Edward Conard

Top Ten New York Times Bestselling Author

  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
Upside of Inequality Oxford Unintended Consequences
Buy the Books
  • Macro Roundup
  • About Roundup
  • About Ed Conard
  • Highlights
  • Topics
  • Subscribe
Edward Conard
  • twitter
  • facebook
  • linkedin
  • youtube

Macro Roundup

  • Email
  • Text Message (SMS)
  • Twitter/X
  • LinkedIn
  • Facebook
  • WhatsApp Message
Subscribe to Macro Roundup Emails
Select topics to choose: articles that mention them (broader) or articles mainly about them (focused)
  • Mentions 0
  • Primary focus 0
Showing all 7,320 Macro Roundup articles
When you search for any topic (like GDP, Inflation, or Banking), choose:
Choose search scope

Wednesday, February 21, 2024

Taxing Top Wealth: Migration Responses and Their Aggregate Economic Implications

AI Summary. Swedish data show that when a wealth-taxed entrepreneur emigrates, employment at their businesses falls 33%, value-added 34%, tax payments 50%, and investment 21%, but 60% of closed firms are absorbed by other domestic companies. The authors estimate aggregate effects on employment and investment are small.

Katrine Jakobsen, Henrik Kleven, Jonas Kolsrud, Camille Landais and Mathilde Muñoz National Bureau of Economic Research
Date Posted:
February 21, 2024
Is Database:
Database
Is Important:
Important

In Sweden and Denmark, a 1pp increase in the mean wealth tax reduced the stock of rich taxpayers by 2%. When an entrepreneur subject to the wealth tax emigrates, employment in their businesses drops by 33%, and tax payments by 50%. @MathildeMunoz

How large are the aggregate economic costs when wealthy entrepreneurs emigrate?

Core argument: When a Swedish entrepreneur subject to the wealth tax out-migrates, employment in their businesses drops 33%, value-added 34%, tax payments 50%, and gross investments 21%.

We show that, when an entrepreneur subject to the wealth tax out-migrates, employment in their businesses drops by 33%, value-added by 34%, tax payments by 50%, and gross investments by 21%. Our data enable us to delve beyond firm-level effects and explore the reallocation of economic activity within Sweden following the out-migration of wealthy entrepreneurs. We find substantial reallocation: 60% of the firms closed by their wealthy owners upon out-migration end up being absorbed by other companies in Sweden, and employees at these firms experience limited persistent losses in labor earnings or employment prospects. Overall, our results indicate that the impact of wealthy entrepreneur expatriation on aggregate domestic activity is mitigated by reallocation forces in the Swedish labor market. We show that wealthy out-migration is associated with tax revenue losses from wealth, income, and local taxes. We also find evidence of negative spillovers of out-migration through reduced employment, investments, and tax payments at firms held by wealthy entrepreneurs. A 1pp increase in the effective average tax rate on wealth increases net out-migration by .22pp (+0.17 pp for out-migration and -.05 pp for in-migration). Our results indicate that these aggregate effects are small. A 1pp decrease in the effective average tax rate on wealth increases the size of the wealthy population by at most 2% in the long run, with an induced impact on aggregate employment and total investment in the economy of .03% and .04%, respectively.

Takeaways by Macro Roundup® AI

  1. When a Swedish entrepreneur subject to the wealth tax out-migrates, employment in their businesses drops 33%, value-added 34%, tax payments 50%, and gross investments 21%.
  2. Some 60% of firms closed by wealthy owners upon out-migration are absorbed by other Swedish companies, and employees at these firms experience limited persistent losses in labor earnings or employment prospects.
  3. A 1pp increase in the effective average tax rate on wealth raises net out-migration by 0.22pp, while a 1pp decrease raises the wealthy population by at most 2% in the long run, with aggregate employment and investment effects of 0.03% and 0.04%.

Related Articles:

  • Behavioral Responses to State Income Taxation of High Earners: Evidence from California — A California ballot measure raising top marginal income tax rates by up to 3 percentage points prompted an additional 0.8% of the affected tax base to leave the state, with an estimated income elasticity of 2.5–3.2 for high earners who stayed. The authors estimate these responses eroded 45.2% of windfall revenues within one year and 60.9% within two.
  • Taxing Billionaires: Estate Taxes and the Geographical Location of the Ultra-Wealthy — The authors estimate that US billionaires move to states without estate taxes as they age, with $80.7bn of Forbes 400 wealth escaping estate taxation as a result. They find that for the average state the added estate tax revenue exceeds forgone income tax revenue by 31%, with California a notable exception.
  • The Economics of Inequality in High-Wage Economies — United States Income, Wealth, Consumption, and Inequality Diana Furchtgott-Roth
  • Taxation
  • Fiscal Policy
  • Productivity
    • Incentives/Risk-Taking

Megaprojects in the Desert Sap Saudi Arabia’s Cash

AI Summary. Saudi Arabia's spending on megaprojects has risen while oil revenues have leveled off, and the International Monetary Fund estimated oil prices near $80–$86 a barrel would be needed to balance its budget. The kingdom is expected to run a deficit of about $21bn, roughly 2% of gross domestic product.

Eliot Brown and Chelsey Dulaney Wall Street Journal
Date Posted:
February 21, 2024

The IMF estimates that Saudi Arabia needed oil prices above $86 last year and $80 in 2024 to balance their budget. The Kingdom has been turning to the bond markets for financing.

Are megaproject costs outpacing oil revenues and driving budget deficits?

Core argument: The IMF estimated Saudi Arabia needed oil above $86 a barrel in 2023 and $80 a barrel this year to balance its budget, while prices have hovered around $81 over the past year.

At the same time that spending has ramped up, oil revenues have leveled off. The IMF estimated oil prices would need to be above $86 a barrel in 2023 and $80 a barrel this year to balance the government’s budget. Prices have hovered around $81 over the past year. Despite the huge spending, Saudi Arabia experienced a rare economic contraction in 2023. This year, Saudi Arabia is expected to run a budget deficit of $21 billion, or about 2% of the country’s gross domestic product. Riyadh projects it will run small annual deficits through 2026, a change from a previous forecast for surpluses.

Takeaways by Macro Roundup® AI

  1. The IMF estimated Saudi Arabia needed oil above $86 a barrel in 2023 and $80 a barrel this year to balance its budget, while prices have hovered around $81 over the past year.
  2. Saudi Arabia is expected to run a budget deficit of $21 billion, about 2% of GDP, as spending has ramped up while oil revenues have leveled off.
  3. Riyadh projects small annual deficits through 2026, a change from a previous forecast of surpluses, and Saudi Arabia experienced a rare economic contraction in 2023.

Related Articles:

  • The World Is Transitioning to American Oil From Saudi Crude — Saudi Aramco scrapped plans to raise production capacity to 13mm barrels a day from 12mm, a cancellation expected to save $20–40bn in capital spending over five years and signaling insufficient demand for additional Saudi oil. Saudi Arabia, pumping about 9mm barrels a day under OPEC+ cuts, appears set on lower output to support higher prices.
  • 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.
  • Energy
  • GDP
    • Financial Markets

A January Bounce

AI Summary. Inflation in "super core" services — services excluding housing — posted its strongest monthly reading since mid-2022, and its three-month average has ticked higher, reviving concern that late-year disinflation progress was a head fake. Disinflation has been uneven since core goods prices peaked, with the three-month average accelerating roughly every 8 months.

