Edward Conard

Top Ten New York Times Bestselling Author

  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “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 very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…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 comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “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
  • “…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
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Wednesday, September 27, 2023

AI Summary. An analysis of companies that went public from 1990 to 2022 found that the gap between return on invested capital and the weighted average cost of capital was high at the time of listing, then narrowed before stabilizing around the fifth year — nearly the opposite of the authors' expected life-cycle pattern.

Michael Mauboussin and Dan Callahan Morgan Stanley
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The spread between return on invested capital and the weighted average cost of capital is highest early in a firm’s life cycle and then declines until late in a firm’s life cycle. @mjmauboussin

Do newly public companies follow the expected corporate life-cycle pattern?

Core argument: For companies that completed an initial public offering from 1990 to 2022, the spread between return on invested capital (ROIC) and weighted average cost of capital (WACC) was high at the IPO date, then narrowed before stabilizing around year five.

We examined the spread between return on invested capital (ROIC) and weighted average cost of capital (WACC) for companies that did an initial public offering from 1990 to 2022. We expected to see low or negative spreads between ROIC and WACC for companies newly listed, rising spreads as they mature, and a decline in senescence. But what we found was nearly the opposite. The spread at the date of the IPO was high and narrowed before stabilizing around year five.

Takeaways by Macro Roundup® AI

  1. For companies that completed an initial public offering from 1990 to 2022, the spread between return on invested capital (ROIC) and weighted average cost of capital (WACC) was high at the IPO date, then narrowed before stabilizing around year five.
  2. The authors expected newly listed companies to show low or negative ROIC-WACC spreads that rise with maturity and decline in senescence, but found nearly the opposite pattern.

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.
  • The Economics of Inequality in High-Wage Economies — United States Income, Wealth, Consumption, and Inequality Diana Furchtgott-Roth
  • Data Update 5 for 2023: Pathways to Profitability — The median return on capital is 7.44% for US firms and 5.19% globally, with about 10% of all firms earning above 50% and 10% below -50%. Rising risk-free rates and higher equity risk premiums and default spreads raised the US cost of capital from 5.60% to 9.63%, leaving the median US firm below its cost of capital.

AI Summary. US gross investment has run about 20-25% of GDP over time, but net investment has fallen from roughly 10% of GDP in the 1950s-1980s to about 5% recently. About three-quarters of gross investment now replaces capital that has worn out, rather than adding to the capital stock.

Timothy Taylor Conversable Economist
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US net investment has declined from its 1950-80 average of 10% of GDP to 5%. @TimothyTTaylor argues that the cause is increased investment in information technology that depreciates more quickly than plant and equipment.

Is a shrinking share of US investment adding to the capital stock?

Core argument: U.S. net investment has fallen to about 5% of GDP in the last decade or so, down from roughly 10% of GDP from the 1950s into the 1980s.

Gross investment has typically been 20-25% of GDP over time, although in recent years it’s been closer to the lower end of that range. From the 1950s up into the 1980s, net investment was (very roughly) 10% of GDP. Thus, it was plausible to say that in a typical year, a little more than half of gross investment went to replace capital that was wearing out, and a little less than half of gross investment was actually new, net investment growing the capital stock. But in the last decade or so, gross investment has been about 20% of GDP, and net investment has fallen to about 5% of GDP. In other words, gross investment as a share of GDP has fallen a bit, but not too much. The real change is that about three-quarters of investment is now going to replace capital that has worn out, so net investment is much lower.

Takeaways by Macro Roundup® AI

  1. U.S. net investment has fallen to about 5% of GDP in the last decade or so, down from roughly 10% of GDP from the 1950s into the 1980s.
  2. U.S. gross investment has typically run 20–25% of GDP and has been about 20% in the last decade, a smaller decline than the fall in net investment.
  3. About three-quarters of U.S. gross investment now replaces capital that has worn out, compared with a little more than half in a typical earlier year.

Related Articles:

  • Capital Allocation — Capital spending minus depreciation as a share of sales peaked at 6.9% and bottomed at 0.5%, averaging 1.8% over the past decade. Depreciation is an imperfect proxy for maintenance capital spending because rising prices make replacement costs exceed historical-cost depreciation, and technological obsolescence means depreciation can overstate an asset's useful life.

AI Summary. Using test data from over two million students in nearly 10,000 schools across 49 states and Washington, D.C., the authors find remote instruction was a primary driver of widening achievement gaps by race and school poverty, with math gaps not widening where schools stayed in person.

