Edward Conard

Top Ten New York Times Bestselling Author

  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…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 represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “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 comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Friday, March 15, 2024

AI Summary. Private credit loans are negotiated bilaterally outside traditional regulatory requirements and are illiquid because no secondary market exists, leaving investors expected to hold them to maturity or face steep losses if they need to exit. Scarce data on this growing form of nonbank lending makes assessing its risks difficult.

Fang Cai and Sharjil Haque Federal Reserve Board
Date Posted:

Private credit has grown exponentially since 2000, reaching over $1.7T in June of 2023. @FederalReserve analysis suggests private credit raises overall corporate leverage, potentially increasing corporate sector vulnerability to financial shocks.

What makes private credit risks hard to assess?

Core argument: Private credit is growing rapidly as a frontier for nonbank lending, but the scarcity of available data makes assessing risks in this market difficult.

As private credit continues to grow rapidly as a new frontier for nonbank lending, the scarcity of available data has made it challenging to assess risks in this market. Private credit involves bilateral negotiation of terms and conditions without the need to comply with traditional regulatory requirements. These loans are illiquid due to the lack of a secondary market. There is limited market discovery, and investors acquiring these loans should expect to hold them to maturity or face steep losses in need of an emergency exit.

Takeaways by Macro Roundup® AI

  1. Private credit is growing rapidly as a frontier for nonbank lending, but the scarcity of available data makes assessing risks in this market difficult.
  2. Private credit involves bilateral negotiation of terms and conditions without the need to comply with traditional regulatory requirements.
  3. Private credit loans are illiquid because no secondary market exists, so investors should expect to hold them to maturity or face steep losses if they need an emergency exit.

Related Articles:

  • Trends In Private Markets Going Into 2024 — Global private capital assets under management total $13tn, less than 5% of global financing markets, against $103tn in outstanding fixed income, $101tn in equity market capitalization, and $98tn in banking sector balance sheets. Over the past decade private capital grew by $8tn, far less in absolute terms than fixed income ($42tn), equities ($35tn), and banking ($34tn).
  • Where Are All the Defaults? — One explanation for subdued high-yield bond spreads is that the lowest-quality borrowers, those most likely to default, have migrated from high-yield markets into private credit. Moody's reports the number of issuers with its lowest speculative-grade ratings has fallen, and that 62% of its rated universe is rated single-B or below.
  • How Private Credit Gives Banks a Run for Their Money — Private credit emerged as an alternative to banks as regulators tightened rules on risky lending by deposit-taking institutions, and now competes with mainstream lenders across businesses from real estate firms to tech startups. Closed-end private debt funds held roughly $1.6tn in assets globally, up from about $500bn at the end of 2015.

AI Summary. Artificial intelligence is projected to push datacenters to 4.5% of global electricity generation by 2030, with datacenter power capacity growth accelerating from a 12-15% annual rate to 25%. Global datacenter critical IT power demand is projected to rise from 49 gigawatts to 96 gigawatts, about 40 gigawatts of it for AI.

Dylan Patel, Daniel Nishball, and Jeremie Eliahou Ontiveros Semi Analysis
Date Posted:

Datacenters currently consume approximately 1.5% of global electrical generation. @dylan522p @dnishball forecast they will consume 4.5% by 2030 and “there is a real power crunch coming soon.”

How much will AI raise datacenter electricity demand?

Core argument: Global datacenter critical IT power demand is projected to nearly double from 49 GW in 2023 to 96 GW by 2026, with AI accounting for roughly 40 GW of that total.

The AI boom will indeed rapidly accelerate datacenter power consumption growth. We believe AI will propel datacenters to use 4.5% of global energy generation by 2030. Datacenter power capacity growth will accelerate from a 12-15% CAGR to a 25% CAGR over the next few years. Global Datacenter Critical IT power demand will surge from 49 Gigawatts (GW) in 2023 to 96 GW by 2026, of which AI will consume ~40 GW. In reality, the buildout is not this smooth and there is a real power crunch coming soon.

