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


Thursday, December 7, 2023

AI Summary. If artificial intelligence can perform economically valuable cognitive tasks at very low marginal cost, consumers would buy far more of the cheapened goods and spend the savings in other categories, expanding activity and employment in sectors facing new demand. Where supply is inherently limited, such as real estate, those savings could bid up prices and produce inflation.

Greg Jensen, Lauren Simon, and Josh Moriarty Bridgewater Associates
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Bridgewater forecasts that AI productivity will have a “Model T Effect” where consumers buy more of previously-unaffordable cognitive services, and shift spending to other forms of consumption.

How would cheap AI cognitive work reshape spending, employment, and prices?

Core argument: If AI performs economically valuable cognitive tasks at very little marginal cost, it could produce a "Model T effect" in which slashed prices drive consumers to buy much more of previously unaffordable items and spawn entire new industries.

If AI can perform economically valuable cognitive tasks at very little marginal cost, it could similarly open up new horizons for spending and economic activity. In some cases, we will see a “Model T effect”: consumers buying a lot more when the price of a previously unaffordable item is slashed, causing entire new industries to spring up. Lower prices in one sector also often lead to higher spending in unrelated discretionary sectors because people effectively have more to spend elsewhere. A similar phenomenon (though not productivity-driven) happens over shorter time horizons when energy prices fall and consumers shift wallet share toward more discretionary categories of spending. Over longer periods, this dynamic generally leads to rising activity and employment in sectors facing increased demand. When supply in those sectors is inherently limited—such as in real estate—it can also produce inflation, as cost savings in one area are used to bid up the price of truly scarce resources in another. We’ll likely see a mix of the two dynamics as AI lowers production costs: customers will buy more at the new lower price but will also spend some of their savings in other categories.

Takeaways by Macro Roundup® AI

  1. If AI performs economically valuable cognitive tasks at very little marginal cost, it could produce a "Model T effect" in which slashed prices drive consumers to buy much more of previously unaffordable items and spawn entire new industries.
  2. Lower prices in one sector often raise spending in unrelated discretionary sectors, a dynamic also seen over shorter horizons when falling energy prices shift consumer wallet share toward discretionary categories.
  3. Rising demand generally lifts activity and employment in the affected sectors, but where supply is inherently limited, such as real estate, cost savings elsewhere can bid up scarce resources and produce inflation.

Related Articles:

  • Will A.I. Transform the Economy, and if So, How? — During the 1995-2005 information technology boom, productivity ended about 12% above the trend implied by growth from 1973 to 1995, and a comparable or larger gain of around 15% from artificial intelligence is plausible. If such optimistic estimates hold, growth would exceed conventional long-run estimates such as the Federal Reserve's roughly 1.8%, lifting revenue and easing debt concerns.
  • Integrating the Goldman AI Report Into Our Views — Goldman Sachs estimates generative AI productivity gains based on how easily the technology applies to each occupation rather than where the largest untapped economic opportunities lie. The author argues gains in producing documents and emails are overstated, while gains in software production are far larger than Goldman anticipates.
  • The Outlook for Long-Term Economic Growth — Growth theory holds that long-run growth in living standards is determined by growth in the worldwide number of people searching for ideas, and growth accounting for the US suggests temporary boosts from rising educational attainment and idea investment could fade. Potential offsets include China and India, better talent allocation, and artificial intelligence.

AI Summary. Using gasoline and food microdata, the author finds commodity cost pass-through that looks incomplete in percentage terms is complete in levels, so a $1 cost increase raises retail prices by $1. Because low-margin products then show larger percentage price increases, unequal pass-through accounts for two-thirds of the food-at-home inflation gap between low- and high-income households.

Kunal Sangani Working Paper
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As prices rise, lower-income households are disproportionately impacted as they generally buy products with lower prices and margins which are more sensitive to inflationary episodes. @ksangani8

Do commodity cost increases raise inflation more for low-income households?

Core argument: Using gasoline and food microdata, the author finds that commodity cost pass-through is complete in levels — a $1/unit cost increase raises retail prices $1/unit — even though it appears incomplete in percentages because of an additive margin between marginal costs and prices.

