods, personal consumption inflation of 1–3% accompanied real consumption growth of about 2–3%, with a positive relationship between the two, but high-inflation subperiods showed roughly 6% inflation alongside average consumption growth. This pattern suggests that high inflation reflected supply disruptions or other demand components rather than strong consumption growth.
  • 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 Unresolved Tension Between Prices and Incomes — Persistent per-worker income growth of about 5% a year is difficult to reconcile with forecasts of 2% inflation, since inflation reflects the gap between nominal spending growth and real production, and wages are the largest source of financing for consumer spending. Interest rates may therefore fall more slowly than market prices imply.

AI Summary. An estimated 20–40m tonnes of lithium metal lie within a volcanic crater in the US, larger than the deposits beneath a Bolivian salt flat previously considered the world's largest. Planned extraction would remove clay with water, centrifuge out lithium-bearing grains, and leach the clay in sulfuric acid.

Anthony King Chemistry World
Date Posted:

A lithium deposit in a volcanic crater on the Nevada–Oregon border is likely the world’s largest. Mining could begin by 2026. @ChemistryWorld

Does the US hold the world's largest lithium deposit?

Core argument: An estimated 20–40 million tonnes of lithium metal lie within a US volcanic crater formed around 16 million years ago, larger than the Bolivian salt flat deposit previously considered the world's largest.

An estimated 20 to 40 million tonnes of lithium metal lie within a volcanic crater formed around 16 million years ago. This is notably larger than the lithium deposits found beneath a Bolivian salt flat, previously considered the largest deposit in the world. Thomas Benson, a geologist at Lithium Americas Corporation expects to begin mining in 2026. It will remove clay with water and then separate out the small lithium-bearing grains from larger minerals by centrifuging. The clay will then be leached in vats of sulfuric acid to extract lithium.

Takeaways by Macro Roundup® AI

  1. An estimated 20–40 million tonnes of lithium metal lie within a US volcanic crater formed around 16 million years ago, larger than the Bolivian salt flat deposit previously considered the world's largest.
  2. Thomas Benson, a geologist at Lithium Americas Corporation, expects mining at the site to begin in 2026.
  3. The planned extraction removes clay with water, centrifuges to separate small lithium-bearing grains from larger minerals, and leaches the clay in vats of sulfuric acid.

Related Articles:

  • Tesla’s Lithium Lead at Risk as Rivals Make Supply Deals — Lithium demand is expected to rise more than fivefold by the end of the decade, and 2030 electric-vehicle sales targets are probably unachievable because of raw-material constraints, according to Piper Sandler & Co. New lithium mines can cost up to $1bn and take more than six years to build.
  • Chile’s Move to Control Lithium Alarms Industry — Chile has moved to take state control of key lithium projects, and the combined market value of its two incumbent lithium producers has fallen by $8.5bn. Mining executives and analysts argue the strategy will erode the appeal of the world's second-largest lithium producer as an investment destination, benefiting Australia, Argentina and several African countries.
  • 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.

AI Summary. Vietnam has elevated the US to a "comprehensive strategic partnership," its highest tier of bilateral relations, a status previously held only by China, Russia, India and South Korea. The upgrade carries security implications including potential defense cooperation, as well as economic significance in industries such as semiconductors.

Mercedes Ruehl, James Politi, Henry Foy and Stefania Palma Financial Times
Date Posted:

Vietnam has upgraded its relationship with the United States to the level previously reserved for China, Russia, India, and as of last year, South Korea. Vietnam had long avoided the move for fear of upsetting Beijing.

Vietnam has upgraded its relationship with the United States to the level previously reserved for China, Russia, India, and...

Is Vietnam deepening ties with the US to counter China?

Core argument: Vietnam raised the US by two levels to a "comprehensive strategic partnership," the top tier of its bilateral ties hierarchy, previously reserved only for China, Russia, India and, as of last year, South Korea.

