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

Macro Roundup


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.

Related Articles:

  • 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.
  • 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
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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.

Related Articles:

  • 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.

Friday, May 3, 2024

AI Summary. Measuring U.S. manufacturing concentration by domestic production alone shows the top 20 firms' share rising, but including imports and excluding exports leaves the top 20 firms' share of total U.S. sales flat. The authors argue the falling market share of U.S. firms suggests their market power may have declined.

Mary Amiti and Sebastian Heise Federal Reserve Bank of New York
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A @NewYorkFed note argues that overall market concentration across 169 manufacturing industries has remained flat from 1992 to 2012 as foreign competition has put less competitive US firms out of business, increasing domestic production concentration.

Does counting imports change whether U.S. manufacturing concentration has risen?

Core argument: The top 20 U.S. manufacturing firms' production concentration — their sales as a share of U.S. production, excluding imports but including exports — rose between 1992 and 2012.

Previous studies have focused on what we refer to as production concentration, which is measured as the sales of the largest U.S. producers as a share of total production in the U.S. It does not take account of imported goods, but does include U.S. firms’ exports. As shown in the chart, the production concentration of the top twenty firms has increased between 1992 and 2012 (blue line). For questions related to market power in the product market, we need to take into account the sales of foreign exporters in the United States (and exclude U.S. firms’ sales abroad). We refer to this measure of concentration as market concentration. The chart [based on confidential census data] shows that the largest [20] firms’ (which could be U.S. or foreign) share of total sales (inclusive of sales by foreign firms) in U.S. manufacturing industries has been flat in the aggregate (red line). Our finding that U.S. firms’ market share has fallen suggests that the market power of U.S. manufacturing firms may actually have declined over the past few decades.

Takeaways by Macro Roundup® AI

  1. The top 20 U.S. manufacturing firms' production concentration — their sales as a share of U.S. production, excluding imports but including exports — rose between 1992 and 2012.
  2. Market concentration, which includes sales by foreign exporters in the United States and excludes U.S. firms' sales abroad, has been flat in the aggregate for the largest 20 firms in U.S. manufacturing industries, based on confidential census data.
  3. The authors find U.S. firms' market share has fallen, which suggests the market power of U.S. manufacturing firms may have declined over the past few decades.

Related Articles:

  • Why American Manufacturing is Increasingly Inefficient — Labor productivity in U.S. manufacturing has been in secular decline since 2011, the first decade-long fall in the available data, even as services drove overall output growth. More than a third of the manufacturing slowdown since 2011 is accounted for by computers and electronics, a sector whose gains had soared in the 1990s and 2000s.
  • The Concentration Conundrum; What To Do About Market Dominance — The largest US stocks make up a bigger share of the equity market than during the 2000 technology bubble, yet their valuations are lower than in earlier bubble episodes including the Nifty 50 of the early 1970s and Japan's late-1980s bubble. Today's dominant companies are also more profitable with stronger balance sheets.
  • Rising Markups and Declining Business Dynamism: Evidence From the Industry Cross Section — Across industries, larger increases in markups are not associated with larger declines in business dynamism—measured by new business entry rates and gross job or worker flows—and the correlation may even be positive. The authors conclude that rising markups as commonly measured are not a major explanatory factor behind declining dynamism.

AI Summary. Inflation-adjusted U.S. house prices are 2.4% below their peak, while the monthly principal-and-interest payment on an equivalent house has risen 12% over one year and 107% over three years, as house prices rose 31% over that three-year span and 30-year mortgage rates went from 2.81% to 6.78%.

Bill McBride Calculated Risk
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According to @calculatedrisk inflation-adjusted housing prices are 2.4% below their 2023 peak and 10.2% above the bubble era peak. Based on housing prices, mortgage rates, and median incomes, housing is now less affordable than during the bubble era.

Have mortgage payments risen far more than house prices?

Core argument: Inflation-adjusted U.S. house prices in February stood 2.4% below their peak.

For February: a year ago, the payment on a $500,000 house, with a 20% down payment and 6.26% 30-year mortgage rates, would be around $2,465 for principal and interest. The monthly payment for the same house, with house prices up 6.4% YoY and mortgage rates at 6.78% in February 2024, would be $2,769 - an increase of 12%. However, if we compare to three years ago, there is a huge difference in monthly payments. In February 2021, the payment on a $500,000 house, with a 20% down payment and 2.81% 30-year mortgage rates, would be around $1,646 for principal and interest. The monthly payment for the same house, with house prices up 31% over three years and mortgage rates at 6.78% in February 2024, would be $3,399 - an increase of 107%! More than double.

