Edward Conard

Top Ten New York Times Bestselling Author

  • “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
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “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
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “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
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Monday, October 14, 2024

AI Summary. The authors estimate substantially higher intergenerational persistence using expected lifetime resource measures than using traditional income measures. They estimate that, measured at ages 30–35, almost 80% of male children have higher disposable income than their fathers did, about 70% have higher consumption, and around 60% have greater expected lifetime resources.

Sadegh Eshaghnia, James Heckman, Rasmus Landersø, and Rafeh Qureshi National Bureau of Economic Research
Date Posted:

Estimating evolving expectations of lifetime resources over 40 years of Danish data, @r_landersoe finds that although 80% of male children have higher disposable income at ages 30-35 than their fathers, only 60% have higher lifetime income.

Do lifetime resource measures show stronger family influence than income measures?

Core argument: Nearly 80% of male children in the 1981–1982 birth cohort had higher disposable income at ages 30–35 than their fathers did at a similar age, versus about 70% for consumption and roughly 60% for expected lifetime resources.

Our expected lifetime measures quantify long-term family influence on children. We estimate significantly higher intergenerational persistence in expected lifetime measures compared to what is found using traditional measures of income and compared to realized lifetime measures. One measure of absolute mobility is the percentage of children who have better outcomes than their parents. For each measure of resources, we estimate the percentage of children (of the 1981—1982 birth cohort) whose resources are greater than those of their parents where we measure resources over ages 30–35. [In figure 9], the steep gradients for wage income, gross income excluding transfers, and gross income including transfers suggest substantial mean reversion across generations. However, once redistribution via taxes is factored in as done for disposable income and consumption, the gradient is much smaller. For disposable income, almost 80% of male children have higher income than their fathers had at a similar age. For consumption, this fraction is around 70%, while for expected PDV around 60% have higher expected lifetime resources than their father.

Takeaways by Macro Roundup® AI

  1. Nearly 80% of male children in the 1981–1982 birth cohort had higher disposable income at ages 30–35 than their fathers did at a similar age, versus about 70% for consumption and roughly 60% for expected lifetime resources.
  2. Expected lifetime measures of resources show significantly higher estimated intergenerational persistence than traditional income measures or realized lifetime measures.
  3. Steep intergenerational gradients for wage income and gross income with and without transfers suggest substantial mean reversion across generations, while the gradient is much smaller for disposable income and consumption, which factor in redistribution via taxes.

Related Articles:

  • Changing Opportunity: Sociological Mechanisms Underlying Growing Class Gaps and Shrinking Race Gaps in Economic Mobility* — The authors find that children's economic mobility improves across birth cohorts in communities where parental employment rates increase, with larger effects for children who move to such communities at younger ages. The relationship is strongest for the parental employment rates of peers in a child's own birth cohort, suggesting it is mediated by social interaction.
  • The Life-Cycle Dynamics of Wealth Mobility — The authors identify four wealth trajectory groups within a birth cohort: 21% who start and remain near the top, 42% who start and remain near the bottom, and 21% and 15% who stay in the middle while rising or falling in rank. They conclude that wealth mobility is concentrated in these middle groups rather than shared across the population.
  • Intergenerational Mobility in American History: Accounting for Race and Measurement Error — Accounting for Black families, who historical studies routinely drop, and for measurement error in fathers' economic status can double estimates of intergenerational persistence in linked United States census data from 1850 to 1940. The author argues historical mobility was lower than previously estimated, implying greater equality of opportunity today than in the past.

AI Summary. Hungary and Norway devote more resources to family support than almost any other country, yet have fertility rates of 1.5 and 1.4 children per woman, below the 2.1 replacement rate needed to keep population steady; the U.S. rate is 1.6. Demographers suggest reluctance to have children reflects a cultural rather than purely financial shift.

Chelsey Dulaney Wall Street Journal
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Parental benefits have failed to raise birth rates in advanced economies. Both Hungary and Norway spend more than 3% of GDP on efforts to raise fertility. Yet their birth rates remain under the US rate of 1.6 and the replacement rate of 2.1.

Can government family support programs raise fertility rates?

Core argument: Hungary and Norway devote more resources to families than almost any other nation, yet their fertility rates stand at 1.5 and 1.4 children per woman, far below the 2.1 replacement rate needed to keep population steady.

Two European countries devote more resources to families than almost any other nation: Hungary and Norway. Despite their programs, they have fertility rates of 1.5 and 1.4 children for every woman, respectively—far below the replacement rate of 2.1, the level needed to keep the population steady. The U.S. fertility rate is 1.6. Demographers suggest the reluctance to have kids is a fundamental cultural shift rather than a purely financial one.