Chris Marsh Money: Inside and Out
Date Posted:
February 21, 2024

The January rise in super core services inflation could mean the disinflationary process is slowing or has stopped, or it might be “just be another set-back in a very slow process of disinflation.” @GeneralTheorist

Is a jump in services inflation a setback or a trend reversal?

Core argument: The super core services print is the strongest month since mid-2022 and above last year's January print, with the 3-month moving average ticking higher.

The super core service print is more of a worry. As noted, this is the strongest month since mid-2022 and above last year’s January print. The 3MMA has ticked higher. And a sequence of stronger prints, as in the first third of last year, would hint at the disinflation progress late last year being a head fake. Concern about sticky service inflation, after the progress through December, will return. On the other hand, this might just be another set-back in a very slow process of disinflation. Since core goods peaked in late-2021, the disinflation process has not been smooth, as there has been an acceleration in the 3MMA of seasonally adjusted inflation roughly every 8 months—with each peak being 0.2 - 0.3 ppts below the previous. Super core services peaked last February and now has also two set-backs since. The second peak was only marginally below the first, however. And it is possible the current peak equals or exceeds the second. This will hinge on whether the February and March prints show further signs of price re-sets at the beginning of the year.

Takeaways by Macro Roundup® AI

  1. The super core services print is the strongest month since mid-2022 and above last year's January print, with the 3-month moving average ticking higher.
  2. Since core goods inflation peaked in late 2021, the 3-month moving average of seasonally adjusted inflation has accelerated roughly every 8 months, with each peak 0.2–0.3 percentage points below the previous one.
  3. Super core services inflation peaked last February and has seen two setbacks since, with the second peak only marginally below the first; whether the current peak matches or exceeds it hinges on whether February and March prints show further start-of-year price re-sets.

Related Articles:

  • OER You Serious? — January price increases tend to be cyclical and volatile—a "January effect"—with sequential inflation usually slowing the following month, and 3- and 6-month trimmed inflation measures remained rangebound. The authors therefore raise their core personal consumption inflation forecast only modestly, by 0.1pp to 2.3%, and continue to project five 25bp Federal Reserve rate cuts this year.
  • Furman On January CPI — Core consumer price inflation came in hotter than expected at 0.4% in a single month, a 4.8% annual rate, versus 3.9% over 12 months, 3.6% over 6 months and 4.0% over 3 months. Overall inflation also picked up but trailed core, as food prices rose further while energy prices fell for a fourth straight month.
  • The Big Picture: Back to the Future — The secular backdrop has shifted from disinflationary to more inflationary, with interest rates no longer near zero and real rates no longer negative. Household balance sheets are as healthy as they have been in 20 years, leaving room to borrow, while the public sector is as indebted as it has ever been.
  • Business Cycle
  • GDP
    • Inflation
  • Monetary Policy

Higher (Real Rates) For Longer

AI Summary. Federal Reserve officials gauge policy tightness by comparing the inflation-adjusted interest rate to a perceived neutral rate, and most policymakers' projections continue to place neutral at a 0.5% real rate. On that basis the prevailing 1.8% real rate is historically restrictive and arguably inappropriate when inflation is only modestly above target.

Joseph Wang Fed Guy Blog
Date Posted:
February 21, 2024

Noting the median Fed estimate of the neutral rate remains at the pre-pandemic level of 0.5%, @FedGuy12 expects cuts starting in June with a terminal rate of around 3.7%.

Is the current real interest rate too restrictive?

Core argument: The great majority of FOMC members in the Fed's dot-plot continue to perceive the neutral rate as a 0.5% real rate, suggesting the current 1.8% real rate is historically restrictive and likely inappropriate for inflation modestly above target.

Fed officials are likely concerned about overtightening because they perceive the economy’s sensitivity to policy to be unchanged from the pre-pandemic era. The officials measure policy tightness by comparing real rates to a perceived neutral rate, which is the rate at which policy is neither restrictive nor accommodative. Some Fed officials have adjusted their perception of neutral to be slightly higher post-pandemic, but the Fed’s recent dot-plot shows that the great majority of FOMC members continue to perceive neutral to be a 0.5% real rate. This suggests that the current 1.8% real rate is historically restrictive and likely inappropriate for an inflation rate that is modestly above target. A few cuts would adjust the degree of restriction policy in line with declining inflation. The first cut would likely come in the June meeting, which includes a dot-plot for clearer communication.

Takeaways by Macro Roundup® AI

  1. The great majority of FOMC members in the Fed's dot-plot continue to perceive the neutral rate as a 0.5% real rate, suggesting the current 1.8% real rate is historically restrictive and likely inappropriate for inflation modestly above target.
  2. Fed officials measure policy tightness by comparing real rates to a perceived neutral rate, and their concern about overtightening reflects a view that the economy's sensitivity to policy is unchanged from the pre-pandemic era.
  3. A few rate cuts would align the degree of policy restriction with declining inflation, with the first cut likely at the June meeting, which includes a dot-plot for clearer communication.

Related Articles:

  • The Price of Money Is Going Up, and It’s Not Only Because of the Fed — A model projects the inflation-adjusted natural interest rate rising about a percentage point from a 1.7% trough to 2.7% by 2050, implying 10-year US Treasury yields of 4.5%–5%. The authors estimate wide fiscal deficits, climate investment, and faster growth could lift the natural rate to 4%, implying roughly 6% yields.
  • Measuring the Natural Rate of Interest After COVID-19 — Model estimates for the United States, Canada, and the Euro Area place the natural rate of interest within a few tenths of a percentage point of pre-pandemic estimates, with the main longer-term consequence of the pandemic a reduction in the natural rate of output. The authors find no evidence that the era of historically low natural rates has ended.
  • What Have We Learned About the Neutral Rate? — Analysts estimate that if inflation is brought down without a recession, the Federal Reserve's policy rate will stabilize nearer 3–3.25% than the 2.5% longer-run median projection of Federal Reserve officials. Projected shifts in government debt and demographics imply a roughly 0.5 percentage point net increase in the neutral rate over the next decade.
  • Business Cycle
  • GDP
    • Inflation
  • Monetary Policy

It’s Been 30 Years Since Food Ate Up This Much of Your Income

AI Summary. U.S. Department of Agriculture data show consumers spent 11.3% of disposable personal income on food in 2022, matching the 11.4% share recorded in 1991.

Jesse Newman and Heather Haddon Wall Street Journal
Date Posted:
February 21, 2024
Is Database:
Database

Americans spent 11.3% of their disposable income on food in 2022, the highest level since 1991, driven by a rise in both restaurant and grocery prices.

How much of income do consumers now spend on food?

Core argument: U.S. consumers spent 11.3% of their disposable personal income on food in 2022, according to the most recent USDA data, matching a share last seen more than three decades earlier.

In 1991, U.S. consumers spent 11.4% of their disposable personal income on food, according to data from the U.S. Agriculture Department. At the time, households were still dealing with steep food-price increases following an inflationary period during the 1970s. More than three decades later, food spending has reattained that level, USDA data shows. In 2022, consumers spent 11.3% of their disposable income on food, according to the most recent USDA data available.