Vietnam has upgraded its relationship with the US to the highest level. The US signed a “comprehensive strategic partnership” with the south-east Asian country on Sunday after President Joe Biden arrived in Hanoi from New Delhi, where he had attended the G20 summit. The symbolic but significant change, which follows years of lobbying by Washington, raises the US by two levels to the top status in Vietnam’s bilateral ties hierarchy. The status is one previously reserved only for China, Russia, India and, as of last year, South Korea. Vietnam had long avoided the move for fear of upsetting Beijing. As well as having security implications, such as potential defence co-operation, the new US status also carries economic importance, especially in crucial industries such as semiconductors.

Takeaways by Macro Roundup® AI

  1. Vietnam raised the US by two levels to a "comprehensive strategic partnership," the top tier of its bilateral ties hierarchy, previously reserved only for China, Russia, India and, as of last year, South Korea.
  2. The upgrade, signed after President Joe Biden arrived in Hanoi from the G20 summit in New Delhi, follows years of lobbying by Washington, a move Vietnam had long avoided for fear of upsetting Beijing.
  3. The new US status carries security implications, such as potential defence co-operation, as well as economic importance in crucial industries such as semiconductors.

Related Articles:

  • Vietnam Boots UK Out of Top Seven US Trading Partners — Vietnam is on track to displace Britain from the US's top seven goods trading partners for the first time in records going back at least to 2004, with the UK's share of US merchandise trade at 2.6% and Vietnam's at 2.7%. China's share stood at 13.2%, down from a full-year peak of 16.4% in 2017.
  • War, AI and Climate Change Shake Up $32 Trillion in Global Trade — US imports of tariffed goods from China are estimated to be about $150bn below where they would otherwise be, with Mexico filling much of the gap. Manufacturing accounts for 13% of India's gross domestic product, below the government's 25% goal, and Indian manufacturers' value-add is 20% versus 49% for China.
  • Globalization Isn’t Dead. But It’s Changing — China's share of US imports fell from a peak of 22% to under 17%, while other Asian economies and Mexico gained share. Vietnam's exports to the US rose from under $10bn to more than $120bn, Mexico's roughly doubled to over $400bn, and the Philippines, Taiwan, Thailand, India, and Malaysia also grew exports rapidly.

AI Summary. Italy has told China it plans to withdraw from China's Belt and Road Initiative, the infrastructure and investment program it joined in 2019, while seeking to maintain friendly relations with Beijing.

Antonio Vanuzzo and Alberto Nardelli Bloomberg
Date Posted:

Italy has privately told China it plans to withdraw from Xi’s signature Belt and Road Initiative.

Italy has privately told China it plans to withdraw from Xi’s signature Belt and Road Initiative.

Is Italy withdrawing from China's Belt and Road Initiative?

Core argument: Italian Prime Minister Giorgia Meloni told Chinese Premier Li Qiang that Italy plans to withdraw from Xi Jinping's Belt and Road Initiative, according to a person familiar with the matter who asked not to be named.

During a meeting on Saturday on the sidelines of the Group of 20 summit in India, Giorgia Meloni told Chinese Premier Li Qiang that Italy plans to withdraw from Chinese President Xi Jinping’s signature Belt and Road Initiative while still looking to maintain friendly relations with Beijing, according to a person familiar with the matter, who asked not to be named. Italy officially signed up for the pact in 2019.

Takeaways by Macro Roundup® AI

  1. Italian Prime Minister Giorgia Meloni told Chinese Premier Li Qiang that Italy plans to withdraw from Xi Jinping's Belt and Road Initiative, according to a person familiar with the matter who asked not to be named.
  2. Italy officially signed up for the Belt and Road pact in 2019, and Meloni conveyed the planned exit while saying Italy still seeks to maintain friendly relations with Beijing.
  3. The Meloni-Li meeting took place on the sidelines of the Group of 20 summit in India.

Related Articles:

  • Italy Intends to Exit China Belt and Road Pact as Relations Sour — Italy's government is favoring an exit from China's Belt and Road Initiative, though no final decision has been made, and its participation renews automatically unless Rome actively withdraws. Italy is the only Group of Seven country in the pact, which has funded $900bn in infrastructure projects globally.
  • China As an International Lender of Last Resort — Using the first comprehensive dataset of China's overseas bailouts, the authors find China has extended over $170bn in central bank swap line liquidity to distressed countries plus $70bn in rescue loans from state-owned banks and enterprises, equal to more than 20% of International Monetary Fund lending over the past decade.