Edward Conard

Top Ten New York Times Bestselling Author

  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “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 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
  • “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 represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…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 full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Tuesday, October 10, 2023

AI Summary. Ivy League athletes are far more likely than non-athlete classmates to enter business and finance jobs, and the authors estimate they attain higher terminal wages, greater cumulative career earnings, and more senior positions, controlling for school, graduation year, major, and first job. The authors argue this suggests non-academic human capital developed through athletics is valued in the labor market.

Natee Amornsiripanitch, Paul Gompers, George Hu, et al. National Bureau of Economic Research
Date Posted:
Is Database:
Database

Among 400,000 people who graduated from Ivy League schools between 1970 and 2021, athletes earned 3.4% more than non-athletes over the course of their careers. @NateeA1

Do college athletes out-earn their non-athlete classmates?

Core argument: Ivy League athletes attain higher terminal wages and earn cumulatively more over their careers than non-athlete classmates, controlling for school, graduation year, major, and first job.

Combining team-level information on all Ivy League athletes from 1970 to 2021 with resume data for all Ivy League graduates, we examine both post-graduate education and career choices as well as career outcomes. Athletes are far more likely to go into business and finance-related jobs than their non-athlete classmates. Athletes attain higher terminal wages and earn cumulatively more than non-athletes over the course of their careers controlling for school, graduation year, major, and first job. In addition, they attain more senior positions in the organizations they join. Collectively, our results suggest that non-academic human capital developed through athletic participation is valued in the labor market and may support the role that prior athletic achievement plays in admissions at elite colleges.

Takeaways by Macro Roundup® AI

  1. Ivy League athletes attain higher terminal wages and earn cumulatively more over their careers than non-athlete classmates, controlling for school, graduation year, major, and first job.
  2. Ivy League athletes are far more likely than their non-athlete classmates to enter business and finance-related jobs, and they reach more senior positions in the organizations they join.
  3. The authors suggest that non-academic human capital developed through athletic participation is valued in the labor market and may support the role of prior athletic achievement in elite college admissions.

Related Articles:

AI Summary. Selection plausibly accounts for most or all of the widening mortality gap between US adults with and without a bachelor's degree: high school achievement measures have not risen since the early 1970s while the share earning degrees rose, and national youth survey data show non-graduates increasingly negatively selected on aptitude scores.

Caroline Hoxby Brookings Papers On Economic Activity
Date Posted:
Is Database:
Database

Caroline Hoxby argues that Anne Case and Angus Deaton’s recent findings on the divergence btw Americans with a BA and those without is largely driven by a compositional shift that has occurred as more Americans have graduated college.

Does selection explain the widening mortality gap by education?

Core argument: Selection is plausibly responsible for most or even all of the widening mortality gap between American adults with and without a BA, according to this commentary on Anne Case and Angus Deaton's work.

I find it entirely plausible that selection accounts for most or even all of the widening mortality gap. Measures of achievement have not risen among 12 graders and other high school students for essentially the entire period since we started to measure them in a consistent way (i.e. since the early 1970s). However, the share who obtain a BA degree has increased quite dramatically over the same period. An NLSY [National Longitudinal Survey Youth] exercise shows that non-BAs are increasingly negatively selected. A comparison between the NLSY79 (1979) and the NLSY97 (1997) shows that the distribution of ASVAB [Armed Services Vocational Aptitude Battery] percentiles of non-BAs is shifted to the left for 97 vis-a-vis 79.

Takeaways by Macro Roundup® AI

  1. Selection is plausibly responsible for most or even all of the widening mortality gap between American adults with and without a BA, according to this commentary on Anne Case and Angus Deaton's work.
  2. Comparing the National Longitudinal Survey of Youth cohorts of 1979 and 1997, the distribution of ASVAB percentiles among adults without a BA is shifted leftward for 1997, suggesting non-BAs are increasingly negatively selected.
  3. Measures of achievement among 12th graders and other high school students have not risen since consistent measurement began in the early 1970s, while the share obtaining a BA degree rose dramatically over the same period.