Empirical studies of commodity cost pass-through typically find that pass-through is incomplete: even at long horizons, a 10% increase in costs causes retail prices to rise less than 10%. Using microdata from gasoline and food products, Incomplete pass-through in percentages often disguises complete pass-through in levels: a $1/unit increase in commodity costs leads to $1/unit higher retail prices. Pass-through appears incomplete in percentages due to an additive margin between marginal costs and prices. An implication of complete pass-through in levels is that rising commodity costs lead to higher inflation rates for low-margin products in a category, though absolute price changes are similar across products. This generates cyclical inflation inequality. I find that food-at-home inflation for the lowest income quintile is 10% more sensitive to upstream commodity costs. From 2020–2023, unequal commodity cost pass-through is responsible for two-thirds of the gap in food-at-home inflation rates experienced by low- and high-income households.

Takeaways by Macro Roundup® AI

  1. Using gasoline and food microdata, the author finds that commodity cost pass-through is complete in levels — a $1/unit cost increase raises retail prices $1/unit — even though it appears incomplete in percentages because of an additive margin between marginal costs and prices.
  2. The author estimates food-at-home inflation for the lowest income quintile is 10% more sensitive to upstream commodity costs, since similar absolute price changes translate into higher inflation rates for low-margin products.
  3. Unequal commodity cost pass-through accounts for two-thirds of the 2020–2023 gap in food-at-home inflation rates between low- and high-income households.

Related Articles:

  • Powerful CPI — A US consumer price report showed core inflation held down by monthly declines in reopening-related items (used cars and trucks -0.8%, airfares -0.9%, hotels -2.9%), with commodities excluding used vehicles essentially flat. Services excluding housing, medical care, hotels, and airfares slowed to +0.39% monthly from +0.52%, which the author calls the report's most important signal.
  • Fiscal Influences on Inflation in OECD Countries, 2020-2022 — Across 21 economies, the authors find that headline and core inflation responded positively to a measure of government spending increases scaled by pre-pandemic debt-to-GDP and average debt duration. Estimated coefficients of 0.4–0.5 suggest 40–50% of the extra spending was financed through inflation, with the rest through conventional public finance.
  • Digesting Inflation — The authors estimate that inflation's drag on consumer sentiment decays about 50% per year, with a 10% inflation shock cutting sentiment by 35 index points in the current year, 16 the next, and 8 the year after. On these estimates, inflation over the prior three years is holding sentiment down by 16 index points.

AI Summary. Migration into southern metropolitan areas such as Austin, San Antonio, Jacksonville, and Tampa has continued, and the South also has a higher birth rate than other census regions. Growth has been uneven: Florida's GDP rose 20% and Texas and Tennessee 15% against a US average of 11%, while Oklahoma and Louisiana contracted.

David Michael Tinsley Bank of America
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The US South (16 states plus DC) has 39% of the population and 1/3 of GDP. Growth in the region is uneven with seven states led by FL, TN, and TX outpacing US GDP growth between 2017-2022 while OK and LA shrank. @BankofAmerica

Is growth across southern states as uneven as migration is strong?

Core argument: Florida's GDP rose 20% between 2017 and 2022, ahead of Texas and Tennessee at 15% each, against an average US increase of 11%, while Oklahoma and Louisiana posted negative growth over the same period.

People have been moving to the South over a long period, with the pace accelerating during the pandemic. In recent internal data, covering 2023 Q3, we see a continued strong inflow into southern Metropolitan Statistical Areas (MSAs), such as Austin, San Antonio, Jacksonville, and Tampa. And, on top of the migration story the South has a higher birth rate than other census regions, too. But GDP growth across the South has not been even. Between 2017 and 2022, seven southern states had a larger increase than the average US rise of 11%. Of these, Florida showed the biggest jump in GDP, by 20%, followed by Texas and Tennessee, growing by 15%. However, over the same period, nine others and D.C. expanded more slowly, with Oklahoma and Louisiana showing negative growth.

Takeaways by Macro Roundup® AI

  1. Florida's GDP rose 20% between 2017 and 2022, ahead of Texas and Tennessee at 15% each, against an average US increase of 11%, while Oklahoma and Louisiana posted negative growth over the same period.
  2. Internal data for 2023 Q3 show continued strong inflows into southern Metropolitan Statistical Areas including Austin, San Antonio, Jacksonville, and Tampa, extending a long-running migration to the South that accelerated during the pandemic.
  3. The South has a higher birth rate than other US census regions, though GDP growth across the region has been uneven, with nine southern states and D.C. expanding more slowly than the national average between 2017 and 2022.

