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


Tuesday, October 22, 2024

AI Summary. The authors model investors as having limited foresight in forecasting future government debt issuance, with participants differing in how far ahead they apply economic relationships. This heterogeneity implies that expected future increases in debt issuance raise the extra yield investors demand on longer-term bonds, with more distant changes discounted more heavily than nearer-term ones.

Christopher Gust and Arsenios Skaperdas Federal Reserve Board
Date Posted:

Gust and Skaperdas find that when people form expectations of future debt over a cognitively realistic 5 yr horizon, a permanent 1 ppt increase in debt-to-GDP raises the term premium on the 10-year by only 3 bps, half of the perfect foresight estimate.

Do expected future debt increases raise long-term bond yields?

Core argument: Modeling investors with limited foresight, the authors find that heterogeneity in forecast horizons creates a relationship in which changes in government debt issuance in the far future are discounted more heavily than near-future changes when pricing the term premium.

We modify the assumption regarding investors’ expectations formation to allow for limitations on the ability of investors to foresee and forecast future events. When investors differ in the horizon over which they use economic relationships to make forecasts, this heterogeneity gives rise to a relationship between the term premium and changes in debt issuance in which changes in debt issuance in the far future are discounted more heavily than those occurring in the near future. Accordingly, the limited foresight of financial market participants introduces an additional [discounting] parameter into the relationship between government debt and the term premium relative to the case of perfect foresight. The parameter 𝛾 corresponds to how far in the future the average financial market participant uses information on government debt to form beliefs about the term premium. As 𝛾 approaches 1, the model implies the same term premium effects as under perfect foresight. due to cognitive limits

Takeaways by Macro Roundup® AI

  1. Modeling investors with limited foresight, the authors find that heterogeneity in forecast horizons creates a relationship in which changes in government debt issuance in the far future are discounted more heavily than near-future changes when pricing the term premium.
  2. Limited foresight among financial market participants introduces an additional discounting parameter into the relationship between government debt and the term premium relative to the perfect-foresight case, according to the authors' model.
  3. The discounting parameter corresponds to how far into the future the average financial market participant uses government debt information to form beliefs about the term premium, and as it approaches 1 the model implies the same term premium effects as under perfect foresight.

Related Articles:

  • Federal Debt — Stabilizing federal debt would require a zero primary deficit — borrowing only to cover interest on past borrowing — which today would mean a cash deficit of about 3% of GDP, or roughly $800bn a year. The actual deficit is about $1.7tn, or 6% of GDP, with no political dynamics in prospect that would cut it to 3%.
  • 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.
  • The Long-Term Budget Outlook Under Alternative Scenarios for the Economy and the Budget — The Congressional Budget Office projects that if private investment were more sensitive to federal deficits, debt held by the public would exceed 250% of GDP and real national income per person would be 18% ($21,300) lower than its baseline, with the average interest rate on federal debt 2pp higher.

AI Summary. US Treasury net interest payments reached $882bn in a fiscal year, equal to 3.06% of gross domestic product — the highest ratio since 1996 — and about 18% of federal revenues. The net interest bill exceeded Defense Department spending on military programs for the first time.

Viktoria Dendrinou Bloomberg
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The US is spending 3.06% of GDP or 18% of federal revenue on debt service, the highest level since 1996. Interest payments are higher than defense spending for the first time.

Has federal interest spending surpassed military spending for the first time?

Core argument: The Treasury paid $882 billion in net interest in the fiscal year through September, roughly $2.4 billion a day, equal to 3.06% of GDP — the highest ratio since 1996.

The Treasury spent $882 billion on net interest payments in the fiscal year through September — an average of roughly $2.4 billion a day. The cost was the equivalent of 3.06% as a share of gross domestic product, the highest ratio since 1996. The net interest bill exceeded the Defense Department’s spending on military programs for the first time, according to data from the Treasury Department and the Office of Management and Budget. It also amounted to about 18% of federal revenues — almost double the ratio from two years ago.

Takeaways by Macro Roundup® AI

  1. The Treasury paid $882 billion in net interest in the fiscal year through September, roughly $2.4 billion a day, equal to 3.06% of GDP — the highest ratio since 1996.
  2. Net interest payments exceeded the Defense Department's spending on military programs for the first time, according to Treasury Department and Office of Management and Budget data.
  3. Net interest amounted to about 18% of federal revenues, almost double the ratio of two years earlier.