Dan Goldhaber, Thomas Kane, Andrew McEachin, et al. American Economic Review
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In a study of nearly 10,000 US schools, @CEDR_US, @emily_r_morton, and @ajmceachin find that remote instruction during the pandemic was a primary driver of widening math achievement gaps in high-poverty districts. @HarvardCEPR

Did remote instruction widen achievement gaps by race and school poverty?

Core argument: Using testing data from over two million students in nearly 10,000 schools across 49 states and the District of Columbia, the authors find that remote instruction was a primary driver of widening achievement gaps by race and school poverty.

Using testing data from over two million students in nearly 10,000 schools in 49 states (plus the District of Columbia), we investigate the role of remote and hybrid instruction in widening gaps in achievement by race and school poverty. We find that remote instruction was a primary driver of the widening gaps. Math gaps did not widen in areas that remained in person (although reading gaps did). We estimate that high-poverty districts that went remote in 2020–2021 will need to spend nearly all of their federal aid on helping students recover from pandemic-related academic achievement losses.

Takeaways by Macro Roundup® AI

  1. Using testing data from over two million students in nearly 10,000 schools across 49 states and the District of Columbia, the authors find that remote instruction was a primary driver of widening achievement gaps by race and school poverty.
  2. Math achievement gaps did not widen in areas that remained in person, though reading gaps did widen in those areas.
  3. The authors estimate that high-poverty districts that went remote in 2020–2021 will need to spend nearly all of their federal aid to help students recover from pandemic-related academic achievement losses.

Related Articles:

  • Parents Don’t Understand How Far Behind in School Their Kids Are — The authors calculate that the average student fell half a year behind in math and a third of a year behind in reading. Students in the poorest 10% of districts lost three-quarters of a year in math, more than double the decline in the richest districts, with reading declines half as large.
  • NAEP Long-Term Trend Assessment Results: Reading and Mathematics — U.S. national assessment scores for 13-year-olds declined 4 points in reading and 9 points in mathematics from the prior assessment, and 7 and 14 points respectively compared with a decade earlier. Mathematics declines were larger for lower-performing students (12–14 points) than for middle- and higher-performing students (6–8 points).

AI Summary. Chinese mortgage loans account for over 50% of total household debt, at $6tn and a third of GDP, and the stock of outstanding mortgage loans has declined for the first time as households prioritize repayment. Other forms of consumer credit have slowed sharply while new deposit growth has accelerated.

Jeff Dawson Federal Reserve Bank of New York
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A Keynesian paradox of thrift may be taking hold in China as the household savings rate rises in response to fears about the direction of the Chinese economy. @NewYorkFed

Are Chinese households paying down mortgage debt instead of spending?

Core argument: As of July 2023, mortgage loans made up over 50% of Chinese household debt, at $6 trillion and a third of GDP, and outstanding mortgage loans declined over the past year for the first time ever in China as households prioritized repayments.

Households are paying down their mortgage debt. As of July 2023, mortgage loans accounted for over 50% of total household debt ($6 trillion and a third of GDP). Over the past year, the amount of mortgage loans outstanding has declined for the first time ever in China as households have prioritized mortgage repayments. Note that other forms of consumer credit have also slowed sharply. The lockdown’s impact on consumer spending helped push up deposits in the 2020-21 period. New deposit growth has accelerated notably over the past year.

Takeaways by Macro Roundup® AI

  1. As of July 2023, mortgage loans made up over 50% of Chinese household debt, at $6 trillion and a third of GDP, and outstanding mortgage loans declined over the past year for the first time ever in China as households prioritized repayments.
  2. Other forms of Chinese consumer credit have also slowed sharply, alongside the decline in outstanding mortgage debt.
  3. Chinese deposits rose in 2020–21 as the lockdown's impact curbed consumer spending, and new deposit growth has accelerated notably over the past year.

Related Articles:

  • 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.
  • China Must Slow Down Investment If It Wants To Rebalance its Debt-Laden Economy — The author estimates that transferring roughly 1.5% of GDP a year to Chinese households could lift household income and consumption growth to around 7% annually, supporting GDP growth of 4-5% even with sharply slower investment growth. The argument is that China cannot sustain its current investment share of GDP while growing faster than the rest of the world.
  • 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.

AI Summary. Chinese employers are reluctant to lay off older workers, both because of their experience and because labor laws protect them, so contraction in jobs is felt most acutely by young people. Acceptance rates at top Chinese universities are estimated below 0.01% in some provinces and around 0.5% in Beijing and Shanghai, compared with 3.41% at Harvard College.

