Edward Conard

Top Ten New York Times Bestselling Author

  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Wednesday, May 1, 2024

AI Summary. The authors estimate that immigration to the US over 2000-2019 raised wages of natives with a high school degree or less by 1.7% to 2.6%, a period when that group's real wages fell by 5% to 6%. Effects on more-educated natives ranged from -0.5% to +0.7%, with an overall average effect of +0.5% to +0.8% that was not statistically significant.

Alessandro Caiumi and Giovanni Peri National Bureau of Economic Research
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Between 2000 and 2019 a @giov_peri @ale_caiumi analysis finds immigration had a positive 1.7-2.6% impact on US non-college workers’ wages, as high-skilled immigrant labor complemented low-skilled native labor.

Does immigration raise or lower wages for less-educated native workers?

Core argument: The 2000–2019 immigrant inflow is estimated to have raised wages of natives with a high school degree or less by 1.7%–2.6%, attributed to immigrants' concentration among the college-educated and complementarity between college- and non-college-educated workers.

Three findings emerge from columns (1) to (4) of Table 9.  First, due to the relative concentration of new immigrants among college-educated and the complementarity between college- and non-college-educated, the immigrant inflow of 2000-2019 helped the wage growth of less-educated natives (those with high school degree or less) by between 1.7% and 2.6%. This represents a significant boost in real wages, especially considering that the real wage growth of this group during the 2000-2019 period was actually negative, between -5% to -6%. Second, in spite of the large inflow of college-educated immigrants, the complementarity between immigrants and natives, attenuated or reversed most  of the competition effect for the groups with some college education or a college degree. As a result, they also experienced between no and small effects (between -0.5% and +0.7%). Third, the average effect on wages of natives was small, overall positive (+0.5% to +0.8%) and not statistically significant.

Takeaways by Macro Roundup® AI

  1. The 2000–2019 immigrant inflow is estimated to have raised wages of natives with a high school degree or less by 1.7%–2.6%, attributed to immigrants' concentration among the college-educated and complementarity between college- and non-college-educated workers.
  2. Real wage growth for less-educated natives was negative over 2000–2019, between -5% and -6%, against which the estimated 1.7%–2.6% immigration effect represents a significant boost.
  3. Estimated effects on natives with some college or a college degree ranged from -0.5% to +0.7%, as complementarity between immigrants and natives attenuated or reversed most of the competition effect, while the average effect on native wages was a statistically insignificant +0.5% to +0.8%.

Related Articles:

  • Monopsony, Efficiency, and the Regularization of Undocumented Immigrants — A study of France's amnesty program, which regularized undocumented workers making up 2.0% of workers in Paris and nearly 1% nationwide, finds positive effects on employment and wages, particularly for male, low-skill workers. The authors argue regularization reduces employers' wage-setting power in the undocumented labor market, and estimate a rise in total French GDP of around 1%.
  • The Unexpected Compression: Competition at Work in the Low Wage Labor Market — Labor market tightness produced an unexpected compression in the US wage distribution, with disproportionate wage growth at the bottom reducing the college wage premium and reversing nearly 40% of the rise in 90-10 wage inequality since 1980. The authors attribute this in part to increased competition for low-wage workers.
  • Without Immigrants, US Working-Age Population Would Shrink — All net US employment growth since early 2020 has been among foreign-born workers, and without immigration the US working-age population would be shrinking — a pattern likely to persist for the rest of the decade. The jump in immigration appears to be enabling a soft landing that most economists had thought impossible.

AI Summary. Net migration into the rich world has surged, with annual inflows of 3.3m to America, 1.9m to Canada, 1.2m to Britain and 740,000 to Australia — record levels in each. While new arrivals boost total output, they appear to be dragging down output per person, which fell 2% in a year in Canada.

Economist Staff The Economist
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The rich world is in the midst of an unprecedented migration boom, with foreign-born populations growing at 4%/year, double the 2010s rate. Lower-skilled immigrants are driving down GDP per capita in Australia, Britain, and Canada.