Related Articles:

  • Accounting for the Widening Mortality Gap Between American Adults With and Without a BA — The mortality gap between American adults with and without a four-year college degree widened across three periods—falling mortality for both with larger gains for graduates, then diverging, then rising faster for the less educated during the pandemic—reaching an 8.5-year difference in adult life expectancy. Americans with a degree, treated as a separate country, would rank just below Japan.
  • Why Are Americans Dying So Young? — One in 25 American five-year-olds is projected not to reach age 40, making deaths among the young a defining feature of US mortality. These deaths are overwhelmingly caused by external factors such as drug overdoses, gun violence, and dangerous driving.
  • Who Won the Cold War? Part II — Americans born around 1990 had higher death rates in their 20s than peers in affluent allied countries, and the gap widened across young adulthood. By age 29, US mortality for that cohort was about 2x New Zealand's, 2.5x France's, 3x Japan's, and 4x Italy's or Spain's.

AI Summary. A survey by American Compass concludes that only 40% of American workers have secure jobs, a finding critics dispute on methodological grounds. On one of the survey's own criteria, 96% of workers reported either a regular weekly schedule or satisfaction with their control over a varying one.

Scott Winship American Enterprise Institute
Date Posted:
Is Database:
Database

.@swinshi notes a recent American Compass survey finds 96% of American workers are working full time or working the number of hours they prefer. This suggests a labor market that is effectively matching workers to their preferences.

.@swinshi notes a recent American Compass survey finds 96% of American workers are working full time or working the number...

Does survey evidence support the claim that most American jobs are insecure?

Core argument: American Compass's survey finds that only 40% of American workers have secure jobs, a result the article characterizes as the group's latest attempt to portray the U.S. economy as needing "rebuilding.".

American Compass has a new survey out in which it finds, among other results, that “only 40% of workers have secure jobs.” This is the latest attempt by the outfit to portray the American economy as in dire need of “rebuilding.” One criterion for assessing whether a worker has a secure job is their indicating either that “I have a regular work schedule that is generally the same from week to week” or that “My work schedule varies from week to week, but I am satisfied with my control over it.” American Compass does not provide the alternative responses workers could give, but 96% of them gave one of these two answers. It is striking that nearly all workers (at least those working 20 or more hours a week) either have a stable work schedule or are OK with their varying schedules.

Takeaways by Macro Roundup® AI

  1. American Compass's survey finds that only 40% of American workers have secure jobs, a result the article characterizes as the group's latest attempt to portray the U.S. economy as needing "rebuilding.".
  2. On the survey's work-schedule criterion, 96% of workers said either that their schedule is generally the same week to week or that it varies but they are satisfied with their control over it.
  3. American Compass does not provide the alternative schedule responses workers could give, and the survey covers those working 20 or more hours a week.

Related Articles:

  • The Cost of Thriving Has Fallen: Correcting and Rejecting the American Compass Cost of Thriving Index — The authors recalculate the Cost of Thriving Index and estimate the cost of supporting a family on one male earner's wages rose by just over 10 weeks of work rather than 22 weeks. Accounting for federal taxes—including the child tax credit—and quality improvements in health care and cars, they estimate the cost is now lower than in 1985.
  • Upward Mobility Is Alive and Well in America — Comparing children's adult incomes with the inflation-adjusted income quintiles of their childhood rather than contemporaneous quintiles produces much higher measured upward mobility: only 28% of children raised in the bottom quintile remained below that childhood threshold as adults, while 26% reached the top childhood quintile, which required $111,416 (2016 dollars) for a family of four.
  • The Economics of Inequality in High-Wage Economies — United States Income, Wealth, Consumption, and Inequality Diana Furchtgott-Roth

AI Summary. The authors estimate that U.S. debt held by the public cannot exceed roughly 200% of GDP even under favorable market conditions, and that under current policy the ratio reaches 175–200% within about 20 years. After that point, they argue, no tax increases or spending cuts could avert default or inflationary debt monetization.

Jagadeesh Gokhale and Kent Smetters University of Pennsylvania
Date Posted:
Is Database:
Database

A @BudgetModel analysis argues the United States has two decades to undertake structural reforms to keep debt below 200% of GDP, a level which will be associated with a government default.

How much federal debt can the United States sustain?

Core argument: The authors estimate that U.S. debt held by the public cannot exceed about 200% of GDP even under today's generally favorable market conditions, beyond which no future tax increases or spending cuts could avoid explicit default or debt monetization producing significant inflation.