Takeaways by Macro Roundup® AI

  1. Global datacenter critical IT power demand is projected to nearly double from 49 GW in 2023 to 96 GW by 2026, with AI accounting for roughly 40 GW of that total.
  2. AI is expected to push datacenters to consume 4.5% of global energy generation by 2030, with power capacity growth accelerating from a 12–15% CAGR to a 25% CAGR.
  3. The datacenter buildout is not expected to proceed smoothly, with a power crunch approaching.

Related Articles:

  • Electricity 2024 — More than 8,000 data centers operate globally, with about 33% in the United States, 16% in Europe, and close to 10% in China. US data center electricity use is projected to rise from roughly 200 TWh in 2022, about 4% of US electricity demand, to almost 260 TWh, or 6% of total demand.
  • Data Centres Curbed as Pressure Grows On Electricity Grids — The International Energy Agency reports that data center energy use is growing rapidly in the US, home to a third of the world's 8,000 data centers, and in China, which has a tenth, and projects that global electricity consumption from data centers, cryptocurrencies, and artificial intelligence could double over a four-year span.
  • Microsoft Infrastructure – AI & CPU Custom Silicon Maia 100, Athena, Cobalt 100 — Microsoft has planned annual datacenter spending of more than $50bn, which exceeds the annual spend of megaprojects such as nationwide rail networks, dams, and the Apollo moon program. The buildout is aimed at accelerating artificial general intelligence and extending generative AI from productivity applications to leisure.

AI Summary. Japanese companies including Honda, Nippon Steel, and ANA Holdings granted workers their largest pay rise in more than three decades, with economists expecting large firms to give unionised workers average increases above 4%, up from 3.6% the prior year. The increases strengthen the case for the Bank of Japan to begin raising interest rates.

Kana Inagaki Financial Times
Date Posted:

Japan might be successfully reflating. While real wages in Japan are just above their 2000 level, Japanese workers are now seeing the largest annual real wage gains in thirty years.

Do rising Japanese wages strengthen the case for higher interest rates?

Core argument: Economists expect Japan's large companies to grant unionised workers average wage increases of more than 4% in the shunto spring negotiations, up from 3.6% last year and the biggest rise since 1992.

Japanese companies including Honda, Nippon Steel, and ANA Holdings have granted workers their biggest pay rise in more than three decades, underlining the inflationary trend and bolstering the case for the Bank of Japan to begin raising interest rates. Galvanised by the sharp rise in living costs and a deepening labour shortage, the country’s trade unions have negotiated an increase in wages that is certain to exceed the rate of inflation, marking a milestone in a country where real wages have stagnated since the late 1990s. With the shunto spring wage negotiations mostly concluding on Wednesday, economists expect large companies to give their unionised workers an average wage increase of more than 4%, compared with 3.6% last year. That would be the biggest rise since 1992. Nippon Steel agreed to an 11.8% increase in base salary, exceeding its trade union’s request for the biggest jump in monthly pay since 1979.

Takeaways by Macro Roundup® AI

  1. Economists expect Japan's large companies to grant unionised workers average wage increases of more than 4% in the shunto spring negotiations, up from 3.6% last year and the biggest rise since 1992.
  2. Nippon Steel agreed to an 11.8% base salary increase, exceeding its trade union's request for the largest jump in monthly pay since 1979.
  3. Wage increases negotiated at Japanese firms including Honda, Nippon Steel and ANA Holdings are set to exceed the rate of inflation, bolstering the case for the Bank of Japan to begin raising interest rates.

Related Articles:

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

AI Summary. Consumer spending has not weakened in the way a soft household employment survey would imply, which challenges the near-consensus view that fundamental factors keep the neutral interest rate very low and that a high policy rate is therefore inappropriate for an economy at full employment with inflation near target.

Brad DeLong Project Syndicate
Date Posted:

.@delong notes that long-term real rates are 2pp higher than their pre-pandemic level with little contractionary effect on the economy, and suggests that the neutral rate may have risen.

.@delong notes that long-term real rates are 2pp higher than their pre-pandemic level with little contractionary effect on...

Is the neutral interest rate still as low as assumed?