Does surging immigration raise total output while lowering output per person?

Core argument: Net migration to America reached 3.3m last year, almost four times typical 2010s levels, while Canada took in 1.9m immigrants, Britain 1.2m and Australia 740,000 — records in each country.

The rich world is in the midst of an unprecedented migration boom. Last year 3.3m more people moved to America than left, almost four times typical levels in the 2010s. Canada took in 1.9m immigrants. Britain welcomed 1.2m people and Australia 740,000. In each country the number was greater than ever before. For Australia and Canada net migration is more than double pre-covid levels. In Britain, the intake is 3.5x that of 2019. Although new arrivals are clearly boosting GDP, they appear to be dragging down GDP per person. GDP per person has fallen or failed to grow for four consecutive quarters in Australia and seven in Britain. In Canada, where the drop in the measure is most pronounced, output per person fell by 2% in 2023. This reflects a shift in the type of immigration. For instance, whereas before the Covid-19 pandemic immigrants to America were as likely to have a bachelor’s degree as their local-born peers, today’s newcomers are more likely to have trekked from poor parts of Latin America and lack the right to legally work. About 2.4m people entered America last year by illegally crossing the country’s southern border.

Takeaways by Macro Roundup® AI

  1. Net migration to America reached 3.3m last year, almost four times typical 2010s levels, while Canada took in 1.9m immigrants, Britain 1.2m and Australia 740,000 — records in each country.
  2. GDP per person has fallen or failed to grow for four consecutive quarters in Australia and seven in Britain, and Canadian output per person fell by 2% in 2023, even as new arrivals boost overall GDP.
  3. Immigrants to America were as likely as locally born peers to hold a bachelor's degree before the Covid-19 pandemic, whereas today's newcomers more often come from poor parts of Latin America and lack the right to work legally, with about 2.4m crossing the southern border illegally last year.

Related Articles:

  • Without Immigrants, US Working-Age Population Would Shrink — All net US employment growth since early 2020 has been among foreign-born workers, and without immigration the US working-age population would be shrinking — a pattern likely to persist for the rest of the decade. The jump in immigration appears to be enabling a soft landing that most economists had thought impossible.
  • 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.
  • 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.

AI Summary. US private sector union workers' wages rose 6.3% over 12 months, the largest increase in Bureau of Labor Statistics employment cost data going back to 2001, while nonunion private sector pay rose 4.1%, not much above inflation.

Alexandre Tanzi Bloomberg
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US private sector union workers’ wages rose 6.3% y/y – the largest increase since 2001, outpacing non-union workers’ 4.1% bump, which barely exceeded inflation.

Are union workers' wages rising faster than nonunion workers' pay?

Core argument: Private sector union workers' wages rose 6.3% in the year ended March, the largest increase in Bureau of Labor Statistics employment cost data going back to 2001.

Unionized workers in the US saw record raises, while nonunion workers’ pay barely beat inflation over the past 12 months, the latest government data show. Wages of private sector union workers rose 6.3% in the year ended in March, the largest increase in data back to 2001, according to Bureau of Labor Statistics employment cost figures released Tuesday. Meanwhile, non-union workers in the private sector saw a 4.1% bump in their salaries over the past 12 months, not much higher than inflation.

Takeaways by Macro Roundup® AI

  1. Private sector union workers' wages rose 6.3% in the year ended March, the largest increase in Bureau of Labor Statistics employment cost data going back to 2001.
  2. Nonunion private sector workers saw a 4.1% pay increase over the same 12 months, not much higher than inflation, according to Bureau of Labor Statistics figures.