We estimate that the U.S. debt held by the public cannot exceed about 200% of GDP even under today’s generally favorable market conditions. Under current policy, the United States has about 20 years for corrective action after which no amount of future tax increases or spending cuts could avoid the government defaulting on its debt whether explicitly or implicitly (i.e., debt monetization producing significant inflation). Table 1 then shows the impact on the debt-GDP ratio if financial markets start to demand a larger return before unraveling. However, additional rates closer to 50 to 100 b.p. are more reasonable in the short run, as some borrowing rates are already locked in at a weighted average duration of about 6 years. Table 1 shows that between 2040 and 2045---or in about 20 years---the U.S. debt-GDP ratio will hit between 175 and 200 percent under current fiscal policy, depending on the assumed interest rates.

Takeaways by Macro Roundup® AI

  1. The authors estimate that U.S. debt held by the public cannot exceed about 200% of GDP even under today's generally favorable market conditions, beyond which no future tax increases or spending cuts could avoid explicit default or debt monetization producing significant inflation.
  2. Under current fiscal policy, the authors project the U.S. debt-GDP ratio will reach 175–200% between 2040 and 2045, depending on assumed interest rates, leaving about 20 years for corrective action.
  3. The authors judge additional borrowing rates closer to 50–100 basis points more reasonable in the short run, since some borrowing rates are already locked in at a weighted average duration of about 6 years.

Related Articles:

  • Interest Expense: A Bigger Impact on Deficits than Debt — The US is running a primary deficit—excluding interest costs—much larger than its historical norm, at a point in the business cycle when deficits would normally be smaller than usual. The average interest rate on federal debt is projected to remain at or below the rate of nominal GDP growth over the next decade.
  • The High Cost of Borrowing at Low Rates — The authors estimate that nearly 60% of US debt originated when the average ten-year Treasury rate was below 3%, and 75% when three-month Treasuries paid below 3%. That debt is now being rolled over into Treasuries paying 4.5%–5.6%, a rollover risk the authors argue policymakers failed to account for.
  • 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. U.S. crude oil exports reached a record high of 3.99m barrels per day, up 650,000 b/d (19%) from a year earlier, yet the U.S. remains a net crude oil importer. Many U.S. refineries are configured to process heavy, sour crude rather than the light, sweet crude typically produced domestically.

Kevin Hack Energy Information Administration
Date Posted:

US crude exports hit a record high of 3.99mm barrels per day in the first half of 2023. @EIAgov

Why does the U.S. import crude oil while exporting record amounts?

Core argument: U.S. crude oil exports averaged 3.99 million b/d in the first half of 2023, a record for the first half of a year since the United States repealed its ban on most crude oil exports in 2015.

U.S. crude oil exports in the first half of 2023 averaged 3.99 million barrels per day (b/d), which is a record high for the first half of a year since 2015, when the U.S. ban on most crude oil exports from the United States was repealed. In the first half of 2023, crude oil exports were up 650,000 b/d (19%) compared with the first half of 2022. Although exports increased in the first half of 2023, the United States still imports more crude oil than it exports, meaning it remains a net crude oil importer. The United States continues to import crude oil despite rising domestic crude oil production in part because many U.S. refineries are configured to process heavy, sour crude oil rather than the light, sweet crude oil typically produced in the United States.

Takeaways by Macro Roundup® AI

  1. U.S. crude oil exports averaged 3.99 million b/d in the first half of 2023, a record for the first half of a year since the United States repealed its ban on most crude oil exports in 2015.
  2. U.S. crude oil exports rose 650,000 b/d, or 19%, in the first half of 2023 compared with the first half of 2022, though the United States remains a net crude oil importer.
  3. The United States continues to import crude oil despite rising domestic production in part because many U.S. refineries are configured to process heavy, sour crude rather than the light, sweet crude typically produced domestically.

Related Articles:

  • U.S. Petroleum Product Exports Set New Record In the First Half of 2023 — U.S. petroleum product exports reached nearly 6.0m barrels per day in the first half of the year, 2% above the same period a year earlier and the highest first-half total in records dating to 1981. The rise over the 2000s and 2010s reflects factors including greater competitiveness and efficiency at U.S. Gulf Coast refineries and increasing hydrocarbon gas liquids production.
  • Portfolio Nuclear — The US is in its fifth year of net energy independence, with domestic oil and gas production at all-time highs across four consecutive administrations. Wind and solar now supply 15% of the grid, allowing more coal and liquefied natural gas to be exported.
  • The Changing Nexus Between Commodity Prices and the Dollar: Causes and Implications — The shale boom turned the United States into a net exporter of natural gas and of oil, altering how commodity prices relate to US trade. Where higher oil prices were historically associated with a deterioration in US terms of trade, they now correspond to an improvement.