Core argument: The near-consensus since the start of the pandemic holds that fundamental factors keep the neutral interest rate very low and that those fundamentals have not materially changed, implying the current high policy rate is inappropriate for an economy at full employment with inflation near target.

The near consensus since the start of the pandemic has been that there are powerful fundamental factors keeping the neutral interest rate very low, and that there have been no major changes to those fundamentals. The neutral rate therefore should still be very low, implying that the high policy rate is inappropriate to an economy at full employment with inflation near its target. If the labor market is as weak as the household survey suggests, that weakness should have already shown up in consumer spending. It has not. This leaves the possibility of a faulty analysis [suggesting a persistently low neutral rate.]

Takeaways by Macro Roundup® AI

  1. The near-consensus since the start of the pandemic holds that fundamental factors keep the neutral interest rate very low and that those fundamentals have not materially changed, implying the current high policy rate is inappropriate for an economy at full employment with inflation near target.
  2. Labor market weakness of the magnitude suggested by the household survey should already have appeared in consumer spending, and it has not.
  3. The absence of the expected weakness in consumer spending leaves open the possibility that the analysis pointing to a persistently low neutral rate is faulty.

Related Articles:

  • Data Update 3 for 2024: A Rule-breaking Year for Interest Rates — Central bank influence on interest rates is strongest at the shortest maturities and decays at longer ones, so long-term rates are better understood through the Fisher decomposition of a nominal rate into expected inflation plus an expected real rate. Assuming the expected real rate converges on real economic growth yields an "intrinsic risk-free rate" estimated as inflation plus real growth.
  • 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.
  • Has the U.S. Economy Transitioned to a Higher Long-Run Real Interest Rate Regime? — Labor productivity growth in the U.S. nonfarm business sector has exceeded its longer-run average in three of the past five years, suggesting a possible shift to a faster productivity growth regime. Such a shift is one possible explanation for a long-run neutral real interest rate above 2%.

AI Summary. Surveys and interviews find that Generation Z adults—those born in 1997 or later—report more disillusionment than any other living generation, doubting they will ever earn enough to reach the security of earlier generations and citing delayed adulthood, unaffordable housing, and student debt. That pessimism contrasts with entry into a historically strong labor market.

Andrew Restuccia and Eliza Collins Wall Street Journal
Date Posted:

According to a WSJ survey of Gen Z Americans (18-27) a cohort of 41mm are “feeling more disillusioned than any living generation before them.”

Are young adults the most disillusioned generation despite a strong labor market?

Core argument: Generation Z Americans, those born in 1997 or after, have emerged from the pandemic more disillusioned than any living generation before them, according to long-running surveys and interviews with dozens of young people across the country.

Young adults in Generation Z—those born in 1997 or after—have emerged from the pandemic feeling more disillusioned than any living generation before them, according to long-running surveys and interviews with dozens of young people around the country. They worry they’ll never make enough money to attain the security previous generations have achieved, citing their delayed launch into adulthood, an impenetrable housing market, and loads of student debt. The pessimistic mood contrasts with what in many ways are relatively healthy economic circumstances. Many millennials—those born between 1981 and 1996—started careers around the 2007-09 recession. Gen Z workers are entering the labor market during a historically strong stretch.

Takeaways by Macro Roundup® AI

  1. Generation Z Americans, those born in 1997 or after, have emerged from the pandemic more disillusioned than any living generation before them, according to long-running surveys and interviews with dozens of young people across the country.
  2. Gen Z young adults worry they will never earn enough to attain the security previous generations achieved, citing a delayed launch into adulthood, an impenetrable housing market, and heavy student debt.
  3. Gen Z's pessimism contrasts with relatively healthy economic circumstances, as Gen Z workers enter the labor market during a historically strong stretch, while many millennials, born between 1981 and 1996, started careers around the 2007-09 recession.

Related Articles:

Monday, March 18, 2024

AI Summary. Slowing wage growth across all three major US wage measures is consistent with a soft landing in which inflation returns to 2% without a recession. Forward-looking measures based on wage surveys and posted wages in job ads point to further slowing toward roughly 3½%, an estimated sustainable pace.