Nancy Qian Project Syndicate
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Nancy Qian argues China’s youth “will be wealthier than any other generation in China’s history,” but the mismatch between young people’s expectations and reality risks political unrest.

Nancy Qian argues China’s youth “will be wealthier than any other generation in China’s history,” but the mismatch...

Why do young workers bear the brunt of China's job contraction?

Core argument: Acceptance rates at top Chinese universities are estimated below 0.01% for students in some provinces and around 0.5% in major municipalities such as Beijing and Shanghai, compared with Harvard College's 3.41% this year.

Acceptance rates at top Chinese universities are estimated to be below 0.01% for students in some provinces and around 0.5% for those in major municipalities such as Beijing and Shanghai. For comparison, Harvard College had an acceptance rate of 3.41% this year. During China’s large-scale privatization process, older workers struggled to find new employment in the rapidly changing economy. But now, employers are reluctant to lay off older workers – both because they have valuable experience and because they are protected by labor laws. The contraction in jobs therefore is felt most acutely among young people.

Takeaways by Macro Roundup® AI

  1. Acceptance rates at top Chinese universities are estimated below 0.01% for students in some provinces and around 0.5% in major municipalities such as Beijing and Shanghai, compared with Harvard College's 3.41% this year.
  2. Chinese employers are reluctant to lay off older workers because they hold valuable experience and are protected by labor laws, so the contraction in jobs is felt most acutely among young people.
  3. During China's large-scale privatization, older workers struggled to find new employment in the rapidly changing economy.

Related Articles:

  • Why Has Youth Unemployment Risen So Much in China? — Young workers aged 15-24 are particularly vulnerable when economic growth slows, and China's youth unemployment rate does not appear to be an outlier relative to its income level among global peers. Mismatches between the skills graduates acquire in higher education and those employers demand may add to labor market frictions.
  • The Root of China’s Growing Youth Unemployment Crisis — China's government has long encouraged university enrollment, raising higher-education student numbers from 22m to 383m and expanding graduate-school capacity, with master's candidates up 25% in one year. The author argues that boosting graduate numbers while restricting the services sector and subsidizing construction is bad economics and worse social policy.
  • 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.

AI Summary. China's high savings, concentrated among controllers of capital, now exceed what can be productively invested, so income needs to shift toward those who will spend it. The risk is chronically weak demand rather than a financial crisis, since China is a creditor country whose debts are in its own currency.

Martin Wolf Financial Times
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Martin Wolf argues that while the risk of a true financial crisis in China is low, China will not be able to generate growth through an export boom or consistent current account surpluses. The choice is rebalancing or slow growth.

How can China shift income toward spenders to sustain demand?

Core argument: China's savings, concentrated among the controllers of capital who receive an enormous share of national income, now exceed what can be productively used, so income needs to accrue to those who will spend it.

China is in fact hyper-capitalist. An enormous proportion of national income goes to the controllers of capital and is being saved by them. During the earlier hypergrowth period, this worked well. But now the savings are far greater than can be productively used. Income now needs to accrue to those who will spend it. The danger is not one of a huge financial crisis: China is a creditor country; its debts are overwhelmingly in its own currency; and its government owns all the important banks. A policy of financial repression would work quite well. The danger is rather one of chronically weak demand. It will be impossible, in today’s global environment, to generate either a huge export boom or consistent current account surpluses. The investment rate is already spectacularly high, while growth is slowing. Still higher non-property investment cannot be justified.

Takeaways by Macro Roundup® AI

  1. China's savings, concentrated among the controllers of capital who receive an enormous share of national income, now exceed what can be productively used, so income needs to accrue to those who will spend it.
  2. China's main danger is chronically weak demand rather than a financial crisis, since it is a creditor country whose debts are overwhelmingly in its own currency and whose government owns all the important banks.
  3. China's investment rate is already spectacularly high while growth slows, and today's global environment makes a huge export boom or consistent current account surpluses impossible, leaving still higher non-property investment unjustifiable.

Related Articles:

  • An Economic Hail Mary for China — A higher ratio of people aged 59 and over to children under 15 is strongly negatively correlated with GDP growth, as are higher median age and a larger share over 59. In China's northeastern provinces, where fertility fell a decade before the rest of the country, growth has stalled.
  • 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.
  • The Neoclassical Growth of China — China's per capita GDP growth path closely tracks those of Japan, South Korea, and Taiwan from similar starting income levels, indicating nothing unusual about its growth rate. The authors' model projects China's per capita GDP will level off at about 41% of the US level, reflecting a slowdown in productivity catch-up.