Takeaways by Macro Roundup® AI

  1. U.S. consumers spent 11.3% of their disposable personal income on food in 2022, according to the most recent USDA data, matching a share last seen more than three decades earlier.
  2. In 1991, U.S. consumers spent 11.4% of disposable personal income on food, USDA data show, a period when households were still absorbing steep food-price increases that followed 1970s inflation.

Related Articles:

  • Labor Shock and Pay Raises Fuel a Dining Transformation — US full-service restaurants appear to have restructured toward operating with less labor, with higher minimum wages likely factoring into those decisions. Labor productivity, measured as real output per hour worked, grew at a 1.2% annualized rate over an earlier six-year stretch, then jumped 21% in a single year, retaining most of that gain after a slight pullback.
  • Wendy’s, Google Train Next-Generation Order Taker: An AI Chatbot — Wendy's is automating drive-through ordering with an artificial-intelligence chatbot built on natural-language software from Google and trained to understand the many ways customers order off the menu.
  • Inflation
  • GDP
  • Politics

China Circumvents US Tariffs By Shipping More Goods Via Mexico

AI Summary. An analysis of trade data indicates China is shipping more goods to the US via Mexico, circumventing US tariffs, with containers shipped from China to Mexico rising to 881,000 from 689,000 over comparable nine-month periods. Mexico has overtaken China as the largest exporter of goods to the US.

Claire Jones, Christine Murray, and Keith Fray Financial Times
Date Posted:
February 21, 2024

An @FT analysis of shipping data suggests that “China is shipping more goods to the US via Mexico, circumventing steep tariffs imposed by the Trump administration and retained by Joe Biden’s White House.”

Is China circumventing US tariffs by routing goods through Mexico?

Core argument: Container shipments from China to Mexico reached 881,000 20ft containers in the first three quarters of 2023, up from 689,000 a year earlier, according to Container Trades Statistics data analysed by Xeneta.

China is shipping more goods to the US via Mexico, circumventing steep tariffs imposed by the Trump administration and retained by Joe Biden’s White House, according to a Financial Times analysis of trade data. Figures from Container Trades Statistics, analysed by Xeneta, show the number of 20ft containers shipped from China to Mexico hit 881,000 in the first three quarters of 2023, the most recent period for which data is available, up from 689,000 in the same period of 2022. The rise came as Mexico overtook China as the biggest exporter of goods to the US last year, and as truck shipments across the border into the US have continued to increase quickly.

Takeaways by Macro Roundup® AI

  1. Container shipments from China to Mexico reached 881,000 20ft containers in the first three quarters of 2023, up from 689,000 a year earlier, according to Container Trades Statistics data analysed by Xeneta.
  2. A Financial Times analysis of trade data finds China is shipping more goods to the US via Mexico, circumventing tariffs imposed by the Trump administration and retained by the Biden White House.
  3. Mexico overtook China as the biggest exporter of goods to the US, and truck shipments across the border into the US have continued to increase quickly.

Related Articles:

  • 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.
  • Hidden Exposure: Measuring U.S. Supply Chain Reliance — 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.
  • As Long As The US Is Outlet For China’s Surplus Rumors Of Decoupling Are Overstated — With Europe's current account near balance and Japan back in surplus, the question of which economy absorbs China's current account surplus remains open, and the US external deficit exceeds what G-7 countries can finance. The global economy stays relatively integrated despite frictions, even as global politics is more fractured.
  • Trade (not deficits)
  • China
  • GDP

Australia To Build Biggest Navy Since Second World War To Meet China Threat

AI Summary. Australia plans to more than double its naval fleet with an additional $7.2bn of investment, expanding to 26 warships including 11 new frigates and six large vessels with long-range missile capability, in response to China's military build-up in the Pacific. The expansion would give Australia its largest navy since the Second World War.

Nic Fildes Financial Times
Date Posted:
February 21, 2024

Australia is adding another $7.2B to its defense budget as part of a $35.5B plan to more than double the size of the Australian fleet over the next decade.

Australia is adding another $7.2B to its defense budget as part of a $35.5B plan to more than double the size of the...

Is Australia doubling its naval fleet in response to China?

Core argument: Australia will more than double its naval fleet to 26 warships with an extra $7.2bn of investment, giving the country its largest navy since the Second World War.

Australia is to more than double the size of its naval fleet with an extra $7.2B of investment to adapt to China’s military build-up in the Pacific region. The navy will expand to 26 warships, including 11 new frigates and six new large vessels with long-range missile capability, as Canberra toughens its military stance in response to rising regional tension. The investment will give Australia its largest navy since the second world war. The overhaul also comes as Australia, the UK, and US continue to implement the Aukus agreement that will deliver nuclear-powered submarines to the Pacific country for the first time.

Takeaways by Macro Roundup® AI

  1. Australia will more than double its naval fleet to 26 warships with an extra $7.2bn of investment, giving the country its largest navy since the Second World War.
  2. The Australian expansion includes 11 new frigates and six new large vessels with long-range missile capability, as Canberra toughens its military stance in response to China's military build-up in the Pacific.
  3. Australia's naval overhaul comes as Australia, the UK, and the US implement the Aukus agreement, which will deliver nuclear-powered submarines to Australia for the first time.

Related Articles:

  • Aukus Allies Unveil Plan to Supply Australia With Nuclear-Powered Submarines — The US, UK and Australia have unveiled a decades-long plan to supply Australia with nuclear-powered submarines, with the UK and Australia co-building a new design and each planning at least eight boats. Australia will also invest in US and UK shipyards to boost strained manufacturing capacity.
  • How War in Europe Boosts the U.S. Economy — Federal Reserve data show U.S. defense and space industrial production has risen 17.5% since Russia's full-scale invasion of Ukraine. U.S. officials say 64% of the $60.7bn earmarked for Ukraine will flow back to the U.S. defense industrial base, and the State Department reported over $80bn in major arms deals, about $50bn to European allies.
  • China’s Shipyards Are Ready for a Protracted War. America’s Aren’t — China produced more than half of the world's commercial shipbuilding output, while Europe accounts for about 5% and the US next to nothing, with most of the remainder built in South Korea and Japan. Analysts argue that in a protracted conflict China's wartime-scale yards could quickly accelerate production, replace lost ships, and repair damaged ones.
  • Security

The Tricking Up Excess Savings

AI Summary. Excess savings created by deficit-financed government transfers are projected to affect the economy for up to five years as they "trickle up" the wealth distribution toward households that spend less of each additional dollar. In a closed economy, these savings persist as households spend them unless the government pays down the debt behind the transfers.

Adrien Auclert, Matthew Rognlie and Ludwig Straub National Bureau of Economic Research
Date Posted:
February 21, 2024
Is Database:
Database

Excess savings from deficit-financed fiscal transfers influence the economy for up to 5 years as they trickle up to individuals with lower marginal propensities to consume.

How long do excess savings from deficit-financed transfers affect demand?

Core argument: Excess savings from deficit-financed fiscal transfers are expected to influence the economy for up to five years as they "trickle up" the wealth distribution toward households with lower marginal propensities to consume, prolonging the effect on aggregate demand.