Jan Hatzius Goldman Sachs
Date Posted:

Jan Hatzius @GoldmanSachs raised his 2024 core PCE forecast to 2.4% and expects 75bps of cuts this year. GS’s wage growth tracker has slowed down to 3.5%, consistent with the 2% inflation target and 1.5% productivity growth.

Does slowing wage growth signal inflation returning to 2% without recession?

Core argument: Average hourly earnings rose 0.1% in February, with January revised down to 0.5%, keeping the downward trend in the year-on-year rate intact.

The US economy is still on track for a soft landing, defined as a return of inflation to 2% without a recession. The ongoing slowdown in wage growth fits well into this picture. It is visible across all three of the major wage measures. The employment cost index continued to slow meaningfully in Q4 (although Q1 won't be available until April 30). Average hourly earnings grew just 0.1% in February while January was revised down to 0.5%, keeping the downward trend in the year-on-year rate intact. And over the past two months, the Atlanta Fed wage growth tracker—which measures year-on-year changes in individual wages in the household survey—ran at the lowest rate since 2021. Moreover, forward-looking measures suggest that the slowdown has further to run. Both our wage survey tracker and the Indeed wage tracker—which is based on posted wages in job ads—are already consistent with a slowdown to 3½%, our estimate of sustainable wage growth at 2% inflation and 1½% productivity growth.

Takeaways by Macro Roundup® AI

  1. Average hourly earnings rose 0.1% in February, with January revised down to 0.5%, keeping the downward trend in the year-on-year rate intact.
  2. The Atlanta Fed wage growth tracker, which measures year-on-year changes in individual wages in the household survey, ran at its lowest rate since 2021 over the past two months, while the employment cost index slowed meaningfully in Q4.
  3. Forward-looking measures, including Goldman Sachs' wage survey tracker and the Indeed wage tracker based on posted wages in job ads, are consistent with a slowdown to 3½%, the firm's estimate of sustainable wage growth at 2% inflation and 1½% productivity growth.

Related Articles:

  • How Fast Can the Fed Ease? The Private Sector Response to Easier Conditions Will Be a Key Factor — US households have reduced debt over the past 20 years, leaving room to borrow more if incentives improve, while companies that issued debt at low rates hold large liquidity and healthy balance sheets. That gives businesses capacity to raise investment, and business surveys indicate capital-spending sentiment is already improving.
  • U.S. Inflation Surged in January. Is It a Fluke? — Quarterly growth in the Employment Cost Index has slowed continuously and now runs roughly 1 percentage point faster on an annualized basis than just before the pandemic, while hourly private-sector pay growth has stayed stable. Despite the normalization of job-market churn, both measures of pay gains remain much faster than pre-pandemic.
  • Macro Outlook 2024: The Hard Part Is Over — Goldman Sachs projects limited recession risk, holding a 15% US recession probability, and expects tailwinds to global growth including strong real household income growth, a smaller drag from monetary and fiscal tightening, recovering manufacturing, and central banks more willing to cut rates if growth slows. It projects core inflation falling to 2–2½%.

AI Summary. Shelter costs make up about 30% of the consumer price index, and their monthly inflation appears to be stabilizing above pre-pandemic rates rather than delivering the disinflation forward-looking data had implied. The author suggests this may be related to a surge in migration, estimated at 3.3m migrants in a year.

Joseph Wang Fed Guy Blog
Date Posted:
Is Database:
Database

.@FedGuy12 argues that the recent surge of at least 3.3mm immigrants is putting upward pressure on housing costs which make up 30% of the CPI, creating a challenge to the 2% target.

Is a surge in migration keeping shelter inflation elevated?

Core argument: Shelter inflation, which accounts for around 30% of CPI, was widely expected based on forward-looking data to slow or fall into outright deflation and become a major contributor to disinflation.

Shelter inflation accounts for around 30% of CPI and was widely anticipated to slow or even fall into outright deflation. Shelter inflation surged post-pandemic, but was widely expected based on forward looking data to become a major contributor to disinflation. That disinflation has stalled in recent months as monthly shelter inflation appears to be stabilizing at a rate clearly above that seen pre-pandemic. This may potentially be related to the surge to migration [an estimated 3.3 million migrants in 2023], as the housing market is unlikely to be elastic enough to accommodate the unexpected appearance of millions of people. Note that some research also attributes the continued strength in U.S. job growth and consumer spending to the surge in migration.