AI Summary. Black Americans previously had a lower per-capita traffic fatality rate than White Americans, largely because they drive less, but their rate is now 26% higher after peaking at 37% higher. Survey data show 9% of Americans 16 and older were involved in a traffic stop as a driver or passenger, down from 11%.

Justin Fox Bloomberg
Date Posted:
Is Database:
Database

46,020 Americans were killed in traffic accidents in the US in 2022, up 18% from pre-pandemic levels. This was driven primarily by rising Black per-capita fatality rates, which were 26% higher than for whites last year. @foxjust

Do fewer traffic stops raise traffic fatalities among Black Americans?

Core argument: Black Americans' per-capita traffic fatality rate was 37% higher than White Americans' by 2021 and 26% higher last year, reversing a pre-2014 pattern in which Black Americans faced lower risk, mainly because they drive much less.

Before 2014, which is when concerns about police bias began to take center stage after a police killing in the St. Louis suburb of Ferguson, Missouri, Black Americans were at lower risk of dying in a traffic accident than White Americans (mainly because they drive much less). By 2021, Black Americans’ per-capita fatality rate was 37% higher; last year it was 26% higher. National data on traffic stops is limited, with the Bureau of Justice Statistics’ most recent Police-Public Contact Survey, conducted in 2020, finding that 9% of Americans 16 and older were involved in a traffic stop as a driver or passenger that year, down from 10.3% in 2018 and 11% in 2015.

Takeaways by Macro Roundup® AI

  1. Black Americans' per-capita traffic fatality rate was 37% higher than White Americans' by 2021 and 26% higher last year, reversing a pre-2014 pattern in which Black Americans faced lower risk, mainly because they drive much less.
  2. The Bureau of Justice Statistics' Police-Public Contact Survey found 9% of Americans 16 and older were in a traffic stop as a driver or passenger in 2020, down from 10.3% in 2018 and 11% in 2015.
  3. National data on traffic stops is limited, with the most recent Police-Public Contact Survey conducted in 2020, while concerns about police bias took center stage after the 2014 police killing in Ferguson, Missouri.

Related Articles:

  • The Pandemic Drinking Binge Just Keeps Going — Alcohol-induced deaths in the US rose from 39,043 in 2019 to 54,258 in 2021, according to the Centers for Disease Control and Prevention, with the population-adjusted death rate more than double its level in the 2000s. Even so, US alcohol consumption likely remains below that of many affluent countries, particularly in Europe.
  • Who Won the Cold War? Part II — Americans born around 1990 had higher death rates in their 20s than peers in affluent allied countries, and the gap widened across young adulthood. By age 29, US mortality for that cohort was about 2x New Zealand's, 2.5x France's, 3x Japan's, and 4x Italy's or Spain's.
  • Who Won the Cold War? Part III — In the US, death rates at age 39 for the cohort born in 1980 exceeded those of cohorts born in 1970 and 1960, and death rates at age 29 for the 1990 cohort were indistinguishable from the 1950 cohort's. In Japan, mortality at 29 fell over 80% across comparable cohorts versus under 8% in the US.

Wednesday, October 11, 2023

AI Summary. Each successive generation of prime-age men has shown higher rates of not participating in the labor force, with millennials starting at a higher level and declining more steeply into their mid-30s, a pattern driven by school enrollment. Given rising educational attainment, the authors suggest the sustained rise in male nonparticipation may slow, which could benefit economic growth.

Leila Bengali, Evgeniya Duzhak, and Cindy Zhao Federal Reserve Bank of San Francisco
Date Posted:

Prime-age male workforce nonparticipation has risen across generations, from 5.8% in 1976 to 11.4% last year. There is evidence of generation convergence around age 40 likely driven by younger generations’ higher education attainment. @sffed

Why has men's labor force nonparticipation risen across generations?