Related Articles:

  • The Fiscal Impact of the Harris and Trump Campaign Plans — The Congressional Budget Office's current-law baseline projects U.S. national debt rising from 102% of GDP to 125% by 2035, exceeding the record 106% share set in 1946 within three years. The authors estimate the Harris campaign plan would raise debt to 133% of GDP by 2035 and the Trump plan to 142%.
  • 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.
  • Larry Summers and Bob Rubin Join Our CIOs to Discuss the Surprising Economic Cycle — Adopting the Simpson-Bowles fiscal consolidation when interest rates were at zero would have risked excessive disinflation, since long rates had no room to fall to provide an offsetting expansionary impulse. After the large run-up in debt and rise in real interest rates, the developing fiscal situation risks inflationary pressure, Treasury market disruption, or crowding out of private investment.

AI Summary. The rise in the gold price reflects more than traditional economic, financial, and geopolitical influences, capturing a broader phenomenon that is building secular momentum as a growing number of countries become involved. As it takes deeper root, it risks fragmenting the global system and eroding the international influence of the dollar and the US financial system.

Mohamed El-Erian Financial Times
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Gold is up ~ 40% y/y but its rise isn’t tracking its historical relationship with US yields. @elerianm argues the relatively linear rise implies investors are buying based on the prospect of a “gradual change in the operation of the global system.”

Does the rising gold price signal fragmentation of the global financial system?

Core argument: The rise in the gold price goes beyond traditional economic, financial, and geopolitical influences, capturing a broader phenomenon that is building secular momentum, according to the author.

What is at stake here is not just the erosion of the dollar’s dominant role but also a gradual change in the operation of the global system; and a growing number of countries are interested and increasingly involved. What has been happening to the gold price is not just unusual in terms of traditional economic and financial influences. It also goes beyond strict geopolitical influences to capture a broader phenomenon which is building secular momentum. As it develops deeper roots, this risks materially fragmenting the global system and eroding the international influence of the dollar and the US financial system.

Takeaways by Macro Roundup® AI

  1. The rise in the gold price goes beyond traditional economic, financial, and geopolitical influences, capturing a broader phenomenon that is building secular momentum, according to the author.
  2. A growing number of countries are interested and increasingly involved in a gradual change in the operation of the global system, with the dollar's dominant role at stake.
  3. As the phenomenon develops deeper roots, it risks materially fragmenting the global system and eroding the international influence of the dollar and the US financial system.

Related Articles:

  • Taking Stock: Dollar Assets, Gold, and Official Foreign Exchange Reserves — Gold accounts for about 10% of aggregate official foreign exchange reserves, roughly its level in the early 2000s. International Monetary Fund country data indicate most added official gold holdings came from a few central banks, with over half of reported accumulation from China and Russia and about a quarter from several emerging markets.
  • Top Dollar — Foreign holdings of U.S. financial assets exceed American holdings abroad, making the United States a net debtor whose liabilities are denominated in dollars while its foreign assets are largely in other currencies. U.S. foreign liabilities grew from $30tn to over $51tn while U.S. foreign assets grew from $24tn to $33tn, tripling the net debtor position from $6tn.
  • Gold Rising — China appears to be shifting its reserve diversification toward gold, but its gold allocation remains well below that of other countries at odds with the United States, such as Russia and Turkey, which raised their gold holdings substantially. Gold held in domestic custody sits outside U.S. influence.

AI Summary. US research and development spending held between about 2.3% and 2.7% of GDP from the early 1980s until about 2013, then rose to roughly 3.5% of GDP as business R&D spending climbed while federal support as a share of GDP continued to lag. That 1-point rise equals about $290bn in additional annual R&D.

Timothy Taylor Conversable Economist
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At ~ 3.5% of GDP, US R&D spending is at an all-time high, driven by a surge in business spending on R&D starting around 2016. US R&D spending is higher in absolute and relative terms than that of the EU and China. @TimothyTTaylor

Is business spending driving the rise in US R&D?

Core argument: Total US R&D spending has risen to about 3.5% of GDP after hovering between roughly 2.3%–2.7% of GDP from the early 1980s through about 2013.