Excess savings from deficit-financed fiscal transfers are expected to influence the economy for up to five years, as they gradually move up the wealth distribution to individuals with lower marginal propensities to consume (MPCs). This process, known as "trickling up," implies that the impact of these savings on aggregate demand is more prolonged than previously assumed. In a closed economy, unless the government reduces the debt used for these transfers, excess savings persist even as households spend them. Tight monetary policy can modestly accelerate this process by mitigating the effects on demand, but the duration of excess savings and their impact on output remains significantly longer than conventional wisdom suggests. The effect is particularly pronounced when MPCs are lower, highlighting the importance of understanding savings distribution in macroeconomic forecasting.

Takeaways by Macro Roundup® AI

  1. Excess savings from deficit-financed fiscal transfers are expected to influence the economy for up to five years as they "trickle up" the wealth distribution toward households with lower marginal propensities to consume, prolonging the effect on aggregate demand.
  2. In a closed economy, excess savings persist even as households spend them unless the government retires the debt used to finance the transfers.
  3. Tight monetary policy can modestly accelerate the drawdown of excess savings by mitigating their effects on demand, though their duration and output impact remain considerably longer than conventional wisdom assumes, particularly when marginal propensities to consume are lower.

Matt Rognlie @ludwigstraub @a_auclert argue that it will take up to five years for excess savings to work though the systems as individuals with higher marginal propensity to consume generate income for individuals with higher savings rates.

“…Deficit-financed fiscal transfers generate excess savings. One person’s spending is another person’s income. As we show, taking this fact into account implies that excess savings from debt-financed transfers have much longer-lasting effects than a naive calculation would suggest. In a closed economy, unless the government pays down the debt used to finance the transfers, excess savings do not go away as households spend them down. Instead, the effect of excess savings on aggregate demand slowly dissipates as they “trickle up” the wealth distribution to agents with lower MPCs. Tight monetary policy speeds up this process, but this effect is likely to be quantitatively modest. The partial equilibrium scenario summarizes the conventional wisdom according to which the effect of excess savings will dissipate in a few quarters. By contrast, our benchmark scenario suggests that these effects will stick around for roughly 5 years….”

Core of paper

“…Because excess savings and their distribution across the population intuitively matter for aggregate demand, economists have paid a considerable amount of attention to estimating both. In this paper, we provide a tractable Heterogeneous Agent New Keynesian model that explicitly maps the distribution of excess savings to the path of output, and that explains the process by which their effect dissipates. We use this framework to estimate the likely contribution of excess savings to aggregate spending in the coming years under various assumptions about the marginal propensities to consume (MPCs) of agents holding the savings and scenarios for monetary policy. Our framework recognizes that one person’s spending is another person’s income. As we show, taking this fact into account implies that excess savings from debt-financed transfers have much longer-lasting effects than a naive calculation would suggest. In a closed economy, unless the government pays down the debt used to finance the transfers, excess savings do not go away as households spend them down. Instead, the effect of excess savings on aggregate demand slowly dissipates as they “trickle up” the wealth distribution to agents with lower MPCs. Tight monetary policy speeds up this process, but this effect is likely to be quantitatively modest….”

Implication For US Economy Post-Pandemic

“…Table 1 summarizes our results by displaying the duration of output and excess savings for the middle class and the rich under each of our scenarios. The partial equilibrium scenario summarizes the conventional wisdom according to which the effect of excess savings will dissipate in a few quarters. By contrast, our benchmark scenario suggests that these effects will stick around for roughly 5 years. These numbers are larger if MPCs are lower, and are robust to plausible alternative calibrations. Rational expectations about the future boom make the response much larger on impact due to current spending out of anticipated income, which turns out to speed up the trickling up process. Tight monetary policy, on the other hand, also speeds up tickling up, but it does so by mitigating the effects of excess savings on demand. In either case, however, the duration of excess savings and output remains more than twice as long as the conventional wisdom suggests….”

Adrien Auclert, Matthew Rognlie and Ludwig Straub, “The Tricking Up Excess Savings,” National Bureau of Economic Research, January 2023, https://www.nber.org/papers/w30900

  • Inflation
  • GDP
    • Business Cycle

When few do great harm

AI Summary. Criminal offending is concentrated among a small share of offenders: Swedish data show 1% of individuals accounted for 63% of violent crime convictions, and in New York City 0.00386% of the population accounted for nearly a third of shoplifting arrests. The author argues targeting repeat offenders could substantially reduce crime.

Inquisitive Bird Patterns in Humanity
Date Posted:
February 21, 2024
Is Database:
Database

Criminal behavior follows a power law distribution, where a small fraction of offenders are responsible for a large portion of crimes.

Is crime concentrated among a small share of repeat offenders?

Core argument: Swedish data show 1% of individuals accounted for 63% of violent crime convictions and 0.12% accounted for 20%, illustrating a power law distribution in which a small fraction of offenders commit a large share of crimes.

Criminal behavior follows a power law distribution, where a small fraction of offenders are responsible for a large portion of crimes. For instance, Swedish data shows that 1% of individuals accounted for 63% of violent crime convictions, while 0.12% were responsible for 20%. In the UK, 70% of custodial sentences are given to those with at least seven prior convictions. In the US, 72.8% of federal offenders had previous convictions, averaging 6.1 prior offenses. In NYC, 0.00386% of the population accounted for nearly a third of shoplifting arrests in 2022. This pattern suggests that targeting repeat offenders could significantly reduce crime rates and associated economic costs, highlighting the potential benefits of focused criminal justice policies.

Takeaways by Macro Roundup® AI

  1. Swedish data show 1% of individuals accounted for 63% of violent crime convictions and 0.12% accounted for 20%, illustrating a power law distribution in which a small fraction of offenders commit a large share of crimes.
  2. In the UK, 70% of custodial sentences go to offenders with at least seven prior convictions, while in the US 72.8% of federal offenders had previous convictions, averaging 6.1 prior offenses.
  3. In New York City, 0.00386% of the population accounted for nearly a third of shoplifting arrests in 2022, a concentration suggesting that focusing enforcement on repeat offenders could reduce crime and its economic costs.

Inquisitive Bird summarizing data suggesting criminal activity has a power law distribution, “…perhaps the most illustrative study is by Falk et al. (2014), who used Swedish nationwide data of all 2.4 million individuals born in 1958-1980 and looked at the distribution of violent crime convictions. In short, they found that 1% of people were accountable for 63% of all violent crime convictions, and 0.12% of people accounted for 20% of violent crime convictions….”

Inquisitive Bird, "When few do great harm,"Patterns in Humanity, April 23, 2023, https://inquisitivebird.substack.com/p/when-few-do-great-harm

When few do great harm

I summarize some data illustrating how few number of criminals are responsible for a large fraction of crime.

While the terms “power law” or “Pareto distribution” have precise mathematical definitions, colloquially they have come to be used to convey an important fact: in many contexts, few account for much. For example, a small fraction of people hold a large fraction of overall wealth. Here I will consider it in the context of crime, where a small minority of repeat offenders are responsible for a large fraction of all crimes.

Criminal and delinquent behavior approximately follow such power laws. It is observed for arrests, convictions and even self-reported delinquent behavior. For example, Cook et al. (2004) compared convictions in a UK study and self-reported delinquency from a US dataset and found that both were well-described by a power law. Other UK data show that 70% of custodial sentences are imposed on those with at least seven previous convictions or cautions, and 50% are imposed on those with at least 15 previous convictions or cautions (Cuthbertson, 2017).