Core argument: Nonparticipation rates among prime-age men have risen with each successive generation, leaving millennials with higher nonparticipation than earlier cohorts.

Nonparticipation rates have increased with each generation of prime-age men. Millennials experience a notably different nonparticipation rate trajectory over their lifetime compared with previous generations, with rates starting at a higher level and declining more steeply until their mid-30s. This temporarily higher level of nonparticipation is driven by school enrollment. Even though nonparticipation rates for millennials are still higher than in previous generations, given the increasing educational attainment for younger generations and the trends we observe by education groups, the pace of the sustained rise in male nonparticipation rates may slow in the future, which could benefit economic growth.

Takeaways by Macro Roundup® AI

  1. Nonparticipation rates among prime-age men have risen with each successive generation, leaving millennials with higher nonparticipation than earlier cohorts.
  2. Millennial men's nonparticipation follows a different lifetime path, starting at a higher level and declining more steeply until their mid-30s, a temporary elevation driven by school enrollment.
  3. Given rising educational attainment among younger generations and observed trends by education group, the sustained rise in male nonparticipation rates may slow, which could benefit economic growth.

Related Articles:

AI Summary. High interest rates will likely crowd out private investment and weaken long-term growth prospects. Because Social Security, health care, other safety-net programs, defense, and interest payments make up most federal spending, leaving only a small and already squeezed slice of nondefense discretionary spending, deficit reduction requires either cutting popular benefits or raising taxes.

Paul Krugman Krugman Wonks Out
Date Posted:
Is Database:
Database

.@paulkrugman argues “high interest rates will almost surely crowd out private investment, hurting our long-term prospects,” but doesn’t see paths for either federal spending reductions or “a tax increase that would make a large dent in the deficit.”

Why is deficit reduction so difficult without cutting benefits or raising taxes?

Core argument: Krugman argues high interest rates will almost surely crowd out private investment, harming long-term U.S. prospects, with particular concern about the effects of high rates on renewable energy investment.

Even if there’s no immediate crisis, high-interest rates will almost surely crowd out private investment, hurting our long-term prospects. I’m especially concerned about the effects of high rates on investments in renewable energy, which are of existential importance. The federal government is essentially an insurance company with an army. Look at spending in fiscal 2023: Social Security, health care and other safety net programs accounted for most government spending. Add military spending and interest payments, and what’s left — NDD, for “nondefense discretionary” spending — is a small slice of the total. Furthermore, NDD has been squeezed by past austerity. So there’s no possibility for major spending cuts unless we slash programs that are extremely popular. The point is that the economics of deficit reduction are straightforward. It can be accomplished either by reducing social benefits or by raising taxes. Given that America has weak social spending compared with other countries, taxes are the most plausible route. But I don’t see any plausible political path to a tax increase that would make a large dent in the deficit.

Takeaways by Macro Roundup® AI

  1. Krugman argues high interest rates will almost surely crowd out private investment, harming long-term U.S. prospects, with particular concern about the effects of high rates on renewable energy investment.
  2. Social Security, health care and other safety net programs accounted for most federal spending in fiscal 2023, leaving nondefense discretionary spending a small slice once military spending and interest payments are added.
  3. Krugman contends deficit reduction requires either cutting social benefits or raising taxes, and that weak U.S. social spending relative to other countries makes taxes the most plausible route, though he sees no plausible political path to a large tax increase.

Related Articles:

  • U.S. Deficit Explodes Even As Economy Grows — The Committee for a Responsible Federal Budget projects the federal deficit will roughly double to about $2tn for the fiscal year, driven by higher interest payments and lower tax receipts despite robust economic growth. After falling from close to $3tn to roughly $1tn in its largest-ever decline, the deficit turned upward rather than returning to pre-pandemic levels.
  • 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.
  • The Limits of Taxing the Rich — Stabilizing US federal debt at 100% of GDP would require non-interest savings starting at 2% of GDP and rising to 5% of GDP over three decades, assuming no new spending, tax cuts, or crises. Taxing the rich cannot close more than a small fraction of this gap.

AI Summary. The median existing-home sale price exceeds what a buyer spending 25% of gross household income with a 15% down payment and a 30-year fixed mortgage could afford, leaving affordability more strained than in 2004-07. With for-sale supply very low and most existing mortgages carrying below-market rates, the authors expect home prices to rise slowly.