Related Articles:

  • A $100 Billion Wealth Migration Tilts US Economy’s Center of Gravity South — Six fast-growing Southern states — Florida, Texas, Georgia, North and South Carolina, and Tennessee — now contribute more to US GDP than the Northeast, including the Washington-New York-Boston corridor. The Southeast accounted for more than two-thirds of US job growth since the pandemic began, nearly double its pre-pandemic share, and housed 10 of the 15 fastest-growing large American cities.
  • On the Move: Which Cities Have The Biggest Housing Shortage? — An analysis finds San Antonio, Dallas, and Orlando have the most constrained housing supply as strong labor markets attract residents, while St. Louis, Detroit, and Miami have the highest housing stock relative to population. Cities with lower housing supply are already seeing higher construction trends.
  • What’s the Matter With Miami? — A significant share of Florida's population inflow is retirees, and while the overall U.S. population grew 7.4% from 2010 to 2020, the population aged 65 and older grew 38.6%. Because retirees spend money on local services, the influx of seniors creates jobs for younger adults as well.

AI Summary. US crude oil production reached an all-time high of 13.2mn barrels a day, more than any other country and about one in eight barrels of global output, outpacing official forecasts. The International Energy Agency attributes 80% of this year's growth in global oil supply to the US, complicating OPEC+ efforts to prop up prices through output cuts.

Myles McCormick and Jamie Smyth Financial Times
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The US is the world’s largest oil producer, currently producing 1 in 8 barrels of global output. According to an International Energy Agency forecast the US drove 80% of the expansion of global oil supply in 2023.

Is record US oil production undercutting OPEC+ efforts to lift prices?

Core argument: US crude oil production hit an all-time high of 13.2mn barrels a day in September, more than any other country and about one in eight barrels of global output.

American crude oil production reached a fresh all-time high of 13.2mn barrels a day in September, according to figures released last week, more than any other country and accounting for about one in eight barrels of global output. The added volumes have outpaced official forecasts and called into question claims of a US oil industry constricted by Wall Street or environmental regulations. They are causing difficulties for the OPEC+ oil cartel, which last week agreed to deepen cuts to its members’ own volumes in a bid to prop up faltering prices. The US accounts for 80% of the expansion in global oil supply this year, according to the International Energy Agency. Its production is set to grow by 850,000 b/d, the US Energy Information Administration estimates, well below the pace reached earlier in the shale revolution but much faster than analysts had anticipated.

Takeaways by Macro Roundup® AI

  1. US crude oil production hit an all-time high of 13.2mn barrels a day in September, more than any other country and about one in eight barrels of global output.
  2. The US accounts for 80% of this year's expansion in global oil supply, according to the International Energy Agency, with output set to grow by 850,000 b/d per EIA estimates.
  3. The added US volumes have outpaced official forecasts and caused difficulties for OPEC+, which agreed to deepen cuts to members' volumes in a bid to prop up faltering prices.

Related Articles:

  • An Unruly OPEC is Causing Problems for Russia and Saudi Arabia — Saudi Arabia and Russia are cutting oil output by 1m and 300,000 barrels a day respectively, with the rest of the OPEC+ group contributing another 3.7m b/d in cuts. Falling oil prices reflect expectations of slowing global demand tied to concerns about China's economy, reduced geopolitical risk, and higher output from the US, Brazil, and Guyana.
  • US Shale: The Marginal Supplier Matures — The responsiveness of US oil supply to prices has declined and is estimated to be much smaller for publicly traded producers than private ones, with a 10% price increase raising US liquids output by roughly 1%, or 200,000 barrels a day. That implies US supply would offset only about 20-25% of a geopolitical supply shock.
  • 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. China's Ministry of Education projects the number of college graduates will reach a record 11.79m, up 210,000 from the prior year. The figure adds to pressure on Beijing to create enough jobs amid an uneven recovery weighed down by a protracted property slump and a weak private sector.

Mia Nulimaimaiti South China Morning Post
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A record 11.8mm Chinese will graduate from college in 2024 putting additional stress on the Chinese labor market. The jobless rate for 16-24 was 21.3% in June before Beijing stopped publishing the data. @SCMPNews

Are record numbers of college graduates straining China's job market?

Core argument: China's Ministry of Education expects college graduates to reach a record 11.79 million next year, an increase of 210,000 from this year.