Takeaways by Macro Roundup® AI

  1. Inflation-adjusted U.S. house prices in February stood 2.4% below their peak.
  2. The monthly principal-and-interest payment on a $500,000 house with 20% down rose 107% over three years, from $1,646 at February 2021's 2.81% mortgage rate to $3,399 at February 2024's 6.78% rate with prices up 31%.
  3. Over one year, the payment on a $500,000 house with 20% down rose 12%, from $2,465 at a 6.26% mortgage rate to $2,769, with house prices up 6.4% year-over-year and rates at 6.78% in February 2024.

Related Articles:

  • It’s All About Shelter — Producer price inflation for final demand tracks consumer price inflation excluding shelter closely, and both show inflation under control; overall consumer inflation looks hot only because the shelter component is up 5.6%. That shelter measure lags rents by construction, and more current rent series show no recent inflation.
  • The Boomer-Millennial Housing Battle Cools — Demographic needs are outweighing affordability in the housing market, with the share of first-time buyers returning nearly to pre-pandemic levels despite high prices and interest rates. One in four Millennial buyers reported purchasing because they had no choice, and Millennials again make up the largest group of homebuyers.
  • A Huge Number of Homeowners Have Mortgage Rates Too Good to Give Up — About 70% of US mortgage holders hold rates more than three percentage points below what a new loan would cost, compared with a 1998–2020 period in which no more than 40% had rates even one point below market. Economists at the Federal Housing Finance Agency estimate this lock-in effect accounts for roughly 1.3m fewer home sales.

AI Summary. Utility Dominion Energy says data center developers in Northern Virginia are requesting as much as several gigawatts of electricity for single planned campuses, with a gigawatt roughly equal to one nuclear reactor's output or enough to power 750,000 homes. Dominion has connected 94 data centers consuming about 4 gigawatts combined over the past five years.

Josh Saul Bloomberg
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Virginia electric utility Dominion Energy is fielding requests for new data centers that would need “several gigawatts” of power, compared to a total of 4GW consumed by 94 data centers added since 2019.

How much electricity are single data center campuses now requesting?

Core argument: Dominion Energy CEO Bob Blue said the utility regularly fields requests from data center developers whose planned campuses need as much as "several gigawatts" of electricity, roughly the output of several nuclear reactors.

Data center developers in Northern Virginia are asking utility Dominion Energy for as much power as several nuclear reactors can generate, in the latest sign of how artificial intelligence is helping drive up electricity demand. Dominion regularly fields requests from developers whose planned data center campuses need as much as “several gigawatts” of electricity, Chief Executive Officer Bob Blue said Thursday during the company’s first-quarter earnings call. A gigawatt is roughly the output of a nuclear reactor and can power 750,000 homes. Over the past five years, Dominion has connected 94 data centers that, together, consume about four gigawatts of electricity, Blue said. That means that just two or three of the data center campuses now being planned could require as much electricity as all the centers Dominion hooked up since about 2019.

Takeaways by Macro Roundup® AI

  1. Dominion Energy CEO Bob Blue said the utility regularly fields requests from data center developers whose planned campuses need as much as "several gigawatts" of electricity, roughly the output of several nuclear reactors.
  2. Dominion has connected 94 data centers over the past five years that together consume about four gigawatts, meaning two or three of the campuses now being planned could require as much electricity as all of them.
  3. A gigawatt is roughly the output of a nuclear reactor and can power 750,000 homes.

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.
  • Generational Growth AI, Data Centers and the Coming US Power Demand Surge — Data center power demand is projected to grow 15% annually through 2030, lifting data centers to 8% of US power demand from about 3% and raising overall US power demand growth to 2.4% a year versus roughly 0% over the prior decade.
  • The AI Transition One Year Later: On Track, but Macro Impact Still Several Years Off — Investment in AI hardware is projected to rise substantially as a precursor to integrating AI into business processes, with the investment cycle estimated to peak at 2–2½% of GDP and early signs visible among AI-enabling companies. The authors estimate generative AI could raise developed-market labor productivity growth by 1.5pp annually over a 10-year adoption period, roughly 15% cumulatively.

AI Summary. Mining companies' interest in acquiring Anglo American reflects the value of its copper mines in Chile and Peru, with copper futures contracts trading well above spot prices. Such acquisitions add no new copper supply, and it is simpler and cheaper to buy a rival copper miner than to build a new mine.

FT Staff Financial Times
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Copper futures are trading above spot prices as traders bet on a structural mismatch between supply and demand. BlackRock forecasts at least a 20% jump in prices is needed to catalyze large-scale investment which can take a decade to start production.

Why are miners buying copper rivals instead of building new mines?

Core argument: BHP's £31bn bid for Anglo American was rebuffed, and the world's largest mining group is weighing an improved offer for a target whose draw is its lucrative copper mines in Chile and Peru.