Related Articles:

  • Pettis On American Labor Unions — Strong labor unions are incompatible with a global trading system in which countries that subsidize domestic production externalize those costs through large, persistent trade surpluses, according to this argument. The US must either reform that system or unilaterally limit its economy's role in absorbing global savings and production imbalances.
  • American Labor’s Real Problem: It Isn’t Productive Enough — U.S. manufacturing output per hour has grown about 0.2% a year since 2009, below the overall economy and peer economies in Europe and Asia except Japan, with motor vehicle manufacturing productivity falling 32% from 2012 through last year. Unlike warehouses and hospitals, manufacturers face foreign competition and cannot pass higher labor costs to customers.
  • Union Voters Could Be Decisive in 2024 — A declining union share of the electorate and weaker Democratic performance among union households have made Michigan, Pennsylvania, and Wisconsin more competitive, with white voters without college degrees making up majorities of the electorate in all three states. Unionized white non-college voters were less likely to back Trump than their non-union counterparts.

AI Summary. Bank of America internal data show the share of its customers receiving income from gig platforms reached 3.8% on a three-month moving average, above the prior peak, after stalling and then resuming an uptrend. Ridesharing has driven the increase and is now the largest gig category, while social commerce and delivery shares have moderated.

Joe Wadford and David Tinsley Bank of America
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A record 3.8% of @BankofAmerica customers received income from gig platforms in March, led by ridesharing, while delivery remains below late 2021 levels. This mirrors the pivot in consumer spending towards out-of-home services vs in-home goods.

Is the share of workers earning gig income rising?

Core argument: The three-month moving average share of Bank of America customers receiving gig platform income via direct deposit or debit card reached 3.8% in March 2024, above the prior peak in early 2022, according to Bank of America internal data.

Gig employment continues to increase. The three-month moving average of the share of Bank of America customers who received income from gig platforms through direct deposits or debit cards was 3.8% in March 2024, above the previous peak in early 2022. While gig employment stalled through 2022 as wage gains attracted workers to more traditional forms of employment, there was a renewed uptrend starting in spring 2023, according to Bank of America internal data. Bank of America data also shows that ridesharing has driven overall gig employment (Exhibit 2) over the past year and is now the gig type with the largest share of workers. Conversely, the share of Bank of America customers earning income from social commerce and deliveries has moderated since December 2021. This mirrors the pivot in consumer spending towards out-of-home services and away from in-home services and goods, with more people eating out, for example, rather than ordering in.

Takeaways by Macro Roundup® AI

  1. The three-month moving average share of Bank of America customers receiving gig platform income via direct deposit or debit card reached 3.8% in March 2024, above the prior peak in early 2022, according to Bank of America internal data.
  2. Gig employment stalled through 2022 as wage gains drew workers into more traditional employment, with a renewed uptrend beginning in spring 2023, according to Bank of America internal data.
  3. Ridesharing has driven overall gig employment over the past year and is now the gig type with the largest worker share, while the shares earning from social commerce and deliveries have moderated since December 2021, Bank of America data show.

Related Articles:

  • For Lower-Income Workers, Recent Economic Gains Endure — Economists expect low-income workers' wage gains to hold rather than reverse, citing a solid economy, retirements, a premium for in-person work and less exposure to job displacement from artificial intelligence. Research found inflation-adjusted wages rose most for the lowest-paid 20% of workers and fell only for the top 20%.
  • Just How Bad Is the US Cost-of-Living Squeeze? We Did the Math — It now takes $119.27 to buy what $100 purchased before the pandemic, with prices rising about as much since early 2020 as in the preceding decade. Groceries and electricity are each up 25% since January 2020, used cars 35%, auto insurance 33%, and rents roughly 20%.
  • Gig Work Back In Favor As Wages Slide — Bank of America internal data show the share of its customers receiving income from gig platforms rose to 3% from 2.7%, an increase concentrated in ridesharing and younger workers. An increased supply of ridesharing gig workers has driven average monthly ridesharing gig pay down.

AI Summary. China's push for self-sufficiency began in the mid-2000s, and its reliance on global supply chains for inputs into its products has declined alongside that strategy, alongside a doctrine of "comprehensive national security" spanning the economy and society. Analysts argue China now gauges national power in military capacity rather than purely economic terms, making manufacturing central.

Joe Leahy Financial Times
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Zhiwu Chen of HKU argues that increased domestic consumption in China is unlikely as CCP leadership no longer measures national power in economic terms, “but more importantly, in terms of military…capacity.”