Takeaways by Macro Roundup® AI

  1. Shelter inflation, which accounts for around 30% of CPI, was widely expected based on forward-looking data to slow or fall into outright deflation and become a major contributor to disinflation.
  2. Shelter disinflation has stalled, with monthly shelter inflation appearing to stabilize at a rate clearly above its pre-pandemic pace.
  3. The stalled shelter disinflation may relate to an estimated 3.3 million migrants in 2023, as the housing market is unlikely to be elastic enough to accommodate millions of people; some research also attributes continued U.S. job growth and consumer spending to that migration surge.

Related Articles:

  • New Immigration Estimates Help Make Sense Of The Pace Of Employment — The Congressional Budget Office estimates net immigration was 3.3m in 2023, versus the 1m it had projected, implying faster population and labor force growth than currently reported. The authors estimate this raised real economic growth by about 0.1 percentage point and, by lifting both production and demand, added little price or wage pressure.
  • The Demographic Outlook: 2024 to 2054 — The Congressional Budget Office projects the US population will grow from 342mm in 2024 to 383mm in 2054, an average 0.4% a year — less than half the 0.9% pace of the prior five decades. Immigration accounts for about 70% of growth over the next decade and for all population growth beginning in 2040.
  • Immigrants & Their Kids Were 70% of U.S. Labor Force Growth Since 1995 — U.S. labor force data show immigrants accounted for 49% of labor force growth over roughly the past three decades and their children another 21%, together about 70% of an increase of nearly 32.8m workers. Immigrants rose from about 10% to 18% of the labor force, and immigrants plus their children from 18% to 29%.

AI Summary. Measured using the 1970s-era method, which treated home purchase prices and mortgage interest rates as the cost of housing rather than the current approach based on rental costs, the recent inflation episode would have registered higher than the worst of the 1970s. The change in measurement complicates comparisons of inflation across time.

John Cochrane The Grumpy Economist
Date Posted:

.@JohnHCochrane comments on @LHSummers’ new working paper on inflation which accounts for interest costs. “[Their] new way is closer to right, if the question is to measure changes in the cost of living right now for the average person.”

Does housing measurement make recent inflation look lower than the 1970s?

Core argument: Measured with the 1970s methodology, the recent bout of inflation would exceed the worst of the 1970s, according to the author's recomputation.

If we measured inflation as we did in the 1970s, the recent bout of inflation would have been even higher than the worst of the 1970s! No wonder the deplorables are ungrateful for Bidenomics, is essentially the author’s point, though quantified and much more politely stated. The main difference is that the old measure counts the price and interest rate you have to pay to buy a new house as the cost of the house, while the new measure is based on what it costs to rent a house. You can see that the new and old methods are the same in the initial run up of inflation starting in 2021, but then the new measure shoots up when the Fed raised interest rates. But the change in measurement makes it hard to compare over time. It would be nice to recompute the old data with new measurement. But when you can’t do that, computing new data with the old measurement is a nice way to compare over time on an even basis.

Takeaways by Macro Roundup® AI

  1. Measured with the 1970s methodology, the recent bout of inflation would exceed the worst of the 1970s, according to the author's recomputation.
  2. The older measure treated the purchase price and interest rate paid on a new house as the cost of housing, while the newer measure is based on what it costs to rent.
  3. The two measures move together during the inflation run-up beginning in 2021 and diverge after the Federal Reserve raised interest rates, a change in measurement that the author says makes comparison over time difficult.