Takeaways by Macro Roundup® AI

  1. Hungary and Norway devote more resources to families than almost any other nation, yet their fertility rates stand at 1.5 and 1.4 children per woman, far below the 2.1 replacement rate needed to keep population steady.
  2. The U.S. fertility rate is 1.6 children per woman, below the 2.1 replacement level.
  3. Demographers suggest the reluctance to have children reflects a fundamental cultural shift rather than a purely financial one.

Related Articles:

  • The Age of Depopulation: Surviving a World Gone Gray — The United States remains the main outlier among developed countries resisting depopulation, with fertility of just over 1.6 births per woman — high for a rich country but below the 2.1 replacement threshold — plus steady immigration. The Census Bureau projects the U.S. population will peak around 2080 and decline continuously thereafter.
  • The Global Fertility Crisis Is Worse Than You Think — Adjusting United Nations figures for lower recorded births, the author estimates the global fertility rate was 2.18, below the 2.21 replacement threshold. Population is not yet falling because women born in the 1990s and 2000s are having children while older generations live longer, so births still exceed deaths, with a projected peak in about 30 years.
  • Why Family-Friendly Policies Don’t Boost Birth Rates — Developed countries roughly tripled real per capita spending on child benefits, subsidised childcare, and parental leave between 1980 and 2019 while birth rates fell from 1.85 to 1.53 per woman. Finland's fertility rate has fallen by a third since 2010, and Korea's "baby bonus" mainly paid women already planning children.

AI Summary. U.S. household incomes have been rising at a 6% annualized rate for two years, with no sign of slowing, while measures of underlying inflation run about 1 to 1.5 percentage points faster on an annualized basis than before the pandemic. Productivity and employment also appear to be rising faster.

Matt Klein The Overshoot
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The nominal value of US output is growing at ~6%/year, which is “unlikely to be consistent” with the Fed’s target. Underlying inflation remains ~1.0 to 1.5pp higher than its pre-pandemic level. @M_C_Klein

Is the US economy still growing at a rapid pace?

Core argument: American incomes have risen at a 6% annualized rate over the past two years, a pace that shows no signs of changing.

American incomes have been rising at a 6% annualized rate for the past two years—and this shows no signs of changing. Little wonder that measures of underlying inflation remain ~1-1.5 percentage points annualized faster than before the pandemic, even if productivity and employment also seem to be rising faster.

Takeaways by Macro Roundup® AI

  1. American incomes have risen at a 6% annualized rate over the past two years, a pace that shows no signs of changing.
  2. Measures of underlying U.S. inflation remain roughly 1 to 1.5 percentage points annualized faster than before the pandemic.
  3. U.S. productivity and employment also appear to be rising faster, alongside the faster pace of underlying inflation.

Related Articles:

  • U.S. Inflation Is Still Hotter than Pre-Pandemic. And That’s Okay — If underlying services inflation holds near 2% a year and prior relationships reassert themselves, total yearly personal consumption inflation could settle near 3% rather than returning to 2%. That would carry implications for interest rate pricing, and traders assuming a reversion to pre-pandemic inflation norms may be surprised.
  • The Transition to a Higher Cost of Capital — Bond yields near 4.5% sit below the 5.5% short-term interest rate, leaving little risk premium, and those yields have been enough to draw buyers back toward normal bond holdings. The author argues yields still need to rise to a sustainable cost of capital given structurally higher fiscal and inflationary spending.
  • Kudos To Central Banks — The author argues a resurgence of inflation is the biggest threat to an otherwise positive economic outlook, noting the 2021–2023 inflation pattern resembles the first peak of the 1970s, which was followed by a second wave. Risks cited include expected interest rate cuts despite a strong underlying economy and potentially inflationary policy proposals.

AI Summary. Polling in Pennsylvania showed Harris leading 50% to 47%, within the margin of error, while Arizona polling showed Trump ahead 51% to 46%. Harris led by nearly 20 percentage points on handling abortion, her strongest issue across battleground states and the second most important concern for Pennsylvania voters.

Michael Bender and Ruth Igielnik New York Times
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NYT/Siena finds Trump leading Harris by 51-46 in Arizona and down 3pp in Pennsylvania 47-50. The margin of error is +/- 4pp.

Are the two leading candidates splitting key battleground states?

Core argument: Kamala Harris leads Donald Trump 50% to 47% in Pennsylvania in the Times/Siena poll, a margin inside the margin of error and equal to four percentage points using unrounded figures.

In Pennsylvania, Ms. Harris’s polling lead has been steady, though the state remains tight. Her advantage, 50% to 47%, falls inside the margin of error. But this was the third Times/Siena survey in two months showing support for Ms. Harris from at least half of the state. (Her lead in the poll was four percentage points when calculated using unrounded figures.) Fueling Ms. Harris in the state is her commanding lead of nearly 20 percentage points when it comes to handling abortion, her single best issue across battleground states and the second most important concern for Pennsylvania voters. In Arizona, Mr. Trump was ahead, 51% to 46%, or six percentage points when calculated using unrounded figures, nearly unchanged from September, when the poll showed the former president leading, 50% to 45%.