Does China prioritize manufacturing and security over boosting consumer spending?

Core argument: China's drive for self-sufficiency began in the mid-2000s, long before Donald Trump's trade war, and its reliance on global supply chains for inputs into its products has decreased in line with that strategy.

The drive for self-sufficiency started in the mid-2000s, long before Donald Trump began his trade war. China’s reliance on global supply chains for inputs into its products has decreased in line with this strategy. In 2014, Xi introduced the concept of “comprehensive national security” encompassing multiple aspects of the economy and society, according to the EU Chamber report. “This has been going on for at least about 8-10 years,” says Zhiwu Chen, chair professor of finance at the University of Hong Kong, of China’s shift to an industrial policy that takes into account “war preparation”. Chen says China no longer measures its “national power” in purely economic terms “but more importantly, in terms of military . . . capacity. And this is why manufacturing is very important.”

Takeaways by Macro Roundup® AI

  1. China's drive for self-sufficiency began in the mid-2000s, long before Donald Trump's trade war, and its reliance on global supply chains for inputs into its products has decreased in line with that strategy.
  2. Xi Jinping introduced "comprehensive national security" in 2014, a concept spanning multiple aspects of the economy and society, according to the EU Chamber report.
  3. Zhiwu Chen, chair professor of finance at the University of Hong Kong, says China has spent at least 8-10 years shifting to an industrial policy that accounts for "war preparation" and measures national power by military capacity, not purely economic terms.

Related Articles:

  • Why Xi Can No Longer Brag About the Chinese Economy — China's shipyards build 46% of the world's ships, letting it produce several warships and submarines a year, while the U.S. holds under 1% of capacity and its Navy faces late, over-budget deliveries from a few yards lacking workers. China is also the largest drone producer.
  • 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.
  • What Will It Take for China’s GDP to Grow at 4–5 Percent Over the Next Decade? — China accounts for 18% of global GDP, 13% of global consumption, and 31% of global manufacturing. The author estimates that if China grew 4–5% annually for a decade while keeping manufacturing's role in its economy, its share of global manufacturing would reach 36–39%, requiring the rest of the world to let manufacturing's share of its output fall by 0.5–1.0pp.

AI Summary. The 1,114-megawatt Unit 4 reactor at Georgia's Plant Vogtle entered commercial operation, completing an 11-year expansion that brings the plant's capacity to nearly 5 gigawatts and makes it the largest US nuclear plant. No nuclear reactors are currently under construction in the United States, where nuclear supplies about 19% of electricity.

Slade Johnson Energy Information Administration
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Georgia Power’s Vogtle Unit 4, originally scheduled for 2017, entered commercial operations in March. Including Vogle Unit 3, the 2.4GW expansion cost over $30B, vs an initial estimate of $14B; nuclear plants account for 19% of US electrical production.

Has the largest US nuclear plant completed its long-running expansion?

Core argument: Plant Vogtle's 1,114 MW Unit 4 entered commercial operation after connecting to the grid in March 2024, completing an 11-year expansion that brings the Georgia plant's total capacity to nearly 5 GW.

Georgia Power announced this week that the 1,114-megawatt Unit 4 nuclear power reactor at Plant Vogtle near Waynesboro, Georgia, entered into commercial operation after connecting to the power grid in March 2024. The commercial start of Unit 4 completes the 11-year expansion project at Plant Vogtle. No nuclear reactors are under construction now in the United States. Vogtle Unit 3 began commercial operation in July 2023. The plant’s first two reactors, with a combined 2,430 MW of nameplate capacity, began operations in 1987 and 1989. The two new reactors bring Plant Vogtle’s total generating capacity to nearly 5 gigawatts making Vogtle’s four units the largest nuclear power plant in the United States. With a total installed capacity of about 97 GW, the largest commercial nuclear generating fleet of any country is located in the United States. The fleet of operating nuclear power reactors accounted for nearly 19% of domestic electricity production in 2023, making nuclear the second-largest source of U.S. electricity generation after natural gas, which accounted for 43% of electricity generation in the United States last year.