But perhaps the most illustrative study is by Falk et al. (2014), who used Swedish nationwide data of all 2.4 million individuals born in 1958-1980 and looked at the distribution of violent crime convictions. In short, they found that 1% of people were accountable for 63% of all violent crime convictions, and 0.12% of people accounted for 20% of violent crime convictions.

Below the mean number of convictions by percentile among offenders is illustrated, a very Pareto-like distribution. At the extremes there are people who are not merely arrested but convicted of 10, 20 or even more than 50 violent crimes. High-persistence criminals were almost all male, they typically started their first crime young, and very often had major mental disorders and substance use disorders.

When few do great harm: Extended Excerpt Image 1


Another notable fact: approximately half of violent crime convictions were committed by people who already had 3 or more violent crime convictions. In other words, if after being convicted of 3 violent crimes people were prevented from further offending, half of violent crime convictions would have been avoided. Other similar quantities are summarized in the table below.

When few do great harm: Extended Excerpt Image 2


America has a reputation of a very harsh penal system that is very quick to lock anyone up. It may then be the case that Americans are incarcerated long before they can rack up many crimes. But is this perception justified?

1 Pryor et al. (2018) find that 72.8% of federal offenders sentenced had been convicted of a prior offense. The average number of previous convictions was 6.1 among offenders with criminal history. More recently, Durose & Antenangeli (2023) used prison records to analyze arrest history of people admitted to state prison in the United States. The distribution of prior arrest counts is shown below.

When few do great harm: Extended Excerpt Image 3


Generally we are more concerned with how many people have a certain number of prior arrests or more. I converted the given numbers to such cumulative figures, which are illustrated below.

When few do great harm: Extended Excerpt Image 4


It is clear that people tend to have many arrests before being incarcerated. The data show, among persons admitted to state prison, more than 3 out of 4 have at least 5 prior arrests, including the arrest that resulted in their prison sentence. Going further into the tail: 46% (almost 1 in 2) had 10 or more prior arrests, 14% (1 in 7) had 20 or more prior arrests, and 5% (1 in 20) had 30 or more prior arrests. Indeed, having 30 or more prior arrests when admitted to state prison was more common than having no arrest other than the arrest that led to the prison sentence (i.e., 1 prior arrest). Further, it was more common to have 9 or more prior arrests than it was to have 8 or fewer.

In the original graph, “31 or more” is high because it is the aggregation of all arrest counts 31, 32, 33, and so on, until the largest existing number of prior arrests. To consider arrest numbers higher than 31, I used a simple extrapolation method

2. From this extrapolation I speculate that 1% of people admitted to state prison had approximately 46 or more prior arrests, and 1 in 1000 may have had as many as 64 or more prior arrests. The precise numbers, however, are not given in the report and these extrapolations should be taken with a grain of salt.

A different analysis by the National Institute for Criminal Justice Reform finds that for the crime of homicide: “Overall, most victims and suspects with prior criminal offenses had been arrested about 11 times for about 13 different offenses by the time of the homicide. This count only refers to adult arrests and juvenile arrests were not included.” Again, we see that homicide offenders typically have been arrested numerous times before they commit their first homicide.

The fact that a small minority is responsible for a large chunk of crime is true for shoplifting and burglaries as well, perhaps to an even greater extent. Data from New York City finds that a tiny number of shoplifters commit thousands of theft. The police stated that nearly a third of all shoplifting arrests in the city in 2022 involved just 327 people, who collectively were arrested and rearrested more than 6,000 times. Thus 0.00386% of New York City’s population (327 out of 8.468 million, 1 in ~26,000) accounted for nearly a third of all shoplifting arrests in the city. As illustrated by a different study, crime in New York City is not only disproportionately committed by few people, it also disproportionately affects specific local areas. They find that 14% of streets in the city produce 75% of property crime and 10% of streets produce 75% of violent crime.

A particular incident vividly illustrates of how few people can be responsible for a large fraction of crime. In Leinster, Ireland, the number of burglaries plummeted after three criminals died in a car crash. These three criminals together had more than 200 previous convictions.

An implication of the fact that most crimes are committed by repeat offenders is that there are more victims than offenders

3. More people get robbed than there are robbers, more victims of rape than there are rapists4, and so on. More generally, few people can cause great harm to society at large. Of course, the victims themselves experience this damage most directly. But the harms of crime extend beyond those directly affected. It is difficult to precisely estimate the financial costs of crime, however estimates are high (e.g., Wickramasekera et al., 2015; Anderson, 2021, Miller et al., 2021). Beyond direct tangible costs are also opportunity costs, including the value of institutions and services that people don’t have access to because of the prevalence of crime. The benefits of reducing crime, particular in the United States, are therefore great.

1 Lewis & Usmani (2022) show that, while the US has much higher incarceration rates than other highly developed nations, the incarceration rate is not necessarily very high relative to the rate of serious crime. On the other hand, they show that the nation is very under-policed, meaning a low number of police officers per-capita and particularly few on a per-crime basis.

2 I assumed that in the tail the frequency fell exponentially with increasing number of prior arrests by some rate r. Then I fitted r such that the entire distribution summed to 100% (the extrapolated tail filling the otherwise missing 4.6%). The real data along with the extrapolated estimates can be seen below.

When few do great harm: Extended Excerpt Image 5


3 In theory, you could have a situation where there are more offenders than victims, because certain incidents of crime can have multiple offenders. However, in practice the actual contribution of this to offender/victim counts pales in comparison to the number of crimes that are committed by repeat offenders (in a nontrivial amount of cases, offenders who commit dozens of crimes). For example, according to NCVS data, violent crime incidents have on average 1.2-1.3 offenders, just marginally above 1 (Table 6; Beck, 2021). On the other hand, the data I have summarized herein show the typical criminal will rack up many crimes (i.e., 5+), and a nonnegligible fraction of criminals will commit up to dozens of crimes. So it certainly remains true that there are more victims than offenders.

4 Occasionally regarding the issue of rape, activists rhetorically ask something like “Why does every woman know another woman that was raped but no man knows a rapist?” The most obvious explanatory factor is that people are unlikely to publicly acknowledge their own crimes; crimes often committed behind closed doors. But it is also because there legitimately are more victims than offenders, because of the extreme repeat offender phenomenon discussed in this post.

    Millennials are not as badly off as they think but success is bittersweet

    AI Summary. Millennials' inflation-adjusted per capita wealth closely mirrors that of baby boomers, but higher house prices and interest rates have cut their housing purchasing power in half relative to boomers. Millennial home ownership is 10% lower than boomers at the same age in the US and 23% lower in the UK.

    John Burn-Murdoch Financial Times
    Date Posted:
    February 21, 2024
    Is Database:
    Database

    Millennials’ inflation-adjusted per capita wealth closely mirrors that of boomers, yet the economic landscape has shifted, making their financial success bittersweet.

    Do millennials match earlier generations' wealth but not their housing power?

    Core argument: Millennials' inflation-adjusted per capita wealth closely mirrors that of boomers, but high interest rates and inflated house prices cut their housing purchasing power by half relative to boomers.