Roger Ashworth Goldman Sachs
Date Posted:

A @GoldmanSachs analysis expects housing price growth to be positive in 2023 and 2024, as there is a low supply of existing homes that is expected to persist due to the mortgage lock-in effect. They don’t see conditions at all analogous to 2006-2010.

Will home prices keep rising slowly despite strained affordability?

Core argument: The median sale price of an existing U.S. home exceeds an "affordable" price — defined as spending 25% of gross household income on a mortgage payment with a 15% down payment and a 30-year fixed rate loan — leaving affordability for the incremental buyer more challenged than in 2004–07.

Regardless of current credit standards, affordability remains challenging for the incremental home buyer. Exhibit 13 stacks up the median sale price of an existing home vs. a theoretically ‘affordable’ home price. This affordable home is calculated by assuming a borrower spends 25% of gross household income on a mortgage payment, uses a 15% down payment, and borrows the remainder with a 30-year fixed rate mortgage. Now that interest rates have reversed course and are now far higher, affordability for the incremental home buyer is more challenged than during the 2004-07 period. But, the limited supply of homes for sale remains very low and most of the mortgage market has mortgage rates far below current levels (Exhibit 14). As a result, we continue to expect home prices to rise at a slow pace over the medium term.

Takeaways by Macro Roundup® AI

  1. The median sale price of an existing U.S. home exceeds an "affordable" price — defined as spending 25% of gross household income on a mortgage payment with a 15% down payment and a 30-year fixed rate loan — leaving affordability for the incremental buyer more challenged than in 2004–07.
  2. Interest rates have reversed course to far higher levels, worsening affordability for the incremental U.S. home buyer regardless of current credit standards.
  3. With the supply of homes for sale very low and most of the mortgage market carrying rates far below current levels, home prices are expected to rise at a slow pace over the medium term.

Related Articles:

  • U.S. Deficit Explodes Even As Economy Grows — The Committee for a Responsible Federal Budget projects the federal deficit will roughly double to about $2tn for the fiscal year, driven by higher interest payments and lower tax receipts despite robust economic growth. After falling from close to $3tn to roughly $1tn in its largest-ever decline, the deficit turned upward rather than returning to pre-pandemic levels.
  • 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.
  • The Limits of Taxing the Rich — Stabilizing US federal debt at 100% of GDP would require non-interest savings starting at 2% of GDP and rising to 5% of GDP over three decades, assuming no new spending, tax cuts, or crises. Taxing the rich cannot close more than a small fraction of this gap.

AI Summary. Household saving rose in the United States and other high-income economies during the COVID-19 pandemic, but only in the U.S. and Canada did income-support measures push incomes well above pre-pandemic trajectories, while consumption fell everywhere. The divergence between U.S. and foreign saving behavior has no clear explanation.

Thomas Klitgaard and Matthew Higgins Federal Reserve Bank of New York
Date Posted:

The US household saving rate is now lower than its pre-pandemic level, unlike other advanced economies where savings rates remain elevated. @NYFedResearch

Why did only U.S. households spend down their pandemic savings?

Core argument: Household saving, measured as disposable income less consumer spending, surged in the United States and other high-income economies during the COVID-19 pandemic as consumption plummeted across all of them.

Household saving, measured as the difference between disposable income and consumer spending, soared in the United States and other high-income economies during the COVID-19 pandemic. In the U.S. and Canada, stepped-up social benefit payments and other income support measures pushed incomes well above pre-pandemic trajectories, while similar measures in the euro area, United Kingdom, and Japan kept incomes near their trend paths. Meanwhile, consumption plummeted in all these economies. We have no clear explanation for the divergence in U.S. and foreign saving behavior.

Takeaways by Macro Roundup® AI

  1. Household saving, measured as disposable income less consumer spending, surged in the United States and other high-income economies during the COVID-19 pandemic as consumption plummeted across all of them.
  2. In the United States and Canada, stepped-up social benefit payments and other income support pushed household incomes well above pre-pandemic trajectories, while comparable measures in the euro area, United Kingdom, and Japan kept incomes near trend.
  3. The authors report no clear explanation for the divergence between U.S. and foreign saving behavior, describing the spending down of pandemic savings as an "only-in-the-U.S." phenomenon.