Takeaways by Macro Roundup® AI

  1. Kamala Harris leads Donald Trump 50% to 47% in Pennsylvania in the Times/Siena poll, a margin inside the margin of error and equal to four percentage points using unrounded figures.
  2. Donald Trump leads Kamala Harris 51% to 46% in Arizona, or six percentage points using unrounded figures, nearly unchanged from September's 50% to 45% result.
  3. Kamala Harris holds a lead of nearly 20 percentage points on handling abortion in Pennsylvania, her single best issue across battleground states and the second most important concern for Pennsylvania voters.

Related Articles:

  • Changing Opportunity: Sociological Mechanisms Underlying Growing Class Gaps and Shrinking Race Gaps in Economic Mobility — Across the 1978 to 1992 birth cohorts, adult household incomes fell for white children raised in low-income families and rose for those raised in high-income families, increasing the intergenerational persistence of income ranks among white children by 28%. Over the same cohorts, adult incomes rose for Black children at all parental income levels.
  • The Left Is Losing Its Grip On Ethnic Minority Voters — Polling analysis from Echelon Insights finds that white progressive Americans hold views on immigration, racism, patriotism, and meritocracy that are out of line with the average black or Hispanic voter, while hardline conservatives are equally distant in the opposite direction. By self-reported ideology, Americans of colour now sit roughly equidistant between the two groups.
  • Disconnected: The Growing Class Divide in American Civic Life — 17% of Americans report having no close friends, and survey data show a wide educational gap: 24% of those with a high school education or less have no close friends versus 10% of college graduates. Three decades ago, Americans with less formal education reported social circles at least as large.

AI Summary. Unidentified drones flew over a U.S. military base for 17 days in a coordinated pattern of higher-altitude fixed-wing aircraft and smaller quadcopters below, leading U.S. officials to doubt hobbyists were responsible. Federal law bars the military from shooting down drones near domestic bases absent an imminent threat.

Gordon Lubold, Lara Seligman and Aruna Viswanatha Wall Street Journal
Date Posted:

Drone swarms have been flying over major American military facilities in VA and CA. Though they are likely being operated by foreign adversaries, the DOD currently doesn’t have authorization to shoot down the drones.

Can the U.S. military counter unidentified drones over domestic bases?

Core argument: Mystery drones swarmed a U.S. military base for 17 days, with the incident reported to the Pentagon's National Military Command Center and the White House Situation Room, and the president briefed on it in his daily briefing.

The drone swarm was reported to the Pentagon office of the National Military Command Center, which is responsible for dispersing emergency messages to U.S. military commanders worldwide. A report went to the White House Situation Room, and the president learned about it in his daily briefing. U.S. officials didn’t believe hobbyists were flying the drones, given the complexity of the operation. The drones flew in a pattern: one or two fixed-wing drones positioned more than 100 feet in the air and smaller quadcopters, the size of 20-pound commercial drones, often below and flying slower. Occasionally, they hovered. Federal law prohibits the military from shooting down drones near military bases in the U.S. unless they pose an imminent threat.

Takeaways by Macro Roundup® AI

  1. Mystery drones swarmed a U.S. military base for 17 days, with the incident reported to the Pentagon's National Military Command Center and the White House Situation Room, and the president briefed on it in his daily briefing.
  2. The drones flew in a pattern of one or two fixed-wing aircraft more than 100 feet up paired with slower, lower quadcopters the size of 20-pound commercial drones, occasionally hovering; U.S. officials did not believe hobbyists were responsible, given the operation's complexity.
  3. Federal law prohibits the U.S. military from shooting down drones near military bases in the United States unless the drones pose an imminent threat.

Related Articles:

  • Pentagon Plan to Buy Thousands of Drones Faces Looming Snags — The US Department of Defense aims to buy thousands of low-cost drones within as little as 18 months and up to 2,000 larger uncrewed jets, while one of its primary drone suppliers produced 38 aircraft last year. Booming commercial aerospace demand has left shortages of skilled labor, raw materials, and parts such as advanced electronics and fasteners.
  • U.S. Officials Race to Understand Severity of China’s Salt Typhoon Hacks — Federal authorities are investigating breaches of Verizon, AT&T and Lumen networks attributed to Salt Typhoon, a hacking group tied to Chinese intelligence. Investigators believe the compromises may have given the hackers access to systems the U.S. government uses for court-authorized wiretapping requests, though the severity remains unclear.
  • China Is Rapidly Building Warships. Satellite Images Reveal The Scale — China's shipbuilding capacity now exceeds the United States' by such a margin that it can build more ships in a month than American yards build in a year, with a workforce estimated at nearly 5x the US level. Chinese yards handled more than 1,700 orders in a year, compared with fewer than five for American shipyards.