Takeaways by Macro Roundup® AI

  1. Plant Vogtle's 1,114 MW Unit 4 entered commercial operation after connecting to the grid in March 2024, completing an 11-year expansion that brings the Georgia plant's total capacity to nearly 5 GW.
  2. Plant Vogtle's four units form the largest nuclear power plant in the United States, combining reactors that began operating in 1987 and 1989 with Unit 3, which started commercial operation in July 2023.
  3. The United States hosts the largest commercial nuclear fleet of any country at about 97 GW of installed capacity, supplying nearly 19% of domestic electricity in 2023, second to natural gas at 43%, with no reactors under construction.

Related Articles:

  • Bill Gates’ TerraPower Plans To Build First US Next-Generation Nuclear Plant — TerraPower, founded by Bill Gates, plans to seek a US construction permit for its Natrium reactor, which is cooled with liquid sodium rather than water, at a first plant in Kemmerer, Wyoming. The company says the reactors could be built for about half the cost of standard water-cooled reactors.
  • Electravision — The fossil fuel share of global primary energy is falling about 0.40% per year, matching the pace of decarbonization during the 1973–1988 nuclear buildout, though total carbon dioxide emissions have not declined because energy consumption keeps rising. Renewable energy is used almost exclusively for the electricity grid, with little penetration in industry and transport.
  • The Good, the Bad and the Ugly — Dominion Energy, which serves 6m customers, has raised its projected power needs for the coming decade, attributing the change to data center demand. McKinsey, BCG, and S&P Global all expect US power demand to grow 13%-15% annually through 2030, and rising transformer costs alongside electrification could make electricity scarcer.

Thursday, May 2, 2024

AI Summary. Administrative data on over 350,000 men each in Finland and Norway show a convex relationship between earnings rank and cognitive ability measured by military conscription tests: top-percentile earners score about 1 standard deviation above median earners, who score about 0.5 above bottom-percentile earners. The lowest scores are almost absent among top earners.

Bernt Bratsberg, Ole Rogeberg and Marko Terviö European Sociological Review
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The top-earning men in Finland and Norway score 1 standard deviation higher in cognitive ability than median earners. The ability curve is steepest at the top of the earnings range. @MarkoTervio @olerogeberg

Does cognitive ability rise more steeply among top earners?

Core argument: Men in the top earnings percentile in Finland and Norway score on average 1 standard deviation higher on military conscription cognitive tests than median earners, while median earners score about 0.5 standard deviation above the bottom percentile.

We document a convex relationship between earnings rank and cognitive ability [measured by military conscription scores] for men in Finland and Norway using administrative data on over 350,000 men in each country: the top earnings percentile score on average 1 standard deviation higher than median earners, while median earners score about 0.5 standard deviation higher than the bottom percentile of earners. Top earners also have substantially less variation in cognitive test scores. While some high-scoring men are observed to have very low earnings, the lowest cognitive scores are almost absent among the top earners. Overall, the joint distribution of earnings rank and ability is very similar in Finland and Norway. We find that the slope of the ability curve across earnings ranks is steepest in the upper tail, as is the slope of the earnings curve across cognitive ability.

Takeaways by Macro Roundup® AI

  1. Men in the top earnings percentile in Finland and Norway score on average 1 standard deviation higher on military conscription cognitive tests than median earners, while median earners score about 0.5 standard deviation above the bottom percentile.
  2. Top earners in Finland and Norway show substantially less variation in cognitive test scores, with the lowest scores almost absent among them, even though some high-scoring men have very low earnings.
  3. Administrative data on over 350,000 men in each country show the joint distribution of earnings rank and cognitive ability is very similar in Finland and Norway, with the ability and earnings slopes steepest in the upper tail.