    Millennials' inflation-adjusted per capita wealth closely mirrors that of boomers, yet the economic landscape has shifted, making their financial success bittersweet. While millennials have achieved similar wealth levels, the real estate market presents a significant challenge. Boomers capitalized on a more affordable housing market, whereas millennials face high interest rates and inflated house prices, reducing their purchasing power by half compared to boomers. Despite being the most educated generation, with twice as many graduates as Gen X, millennials' income growth has not translated into higher home ownership. In the US, millennial home ownership is 10% lower than boomers at the same age, and in the UK, it is 23% lower. This disparity is more pronounced in expensive markets like New York and London, where even high-earning millennials struggle to buy homes. Thus, while millennials are not financially worse off than boomers, the timing and market conditions have hindered their ability to secure key assets like housing.

    Takeaways by Macro Roundup® AI

    1. Millennials' inflation-adjusted per capita wealth closely mirrors that of boomers, but high interest rates and inflated house prices cut their housing purchasing power by half relative to boomers.
    2. Millennial home ownership is 10% lower than boomers at the same age in the US and 23% lower in the UK, with the disparity more pronounced in expensive markets such as New York and London.
    3. Millennials are the most educated generation, with twice as many graduates as Gen X, yet their income growth has not translated into higher home ownership.

    John Burn Murdoch checks the pulse of millennials and finds that their inflation-adjusted per capita wealth is tracking boomers, but “boomers got there first and bought the best houses in a cheaper market.”

    Millennials are not as badly off as they think but success is bittersweet: Extended Excerpt Image 1


    “…Today, almost one in four US millennials — the cohort born between 1981 and 1997 — say their lives are materially worse than their parents’ were, a record high for any generation of Americans asked that question. If we compare inflation-adjusted per capita wealth within each generation over time, millennials are in fact almost perfectly tracing boomers’ footsteps. So, are millennials wrong to complain? I fear not. The per capita measure is a beautifully simple rejoinder, but it misses one crucial detail. Wealth accumulation — just like income — matters primarily to millennials today as a means to home ownership, especially as we move into an era of high interest rates. If we deflate wealth by the index of house prices instead of the CPI, millennials’ assets only go about half as far as boomers’ once did.We’re left with a smaller millennial deficit than the original chart implied, but a deficit nonetheless. Millennials have no less money in their thirties than boomers did at the same age — but boomers got there first and bought the best houses in a cheaper market…”

    John Burn-Murdoch, "Millennials are not as badly off as they think — but success is bittersweet,"Financial Times, April 6, 2023, https://www.ft.com/content/6f7d7522-42e9-43cb-bd73-36eee6681f3e

    Millennials are not as badly off as they think — but success is bittersweet

    For most of the past two centuries, if you asked a young adult in the west whether they had a better standard of living than their parents enjoyed at the same age, you would have been drowned out by a unity of yesses. More money, more things to spend it on, longer and healthier lives to look forward to.

    But that has all changed. Today, almost one in four US millennials — the cohort born between 1981 and 1997 — say their lives are materially worse than their parents’ were, a record high for any generation of Americans asked that question.

    On the other side of the Atlantic, almost half of the UK population says today’s youth will have a worse life than their parents, up from 13 per cent 20 years ago, according to an Ipsos Mori survey. The malaise is clearly deeply felt, but does it reflect reality? One statistic that is often wheeled out in support of the millennial plight is the wealth deficit. A widely shared chart from the US shows that young adults held only 3 per cent of US household wealth in 2019, while baby boomers owned 21 per cent at roughly the same age.

    At first glance it’s a slam dunk, but this example has a flaw, as first explained by Jeremy Horpedahl, an economist at the University of Central Arkansas. Boomers are so-called because they are a very large generation. At the time they held 21 per cent of the wealth, they made up almost twice as large a share of the adult US population as millennials do today. If we instead take Horpedahl’s suggestion and compare inflation-adjusted per capita wealth within each generation over time, millennials are in fact almost perfectly tracing boomers’ footsteps.

    Millennials are not as badly off as they think but success is bittersweet: Extended Excerpt Image 2


    So, are millennials wrong to complain? I fear not. The per capita measure is a beautifully simple rejoinder, but it misses one crucial detail. Wealth accumulation — just like income — matters primarily to millennials today as a means to home ownership, especially as we move into an era of high interest rates. If we deflate wealth by the index of house prices instead of the CPI, millennials’ assets only go about half as far as boomers’ once did. We’re left with a smaller millennial deficit than the original chart implied, but a deficit nonetheless.

    One area of undeniable progress is education. Millennials entered the labour market with more degrees under their belt than any generation before them, and they’re happy to acknowledge it. But where has this got them? Britain’s millennial workforce boasts twice as many graduates as Gen X at the same stage, yet its incomes are tracing exactly the same path. For boomers and Gen X, more education than their predecessors translated into higher incomes. For millennials these benefits are yet to emerge.

    Millennials are not as badly off as they think but success is bittersweet: Extended Excerpt Image 3


    And that leads us back to home ownership. Here we have a generation more educated than any before it, earning as much as any of its predecessors (and indeed on track to out-earn boomers in real terms). Yet in Britain, this translates into a home-ownership rate which lies 23 per cent below where boomers were at the same age, and 10 per cent lower in the US.

    Those aggregates mask significant differences beneath the surface, too. Degree-educated millennials in London are 41 per cent less likely to own a home than degree-educated boomers were at the same age. And if you think that’s bad, pity the non-graduate under-40s in London, just 20 per cent of whom own a home (among non-graduate boomers of the same age, 60 per cent were homeowners).

    Millennials are not as badly off as they think but success is bittersweet: Extended Excerpt Image 4


    It’s a similar story in the US. Outside the hottest graduate job markets, millennials have done fairly well at catching up with boomers on home-ownership. But in particularly expensive real estate markets such as New York and San Francisco, America’s most skilled and highest-earning generation cannot afford to put down roots in the way its parents did.

    Millennials are not as badly off as they think but success is bittersweet: Extended Excerpt Image 5


    By one definition, millennials have no less money in their thirties than boomers did at the same age — but boomers got there first and bought the best houses in a cheaper market. Millennials have done everything they were told to do, but the fruits of their labours are proving elusive.

    • Inequality
    • GDP
      • Housing
    • Workforce
      • Wages/Income

    Thursday, February 22, 2024

    High Childcare Costs Threaten Women’s Progress

    AI Summary. Prices for daycare and preschool have been rising faster than overall inflation, leaving families to choose between high costs, lower-quality care, fewer work hours, or leaving the workforce. Bank of America reports 16% of employees cut hours, 11% quit, and 9% turned down a promotion because of caregiving responsibilities.

    Taylor Bowley and David Michael Tinsley Bank of America
    Date Posted:
    February 22, 2024

    The average cost of childcare is up 32% from 2019, and the share of lower-income customers making childcare payments has dropped 13pp, suggesting the cost of childcare has forced lower-income mothers out of the labor force. @BankofAmerica

    Are rising childcare costs pushing workers to cut hours or quit?

    Core argument: Bank of America's 2023 Workplace Benefits Report found 16% of employees reduced work hours, 11% quit or left the workforce, and 9% turned down a promotion because of caregiving responsibilities.

    A lack of affordable childcare has likely long been a key driver in the workforce gender gap, but inflationary pressures in the childcare sector are only adding fuel to the fire. The Consumer Price Index showed that prices for daycare and preschool have been rising faster than the general rate of inflation over the past year. Facing these escalating costs, many families are often torn between spending a large portion of their paychecks on such care, finding lower-quality options, reducing work hours, or leaving the workforce altogether to become full-time caregivers. According to Bank of America’s 2023 Workplace Benefits Report, 16% of employees reduced their work hours, 11% quit or left the workforce and 9% turned down a promotion due to caregiving responsibilities. Plus, according to the Bureau of Labor Statistics, in January 2024 nearly 3.7% of part-time workers cited “childcare responsibilities” as the reason for not working full-time, up from 3.2% in 2019.