Total R&D spending as a share of GDP (blue line) hovered between about 2.3%-2.7% of GDP from the early 1980s up through about 2013. But then you see a substantial change. Although federal support for R&D as a share of GDP continues to lag, business spending on R&D takes off, and pushes US R&D spending up to about 3.5% of GDP. With a US GDP in 2024 at around $29 trillion, a 1% rise in GDP means that about $290 billion more is being spent on R&D this year than would have been spent if R&D had stayed in that lower range.

Takeaways by Macro Roundup® AI

  1. Total US R&D spending has risen to about 3.5% of GDP after hovering between roughly 2.3%–2.7% of GDP from the early 1980s through about 2013.
  2. Business spending on R&D drove the increase, while federal support for R&D as a share of GDP continues to lag.
  3. With US GDP around $29 trillion in 2024, the roughly 1 percentage point rise in R&D's GDP share amounts to about $290 billion more spent on R&D than if R&D had stayed in its earlier range.

Related Articles:

  • U.S. Business Investment in the Post-COVID Expansion — Business fixed investment has held at roughly the same share of U.S. GDP as before COVID, a better outcome than after every other recession since 1980, when investment typically fell as a share of GDP and contributed less well into the recovery. American businesses invested $430bn more than if investment had followed its usual historical pattern.
  • Kindleberger Cycles: Method in the Madness of Crowds? — Because companies weigh only their own private returns, they underinvest in research whose returns to society are far higher, and evidence contests whether intellectual property and research subsidies fix this. One model calculates that technology bubbles deliver net social gains when social returns exceed private returns by 2.5x, and estimates put corporate research's ratio near 4x.
  • Public R&D Spillovers and Productivity Growth — Using US firm-level patent and balance-sheet data spanning 1950–2020, the author estimates that a 1% decline in spillovers from publicly funded research and development causes a 0.17% decline in firm productivity growth, with public R&D spillovers about 3x as impactful as private ones and smaller firms gaining most.

AI Summary. Major defense contractors including RTX, MBDA, and QinetiQ are investing heavily in high-energy laser weapons to destroy drones, a technology long regarded as science fiction. Britain's Ministry of Defence says its DragonFire laser will be deployed on Royal Navy ships five years ahead of schedule, firing at roughly £10 a shot.

Sylvia Pfeifer Financial Times
Date Posted:

The UK’s DragonFire system, which can shoot down a drone for ~ $13 a shot, will be deployed by 2027 – five years ahead of schedule – as defense contractors race to deliver affordable counter-drone solutions.

Are laser weapons becoming a practical way to shoot down drones?

Core argument: The UK Ministry of Defence says its DragonFire laser will fire at any target visible in the air for about £10 a shot, with accuracy equivalent to hitting a pound coin from a kilometre away.

Some of the world’s best-known contractors, including RTX in the US and Europe’s MBDA, as well as Britain’s QinetiQ, are investing heavily in the cutting-edge technology — long regarded as more science fiction than reality. The US army this year used high-energy lasers to shoot down drones in the Middle East in what was regarded as a milestone for the burgeoning industry. The UK’s Ministry of Defence said in April it would accelerate the development of its DragonFire laser. The weapon will now be deployed on Royal Navy ships by 2027 — five years earlier than planned. DragonFire will be able to fire at any target visible in the air at around £10 a shot and with an accuracy equivalent to hitting a pound coin from a kilometre away, according to the MoD. It successfully fired at aerial targets during a groundbreaking test in January.

Takeaways by Macro Roundup® AI

  1. The UK Ministry of Defence says its DragonFire laser will fire at any target visible in the air for about £10 a shot, with accuracy equivalent to hitting a pound coin from a kilometre away.
  2. The UK Ministry of Defence said in April it would accelerate DragonFire's development and deploy the weapon on Royal Navy ships by 2027, five years earlier than planned, after a successful test against aerial targets in January.
  3. RTX in the US, Europe's MBDA and Britain's QinetiQ are investing heavily in laser weapons, and the US army used high-energy lasers to shoot down drones in the Middle East.