AI Summary. SpaceX's Starship launch system, the largest and most powerful ever developed, returned its Super Heavy booster to its launch site, where arms on the launch tower caught it after its engines reignited to slow the descent. SpaceX aims to fully reuse both the booster and spacecraft to enable multiple flights per day and lower launch costs.

Loren Grush Bloomberg
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In a major step towards making its Starship rocket system fully reusable, SpaceX successfully flew a 233-foot rocker booster back to its launch site and caught it with two mechanical arms.

Can catching a returning booster make rockets fully reusable?

Core argument: SpaceX's Starship, the largest and most powerful launch system ever developed, lifted off at 8:25 a.m. New York time, with the Super Heavy booster returning to its launch site and reigniting its engines to slow for landing.

The largest and most powerful launch system ever developed lifted off Sunday at 8:25 a.m. New York time. After propelling Starship to space, the Super Heavy booster returned to its launch site on Earth, where it reignited its engines to slow itself down as it came in for landing. Two arms protruding from Starship’s launch tower then “caught” the booster, as cheers and applause erupted at mission control. With Starship, SpaceX’s eventual aim is to fully recover the vehicle’s two main parts: the Starship spacecraft itself — which will carry satellites and eventually passengers — and the Super Heavy booster. By recovering both of these pieces after flight, SpaceX hopes to rapidly reuse and relaunch the hardware following takeoff, allowing for multiple flights of Starship in a single day. The company also expects full reusability to drastically lower the cost of launching Starship.

Takeaways by Macro Roundup® AI

  1. SpaceX's Starship, the largest and most powerful launch system ever developed, lifted off at 8:25 a.m. New York time, with the Super Heavy booster returning to its launch site and reigniting its engines to slow for landing.
  2. Two arms protruding from Starship's launch tower "caught" the returning Super Heavy booster, part of SpaceX's aim of fully recovering both the Starship spacecraft and the booster after flight.
  3. SpaceX expects full reusability of Starship's two main parts to allow multiple flights in a single day and drastically lower launch costs, with the spacecraft carrying satellites and eventually passengers.

Related Articles:

  • SpaceX’s Starship Rocket Successfully Completes 1st Return From Space — SpaceX's Starship completed its first return from space, with the booster setting down in the Gulf of Mexico and the upper-stage spacecraft surviving atmospheric re-entry for a controlled splashdown in the Indian Ocean. The flight was not flawless — the vehicle lost many heat-shield tiles and sustained a damaged flap — and technical hurdles remain.
  • and — SpaceX's Starship completed its first return from space, with the booster setting down in the Gulf of Mexico and the upper-stage spacecraft surviving atmospheric re-entry for a controlled splashdown in the Indian Ocean. The flight was not flawless — the vehicle lost many heat-shield tiles and sustained a damaged flap — and technical hurdles remain.
  • Building an Enduring Advantage in the Third Space Age — SpaceX's Starship completed its first return from space, with the booster setting down in the Gulf of Mexico and the upper-stage spacecraft surviving atmospheric re-entry for a controlled splashdown in the Indian Ocean. The flight was not flawless — the vehicle lost many heat-shield tiles and sustained a damaged flap — and technical hurdles remain.
  • It’s Not a Space Race, It’s the Space Olympics — The US operates 81% of commercial satellites in orbit and 86% of global effective launch capacity, with NATO allies second in satellites at 11% and China second in launch capacity at 9%. China is pursuing mega satellite constellations and reusable rockets, in many cases copying approaches already proven by US companies.

Tuesday, October 15, 2024

AI Summary. Modeling US ports with queueing theory and demand estimation, the authors estimate that port infrastructure investment yields substantial trade and welfare gains only if well targeted—net of costs, returns are positive at a minority of US ports. They also find sizable spillovers, as upgrading one port decongests others, and that macroeconomic volatility can substantially alter returns and their geography.

Giulia Brancaccio, Myrto Kalouptsidi, Theodore Papageorgiou National Bureau of Economic Research
Date Posted:

A study of 51 large U.S. ports over 2010-2021 indicates that only 15 ports would deliver a positive return on infrastructure investment, driven in part by high congestion at the port and the potential to relieve congestion at other ports. @myrto_kaloup

Does port infrastructure investment pay off only at some ports?

Core argument: With 80% of international trade carried by ships, the authors find that port infrastructure investment yields positive returns net of costs at only a minority of US ports, so gains depend on proper targeting.

80% of [international] trade is carried by ships. Ports are susceptible to disruptions, causing costly delays. To explore the drivers of welfare gains from investing in infrastructure, we consider how these gains depend on both the characteristics of the treated port, as well as those of the set of ports it decongests.[The] empirical framework combines insights from queueing theory to capture port technology, with tools from demand estimation and novel datasets, to quantify the costs of disruptions and evaluate transportation infrastructure investment. Our analysis unveils three policy-relevant messages: (i) investing in port infrastructure can lead to substantial trade and welfare gains, but only if targeted properly– in fact, net of costs, investment has positive returns at a minority of US ports; (ii) there are sizable spillovers across ports, as investing in one port can decongest a wider set of ports, suggesting that coordinated decision-making may result in more efficient investment decisions; (iii) [by raising the likelihood that capacity constraints will bind], macroeconomic volatility can drastically change returns to investment and their geography.