Related Articles:

  • The Plateauing of Cognitive Ability Among Top Earners — Measured cognitive ability plateaus at higher wage levels, flattening around an annual wage of about €60,000 ($64,200) at under one standard deviation above average. The authors find no significant ability differences across the top three income percentiles, even though top-percentile earners make more than double those in the 98th percentile.
  • Toward An Understanding Of The Returns To Cognitive Skills Across Cohorts — The authors find that the estimated decline in labor market returns to pre-labor-market cognitive skills for white men across two U.S. youth cohorts depends critically on the widening and increased left-skewness of the test-score distribution, with declines appearing only at the lower end of that distribution.
  • Why Do Wages Grow Faster for Educated Workers? — College graduates sort into professional, non-routine occupations where wages rise much more with job tenure, and the author estimates this occupational sorting explains at least half of the life-cycle growth in the college wage premium. That premium is estimated at 22% at age 26, 49% at age 40, and 56% at age 60.

AI Summary. U.S. nominal economic growth has remained in a stable range of roughly 5.5–6% a year, with nominal GDP, consumer spending, domestic income, and private final domestic demand all growing at rates near that pace across recent periods.

Matt Klein The Overshoot
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. @M_C_Klein argues that the US economy has settled into a 5.5-6% annual nominal growth rate since mid-2022, a range proposed by @LHSummers in 2018. While this may imply inflation above 2%, he views this as a desirable outcome.

Is U.S. nominal growth holding steady near 6% a year?

Core argument: U.S. nominal GDP rose 6.2% from 2022Q3–2023Q3 and grew at a 5% yearly rate from 2023Q3–2024Q1, keeping the economy in the ~5.5–6% nominal growth trend it has occupied since mid-2022.

The latest batch of data for 2024Q1 confirms that, whether by accident or by design, the U.S. economy remains settled in the stable ~5.5-6% yearly nominal growth trend it has occupied since mid-2022. From 2022Q3-2023Q3, nominal GDP rose 6.2%, nominal consumer spending rose by 5.6%, the currently available components of nominal net domestic income rose by 4.9%, and nominal private final domestic demand net of depreciation rose by 5.1%. From 2023Q3-2024Q1, NGDP grew at a yearly rate of 5%, consumer spending rose by 5.6% annualized, NDI excluding corporate profits and net interest paid by business rose at a yearly rate of 5.9%, and NNDP excluding inventories, trade, and government spending rose by 6.1% annualized. Some breakdowns accelerated slightly, some decelerated slightly, and some stayed the same, but the overall picture is one of stability in the Summers (2018) target range.

Takeaways by Macro Roundup® AI

  1. U.S. nominal GDP rose 6.2% from 2022Q3–2023Q3 and grew at a 5% yearly rate from 2023Q3–2024Q1, keeping the economy in the ~5.5–6% nominal growth trend it has occupied since mid-2022.
  2. Nominal consumer spending rose 5.6% from 2022Q3–2023Q3 and at a 5.6% annualized rate from 2023Q3–2024Q1.
  3. Nominal net domestic income excluding corporate profits and net interest paid by business grew at a 5.9% yearly rate from 2023Q3–2024Q1, while nominal net domestic product excluding inventories, trade, and government spending grew 6.1% annualized, within the Summers (2018) target range.

Related Articles:

  • Global Views: Friendly Baseline, Greater Risks — Despite upside inflation surprises, the authors argue the broader disinflation narrative remains intact, citing a labor market that continues to rebalance: a jobs-workers gap of 2.0m, a quits rate below pre-pandemic levels, and wage growth running just over 4% year-on-year. They expect wage growth to converge to 3.5%, the pace they estimate is consistent with 2% inflation.
  • Parsing the 2024 Inflation Rebound — Average pay for most workers is rising about 4.5–5% a year, roughly 1.5–2pp faster than the pre-pandemic average, implying an underlying inflation trend about 1–2pp above the pre-pandemic pace absent a surge in productivity or saving. Earlier one-off drops in consumer goods prices held measured inflation below that trend and appear to have ended.
  • 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.