Related Articles:

  • 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.
  • Mystery Drones Swarmed a U.S. Military Base for 17 Days. The Pentagon Is Stumped — 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.
  • Global Defence Groups Hiring At Fastest Rate In Decades Amid Record Orders — A survey of 20 large and medium-sized US and European defence and aerospace companies found they plan to recruit tens of thousands of workers, with 10 of them seeking to add almost 37,000 positions, or nearly 10% of their combined workforce. Demand spans apprentices to executives, including engineers, software developers, cyber security analysts, welders, and mechanics.

AI Summary. In a survey of 6,204 U.S. adults, 25% said Americans hold mostly negative views of men who are "manly or masculine," fewer than the 43% who said views are mostly positive and 31% who said views are neither. Republican men were most likely to perceive negative views, at 45%.

Juliana Menasce Horowitz and Kim Parker Pew Research Center
Date Posted:

53% of Republican men and 29% of Democratic men rate themselves as “highly masculine.” 45% of Republican men feel people have negative views of masculine men, and that this is a “bad thing.” @pewresearch

How do Americans view masculine men?

Core argument: In a Pew Research Center survey of 6,204 U.S. adults, 25% say Americans hold mostly negative views of men who are "manly or masculine," below the 43% who say views are mostly positive and the 31% who say views are neither positive nor negative.

We asked 6,204 U.S. adults about their views on men and masculinity. Relatively few Americans say people have negative views of masculine men. 25% say people in the United States have mostly negative views of men who are “manly or masculine.” This is smaller than the shares who say people have mostly positive views of masculine men (43%) or that views are neither positive nor negative (31%). But among Republican men, 45% do, and the vast majority of those who feel this way say this is a bad thing. Much smaller shares of Republican women (24%), Democratic men (20%) and Democratic women (13%) say people view masculine men negatively. (Republicans and Democrats include those who lean toward either party.)

Takeaways by Macro Roundup® AI

  1. In a Pew Research Center survey of 6,204 U.S. adults, 25% say Americans hold mostly negative views of men who are "manly or masculine," below the 43% who say views are mostly positive and the 31% who say views are neither positive nor negative.
  2. Republican men are more likely than other partisan groups to say Americans view masculine men negatively, at 45%, compared with 24% of Republican women, 20% of Democratic men and 13% of Democratic women.

Related Articles:

  • The Politics of Progress and Privilege: How America’s Gender Gap Is Reshaping the 2024 Election — Survey data show 35% of Americans say the term "feminist" describes them somewhat or very well, down from 51% earlier. Women are more likely than men to identify as feminist (42% vs 27%), with the widest gap among those age 18–29, where 55% of women but 31% of men claim the label.
  • America’s Young Men Are Falling Even Further Behind — Labor force participation among US men ages 25 to 34 has not grown in a decade, standing at 89%, which one analysis of Bureau of Labor Statistics data estimates is more than 700,000 fewer participants than at 2004 rates; women's participation in that age group is up 6 percentage points over 10 years, to 79%.
  • Many Gen Z Men Feel Left Behind. Some See Trump As An Answer — National polling shows a gender gap of roughly 39 to 51 percentage points among voters under 30, with young men favoring the Republican candidate and young women favoring the Democrat. The Republican message resonates particularly with young men without college degrees and young men of color.

AI Summary. India, the world's fifth largest economy, is projected to grow 6–8% over the next five years and to surpass Japan as the third largest economy. The outlook cites contained inflation, rising capital expenditure, improving fiscal and current account balances, favorable demographics, healthy household balance sheets, rising corporate profitability, and solid bank lending.

Torsten Sløk, Utsav Baijal, Rajvi Shah and Shruti Galwankar Apollo
Date Posted:

The Indian stock market as measured by the BSE 500 has outpaced the S&P 500, Hang Seng and NIKKEI 225 since 2000. Projected to grow at 6-8% over the next five years, India will soon be the world’s third-largest economy, surpassing Japan.

Is India positioned for strong growth and low inflation ahead?

Core argument: India, the world's fifth largest economy, is projected to grow 6–8% over the next five years and to surpass Japan as the third largest economy.