Takeaways by Macro Roundup® AI

  1. With 80% of international trade carried by ships, the authors find that port infrastructure investment yields positive returns net of costs at only a minority of US ports, so gains depend on proper targeting.
  2. The authors find sizable spillovers across ports, as investing in one port can decongest a wider set of ports, suggesting that coordinated decision-making may result in more efficient investment decisions.
  3. By raising the likelihood that capacity constraints bind, macroeconomic volatility can drastically change returns to port investment and their geography, according to a framework combining queueing theory with demand estimation and novel datasets.

Related Articles:

  • US Dockworkers Go Back to Work as Talks Extended to January — US dockworkers ended a three-day strike that halted trade at East and Gulf coast ports, extending their contract and reopening ports while negotiations resume on a long-term deal including a pay increase of about 62%. A supply-chain data company estimates the resulting cargo backlog will take over a month to clear.
  • Americas Transportation: Eye on Freight: Potential Ramifications Should Labor Disruption Arise at East/Gulf Coast Ports — The authors estimate that a labor disruption at U.S. East and Gulf Coast ports would halt roughly $4.9bn of containerized goods per day — about $25bn after one work week — equal to roughly 61% of total U.S. ocean trade and 25% of total daily U.S. trade. Pulled-forward demand and re-routing to the West Coast could mitigate the impact.
  • Labor Market Conflict and the Decline of the Rust Belt — The authors argue that persistent labor market conflict in the Rust Belt's main industries lowered investment and productivity growth, shifting employment to the rest of the country, and estimate it accounts for roughly half the decline in the region's share of US manufacturing employment. Rising foreign competition plays a more modest quantitative role.

AI Summary. Global public debt is projected to approach 100% of GDP by 2030, with China and the United States largely driving the increase. Debt is projected to stabilize or decline in about two-thirds of countries, but remains higher than before the pandemic.

IMF Staff International Monetary Fund
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The IMF projects that global public debt levels will approach 100% of global GDP by 2030, up from ~65% in 2007, primarily driven by the US and China. They argue that “much larger fiscal adjustments than currently planned are required to stabilize debt.”

Is global public debt projected to approach 100% of GDP?

Core argument: Global public debt is expected to exceed $100 trillion in 2024 and is projected to approach 100% of GDP by 2030, with China and the United States, the world's two largest economies, largely driving the increase.

Public debt levels are elevated around the world and are expected to exceed $100 trillion in 2024. After a decline in 2021−22, global public debt edged up again in 2023 and is projected to approach 100% of GDP by 2030, with the world’s two largest economies, China and the United States, largely driving the increase. Although debt is projected to stabilize or decline by 2029 in about two-thirds of the world’s countries, it remains higher than before the pandemic.

Takeaways by Macro Roundup® AI

  1. Global public debt is expected to exceed $100 trillion in 2024 and is projected to approach 100% of GDP by 2030, with China and the United States, the world's two largest economies, largely driving the increase.
  2. Public debt is projected to stabilize or decline by 2029 in about two-thirds of the world's countries, but remains higher than before the pandemic.

Related Articles:

  • Fiscal Monitor: Fiscal Policy in the Great Election Year — The US general government deficit rose to 8.8% of GDP from 4.1% despite strong growth, as income tax revenues fell 3.1 percentage points of GDP and spending rose 1.3 points, with deficits projected above 6% of GDP over the medium term. Loose fiscal policy could make disinflation harder.
  • When Does Federal Debt Reach Unsustainable Levels? — The authors estimate that U.S. debt held by the public cannot exceed roughly 200% of GDP even under favorable market conditions, and that under current policy the ratio reaches 175–200% within about 20 years. After that point, they argue, no tax increases or spending cuts could avert default or inflationary debt monetization.
  • China Begins Nationwide Push to Reveal Hidden Government Debt — China's Ministry of Finance reported governments across the country held 37tn yuan ($5.1tn) in on-book debt, with no official tally of hidden debt or who owes it. The International Monetary Fund estimated local government financing vehicles held 66tn yuan ($9.2tn) of hidden debt at end-2022, up from 40tn yuan in 2019.

AI Summary. The United States' share of combined G7 output has risen from about two-fifths in 1990 to roughly half, with output per person now about 40% above Western Europe and Canada and 60% above Japan — roughly double the 1990 gaps. Average wages in Mississippi exceed national averages in Britain, Canada, and Germany.