AI Summary. Developed countries rarely formally default on domestic debt, instead managing liabilities through surprise inflation and financial repression, but a high debt burden is generally detrimental to economic growth. Wealthy households have investment options that cushion such adjustments, while low- and middle-income citizens tend to bear the brunt of the costs.

Ken Rogoff Project Syndicate
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.@krogoff notes that governments can use high inflation or extended periods of financial repression to manage excessive debt burdens, but low and middle-income people tend to bear the costs.

Who bears the cost when governments manage high debt without defaulting?

Core argument: Developed countries rarely formally default on domestic debt, often managing liabilities through surprise inflation and financial repression, though a high debt burden is generally detrimental to economic growth.

While developed countries rarely formally default on their domestic debt – often resorting to other tactics like surprise inflation and financial repression to manage their liabilities – a high debt burden is generally detrimental to economic growth. To be fair, there is also no need to panic about public debt, at least in advanced economies. Occasional bouts of high inflation or extended periods of financial repression are not catastrophic. But it is important to emphasize that while wealthy people have access to a range of investment options that enable them to cushion the impact of such financial adjustments, low- and middle-income citizens tend to bear the brunt of the costs. In short, government debt can be a valuable tool for addressing myriad economic challenges. But it is not – and has never been – a free lunch.

Takeaways by Macro Roundup® AI

  1. Developed countries rarely formally default on domestic debt, often managing liabilities through surprise inflation and financial repression, though a high debt burden is generally detrimental to economic growth.
  2. Wealthy people have access to a range of investment options that cushion the impact of such financial adjustments, while low- and middle-income citizens tend to bear the brunt of those costs.
  3. Government debt can be a valuable tool for addressing myriad economic challenges, but it has never been a free lunch, even as public debt in advanced economies warrants no panic.

Related Articles:

  • The Long Term Budget Outlook: 2024 to 2054 — The Congressional Budget Office projects the federal budget deficit will reach 8.5% of gross domestic product over a 30-year horizon, with outlays rising to 27.3% of GDP and revenues to 18.8%. The projected growth is attributed to rising interest costs, large sustained deficits excluding interest, and spending on federal health care programs, particularly Medicare.
  • Living with High Public Debt — High public debt ratios are likely to persist because large sustained primary budget surpluses are politically unrealistic, real interest rates are already very low, faster global growth is hard to engineer, inflation is not a sustainable route to reducing debt, and financial repression is less feasible amid liberalized markets.
  • Did the U.S. Really Grow Out of Its World War II Debt? — Decomposing U.S. debt-to-GDP movements, the authors find the post-World War II decline from 106% to a trough of 23% was explained mostly by primary budget surpluses and interest-rate distortions from surprise inflation and pegged nominal rates; absent those, the ratio would have fallen only to 74%.

AI Summary. The US has become a magnet for illegal immigration, with millions crossing the southern border and overwhelming public services in border states and northern cities. By some estimates, the current per capita level of illegal immigration into the US is 5x the surge of refugees and migrants Germany admitted, which triggered a populist backlash in Europe.

Michael Boskin Project Syndicate
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Michael Boskin notes that on a per capita basis, the current level of illegal immigration into the US is 5x the 2015-16 illegal immigration surge that drove a populist backlash across Europe.

Is illegal immigration overwhelming public services and driving voter discontent?

Core argument: Per capita illegal immigration into the US is, by some estimates, five times greater than the 2015–16 influx of refugees and migrants that Angela Merkel welcomed into Germany and Europe, a decision the author argues led to a populist backlash.

While the United States does need workers, it has become a magnet for illegal immigration. In the absence of a more robust immigration system that favors needed skills and includes careful vetting, millions of illegal entrants are crossing the southern border, because the Biden administration refuses to do what is needed to police it. This influx has become a massive political issue that is tearing the country apart and overwhelming public services, not just in border states but also in northern cities. For perspective, consider that the current (per capita) level of illegal immigration into the US is, by some estimates, five times greater than the surge of refugees and migrants that Chancellor Angela Merkel welcomed into Germany and hence Europe in 2015-16 – a fateful decision that led to the populist backlash that much of Europe is still enduring.