India, world’s fifth largest economy is projected to grow at 6-8% over the next five years and surpass Japan to become the third largest economy. Outlook for India remains healthy on the backdrop of strong GDP growth, under control inflation, rising capex, improving fiscal and current account balance and favorable demographics. Consumer and corporate confidence is upbeat. Household balance sheets are healthy and consumer spending is strong. Corporate profitability continues to rise with interest coverage ratio rising and interest burden falling. The financial sector has seen significant transformation with digitalization and bankruptcy law enactment. Bank lending has been solid, and the Indian stock, bond, and private markets continue to grow at a rapid pace.

Takeaways by Macro Roundup® AI

  1. India, the world's fifth largest economy, is projected to grow 6–8% over the next five years and to surpass Japan as the third largest economy.
  2. India's outlook rests on strong GDP growth, contained inflation, rising capital expenditure, improving fiscal and current account balances, and favorable demographics, with consumer and corporate confidence upbeat.
  3. Indian corporate profitability continues to rise, with interest coverage ratios increasing and interest burdens falling, while bank lending has been solid and stock, bond, and private markets grow rapidly.

Related Articles:

  • Where Can Investors Find Geographic Diversification Today? — Japan offers investors geographic diversification, with among the lowest correlation in economic conditions to the US of any developed country, reflecting trade exposure split between the US, China, and the broader Asia region. Most sales of Japanese-listed companies are domestic, and investors remain underweight Japanese assets.
  • Apple’s India iPhone Output Hits $14 Billion in China Shift — Apple assembled $14bn of iPhones in India in its last fiscal year, doubling output there to roughly 14%, or about 1 in 7, of its iPhones. China remains Apple's largest iPhone-making hub and biggest overseas market, though its revenue there is falling amid competition from rivals such as Huawei.
  • India At The Centre — India has averaged real GDP growth above 6% a year for three decades, and unlike China's growth, it has translated into equity returns, with the Sensex matching or beating the S&P 500 over 30-, 20-, 10-, and five-year spans. Analysis attributes the growth to rising total factor productivity, with contributions from services exports and improved basic infrastructure.

Wednesday, October 23, 2024

AI Summary. Income-based poverty measures show a large decline followed by a large increase, while consumption-based poverty declines steadily; the authors attribute the gap to low-income households saving, then dissaving and borrowing. They estimate that expanded child tax credits, stimulus payments, and pandemic unemployment benefits each played similar or larger roles in reducing poverty.

Bruce Meyer, Jeehoon Han, and James Sullivan National Bureau of Economic Research
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CPS disposable income data indicate a large poverty decline in 2021 and a large increase in 2022, while consumption poverty steadily declined over 2021-2022, partly explained by savings from 2021 unemployment and COVID-era cash transfers. @AEIecon

Why do income and consumption measures of poverty tell different stories?

Core argument: Income-based poverty measured from Current Population Survey data with imputed taxes and credits fell sharply in 2021 and rose sharply in 2022, while consumption-based poverty from the Consumer Expenditure Survey declined steadily.

Poverty calculated using CPS income data with imputed taxes and tax credits indicate a large poverty decline in 2021 and a large increase in 2022, [while] consumption-based poverty calculated from the CEX show a steady decline in poverty. Spending data from the Fed’s SHED data also suggest consumption [of the poor] grew more than income in 2022. The puzzle is at least partially resolved by a pronounced increase in saving in 2021 followed by dissaving in 2022 by those with low income or consumption, and an increase in borrowing in 2022. This consumption smoothing behavior sharply contrasts with past evidence of hand to mouth consumption at the bottom of the income distribution and shows that the permanent income model has surprising applicability to the poor in certain circumstances.We estimate income poverty under counterfactual policy scenarios that exclude the enacted programs or the extension of discontinued programs. These indicate [that] while the expanded Child Tax Credit led to a significant decline in poverty, other policies including the stimulus payments and Pandemic unemployment benefits, played a similar or even larger role.

Takeaways by Macro Roundup® AI

  1. Income-based poverty measured from Current Population Survey data with imputed taxes and credits fell sharply in 2021 and rose sharply in 2022, while consumption-based poverty from the Consumer Expenditure Survey declined steadily.
  2. The divergence is at least partially resolved by low-income households saving more in 2021, then dissaving and borrowing more in 2022, consumption smoothing that contrasts with past evidence of hand-to-mouth behavior at the bottom of the distribution.
  3. Counterfactual policy estimates indicate that while the expanded Child Tax Credit led to a significant poverty decline, stimulus payments and pandemic unemployment benefits played a similar or larger role.