Thursday, September 28, 2023

AI Summary. The US buys at least 80% of industrial inputs domestically, so aggregate foreign supply chain exposure is limited, but disruptions occur at the sector level rather than the macro level. Accounting for Chinese inputs embedded in goods bought from other foreign suppliers, US exposure to China is almost 4x larger than it appears at face value.

Richard Baldwin, Rebecca Freeman, and Angelos Theodorakopoulos Brookings Papers on Economic Activity
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After accounting for Chinese inputs into industrial imports from other countries, US exposure to China in 2018 was 4x the headline level. @BaldwinRE @freeman_reb @Angel__Theo

How large is US supply chain exposure to China really?

Core argument: Accounting for Chinese inputs embedded in goods US manufacturers buy from other foreign suppliers, "look through" exposure to China is almost four times larger than it appears at face value.

US exposure to foreign supply chains is much bigger than it appears at face value, but it is not that big on the macro level. By any measure, the US buys at least 80% of all industrial inputs from domestic sources. Thus, at an aggregate level, its foreign exposure is hardly alarming. However, while this may be reassuring, it is important to note that supply chain disruptions rarely occur at the macro level. The 80% figure was not relevant when the US auto sector shuttered factories due to a lack of semiconductors, or when buying home office electronics became problematic due to a demand surge and logistic snarls. Taking account of the Chinese inputs into all the inputs that American manufacturers buy from other foreign suppliers – what we call look through exposure – we see that US exposure to China is almost four times larger than it appears to be at face value.

Takeaways by Macro Roundup® AI

  1. Accounting for Chinese inputs embedded in goods US manufacturers buy from other foreign suppliers, "look through" exposure to China is almost four times larger than it appears at face value.
  2. The US buys at least 80% of all industrial inputs from domestic sources by any measure, leaving aggregate foreign exposure limited.
  3. Supply chain disruptions rarely occur at the macro level, as when the US auto sector shuttered factories for lack of semiconductors and home office electronics became hard to buy amid a demand surge and logistics snarls.

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.
  • How America Is Failing To Break Up With China — 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.
  • 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.

AI Summary. The rise in long-term interest rates is attributed less to shifting Federal Reserve expectations than to the US sovereign credit downgrade, Japan's exit from yield curve control, the Federal Reserve shrinking its balance sheet, fewer dollars for China to recycle as exports fall, the US budget deficit, and larger Treasury auctions.

Torsten Sløk Apollo
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Torsten Sløk @apolloglobal notes that the Treasury market is suffering from poor supply/demand dynamics. He writes that “the employment report next week will be very important and will likely set the tone for markets in Q4.”

Are long-term rates rising from supply factors rather than Fed expectations?

Core argument: The term premium has risen one percentage point since late July, with the rise in long rates driven less by shifting Fed expectations than by other factors.

The term premium is up one percentage point since late July. The ongoing rise in long rates is driven less by changing Fed expectations and more by: 1) The US sovereign downgrade 2) Japan exiting YCC 3) Fed QT 4) Fewer dollars for China to recycle in a falling exports environment 5) The US budget deficit 6) The large stock of T-bills and the Treasury’s intention to increase auction sizes. Looking ahead, the real risk to the economy, including financial stability, is if weak economic data doesn’t result in falling long-term interest rates.

Takeaways by Macro Roundup® AI

  1. The term premium has risen one percentage point since late July, with the rise in long rates driven less by shifting Fed expectations than by other factors.
  2. The drivers of higher long rates include the US sovereign downgrade, Japan's exit from yield curve control, Fed quantitative tightening, fewer dollars for China to recycle as exports fall, the US budget deficit, and the large stock of T-bills alongside the Treasury's intention to increase auction sizes.
  3. The real risk to the economy, including financial stability, is that weak economic data fails to produce falling long-term interest rates.