The number of college graduates is expected to reach 11.79 million next year, the Ministry of Education said on Tuesday, up by 210,000 from this year. Beijing has been under pressure to create enough jobs amid an uneven post-Covid recovery, which has been dragged down by the protracted slump in the property market and a weak private sector. China’s college graduates exceeded 10 million for the first time in 2022.

Takeaways by Macro Roundup® AI

  1. China's Ministry of Education expects college graduates to reach a record 11.79 million next year, an increase of 210,000 from this year.
  2. China's college graduate cohort first exceeded 10 million in 2022, and the 11.79 million projection extends that increase.
  3. Beijing faces pressure to create enough jobs amid an uneven post-Covid recovery weighed down by a protracted property market slump and a weak private sector.

Related Articles:

  • 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.
  • Can China Fix Youth Unemployment Woes With Military Recruitment Drive? — More than 90% of China's military recruitment this year could come from recent graduates and high school students, which analysts say serves both the People's Liberation Army's modernisation targets and the country's record youth unemployment. Military academies remain less attractive to top students than leading public universities.
  • China’s Age Of Malaise — More than 300,000 Chinese people emigrated in a single year, more than double the pace of a decade earlier, with some traveling overland through a half-dozen countries to reach the US. US authorities at the southern border recorded 17,894 encounters with Chinese migrants over ten months, a thirteenfold increase from the prior year.

AI Summary. Italy has formally notified China of its withdrawal from the Belt and Road Initiative, an infrastructure and investment program whose membership had irritated Italy's Western allies. Without the notification, Italy's participation would have renewed automatically for another five years.

Amy Kazmin Financial Times
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Italy has officially pulled out of China’s Belt and Road Initiative.

Italy has officially pulled out of China’s Belt and Road Initiative.

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

Core argument: Italy has formally notified Beijing that it is withdrawing from China's Belt and Road Initiative, a deal that would otherwise have renewed automatically for another five years in early 2024.

Italy has officially informed Beijing of its decision to withdraw from President Xi Jinping’s flagship Belt and Road Initiative, ending months of speculation over a relationship that had irritated Rome’s western allies. The formal decision comes three months after Prime Minister Giorgia Meloni — who in the past had called Rome’s participation in the BRI a “mistake” — publicly confirmed that her rightwing government was considering a pullout while affirming her determination to maintain “mutually beneficial” relations with Beijing. A senior Italian official, who asked not to be identified, confirmed on Wednesday that Rome had formally notified Beijing of its intent to withdraw from the deal, which would have been otherwise renewed automatically for another five years in early 2024. Meloni’s office declined to comment.

Takeaways by Macro Roundup® AI

  1. Italy has formally notified Beijing that it is withdrawing from China's Belt and Road Initiative, a deal that would otherwise have renewed automatically for another five years in early 2024.
  2. Italy's participation in the Belt and Road Initiative had irritated Rome's western allies, and Prime Minister Giorgia Meloni previously called the country's involvement a "mistake.".
  3. Giorgia Meloni publicly confirmed three months before the formal notification that her rightwing government was considering a pullout while affirming her determination to maintain "mutually beneficial" relations with Beijing.

Related Articles:

  • Meloni Tells China That Italy Plans to Exit Belt and Road — 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.
  • Danish Weight Loss Drugs vs. Chinese Cars: Two Models of Export Booms — Denmark's weight-loss drug exports illustrate a positive-sum export boom in which new products create both supply and demand, while Chinese car exports reflect firms with persistent overcapacity fighting for market share. The US preempted Chinese electric vehicles through legislation that boosts demand while reserving a share for local producers; Europe remains more exposed.
  • EU to Press China On Industrial Overcapacity at Beijing Summi — European Union leaders are pressing China over its expansion of industrial capacity, particularly in renewable energy products, at a time of weak Chinese domestic demand and tightening access to markets such as the US, leaving Europe a target for excess exports. EU officials say the bloc's trade deficit with China is just below $400bn and has doubled within two years.

Friday, December 8, 2023

AI Summary. A study using U.S. mortality and import data finds a positive state-level association between imports per resident and drug overdose death rates, driven by fentanyl and accounting for an estimated 15,000–20,000 deaths per year. The authors estimate that 10% higher imports per resident is associated with an 8.1% higher fentanyl death rate.

Timothy Moore, William Olney, and Benjamin Hansen National Bureau of Economic Research
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There is evidence the opioid epidemic was a supply shock: states with higher levels of imports, and more opportunities for smuggling, saw higher levels of fentanyl deaths between 2017 and 2020. @benconomics

Do states with higher imports per resident have higher fentanyl overdose deaths?