Simon Rabinovitch and Henry Curr The Economist
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Between 1990 and today, the US share of G7 GDP increased from 40% to ~ 50%. Mean wages in Mississippi, the poorest state in the US, are higher than mean wages in the UK, Canada, and Germany. @S_Rabinovitch @currhenry

Has the US widened its output gap with other rich countries?

Core argument: U.S. per-person economic output is about 40% higher than in Western Europe and Canada and 60% higher than in Japan, roughly twice the size of those gaps in 1990.

In 1990 America accounted for about two-fifths of the overall GDP of the G7 group of advanced countries; today it is up to about half On a per-person basis, American economic output is now about 40% higher than in Western Europe and Canada, and 60% higher than in Japan—roughly twice as large as the gaps between them in 1990. Average wages in America’s poorest state, Mississippi, are higher than the averages in Britain, Canada, and Germany. America’s outperformance has accelerated recently. Since the start of 2020, just before the covid-19 pandemic, America’s real growth has been 10%, three times the average for the rest of the G7 countries. Among the G20 group, which includes large emerging markets, America is the only one whose output and employment are above pre-pandemic expectations, according to the International Monetary Fund.

Takeaways by Macro Roundup® AI

  1. U.S. per-person economic output is about 40% higher than in Western Europe and Canada and 60% higher than in Japan, roughly twice the size of those gaps in 1990.
  2. The U.S. share of G7 GDP has risen from about two-fifths in 1990 to about half today, and average wages in Mississippi, America's poorest state, exceed the averages in Britain, Canada, and Germany.
  3. Since the start of 2020, U.S. real growth has been 10%, three times the average for the rest of the G7, and the IMF finds America is the only G20 member with output and employment above pre-pandemic expectations.

Related Articles:

  • The Future of European Competitiveness – A Competitiveness Strategy for Europe — A European Union competitiveness report attributes the EU's labour productivity growth gap with the US largely to weaker activity in information and communications technology and large-scale digital services; excluding main ICT sectors, EU productivity was broadly at par with the US from 2000-2019. It estimates Europe's investment share must rise about 5 percentage points of GDP.
  • Europeans ‘Less Hard-Working’ Than Americans, Says Norway Oil Fund Boss — Norway's sovereign wealth fund argues that American companies are outpacing European rivals on innovation and technology because the US more readily accepts failure and risk and because Americans work harder and are more ambitious. US shares now make up almost half of the fund's equity holdings, up from 32% a decade earlier, while UK holdings fell from 15% to 6%.
  • Draghi is Trying To Save Europe From Itself — Real disposable income per head has grown almost twice as much in the US as in the European Union since 2000, with the EU trailing the US and China in the digital revolution and only four of the world's top 50 tech companies European. If average productivity growth since 2015 persists, EU output would merely stay constant until 2050.

AI Summary. Equity markets have grown more concentrated at the stock level, with the 10 largest US companies accounting for just under 20% of global equity market value and the top 5 roughly 15%. Many dominant technology firms are shifting from capital-light, scalable models toward capital-heavy investment, raising uncertainty over whether future returns will justify current valuations.

Peter Oppenheimer, Sharon Bell, Lilia Peytavin and Guillaume Jaisson Goldman Sachs
Date Posted:

A @goldmansachs analysis notes the largest American firms account for 18% of the value of the global equity market, and argues that “this increased concentration has reflected extraordinary profit growth rather than speculative exuberance.”

Does rising market concentration and capital-heavy tech investment raise return uncertainty?

Core argument: The 10 largest companies account for just under 20% of global equity market value and the top 5 roughly 15%, with concentration at the stock level most obvious in the US.

Equity markets have become increasingly concentrated at the stock level. This is most obvious in the US, where the biggest 10 companies account for around just under 20% of the value of the global equity market, and the top 5 companies roughly 15%. Encouragingly, the valuations of large cap Technology remain much lower than we have seen in previous bubble periods. However, many of the dominant Technology companies are shifting away from their capital-light, highly scalable business models and are increasingly capital-heavy. There is rising uncertainty over whether these companies can generate the future returns on these investments that is reflected in their current valuations. History suggests that the companies that build the underlying infrastructure in technology revolutions are often not the main beneficiaries (think of the Telecom companies during the late 1990s compared with the app-based businesses that emerged later and were able to benefit from the capex that had been built and paid for by others).

Takeaways by Macro Roundup® AI

  1. The 10 largest companies account for just under 20% of global equity market value and the top 5 roughly 15%, with concentration at the stock level most obvious in the US.
  2. Valuations of large cap Technology remain much lower than in previous bubble periods, but many dominant Technology companies are shifting from capital-light, highly scalable models toward capital-heavy ones, raising uncertainty over future returns on those investments.
  3. History suggests the companies building underlying infrastructure in technology revolutions are often not the main beneficiaries, as with Telecom firms in the late 1990s versus later app-based businesses that benefited from capex paid for by others.