Related Articles:

  • The Cost of Money is Part of the Cost of Living: New Evidence on the Consumer Sentiment Anomaly — Variation in the University of Michigan consumer sentiment index that inflation and unemployment cannot explain is strongly correlated with growth in consumer borrowing costs, such as mortgage and car loan rates. The authors estimate that including interest payments and homeownership costs in the consumer price index would raise measured inflation from 3% to 9%.
  • Americans Are Suddenly a Lot More Upbeat About the Economy — The University of Michigan's consumer sentiment survey recorded a 29% rise over two months, the largest two-month increase since 1991. The improvement was broad-based across consumers of different ages, incomes, education levels, and regions.
  • 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. Using disaggregated price data, the author estimates that industry-specific shocks to goods whose supply cannot easily expand raise overall inflation through cost-push price wedges. Constructing a counterfactual inflation rate that would have prevailed had monetary policy kept output at potential allows consumer price inflation to be decomposed into components driven by the output gap and by these relative price shocks.

Elisa Rubbo National Bureau of Economic Research
Date Posted:

Elisa Rubbo finds that consumer price inflation in 2020 was due to industry-specific supply bottlenecks, while since 2021 excess aggregate demand has played an approximately equal role.

How much of inflation comes from sector shocks versus demand?

Core argument: The author argues that industry-specific shocks to inelastically supplied goods raise aggregate inflation through a cost-push shock that shows up as a price wedge.

Industry specific shocks to inelastically supplied goods increase aggregate inflation through a cost-push shock [showing up as] a price wedge. I construct the counterfactual consumer price inflation rate which would have prevailed had monetary policy closed the output gap at all periods. The difference between actual and counterfactual inflation is a measure of the component of inflation due to non-zero output gaps, accounting for their effect through inflation expectations and the price wedges χ. Figure 4 shows a decomposition of consumer price inflation between January 2019 and July 2022. The dark rust line is the official CPI [and the lighter orange line is the core PCE]. The bright orange line plots the component of the CPI due to the aggregate output gap. The dark blue bars instead represent the component of CPI inflation driven by exogenous shocks to the relative price wedges. All inflation series are normalized to zero in January 2020.

Takeaways by Macro Roundup® AI

  1. The author argues that industry-specific shocks to inelastically supplied goods raise aggregate inflation through a cost-push shock that shows up as a price wedge.
  2. The author constructs a counterfactual consumer price inflation rate that would have prevailed had monetary policy closed the output gap in all periods, treating the difference from actual inflation as the component attributable to non-zero output gaps, including effects through inflation expectations and price wedges.
  3. The decomposition of consumer price inflation from January 2019 to July 2022 separates the component driven by the aggregate output gap from the component driven by exogenous shocks to relative price wedges, with all inflation series normalized to zero in January 2020.

Related Articles:

  • What We’ve Learned About Inflation — Fiscal theory holds that a one-time $5tn fiscal expansion produces a one-time rise in the price level sufficient to inflate away $5tn of debt value, after which inflation stops even if the Federal Reserve does nothing. Raising interest rates lowers current inflation at the cost of more-persistent inflation, a beneficial smoothing.
  • Fiscal Arithmetic and the Global Inflation Outlook — Across advanced economies, core inflation is significantly positively associated with growth in government debt since the start of the pandemic, and the authors expect this decade's fiscal expansions to shift price levels permanently higher. They argue this differs from permanently higher inflation, projecting inflation to diminish as temporary deficits normalize, with medium-term inflation expectations still anchored near central bank targets.
  • 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.

AI Summary. Among school districts with similar poverty levels, remote learning was associated with greater declines in student achievement, and a district-level analysis found community poverty rates and the length of school closures had roughly equal effects on outcomes. For each week spent remote, students in poor districts experienced steeper math losses than peers in richer districts.

Sarah Mervosh, Claire Cain Miller, and Francesca Paris New York Times
Date Posted:
Is Database:
Database

The more time students spent in pandemic-related remote learning, the more they underperformed. The mean drop in math scores for 3rd through 8th grades in 2022 for mostly in-person was .35 years behind and for mostly remote .57 years behind. @NYTimes

Did remote learning worsen achievement losses most in poor districts?

Core argument: Among districts with similar poverty levels, remote learning was associated with greater declines in student achievement, according to a district-level analysis led by Stanford's Sean Reardon with Harvard economist Thomas Kane.