Related Articles:

  • Accumulated Savings During the Pandemic: An International Comparison with Historical Perspective — The authors construct measures of excess household savings accumulated during the COVID-19 pandemic and find they have been unwound in the United States, declined in advanced foreign economies, and slowed in emerging market economies. Past recessions featured smaller increases in excess savings and greater persistence in the accumulated stock.
  • Excess No More? Dwindling Pandemic Savings — Research on U.S. household savings after the pandemic recession points to rapid accumulation and then drawdown of excess savings, with cumulative drawdowns exceeding $1.9tn and less than $190bn of excess savings remaining in the aggregate economy. The authors estimate that if recent drawdown rates persist, aggregate excess savings would be depleted.
  • The Trickling Up of Excess Savings — The authors argue that excess savings created by debt-financed government transfers do not disappear as households spend them down; instead they "trickle up" to wealthier households with lower propensities to spend, so the boost to aggregate demand fades only slowly. Their benchmark estimate puts this at roughly 5 years rather than a few quarters.

AI Summary. Japan's gross government debt stands at 260% of GDP, or 235% after netting out $1.25tn in foreign-exchange reserves, making the Bank of Japan reluctant to raise short-term policy rates. A 3% increase would sharply raise government debt-servicing costs and strain Japanese banks, especially if long-term rates also rose.

Ken Rogoff Project Syndicate
Date Posted:

.@krogoff argues a Japanese hiking cycle, which is likely given the uptick in domestic inflation, could trigger a systemic Japanese financial crisis.

.@krogoff argues a Japanese hiking cycle, which is likely given the uptick in domestic inflation, could trigger a systemic...

Does high government debt keep a central bank from raising rates?

Core argument: Japan's gross government debt stands at 260% of GDP, or 235% after netting out $1.25 trillion in foreign-exchange reserves, which helps explain the Bank of Japan's reluctance to raise short-term policy rates.

The BOJ’s reluctance to increase its short-term policy rates is understandable, given that Japan’s gross government debt currently stands at 260% of GDP, or 235% of GDP after netting out $1.25 trillion in foreign-exchange reserves. Should the Bank be compelled to raise its short-term policy interest rates by 3% – about half as much as the US Federal Reserve has – the government’s debt-servicing costs would explode. Moreover, a sharp interest-rate increase would put enormous pressure on the Japanese banking sector, particularly if long-term rates were to rise as well.

Takeaways by Macro Roundup® AI

  1. Japan's gross government debt stands at 260% of GDP, or 235% after netting out $1.25 trillion in foreign-exchange reserves, which helps explain the Bank of Japan's reluctance to raise short-term policy rates.
  2. A 3% increase in the Bank of Japan's short-term policy rates, about half the Federal Reserve's increase, would cause the Japanese government's debt-servicing costs to explode.
  3. A sharp interest-rate increase would put enormous pressure on Japan's banking sector, particularly if long-term rates rose as well.

Related Articles:

  • BOJ Shock Has Wall Street Gaming Out the Global Spillovers — The Bank of Japan has signaled it will allow yields to trade toward 1% from roughly 0.5%, though its intervention in the market suggests that shift is not imminent. With Japanese domestic investors holding around $2.5tn of US stocks, bonds and credit, Wall Street is weighing volatile spillovers that could reinforce higher-for-longer interest rates.

AI Summary. Data centers have accounted for a relatively stable 1% of global electricity use, excluding cryptocurrency mining, but there is growing concern that the computing needed to build and run AI models could raise that share. Estimates suggest a single large language model query uses about 3 Wh of electricity, versus 0.3 Wh for a standard Google search.

Alex de Vries Cell
Date Posted:

AI servers could use 0.5% of the world’s electrical generation by 2027. For context, data centers currently use around 1% of global electrical generation.

Is AI set to raise data centers' share of global electricity use?

Core argument: Data center electricity consumption has held at roughly 1% of global electricity use, excluding cryptocurrency mining, amid apprehension that the computing required to develop and run AI models could raise that share.