Related Articles:

  • AI: To Buy, Or Not To Buy, That Is The Question — Valuations of AI-related stocks remain well below levels seen in past bubbles, with the median price-to-earnings and enterprise-value-to-sales ratios of the 7 largest technology companies roughly half those of the dominant 7 at the 2000 technology peak. But leading AI firms are no longer capital-light, and a major capital-spending boom threatens the high returns current valuations imply will continue.
  • Which U.S. Stocks Generated the Highest Long-Term Returns? — Of the 29,078 U.S. common stocks in a database spanning nearly a century, 51.6% had negative cumulative returns, while 17 stocks returned more than 5m% — led by Altria at 265m%. Those top performers averaged annualized returns of just 13.47%, underscoring the value of time invested.
  • Long-Term Shareholder Returns: Evidence From 64,000 Global Stocks — A study of about 64,000 global stocks estimates net global stock market wealth creation of $75.7tn, with returns highly concentrated: the top 159 firms (0.25%) account for half of net wealth creation and the top 1,526 (2.39%) account for all of it. Fewer than half of stocks beat one-month US Treasury bills, 42.6% of non-US and 44.8% of US stocks.

AI Summary. US labor productivity per hour has grown 73% since 1990, versus 39% in the euro area and 55% in both Britain and Japan. America also invests more, with non-residential investment near 17% of GDP and R&D around 3.5%, and sees company churn of nearly 20% annually versus roughly 15% in Europe.

Simon Rabinovitch and Henry Curr The Economist
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Since 1990 labor productivity per hour in the US has increased 73%, outpacing Japan’s 55% increase and the Euro Area’s 39% gain. @S_Rabinovitch and @currhenry speculate this outperformance is driven by higher investment and business dynamism.

Why does American productivity growth outpace other advanced economies?

Core argument: American productivity per hour has grown 73% since 1990, versus 39% in the euro area and 55% in both Britain and Japan.

When assessed on a per-hour basis the gap remains sizeable: 73% productivity growth for American workers since 1990 versus 39% in the euro area, 55% in Britain, and 55% in Japan. American workers have more tools at their disposal, both the physical kind such as highways and warehouses, and the intangible sort in the form of software. Non-residential investment has run at about 17% of GDP in America since the mid-1990s, consistently higher than the share in large European economies. With the exceptions of Israel and South Korea, America invests more in R&D than any other country, at roughly 3.5% of GDP. America’s overall economic environment, often described as its business dynamism, is a second factor. One way of showing this is the churn rate among its companies, or the share that are created or dissolved in any given year. [In the US this is] nearly 20% of companies annually (roughly half are new businesses and the other half are those that stop operating). In Europe, it is closer to 15%. This difference reflects the twin facts that it is easier both for old firms to fold in America and for startups to obtain financing.

Takeaways by Macro Roundup® AI

  1. American productivity per hour has grown 73% since 1990, versus 39% in the euro area and 55% in both Britain and Japan.
  2. Non-residential investment has run at about 17% of GDP in America since the mid-1990s, consistently above the share in large European economies, and America invests roughly 3.5% of GDP in R&D, more than any country except Israel and South Korea.
  3. Nearly 20% of American companies are created or dissolved annually, split roughly evenly between startups and closures, versus closer to 15% in Europe, reflecting that it is easier both for old firms to fold and for startups to obtain financing in America.

Related Articles:

  • Why is the U.S. GDP Recovering Faster Than Other Advanced Economies? — The U.S. output advantage over other advanced economies is attributed mainly to faster labor productivity growth and secondarily to hours worked per employee. Rigid foreign labor markets and job-retention policies kept workers attached to firms producing below capacity, while the U.S. saw about 3x more sectoral worker reallocation and a surge in new firm formation.
  • High-Growth Firms in the United States: Key Trends and New Data Opportunities — The share of U.S. firms classified as high-growth fell from 18% in 1985 to 12% in 2015, with the decline concentrated among young and small firms while mature and large firms showed little change. All sectors declined, especially construction and manufacturing, though information industries staged a modest rebound after 2010.
  • Business Spending Is Lining Up to Reinforce Growth — Around 70% of sectors are posting positive year-over-year profit growth, with big tech showing the largest acceleration in demand and profits but strength broadening across the economy. Companies are responding with rising capital spending growth and more optimistic investment plans, as firms typically add capacity with a slight lag after real demand picks up.

AI Summary. The Federal Reserve expanded the monetary base from $800bn to $4tn without raising inflation fears or spurring spending, because it has promised to contract the money supply before inflation takes hold and has the credibility to do so. Quantitative easing only works if made permanent and thus guaranteed to inflict inflation.

Ed Conard, Simon Johnson, Roger Bootle, and Andrew Huszar EdwardConard.com
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Congratulations @baselinescene (and @DAcemogluMIT and James Robinson) on your well-deserved Nobel. In 2015 Simon and I debated whether “Central Banks Can Print Prosperity.”