Related Articles:

AI Summary. The author argues that negative net national savings means the United States is consuming capital rather than accumulating it, largely by selling capital stock to foreigners and spending the proceeds and by not replacing aging capital. With a negative net international investment position, the author contends U.S. spending depends on continued foreign inflows and that potential growth is declining.

Andrew Lees MacroStrategy Partnership
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Andrew Lees @MacrostrategyP argues that the US current account deficit is being funded in part by the flight of capital from Europe, which cannot continue indefinitely.

Is the US consuming capital and relying on foreign inflows?

Core argument: The author argues the U.S. net national savings deficit means the country is consuming capital rather than accumulating it, largely by selling capital stock to foreigners and spending the proceeds, and partly by not replacing aging capital stock.

With a negative net national savings deficit, rather than the U.S. accumulating capital, it is consuming it. Most of this is from selling capital stock to foreigners and consuming the proceeds, and some is more directly, from not replacing aging capital stock. Either way, without restructuring the economy, the cost of servicing the outstanding stock of debt and unproductive government spending exceeds the capacity of the domestic economy to generate savings, and with a negative net international investment position, is reliant on the generosity of foreigners to fund its spending. Without the recent questionable upward revision to the U.S. personal savings rate, the net national savings deficit would be even more substantial. Through the consumption of capital, the U.S. potential GDP growth rate is declining rapidly, dependent not on productivity but this continuous flow of funds which will eventually exhaust. Whilst this flow of funds has obviously helped drive the relative growth of the U.S. and its market performance, it has been at the expense of world growth which has continued to trend lower, meaning it is not a sustainable position.

Takeaways by Macro Roundup® AI

  1. The author argues the U.S. net national savings deficit means the country is consuming capital rather than accumulating it, largely by selling capital stock to foreigners and spending the proceeds, and partly by not replacing aging capital stock.
  2. With a negative net international investment position, the U.S. relies on foreign inflows to fund debt service and unproductive government spending, which the author argues exceed the domestic economy's capacity to generate savings.
  3. The author contends U.S. potential GDP growth is declining rapidly because it depends on a continuous flow of foreign funds rather than productivity, and that this flow has come at the expense of world growth, leaving the position unsustainable.

Related Articles:

  • United States’ Changing Net IIP — The United States' net international investment position deficit—the gap between foreign-owned US assets and US-owned foreign assets—is the largest on record and has turned negative across all major asset categories. Because much of the liability is equity, the author argues rebalancing could come through a correction in US equity values rather than a weaker dollar.
  • The End of Privilege: A Reexamination of the Net Foreign Asset Position of the United States — The authors document that the U.S. net foreign asset position fell by 60 percentage points of U.S. gross domestic product between 2007 and 2021, even as U.S. current account deficits narrowed. They attribute this to a boom in the market valuation of U.S. corporations' non-financial assets, which mechanically raised the value of large foreign equity holdings in U.S. firms.
  • The Economics of Inequality in High-Wage Economies — Information technology created investment opportunities exceeding the supply of properly trained talent, while trade with low-wage economies, low-skilled immigration, trade deficits, and aging demographics eased constraints on low-skilled labor and risk-averse savings. The author argues this framework, rather than rising cronyism, explains high returns to success, slowing productivity growth, and low interest rates.

AI Summary. The International Monetary Fund projects U.S. gross fixed capital formation, a broad measure of investment, to grow 4.5% this year, more than triple the rate for advanced economies as a group, while German investment spending falls 2.7%. Over 2016-2025, U.S. investment is estimated to have grown 3.3% a year versus 2.3% across advanced economies.

Josh Mitchell Wall Street Journal
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According to the IMF, US gross fixed capital formation will rise 4.5% y/y in 2024 – well above the 2006-15 US mean of 1.2% and more than 3 times the rate for all advanced economies, several of which are expected to experience a fall.

Is U.S. investment growth outpacing other advanced economies?

Core argument: The IMF projects U.S. gross fixed capital formation, a broad measure of investment, will rise 4.5% this year from 2023, more than triple the rate for all advanced economies.