Related Articles:

  • Maxing Out — Hedge funds became a major buyer of US Treasuries after the Federal Reserve and commercial banks stepped back, financing those purchases through dealer repurchase agreements that grew rapidly and then stalled. If these leveraged buyers are hitting financing limits set by dealer balance sheet costs, a new marginal buyer must emerge to absorb upcoming issuance.
  • Resilience Redux in the US Treasury Market — The authors argue that large, persistent US federal deficits and limited dealer balance-sheet flexibility will cause outstanding Treasury debt to grow rapidly relative to the market's capacity to intermediate trades, absent significant changes in market structure. They contend broad central clearing, all-to-all trading, real-time post-trade reporting, capital-regulation changes, and transparent official purchase programs could strengthen market capacity and resilience.
  • 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. Large and accumulating US deficits and debt pose a substantial threat to national security and national power, with budget prospects far worse than during past deficit-reduction efforts. Deficits a decade out could reasonably reach double digits as a share of GDP, with primary deficits around 5% of GDP.

Larry Summers Peterson Institute for International Economics
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.@LHSummers issues a warning that America’s fiscal trajectory is leaving it little slack for meeting contingencies, “military or non-military.”

.@LHSummers issues a warning that America’s fiscal trajectory is leaving it little slack for meeting contingencies,...

Do rising deficits and debt threaten national security and power?

Core argument: Summers projects U.S. budget deficits a decade out comfortably in double digits as a share of GDP, with primary deficits quite likely around 5% of GDP, without assuming vast mobilization for military or non-military contingencies.

I would suggest that substantial and accumulating deficits and debts are a substantial threat to national security and national power. A reasonable calculation would suggest that our budget prospects are vastly worse than they were at the time of the Clinton administration's successful budget actions and substantially worse than they were at the time of the Simpson-Bowles efforts. The budget deficits a decade out comfortably in double digits as a share of GDP now seem a reasonable projection with primary deficits quite likely in the 5% of GDP range. This is without the assumption of the need for vast mobilization for meeting contingencies, military or non-military. And I think it is reasonable to ask the question. How long can or will the world's greatest debtor be able to maintain its position as the world's greatest power?

Takeaways by Macro Roundup® AI

  1. Summers projects U.S. budget deficits a decade out comfortably in double digits as a share of GDP, with primary deficits quite likely around 5% of GDP, without assuming vast mobilization for military or non-military contingencies.
  2. Summers argues that substantial and accumulating deficits and debts pose a substantial threat to U.S. national security and national power, and asks how long the world's greatest debtor can maintain its position as the world's greatest power.
  3. By Summers's calculation, U.S. budget prospects are vastly worse than at the time of the Clinton administration's successful budget actions and substantially worse than at the time of the Simpson-Bowles efforts.

Related Articles:

  • Summers and Blanchard Debate the Future of Interest Rates — With expected inflation near 2.5%, a real interest rate of 1.5% to 2%, and some risk and term premium, short-term interest rates would average around 4%, one argument in a debate on the future of interest rates holds. If traditional spreads reassert themselves, longer-term rates would run about 1 percentage point higher, near 5%.
  • Interest Rates Hit 16-Year Record — Interest rates across the Treasury yield curve stand roughly 75 basis points above Congressional Budget Office baseline projections, with the ten-year note at 4.30%, its highest in 16 years. If that gap persists, the authors estimate it would add $2.3tn (6% of GDP) to the debt over ten years.
  • 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. Revised US government data show households saved about $1.1tn less than previously estimated over a six-year period, with the personal saving rate averaging 8.3% of disposable income annually instead of 9.4%. The Bureau of Economic Analysis attributes the reduction to an accounting adjustment that lowered personal income from mutual funds and real estate investment trusts.

Rich Miller and Reade Pickert Bloomberg
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Revised @BEA_News numbers show Americans saved $1.1T less over the last six years than previous estimates.

Have revised data lowered estimates of how much American households saved?

Core argument: Revised Bureau of Economic Analysis data show US households saved about $1.1 trillion less from 2017 through 2022 than previously estimated.

US households saved some $1.1 trillion less than previously thought over the past six years, according to revised government data released Thursday. The Bureau of Economic Analysis now calculates that Americans stashed away an average 8.3% of their disposable income annually from 2017 through 2022, down from a previously estimated 9.4%. The reduction stems from an accounting adjustment that lowered personal income from mutual funds and real estate investment trusts.

Takeaways by Macro Roundup® AI

  1. Revised Bureau of Economic Analysis data show US households saved about $1.1 trillion less from 2017 through 2022 than previously estimated.
  2. The Bureau of Economic Analysis now puts the average annual personal saving rate at 8.3% of disposable income over 2017-2022, down from a prior estimate of 9.4%.
  3. The downward revision stems from an accounting adjustment that lowered personal income from mutual funds and real estate investment trusts.