    Takeaways by Macro Roundup® AI

    1. Bank of America's 2023 Workplace Benefits Report found 16% of employees reduced work hours, 11% quit or left the workforce, and 9% turned down a promotion because of caregiving responsibilities.
    2. Bureau of Labor Statistics data show nearly 3.7% of part-time workers in January 2024 cited childcare responsibilities as the reason for not working full-time, up from 3.2% in 2019.
    3. Consumer Price Index data show daycare and preschool prices rising faster than the general inflation rate, leaving families choosing among costly care, lower-quality options, fewer work hours, or leaving the workforce.

    Related Articles:

    • Birth Rates Are Falling In The Nordics. Are Family-Friendly Policies No Longer Enough? — Falling Nordic birth rates are now driven by childlessness rather than smaller families, with roughly three-quarters of Finland's recent fertility decline attributable to people who have no children. Nearly 40% of Finnish men with low education are childless at 45, and most have no partners.
    • Rising Childcare Costs Starting to Bite — Bank of America internal data show average monthly household childcare payments have risen steadily over three years to more than $700, 32% above the 2019 average, with prices potentially rising further after a federal program subsidizing childcare providers expired. Over 12% of US households pay for childcare regularly, according to the Department of Health & Human Services.
    • Are Higher Child Care Wages Affecting the Labor Supply? — The labor force participation rate of partnered women with children rose 1.06 percentage points in a six-month span, and the authors estimate that rising child care worker wages held back an even larger increase. They suggest the greater availability of telecommuting jobs, which this group strongly prefers, may explain the rise despite higher child care prices.
    • Family/Marriage
    • Workforce
      • Unemployment/Participation

    The Age Of The Unicorn Is Over

    AI Summary. US venture capital investment totaled $170bn last year, half the 2021 level, and the number of new "unicorns"—private companies valued above $1bn—fell to 45 from 344 in 2021, according to PitchBook. Investors hold stakes in more than 700 unicorns worth a combined $2.4tn and are weighing how to sell them.

    Economist Staff The Economist
    Date Posted:
    February 22, 2024
    Is Database:
    Database

    In 2021 344 unicorns were minted; in 2023 only 45 new firms met that threshold. There are 700 unicorns with a valuation of $2.4T that have yet to IPO or be acquired.

    Has venture capital investment and unicorn creation fallen sharply since 2021?

    Core argument: U.S. venture capital firms invested $170bn last year, down by half from 2021, according to PitchBook, with investors especially wary of signing cheques at lofty valuations apart from exceptions such as OpenAI.

    Venture capital firms invested only $170bn in the country last year, down by half from 2021, according to PitchBook. Bar a few high-profile exceptions, such as Openai, investors have been especially wary of signing cheques at lofty valuations. Throughout the 2010s the number of unicorns—private companies with valuations above $1bn—soared in America. Fully 344 of them were minted in 2021. Last year’s figure was 45. Investors are mulling how to sell their stakes in the unicorns of yesteryear. With over 700 unicorns, at a combined valuation of $2.4trn, a sizeable amount of money is at stake.

    Takeaways by Macro Roundup® AI

    1. U.S. venture capital firms invested $170bn last year, down by half from 2021, according to PitchBook, with investors especially wary of signing cheques at lofty valuations apart from exceptions such as OpenAI.
    2. The number of new American unicorns—private companies valued above $1bn—fell to 45 last year from 344 minted in 2021, after climbing through the 2010s.
    3. More than 700 existing unicorns carry a combined valuation of $2.4trn, and investors are weighing how to sell their stakes in them.

    Related Articles:

    • High Interest Rates Crushed Startup Investment. Here Is What Could Revive It — U.S. venture funding for startups peaked above $300bn—more than double the prior year—before a series of steep interest-rate increases, the fastest in four decades, curbed appetite for risky startup bets and pushed funding down for a second straight year to $167bn.
    • It’s Mostly a Paper Moon: Alternative Investments Review — Venture capital financing has tightened: the median time between funding rounds has lengthened, more startups have shut down through bankruptcy, and the share of "down rounds" — new financing at a lower valuation — rose from 8% to nearly 20%, with those rounds cutting post-money valuations by more than 50%.
    • More Startups Throw in the Towel, Unable to Raise Money for Their Ideas — Venture firms' annual internal rate of return turned negative at -7%, the lowest since 2009, according to PitchBook Data, while U.S. startup funding fell 55% year over year to $37bn in a quarter. A prolonged depressed venture market pushes more startups toward shutting down.
    • Business Cycle
    • GDP
      • Financial Markets

    Japan’s Stock Market Is Back After 34 Years But The Country Is Deeply Changed

    AI Summary. Japan's economy grew an average of just 0.7% during the 2000s amid mild deflation, and the International Monetary Fund expects public debt to reach 256% of gross domestic product, up from 65% in 1989. Net profits at non-financial Japanese firms rose more than fourfold over that period, leaving ¥343tn in cash.

    Kana Inagaki and Leo Lewis Financial Times
    Date Posted:
    February 22, 2024
    Is Database:
    Database
    Is Important:
    Important

    The Nikkei 225 is back at its 1989 peak after 34 years. During that period Japan’s real per capita GDP fell to the lowest of its peers in the G7, and the mean age in Japan rose from 37.2 to 48.9.

    How has Japan's economy changed since its stock market peak?

    Core argument: Net profits of Japanese non-financial companies rose more than fourfold to ¥74tn ($493bn) from fiscal 1989 to fiscal 2022, while dividends paid to shareholders jumped eightfold to ¥32tn, according to finance ministry data.

    The Japanese economy entered a long period of stagnation during the 2000s, when the economy grew on average only 0.7%. As mild deflation continued, people stopped believing that prices or wages would go up. Debt has also risen. The IMF expects Japan’s ratio of public debt to gross domestic product to reach 256% in 2024, compared with 65% in 1989. In 1989, six of the world’s 10 richest people were Japanese. Now, only three Japanese people are ranked among the world’s top 100 billionaires. In terms of earnings, Japanese companies have emerged from the period of low growth with healthy balance sheets. According to finance ministry data, net profits generated by Japanese non-financial companies increased more than fourfold to ¥74tn ($493bn) from fiscal 1989 to fiscal 2022, while the amount of dividends they paid to shareholders jumped eightfold to ¥32tn during the same period. Decades of deflation and economic stagnation, however, have also sapped the appetite for investment, leaving companies sitting on a massive cash pile of ¥343tn. Roughly half of the companies listed in the top tier of the Tokyo bourse have undervalued stocks, with price-to-book ratios below one.

    Takeaways by Macro Roundup® AI

    1. Net profits of Japanese non-financial companies rose more than fourfold to ¥74tn ($493bn) from fiscal 1989 to fiscal 2022, while dividends paid to shareholders jumped eightfold to ¥32tn, according to finance ministry data.
    2. The IMF expects Japan's public debt to reach 256% of GDP in 2024, compared with 65% in 1989, after the economy grew on average only 0.7% during the 2000s amid mild deflation.
    3. Japanese companies hold a cash pile of ¥343tn after decades of deflation and stagnation sapped the appetite for investment, and roughly half of the firms listed in the Tokyo bourse's top tier have price-to-book ratios below one.