Looking at districts with similar poverty levels, remote learning was associated with greater declines [in achievement]. A community’s poverty rate and the length of school closures had a “roughly equal” effect on student outcomes, said Sean Reardon, a professor of poverty and inequality in education at Stanford, who led a district-level analysis with Thomas Kane, an economist at Harvard. But the combination — poverty and remote learning — was particularly harmful. For each week spent remote, students in poor districts experienced steeper losses in math than peers in richer districts. That is notable, because poor districts were also more likely to stay remote for longer. Some of the country’s largest poor districts are in Democratic-leaning cities that took a more cautious approach to the virus.

Takeaways by Macro Roundup® AI

  1. Among districts with similar poverty levels, remote learning was associated with greater declines in student achievement, according to a district-level analysis led by Stanford's Sean Reardon with Harvard economist Thomas Kane.
  2. Sean Reardon said a community's poverty rate and the length of school closures had "roughly equal" effects on student outcomes, with the combination of poverty and remote learning particularly harmful.
  3. For each week spent remote, students in poor districts experienced steeper math losses than peers in richer districts, and poor districts were also more likely to stay remote longer, with some of the largest in Democratic-leaning cities.

Related Articles:

  • Students Are Making a ‘Surprising’ Rebound From Pandemic Closures. But Some May Never Catch Up — An analysis of standardized test data led by Stanford and Harvard researchers finds elementary and middle-school students have regained about a third of pandemic learning losses in math and a quarter in reading. Because poorer districts lost more ground initially, the typical poor district remains nearly half a grade level behind, versus about a fifth for rich districts.
  • NAEP Long-Term Trend Assessment Results: Reading and Mathematics — U.S. national assessment scores for 13-year-olds declined 4 points in reading and 9 points in mathematics from the prior assessment, and 7 and 14 points respectively compared with a decade earlier. Mathematics declines were larger for lower-performing students (12–14 points) than for middle- and higher-performing students (6–8 points).
  • Parents Don’t Understand How Far Behind in School Their Kids Are — The authors calculate that the average student fell half a year behind in math and a third of a year behind in reading. Students in the poorest 10% of districts lost three-quarters of a year in math, more than double the decline in the richest districts, with reading declines half as large.

AI Summary. Brazil's industry ministry has opened at least half a dozen investigations into alleged dumping of Chinese industrial products, spanning metal sheets, pre-painted steel, chemicals and tyres. Brazilian steelmakers have asked for tariffs of 9.6% to 25% on imported steel, as Brazil's steel and iron imports from China rose from $1.6bn to $2.7bn.

Bryan Harris, Joe Leahy, and A. Anantha Lakshmi Financial Times
Date Posted:

Brazil has joined Mexico and the EU in launching a series of anti-dumping investigations in response to a surge of Chinese exports, as the PRC seeks to drive its economy through increased exports.

Are rising Chinese imports triggering anti-dumping probes in Brazil?

Core argument: Brazil's industry ministry has opened at least half a dozen anti-dumping investigations in the past six months into Chinese industrial products spanning metal sheets, pre-painted steel, chemicals and tyres, at the request of industry bodies.

Brazil’s industry ministry has launched a number of investigations into the alleged dumping of industrial products by China as Latin America’s largest economy reels from a wave of cheap imported goods. At the request of industry bodies, the ministry has in the past six months opened at least half a dozen probes on products ranging from metal sheets and pre-painted steel to chemicals and tyres. Brazilian steelmakers have requested the government slap tariffs of between 9.6% and 25% on imported steel products. Overall imports of steel and iron from China rose from $1.6bn in 2014 to $2.7bn last year.

Takeaways by Macro Roundup® AI

  1. Brazil's industry ministry has opened at least half a dozen anti-dumping investigations in the past six months into Chinese industrial products spanning metal sheets, pre-painted steel, chemicals and tyres, at the request of industry bodies.
  2. Brazilian imports of steel and iron from China rose from $1.6bn in 2014 to $2.7bn last year.
  3. Brazilian steelmakers have asked the government to impose tariffs of between 9.6% and 25% on imported steel products.