After its £31bn bid for Anglo American was rebuffed last week, BHP — the world’s largest mining group — is mulling an improved offer. Other suitors may emerge too. On the surface, the effort to acquire the UK-listed mining group’s complex and sprawling business may seem more trouble than it is worth. But it is what is below ground that is luring buyers. Anglo American owns lucrative copper mines in Chile and Peru, and prices for the shiny red metal have been soaring recently. Contracts for copper futures have been rising well above the spot price since the start of 2023. The acquisition of Anglo American’s mining sites, however, makes little contribution to boosting global copper output. It highlights a worrying reality: it is simpler and cheaper to buy out a rival copper miner than to build a new mine. This raises significant concerns for meeting the rising copper demands of the global economy and the green transition.

Takeaways by Macro Roundup® AI

  1. BHP's £31bn bid for Anglo American was rebuffed, and the world's largest mining group is weighing an improved offer for a target whose draw is its lucrative copper mines in Chile and Peru.
  2. Copper futures contracts have traded well above the spot price since the start of 2023, amid soaring prices for the metal.
  3. Acquiring Anglo American's mining sites adds little to global copper output, highlighting that buying out a rival copper miner is simpler and cheaper than building a new mine, raising concerns for meeting rising copper demand and the green transition.

Related Articles:

  • Copper Producers Warn of Lack of Mines to Meet Demand for Metal — Copper producers warn that existing and planned mines are insufficient to meet expected demand, which is projected to climb as the world electrifies and as living standards rise in India and other developing nations. Anglo American estimates Western living standards require 200-250kg of copper per person, versus a global average of 60kg.
  • Glencore Says This Time Is Different for Coming Copper Shortage — Glencore estimates a cumulative gap between projected copper demand and supply of 50m tons through 2030, against current world demand of about 25m tons a year, and argues the industry will not lift supply as it has in previous cycles. The company says copper prices do not yet reflect the coming deficit.
  • Copper Is Unexpectedly Getting Cheaper — Financial investors have shifted away from copper toward cash-generating assets as interest rates rise, with futures positioning implying more bets on falling prices than recovery. Prices remain about $2,500 a tonne above marginal production costs, suggesting the correction removed froth rather than pushing prices too low.

AI Summary. A proposal would require billionaires to pay annual income taxes equal to at least 2% of their wealth, so that someone worth about $210bn who pays no income tax would owe roughly $4.2bn. Supporters estimate it would raise about $250bn a year globally, more than the global minimum tax on corporations is expected to add.

Gabriel Zucman New York Times
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In 2018 the 400 richest Americans had a lower effective tax rate than working-class Americans. @gabriel_zucman argues for a global minimum tax, ensuring that the super-rich tax pay “a small portion — say, 2 percent — of their wealth each year.”

Should billionaires owe minimum annual income taxes equal to 2% of wealth?

Core argument: The proposal would require billionaires to pay annual income taxes equivalent to 2 percent of their wealth, raising an estimated $250 billion per year in additional tax revenue for countries.

The idea is simple. Let’s agree that billionaires should pay income taxes equivalent to a small portion — say, 2 percent — of their wealth each year. Someone like Bernard Arnault, who is worth about $210 billion, would have to pay an additional tax equal to roughly $4.2 billion if he pays no income tax. In total, the proposal would allow countries to collect an estimated $250 billion in additional tax revenue per year, which is even more than what the global minimum tax on corporations is expected to add.

Takeaways by Macro Roundup® AI

  1. The proposal would require billionaires to pay annual income taxes equivalent to 2 percent of their wealth, raising an estimated $250 billion per year in additional tax revenue for countries.
  2. Bernard Arnault, worth about $210 billion, would owe an additional tax of roughly $4.2 billion under the proposal if he pays no income tax.
  3. The estimated $250 billion in annual revenue from the proposed billionaire tax exceeds what the global minimum tax on corporations is expected to add.

Related Articles:

  • Income Inequality in the United States: Using Tax Data to Measure Long-Term Trends — Using administrative tax data with the Survey of Consumer Finances, the authors estimate the top 1% pre-tax income share fell from 11.1% in 1962 to 9.4% in 1979, then rose to 13.8% by 2019, a 3 percentage point rise over the full period. Their after-tax measure shows increases of only 1.4 points since 1979 and 0.2 points since 1962.
  • Comment on Auten and Splinter (2023) — A critique argues that Auten and Splinter's methodology misallocates a large share of untaxed business and capital income to the bottom of the distribution, assuming the top 1% earns only about 15% of untaxed business income while tax data show they earn about 55% of business income overall.
  • The Economics of Inequality in High-Wage Economies — United States Income, Wealth, Consumption, and Inequality Diana Furchtgott-Roth