Can central banks print prosperity by expanding the monetary base?

Core argument: Conard argues that the Fed's five-fold expansion of the monetary base from $800 billion to $4 trillion had no effect on inflation fears, with the money sitting unlent and unborrowed, producing neither growth nor inflation.

Here’s the rub: the Fed increased the monetary base from $800 billion to $4 trillion dollars—an unprecedented five-fold increase—and it had no effect on anyone’s fear of inflation whatsoever. No one ran to the banks to spend their savings. The money sits unused neither lent nor borrowed, creating neither growth nor inflation. Why? Because the Fed has promised to prevent inflation by contracting the money supply before the economy recovers and people start exchanging IOUs for corn. With hard-fought decades of successfully defeating price inflation, the Fed has earned its credibility. And with Republicans threatening the Fed’s independence if it doesn’t fight inflation, the Fed’s promise has even more credibility. Advocates of Quantitative Easing pretend we can have our cake and eat it too—that we can scare savers into spending by printing money without needing to inflict the cost of inflation on the economy after it recovers. But it didn’t work when we needed stimulus. Even Ben Bernanke now admits that QE will only work if it’s permanent—if it’s guaranteed to inflict inflation on the economy. But nowhere does he advocate making QE permanent because of the damage inflation inflicts.

Takeaways by Macro Roundup® AI

  1. Conard argues that the Fed's five-fold expansion of the monetary base from $800 billion to $4 trillion had no effect on inflation fears, with the money sitting unlent and unborrowed, producing neither growth nor inflation.
  2. Conard attributes the absence of inflation to the Fed's credibility, earned over decades of defeating price inflation and reinforced by Republican threats to its independence, in promising to contract the money supply before the economy recovers.
  3. Conard notes that Ben Bernanke admits quantitative easing will work only if made permanent and guaranteed to inflict inflation, yet Bernanke does not advocate making QE permanent because of the damage inflation causes.

Related Articles:

AI Summary. The United States is projected to spend an estimated $1.7tn over 30 years to modernize its nuclear arsenal, including new submarines, bomber jets, land-based missiles, and thermonuclear warheads. The program, planned since 2010, amounts to roughly $57bn a year and involves work in at least 23 states.

W.J. Hennigan New York Times
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The US nuclear modernization program will cost ~ $1.7T over 30 years, including new bomber jets, land-based missiles, and thermonuclear warheads. Overall 2024 defense spending was 2.7% of GDP in 2024, vs. 5.6% at the end of the Cold War.

What will it cost to modernize the US nuclear arsenal?

Core argument: The United States is set to spend an estimated $1.7 trillion over 30 years to revamp its nuclear arsenal, amounting to almost $57 billion a year, or $108,000 per minute.

With Russia at war, China escalating regional disputes, and nations like North Korea and Iran expanding their nuclear programs, the United States is set to spend an estimated $1.7 trillion over 30 years to revamp its own arsenal. The spending spree, which the government began planning in 2010, is underway in at least 23 states — nearly 50 if you include subcontractors. It follows a decades-long freeze on designing, building, or testing new nuclear weapons. Along with the subs, the military is paying for a new fleet of bomber jets, land-based missiles, and thermonuclear warheads. Tally all that spending, and the bill comes to almost $57 billion a year, or $108,000 per minute for three decades.

Takeaways by Macro Roundup® AI

  1. The United States is set to spend an estimated $1.7 trillion over 30 years to revamp its nuclear arsenal, amounting to almost $57 billion a year, or $108,000 per minute.
  2. The nuclear modernization program, which the government began planning in 2010, covers new submarines, bomber jets, land-based missiles, and thermonuclear warheads, following a decades-long freeze on designing, building, or testing new nuclear weapons.
  3. Spending on the U.S. nuclear buildup is underway in at least 23 states, and nearly 50 counting subcontractors, as Russia wages war, China escalates regional disputes, and North Korea and Iran expand their nuclear programs.

Related Articles:

  • China Is Rapidly Building Warships. Satellite Images Reveal The Scale — China's shipbuilding capacity now exceeds the United States' by such a margin that it can build more ships in a month than American yards build in a year, with a workforce estimated at nearly 5x the US level. Chinese yards handled more than 1,700 orders in a year, compared with fewer than five for American shipyards.
  • Top Defence Contractors Set To Rake In Record Cash After Orders Soar — The 15 largest aerospace and defence contractors are forecast to generate $52bn in free cash flow in 2026, almost double their combined 2021 level, as governments increase orders for new weapons. Five top US contractors alone are projected to produce $26bn, more than twice their 2021 total.
  • Business Spending Is Lining Up to Reinforce Growth — Around 70% of sectors are posting positive year-over-year profit growth, with big tech showing the largest acceleration in demand and profits but strength broadening across the economy. Companies are responding with rising capital spending growth and more optimistic investment plans, as firms typically add capacity with a slight lag after real demand picks up.