    Related Articles:

    • Japan’s Foreign Worker Tally Tops Two Million For First Time — Japan's foreign worker count reached about 2.05 million, the most on record, a 12.4% increase from a year earlier, according to the Labor Ministry. About three in five of the roughly 319,000 establishments employing non-Japanese staff have no more than 30 employees in total.
    • More Than 40% of Japanese Women May Never Have Children — Japan's National Institute of Population and Social Security Research projects that up to 42% of Japanese women may never have children, with a midpoint estimate of one-third and a more optimistic scenario of a quarter of women born in 2005. The institute projects childlessness as high as 50% among men.
    • The Wealth of Working Nations — Because of population aging, growth in GDP per capita and GDP per working-age adult have diverged across advanced economies; from 1998 to 2019 Japan's accumulated growth per working-age adult was 31.9% versus 29.5% in the US. The authors find a standard neoclassical growth model calibrated to each country's working-age population tracks output per working-age adult in most economies.
    • Financial Markets
    • GDP
      • Growth
    • Workforce
      • Demographics

    How Japan’s Nikkei 225 Got Its Mojo Back

    AI Summary. Japan's Nikkei 225 stock index has reclaimed the record peak it set more than 34 years ago, closing at 39,098.68, as global investors bet the country has escaped deflation and is on a path of sustainable growth. Gains in technology and chip-equipment shares drove the advance, with the index up over 16% since the start of the year.

    Hideyuki Sano, Yasufumi Saito, and Jin Wu Bloomberg
    Date Posted:
    February 22, 2024

    Overseas investors are driving Japanese financial markets, accounting for 70% of trading in the Topix Prime Index of stocks. Despite a 12% YTD rally, 42% of Topix stocks trade below their book value vs 3% of stocks in the S&P 500.

    Why have Japanese stocks reclaimed their record high after decades?

    Core argument: Japan's Nikkei 225 closed at 39,098.68 on Thursday, breaching the record set more than 34 years ago in a recovery that took longer than Wall Street's rebound from the crash that sparked the Great Depression.

    Japanese stocks have reclaimed the historic peak reached over 34 years ago as global investors pour money into a country they’re betting has finally escaped deflation and is headed on a path of sustainable growth. On Thursday, the Nikkei 225 closed at 39,098.68, finally breaching the previous record. The leap was driven by gains in technology shares and chip-gear producers after Nvidia’s blowout sales forecast. The epic come-back — it took even longer than Wall Street’s recovery from the crash that sparked the Great Depression — marks a rebirth for Japan’s share market. Warren Buffett boosted his holdings in Japan’s biggest companies, an endorsement that’s further increased the allure of Tokyo stocks. Since the start of 2024, the Nikkei has surged over 16%, beating most other major markets. The outperformance is even more striking over the past 12 months or so.

    Takeaways by Macro Roundup® AI

    1. Japan's Nikkei 225 closed at 39,098.68 on Thursday, breaching the record set more than 34 years ago in a recovery that took longer than Wall Street's rebound from the crash that sparked the Great Depression.
    2. The Nikkei has surged over 16% since the start of 2024, beating most other major markets, with the latest leap driven by technology shares and chip-gear producers after Nvidia's blowout sales forecast.
    3. Global investors are pouring money into Japan on bets the country has escaped deflation and is headed toward sustainable growth, and Warren Buffett's increased holdings in Japan's biggest companies have added to the allure of Tokyo stocks.

    Related Articles:

    • Japan: The Land of the Rising Profits — Japanese corporate ordinary profits as a share of GDP have roughly doubled compared with the "lost decades," with rising dividends and a further decline in household saving each accounting for about 40% of the improvement. The analysis attributes the fall in household saving to corporate deleveraging, which reduced firms' interest payments and thus household interest income.
    • One in 10 Japanese Now Aged Over 80, Population Report Shows — People aged over 80 account for more than 10% of Japan's population for the first time, and those over 65 reached a record 29.1%, making Japan the world's oldest country by that measure. The overall population fell by about half a million to 124.4m and is projected to drop below 109m by 2045.
    • US To Link Up With Taiwan and Japan Drone Fleets To Share Real-Time Data — The US, Taiwan and Japan plan to share real-time data from naval reconnaissance drones, with Taiwan's four MQ-9B Sea Guardian drones integrated into the same system used by US forces in the region and Japan's Self-Defense Force. The arrangement would let the US and its allies view the same drone-gathered information simultaneously.
    • Financial Markets
    • GDP
      • Growth
    • Workforce
      • Demographics

    Yale To Require Standardized Test Scores for Admissions

    AI Summary. Yale University will require standardized test scores for admission, becoming the second Ivy League school to abandon the test-optional policies widely adopted during the Covid pandemic. The number of students taking the SAT fell to 1.7m from 2.2m.

    Stephanie Saul New York Times
    Date Posted:
    February 22, 2024

    Joining Dartmouth and MIT Yale will again require applicants to submit standardized test scores for admission.

    Joining Dartmouth and MIT Yale will again require applicants to submit standardized test scores for admission.

    Are elite universities reinstating standardized testing requirements for admissions?

    Core argument: Yale University will require standardized test scores from students applying to enter in the fall of 2025, becoming the second Ivy League university to abandon the test-optional policies widely embraced during the Covid pandemic.

    Yale University will require standardized test scores for admission for students applying to enter in the fall of 2025, becoming the second Ivy League university to abandon test-optional policies that had been widely embraced during the Covid pandemic. The number of students taking the SAT dropped to 1.7 million in 2022, a decline from 2.2 million in 2020.

    Takeaways by Macro Roundup® AI

    1. Yale University will require standardized test scores from students applying to enter in the fall of 2025, becoming the second Ivy League university to abandon the test-optional policies widely embraced during the Covid pandemic.
    2. The number of students taking the SAT fell to 1.7 million in 2022 from 2.2 million in 2020.

    Related Articles:

    • Standardized Test Scores and Academic Performance at Ivy-Plus Colleges — Using admissions records and first-year grades at multiple Ivy-Plus colleges, the authors find SAT and ACT scores substantially predict college academic success even among students with the same high school grades, while high school grade point average does little to predict it. Conditional on test scores, students from lower- and higher-resourced high schools have virtually identical college grades.
    • Diversifying Society’s Leaders? The Determinants and Causal Effects of Admission to Highly Selective Private Colleges — Children from top-1% families are more than 2x as likely as middle-class students with comparable SAT/ACT scores to attend an Ivy-Plus college, with two-thirds of the gap attributable to higher admissions rates. The authors attribute this advantage to legacy preferences, weight on non-academic credentials, and athlete recruitment.
    • The Misguided War On The SAT — The National Assessment of Educational Progress, a nationwide test of elementary and middle school students with no test-prep industry around it, shows racial and economic gaps closely resembling those on the SAT and ACT. Researchers argue this indicates college admissions tests measure underlying learning, making score disparities a symptom rather than a cause of inequality.
    • Education
      • Test Scores


    Loading More Posts

    End of content

    No more pages to load

    © Copyright 2026 Coherent Research Institute · All Rights Reserved · Privacy · Terms