Takeaways by Macro Roundup® AI

  1. Per capita illegal immigration into the US is, by some estimates, five times greater than the 2015–16 influx of refugees and migrants that Angela Merkel welcomed into Germany and Europe, a decision the author argues led to a populist backlash.
  2. The author argues the Biden administration refuses to police the southern border, allowing millions of illegal entrants to cross in the absence of an immigration system that favors needed skills and includes careful vetting.
  3. The influx of illegal entrants is overwhelming public services in border states and northern cities alike, becoming a political issue the author says is tearing the country apart even as the US needs workers.

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  • Immigration Is Surging, With Big Economic Consequences — Net migration into the rich world has surged, with annual inflows of 3.3m to America, 1.9m to Canada, 1.2m to Britain and 740,000 to Australia — record levels in each. While new arrivals boost total output, they appear to be dragging down output per person, which fell 2% in a year in Canada.
  • Without Immigrants, US Working-Age Population Would Shrink — All net US employment growth since early 2020 has been among foreign-born workers, and without immigration the US working-age population would be shrinking — a pattern likely to persist for the rest of the decade. The jump in immigration appears to be enabling a soft landing that most economists had thought impossible.

AI Summary. Japan's Chinese resident population reached about 822,000, up 60,000 from a year earlier. Prospective Chinese buyers of Japanese property must move money out of China, which limits outflows, and secure visas—available to those investing at least $32,000 in a Japanese business with an office and two or more employees.

Miho Inada Wall Street Journal
Date Posted:

The number of Chinese residents of Japan grew almost 8% in 2023 to 822,000, as rich Chinese continue to emigrate to the West.

Are wealthy Chinese moving to Japan and buying property there?

Core argument: Japan hosted about 822,000 Chinese residents as of the end of last year, an increase of 60,000 from the prior year and the biggest jump in recent years.

Japan had about 822,000 Chinese residents as of the end of last year, up 60,000 from the previous year in the biggest jump in recent years. Chinese people who want to move to Japan and buy an apartment or house generally face two challenges: getting their money into Japan and getting a visa. China restricts how much its residents can take out of the country, but many Chinese buyers own companies with international operations or have overseas investments. As for the visa, people who invest the equivalent of at least $32,000 in a Japanese business that has a permanent office and two or more employees can get a business management visa. Other Chinese obtain a visa for what Japan describes as high-level specialists in business, technology, or academia.

Takeaways by Macro Roundup® AI

  1. Japan hosted about 822,000 Chinese residents as of the end of last year, an increase of 60,000 from the prior year and the biggest jump in recent years.
  2. Chinese buyers seeking Japanese property face China's limits on how much money residents can take out of the country, though many own companies with international operations or hold overseas investments.
  3. Japan grants a business management visa to those investing at least the equivalent of $32,000 in a Japanese business with a permanent office and two or more employees, while other Chinese arrivals obtain visas as high-level specialists in business, technology, or academia.

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  • 2023 Letter — Rising numbers of Chinese nationals are being apprehended at the US-Mexico border, with US officers encountering around 1,000 in one month early in the year and nearly 5,000 by November. Most Chinese emigrants leave through legal means, going primarily to Singapore, Japan, and Thailand.
  • Living Outside China Has Become More Like Living Inside China — About 10.5m people living outside China are or once were Chinese citizens, a diaspora exceeded only by India's, Russia's, and Mexico's. Chinese citizens received more than 70% of 81,000 American investor visas issued to dollar-millionaires over a decade, and 18% of China's nearly 900 dollar-billionaires now live abroad, up from 6%.
  • Anatomy of Capital Fight in China… — Unaccounted capital outflows from China show up not only in the balance of payments' net errors and omissions category but also in net other investment and in the gap between customs-reported and foreign-exchange-reported goods trade balances. This combined residual averaged roughly $100bn per quarter, and about twice that during periods of heavier outflow pressure.