Core argument: Using CDC mortality and U.S. Census import data for 2008–2020, the authors find a positive relationship between states' imports per resident and drug overdose death rates that begins in 2013 and accounts for 15,000–20,000 deaths per year over 2017–2020.

Legal trade is a key factor driving fentanyl supply. We assess the empirical relationship between imports and fentanyl overdoses at the state level, with the idea that supply frictions result in overdoses disproportionately occurring near smuggling locations. Specifically, using CDC mortality data and U.S. Census import data for 2008-2020, we show that there is a positive relationship between states’ imports per resident and drug overdose death rates that begins in 2013. The relationship increases over time and accounts for 15,000-20,000 deaths per year over the 2017-2020 period. Results show that states with above-and below-median imports have similar drug overdose trends in the first five years of the sample period (2008-2012). Their drug overdose rates diverge sharply thereafter; by 2017, drug overdose deaths per resident are approximately 40% higher in states with above-median import levels than in other states. These differences, which persist through 2020, are driven by fentanyl overdoses. Summary estimates for the 2017-2020 period imply that a 10% higher value of imports per resident is associated with a 5.5% higher opioid death rate and an 8.1% higher fentanyl death rate.

Takeaways by Macro Roundup® AI

  1. Using CDC mortality and U.S. Census import data for 2008–2020, the authors find a positive relationship between states' imports per resident and drug overdose death rates that begins in 2013 and accounts for 15,000–20,000 deaths per year over 2017–2020.
  2. States with above-median imports per resident had drug overdose deaths per resident roughly 40% higher by 2017 than other states, a gap that persists through 2020 and is driven by fentanyl overdoses.
  3. For 2017–2020, the authors estimate that a 10% higher value of imports per resident is associated with a 5.5% higher opioid death rate and an 8.1% higher fentanyl death rate.

Related Articles:

  • The Global Network Behind The Fentanyl Crisis — Nearly 110,000 Americans died of drug overdoses in a year, with more than two-thirds of those deaths caused by fentanyl, a synthetic opioid 50x as potent as heroin. A kilogram of precursor chemicals bought from Chinese manufacturers for about $800 can produce 415,000 fentanyl pills, which sell wholesale for as little as 50 cents each.
  • How Fentanyl Changed The Game For Mexico’s Drug Cartels — Fentanyl causes most of the more than 85,000 annual opioid overdose deaths in the US and Canada, and has become the leading cause of death for young US adults. Researchers at Rand Corporation estimate a full year's US fentanyl supply weighs about 5 tonnes, versus roughly 125 tonnes for heroin.
  • The Rise in American Pain: The Importance of the Great Recession — The authors find that the rise in reported pain among Americans was almost entirely concentrated in the 2007–2010 recession period rather than following a smooth upward trend, with the disproportionate increase among the less educated also occurring primarily then. The authors state they find this jump difficult to explain.

AI Summary. In a survey experiment with 7,426 respondents across Australia, France, Germany, Switzerland, the UK, and the US, exposure to a media narrative framing inequality as the result of a system rigged in favor of the rich significantly increased support for redistributive policies in five countries, with no effect in the US.

Pepper Culpepper, Ryan Shandler, Jae-Hee Jung, and Taeku Lee Working Paper
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After exposure to a narrative that “the economy is rigged,” survey participants in Australia, France, Germany, Switzerland, and the United Kingdom showed increased support for redistribution, but no effect in the US. @jung_jaehee_

Does hearing that the economy is rigged increase support for redistribution?

Core argument: A "rigged system" media treatment administered to 7,426 online survey respondents significantly increased support for redistributive policies in five of six countries — Australia, France, Germany, Switzerland, and the United Kingdom — consistent with the authors' pre-registered expectation.

We investigate empirically and cross-nationally whether a media treatment featuring a narrative about inequality as the result of a system rigged in favor of the rich increases preferences for redistribution. We administer this “rigged system” treatment to 7,426 online survey respondents in six countries: Australia, France, Germany, Switzerland, the United States, and the United Kingdom. Our experimental treatments include indicators of inequality in the six countries – including the ratio of CEO pay to average worker pay and the assets of the wealthiest one percent of the population – nested within a common media frame that emphasizes these facts as indicative of a fundamentally unfair system that favors the rich. We then probe respondents’ views on a variety of redistributive policies, which we combine into a single indicator of redistributive attitudes. Consistent with our pre-registered expectation, we find that the rigged system treatment significantly increases redistributive preferences in five of the countries. In the sixth – the United States – our treatment has no effect.