AI Summary. Europe's high taxes fund social transfers rather than public sector investment, leaving innovators with a capital market not fit for purpose, high taxes, and low public investment. A capital-markets-driven innovation system would require replacing pay-as-you-go pensions with pension funds, ending subsidies for old industries, cutting corporate taxes and social transfers, and raising public investment.

Euro Intelligence Staff Euro Intelligence
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The 5 largest American firms were all founded within the last 50 years, vs. only one firm in the German Dax 30. Euro Intelligence staff argues that this is driven by government policies.

What changes would a capital-markets-driven innovation system require in Europe?

Core argument: European high taxes fund social transfers rather than public sector investment, leaving innovators with a capital market not fit for purpose, high taxes, and low public investment.

Europeans are using our high taxes to fund social transfers, not public sector investments. Innovators are therefore confronted with the worst of all worlds: a capital market not fit for purpose, high taxes, and low public sector investments. For a capital-markets driven system of innovation, you require a complete reboot of your entire socio-economic system. You would need to replace your pay-as-you go pension systems with pension funds. You would have to stop subsidising old industries and let them fall over the cliff. You would need lower rates of corporate taxes, which you can only have through cuts in social transfers. You would also need to raise public investment spending. It is safe to predict that this will not happen, not even during a long-lasting period of economic decline. We know the politics of decline.

Takeaways by Macro Roundup® AI

  1. European high taxes fund social transfers rather than public sector investment, leaving innovators with a capital market not fit for purpose, high taxes, and low public investment.
  2. Shifting Europe to a capital-markets driven system of innovation would require replacing pay-as-you-go pensions with pension funds, ending subsidies to old industries, cutting corporate tax rates alongside social transfers, and raising public investment spending.
  3. Such a reboot of Europe's socio-economic system will not happen, even during a long-lasting period of economic decline, given the politics of decline.

Related Articles:

  • How The US Is Crushing Europe’s Domestic Exchanges — US equities make up nearly 70% of the MSCI World index, and its 10 largest constituents — all US companies — exceed the combined market capitalization of Japan, the UK, France, Canada, and Germany. That depth and liquidity attracts new listings from both US and overseas issuers.
  • From Strength To Strength — The US produced $25.5tn in GDP, about 25% of the world total—roughly its 1990 share—while China's share stands at 18%; the US share of the G7's nominal GDP rose from 40% in 1990 to 58%. Income per person is now about 30% above western Europe and 54% above Japan, adjusted for purchasing power.
  • Europe Has Fallen Behind America and the Gap is Growing — The EU economy was somewhat larger than the US in 2008 ($16.2tn versus $14.7tn), but by 2022 the US had grown to $25tn while the EU and UK combined reached only $19.8tn. The dollar's status as the world's reserve currency allows the US to finance its ambitions without unsettling markets.

AI Summary. China's annual births fell from 18.83m in 2016 to 9.56m, with yearly declines ranging from 3.81% to 17.95%. Census-based projections indicate the number of women of childbearing age is declining by about 4m annually over a five-year period.

He Yafu Caixin
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China’s birth rate has halved since 2016. The majority of the decline took place prior to the pandemic.

Will China's birth numbers rebound as childbearing-age women decline?

Core argument: China's annual births fell from 18.83 million in 2016 to 9.56 million last year, with year-on-year declines of 6.27%, 13.71%, 3.81%, 17.95%, 11.65%, and 9.98% from 2017 to 2022.

Annual births fell from 18.83 million in 2016 to 17.65 million, 15.23 million, 14.65 million, 12.02 million in 2020, 10.62 million, and 9.56 million last year. Therefore, the rate of decline each year from 2017 to 2022 was 6.27%, 13.71%, 3.81%, 17.95%, 11.65%, and 9.98%, respectively. The number of women of childbearing age is decreasing. Based on the seventh national census data, the number of women of childbearing age is expected to decline by about 4 million annually from 2020 to 2025.

Takeaways by Macro Roundup® AI

  1. China's annual births fell from 18.83 million in 2016 to 9.56 million last year, with year-on-year declines of 6.27%, 13.71%, 3.81%, 17.95%, 11.65%, and 9.98% from 2017 to 2022.
  2. China recorded 12.02 million births in 2020, a 17.95% drop from the prior year and the largest annual decline between 2017 and 2022.
  3. Based on the seventh national census data, China's number of women of childbearing age is expected to decline by about 4 million annually from 2020 to 2025.

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