Related Articles:

  • China’s Record Manufacturing Surplus — China's manufacturing trade surplus has reached about 2% of world GDP, exceeding the peak surpluses of export powerhouses like Japan and Germany, and shows no signs of shrinking as policy continues to emphasize advanced manufacturing capacity. The main offsetting manufactured-goods deficit is in the United States rather than commodity exporters.
  • China’s Excess Savings Are A Danger — China's current account surplus of 4% of GDP is larger in global terms than its 2007 peak of 10%, because its share of the world economy at market prices rose from 6% to 17%. Sustaining that surplus would require China to fund deficits in smaller developing countries.
  • China’s Plan to Reshape World Trade On Its Own Terms — Countries covered by China's free trade agreement network took about 38% of its merchandise exports, roughly $1.3tn out of some $3.43tn shipped worldwide over a 12-month period. That free trade footprint exceeds the total worldwide exports of the Netherlands or Japan, the world's fourth- and fifth-biggest exporters.

AI Summary. China is adding more chip-making capacity than the rest of the world combined, all in mature nodes, backed by government incentives worth more than $150bn, according to research consultancy Gavekal Dragonomics. Utilization rates for mature-node chip producers have fallen from nearly 100% to 65–75%, leaving India's $11bn semiconductor push facing an already well-supplied market.

Megha Mandavia Wall Street Journal
Date Posted:

China is expected to add more legacy chipmaking capacity than the rest of the world combined in 2024, creating a risk that indigenous chipmaking efforts in India will be stillborn.

Does China's mature-node chip expansion undercut India's semiconductor ambitions?

Core argument: China will add more chip-making capacity in 2024 than the rest of the world combined — one million more wafers a month than in 2023, all at mature nodes — according to Gavekal Dragonomics.

When India’s largest conglomerate, Tata Group, broke ground on a $11 billion semiconductor factory this week, Prime Minister Narendra Modi said the country was poised to become a world leader in the sector. He might be in for a rude awakening. China, is pouring capital into legacy chip making on a breathtaking scale. China will add more chip-making capacity than the rest of the world combined in 2024, according to research consulting firm Gavekal Dragonomics: one million more wafers a month than in 2023—all mature nodes. China’s aggressive expansion comes at a time when the market for legacy chips is already well supplied. Utilization rates for producers of mature-node chips have fallen from nearly 100% in 2020 to 65-75% at present, according to Gavekal. China’s government incentives—worth more than $150 billion—will help producers absorb losses. But India would struggle to shower such a capital-intensive infant industry with that kind of cash, especially given its already high government debt and enormous funding needs for infrastructure in general.

Takeaways by Macro Roundup® AI

  1. China will add more chip-making capacity in 2024 than the rest of the world combined — one million more wafers a month than in 2023, all at mature nodes — according to Gavekal Dragonomics.
  2. Utilization rates for mature-node chip producers have fallen from nearly 100% in 2020 to 65–75% at present, according to Gavekal, as China expands into an already well-supplied legacy chip market.
  3. Chinese government incentives worth more than $150 billion will help domestic producers absorb losses, while India's high government debt and infrastructure funding needs would make comparable support difficult, as Tata Group breaks ground on an $11 billion semiconductor factory.

Related Articles:

  • The US-China Chip War is Escalating — China's imports of chipmaking equipment have reached record highs, with purchases rising from Japan, the Netherlands, and Singapore alongside a rebound in imports from the United States, as Chinese manufacturers work to indigenize chip production. Chinese government and military buyers have obtained some NVIDIA A100 and H100 chips that US sanctions were designed to block.
  • China AI & Semiconductors Rise: US Sanctions Have Failed — China's Kirin 9000S is a better-designed, leading-edge chip than the West realizes, developed without access to extreme ultraviolet lithography or cutting-edge US intellectual property, indicating existing export controls have not worked. The authors argue only decisive, full-scale measures—not half measures—could prevent China from mass-manufacturing chips needed for high-end military applications.
  • China Imports Record Amount of Chipmaking Equipment — Chinese customs data show semiconductor production tool imports reached nearly $5bn over two months, up 70% from $2.9bn a year earlier, a record high. Most of the equipment came from the Netherlands and Japan, which have imposed export restrictions on chipmaking equipment alongside the US.