Takeaways by Macro Roundup® AI

  1. A "rigged system" media treatment administered to 7,426 online survey respondents significantly increased support for redistributive policies in five of six countries — Australia, France, Germany, Switzerland, and the United Kingdom — consistent with the authors' pre-registered expectation.
  2. The rigged-system treatment had no effect on redistributive preferences in the United States, the sole exception among the six countries studied.
  3. The experimental treatments presented country-specific inequality indicators, including the ratio of CEO pay to average worker pay and the assets of the wealthiest one percent, nested in a media frame emphasizing a fundamentally unfair system that favors the rich.

Related Articles:

  • Does the American Dream Foster Inequality? — Survey data show Americans are more likely than people in other Western countries to see themselves as upwardly mobile and to say hard work is essential to getting ahead. Americans are the most likely to call income inequality unfair, yet fewer than half see addressing it as the government's responsibility, versus two-thirds or more in the UK, France and Germany.
  • Income Inequality in the United States: Using Tax Data to Measure Long-Term Trends — Using administrative tax data with the Survey of Consumer Finances, the authors estimate the top 1% pre-tax income share fell from 11.1% in 1962 to 9.4% in 1979, then rose to 13.8% by 2019, a 3 percentage point rise over the full period. Their after-tax measure shows increases of only 1.4 points since 1979 and 0.2 points since 1962.
  • The Economics of Inequality in High-Wage Economies — United States Income, Wealth, Consumption, and Inequality Diana Furchtgott-Roth

AI Summary. Survey data show Americans are more likely than people in other Western countries to see themselves as upwardly mobile and to say hard work is essential to getting ahead. Americans are the most likely to call income inequality unfair, yet fewer than half see addressing it as the government's responsibility, versus two-thirds or more in the UK, France and Germany.

John Burn-Murdoch Financial Times
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Noting Americans are less likely to want to address inequality via redistribution, @jburnmurdoch wonders if “seeing inequality can equate to seeing opportunity, the American dream makes US society more tolerant of large disparities.”

Do beliefs about mobility and hard work shape American views on inequality?

Core argument: Fewer than half of Americans see addressing income inequality as the government's responsibility, compared with two-thirds or more in the UK, France and Germany, even though Americans are the most likely to call their country's inequality unfair.

Why the exceptionalism? I think there are two dynamics at play. The first is what I call the two sides of the American dream. Data show that Americans see themselves as more upwardly mobile than people from other western countries, and are more likely to say hard work is essential for getting ahead in life. The second dynamic is Americans’ distrust of government, and in particular, their belief that government is inefficient. While Americans are the most likely to say income inequality in their country is unfair, fewer than half see this as the government’s responsibility to address. This compares with two-thirds or more in the UK, France and Germany. Where other societies see inequality as something that is done to people and must be tackled by helping them, Americans see it as something that people are responsible for themselves.

Takeaways by Macro Roundup® AI

  1. Fewer than half of Americans see addressing income inequality as the government's responsibility, compared with two-thirds or more in the UK, France and Germany, even though Americans are the most likely to call their country's inequality unfair.
  2. Americans see themselves as more upwardly mobile than people in other Western countries and are more likely to say hard work is essential for getting ahead, a dynamic the author calls the two sides of the American dream.
  3. The author attributes American exceptionalism on inequality partly to distrust of government and a belief that government is inefficient, with Americans viewing inequality as something people are responsible for themselves rather than something done to them.

Related Articles:

AI Summary. Barclays estimates that excluding Evergrande, an average 30% haircut on total interest-bearing debt at 26 privately owned Chinese property developers may be required to restore sustainable earnings coverage and leverage ratios. If only offshore creditors bear the cost, the required haircut on offshore debt would rise to around 70%.

Bryce Elder Financial Times
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China’s “slow motion financial crisis” wasn’t that slow, as highlighted by a recent Barclays report. In the aftermath of Evergrande half of China’s major developers have defaulted on at least $140bn of dollar bonds.

How large a debt haircut would restore Chinese developers' sustainability?

Core argument: Barclays estimates an average 30% haircut on total interest-bearing debts across 26 privately owned Chinese developers, excluding Evergrande, would be required to lift EBITDA coverage above 1.5x and cut debt/EBITDA to 8x or below.