In recent years, data center electricity consumption has accounted for a relatively stable 1% of global electricity use, excluding cryptocurrency mining. There is increasing apprehension that the computational resources necessary to develop and maintain AI models and applications could cause a surge in data centers' contribution to global electricity consumption. Alphabet’s chairman indicated in February 2023 that interacting with an LLM could “likely cost 10 times more than a standard keyword search." As a standard Google search reportedly uses 0.3 Wh of electricity, this suggests an electricity consumption of approximately 3 Wh per LLM interaction. This figure aligns with SemiAnalysis’ assessment of ChatGPT’s operating costs in early 2023, which estimated that ChatGPT [requires] 2.9 Wh per request.

Takeaways by Macro Roundup® AI

  1. Data center electricity consumption has held at roughly 1% of global electricity use, excluding cryptocurrency mining, amid apprehension that the computing required to develop and run AI models could raise that share.
  2. Alphabet's chairman said in February 2023 that an interaction with a large language model likely costs 10 times more than a standard keyword search, implying about 3 Wh per interaction given a reported 0.3 Wh per Google search.
  3. SemiAnalysis estimated that ChatGPT required 2.9 Wh per request in early 2023, consistent with the roughly 3 Wh per large language model interaction implied by Alphabet's comparison.

Related Articles:

  • Elon Musk’s Latest Mission: Rev Up the Electricity Industry — U.S. electricity demand has grown at an average of 1% a year over the past 20 years, but McKinsey projects it will double by 2050 and PG&E expects a 70% rise over the next 20 years. Deloitte estimates the largest U.S. electric companies will together spend as much as $1.8tn by 2030.
  • Gridlock: How a Lack of Power Lines Will Delay the Age of Renewables — A study led by Lawrence Berkeley National Laboratory found nearly 2,000GW of solar, wind and storage projects waiting in queues to connect to US long-distance transmission grids, more than the installed capacity of the entire US power plant fleet. The authors find only about a fifth of such requested projects are typically built.

AI Summary. Chinese researchers report that their JiuZhang 3 photonic quantum computer solved a highly complex mathematical problem in a millionth of a second, a task they say the fastest classical supercomputer would take over 20bn years to complete. The team also reports a one-million-fold increase in calculation speed over the prior prototype in the series.

Dannie Peng South China Morning Post
Date Posted:

Chinese scientists claim a breakthrough in quantum computing, completing calculations in less than a second that would have taken the world’s fastest conventional supercomputer 20 billion years. @SCMPNews

Chinese scientists claim a breakthrough in quantum computing, completing calculations in less than a second that would have...

Has a new photonic quantum computer vastly outpaced the fastest classical supercomputer?

Core argument: Chinese researchers say their JiuZhang 3 quantum prototype solved a complex mathematical problem within a millionth of a second, a task they say the US-built Frontier supercomputer would take over 20 billion years to complete.

Scientists in China say their latest quantum computer has solved an ultra-complicated mathematical problem within a millionth of a second-more than 20 billion years quicker than the world’s fastest supercomputer could achieve the same task. The JiuZhang 3 prototype also smashed the record set by its predecessor in the series, with a one million-fold increase in calculation speed, according to a paper published on Tuesday by the peer-reviewed journal Physical Review Letters. The fastest classical supercomputer Frontier-developed in the US and named the world’s most powerful in mid-2022 would take over 20 billion years to complete the same task, the researchers said.

Takeaways by Macro Roundup® AI

  1. Chinese researchers say their JiuZhang 3 quantum prototype solved a complex mathematical problem within a millionth of a second, a task they say the US-built Frontier supercomputer would take over 20 billion years to complete.
  2. JiuZhang 3 achieved a one million-fold increase in calculation speed over its predecessor in the series, according to a paper published in the peer-reviewed journal Physical Review Letters.
  3. Frontier, the classical supercomputer used as the comparison benchmark, was developed in the US and named the world's most powerful in mid-2022.

Related Articles:

  • Quantum Computing Advance Begins New Era, IBM Says — IBM researchers report that a 127-qubit quantum processor simulated the magnetic behavior of 127 atom-scale bar magnets, a problem too complex for an exact answer on the largest supercomputers. Because quantum noise made each sub-millisecond calculation unreliable, the computation was repeated 600,000 times to converge on an answer.
  • White House Unveils Ban On US Investment In Chinese Tech Sectors — The US will ban certain American investments in China's quantum computing, advanced chips, and artificial intelligence sectors, and require companies to notify the government of other investments in those areas, aiming to block the Chinese military's access to US technology and capital. Private equity and venture capital firms are most affected.