Barclays argues, "Stripping out Evergrande, we estimate that an average 30% haircut of the total interest-bearing debts for the other 26 POE developers may be required to: 1) improve EBITDA coverage ratios to more than 1.5x; and 2) lower debt/EBITDA ratios to 8x or below, assuming 6% average interest costs, 15% EBITDA margin, and normalised contracted sales at the 2022 level. Moreover, if only offshore creditors have to bear the cost of the restructuring (ie, no haircuts on onshore debts), then we estimate the potential debt haircuts would need to increase to around 70% for offshore debts, assuming offshore debt accounts for 50% of interest-bearing debts."

Takeaways by Macro Roundup® AI

  1. Barclays estimates an average 30% haircut on total interest-bearing debts across 26 privately owned Chinese developers, excluding Evergrande, would be required to lift EBITDA coverage above 1.5x and cut debt/EBITDA to 8x or below.
  2. Barclays' estimate assumes 6% average interest costs, a 15% EBITDA margin, and contracted sales normalised at the 2022 level for the 26 privately owned developers.
  3. If only offshore creditors bear restructuring costs with no haircuts on onshore debt, Barclays estimates required offshore haircuts would rise to around 70%, assuming offshore debt accounts for 50% of interest-bearing debts.

Related Articles:

  • The Debt Supercycle Comes to China — China's property sector, which accounts for 23% of GDP (26% counting imports), is yielding diminishing returns after a construction boom driven by the country's massive post-2008 investment stimulus. The author argues this debt supercycle is the best explanation for China's faltering economy and what comes next.
  • China Begins Nationwide Push to Reveal Hidden Government Debt — China's Ministry of Finance reported governments across the country held 37tn yuan ($5.1tn) in on-book debt, with no official tally of hidden debt or who owes it. The International Monetary Fund estimated local government financing vehicles held 66tn yuan ($9.2tn) of hidden debt at end-2022, up from 40tn yuan in 2019.
  • China’s Age Of Malaise — More than 300,000 Chinese people emigrated in a single year, more than double the pace of a decade earlier, with some traveling overland through a half-dozen countries to reach the US. US authorities at the southern border recorded 17,894 encounters with Chinese migrants over ten months, a thirteenfold increase from the prior year.

AI Summary. A senior political officer in China's People's Liberation Army has warned that "erroneous ideological trends" and hostile "cognitive penetration" are spreading into military camps, and called for a culture of "absolute loyalty" to the Communist Party and a "dare to fight" spirit.

Amber Wang South China Morning Post
Date Posted:

The CPP is concerned about “hostile forces” spreading misguided ideas inside the Chinese military. The political leadership of the Southern Theater Command Air Force called for “absolute loyalty” to the CCP and a “dare to fight” spirit. @SCMPNews

The CPP is concerned about “hostile forces” spreading misguided ideas inside the Chinese military. The political...

Is China's military warning about ideological threats within its ranks?

Core argument: Chen Zuosong, director of the political work department for the Southern Theatre Command Air Force, wrote that "various erroneous ideological trends and arguments" have spread into military camps, and called for a culture of "absolute loyalty" to the Communist Party.

Under the headline “Build cultural soft power that is compatible with a world-class military”, Chen Zuosong, director of the political work department for the Southern Theatre Command Air Force outlined the ideological risks facing the PLA and called for a culture of “absolute loyalty” to the ruling Communist Party and a “dare to fight” spirit. “Thoughts and sentiments in our country’s society are becoming increasingly active and complex. The changes in information technology have brought an increasing number of variables and hidden dangers to the ideological field,” Chen wrote. “Hostile forces have increased cognitive penetration and destruction, and various erroneous ideological trends and arguments have … spread into military camps.”

Takeaways by Macro Roundup® AI

  1. Chen Zuosong, director of the political work department for the Southern Theatre Command Air Force, wrote that "various erroneous ideological trends and arguments" have spread into military camps, and called for a culture of "absolute loyalty" to the Communist Party.
  2. Chen Zuosong wrote that thoughts and sentiments in Chinese society are becoming increasingly active and complex, and that changes in information technology have brought more variables and hidden dangers to the ideological field.
  3. Writing under the headline "Build cultural soft power that is compatible with a world-class military," Chen Zuosong wrote that hostile forces have increased cognitive penetration and destruction, and called for a "dare to fight" spirit.

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