According to the IMF, U.S. gross fixed capital formation—a broad measure of investment—will rise 4.5% this year from 2023, more than triple the rate for all advanced economies. From 2016-2025, the IMF estimates U.S. investment will have grown an average 3.3% a year, versus 2.3% for all advanced economies. By comparison, investment spending is projected to fall 2.7% this year in Germany, previously the juggernaut of Europe, after falling 1.2% last year. This is a big shift. In the prior decade, from 2006-2015, U.S. investment spending grew an average 1.2% a year, roughly in line with the advanced-economy average.

Takeaways by Macro Roundup® AI

  1. The IMF projects U.S. gross fixed capital formation, a broad measure of investment, will rise 4.5% this year from 2023, more than triple the rate for all advanced economies.
  2. The IMF estimates U.S. investment will have grown an average 3.3% a year from 2016-2025, versus 2.3% for all advanced economies, up from 1.2% a year in 2006-2015, when the U.S. tracked the advanced-economy average.
  3. German investment spending is projected to fall 2.7% this year after declining 1.2% last year.

Related Articles:

  • 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.
  • Capital Is Making a Comeback — Tangible investment in property, factories and equipment fell from 12.5% to 8.5% of private gross domestic product, while intangible investment in intellectual property, software and process knowledge rose from about 11.5% to 16.75%. The author argues demand for tangible capital investment will now have to rise.
  • U.S. Business Investment in the Post-COVID Expansion — Business fixed investment has held at roughly the same share of U.S. GDP as before COVID, a better outcome than after every other recession since 1980, when investment typically fell as a share of GDP and contributed less well into the recovery. American businesses invested $430bn more than if investment had followed its usual historical pattern.

AI Summary. SpaceX's reusable Falcon rockets can send a tonne into space at about a tenth of the cost of a decade ago, according to a Citigroup estimate. Analysis from BryceTech shows the company launched almost 7x as much mass into orbit as all private and national rivals combined in a quarter.

Economist Staff The Economist
Date Posted:

SpaceX can launch a ton of cargo into space “at about a tenth of the cost that prevailed a decade ago.” In Q1 of 2024, the firm put into orbit seven times the combined tonnage of all of its global governmental and private sector rivals.

Have reusable rockets transformed launch costs and market share?

Core argument: Citigroup estimates SpaceX's Falcon rockets can send a tonne into space at about a tenth of the cost that prevailed a decade ago, aided by lower stages that can be recovered and flown again.

SpaceX’s Falcon rockets have already slashed the cost of space flight, partly thanks to the fact that their lower stages, unlike those of almost any other rocket, can be recovered and flown again. According to an estimate by Citigroup, a bank, the Falcons can send a tonne into space at about a tenth of the cost that prevailed a decade ago. Figures from BryceTech, a firm of analysts, show that in the first quarter of this year the firm shot almost seven times as much into orbit as all its rivals put together, be they private firms or national space programmes.

Takeaways by Macro Roundup® AI

  1. Citigroup estimates SpaceX's Falcon rockets can send a tonne into space at about a tenth of the cost that prevailed a decade ago, aided by lower stages that can be recovered and flown again.
  2. BryceTech figures show SpaceX shot almost seven times as much into orbit in the first quarter of this year as all its rivals put together, private firms and national space programmes alike.

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  • SpaceX Captures Booster Rocket in Step Toward Musk’s Mars Dream — 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.
  • 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.
  • Building an Enduring Advantage in the Third Space Age — The United States and China each logged their highest-ever annual launch rates, at 103 and 66 launches, while Russia fell to 19 and Europe recorded three. The US accounted for roughly half of global launches but 81% of effective launch capacity, since Falcon 9 and Falcon Heavy comprised 93% of US launches.

AI Summary. An analysis of all known U.S. abortion providers found that the number of women receiving abortions rose in nearly every state with a ban, including 10 of 13 states with near-total bans, as women traveled to states where abortion is legal or ordered pills by mail.

Claire Cain Miller and Margot Sanger-Katz New York Times
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A survey of abortion providers finds in the 13 states that have enacted near-total abortion bans, the number of women receiving abortions increased in all but three. Nationwide, there were 587,000 abortions in the first half of 2024, up 12% y/y.

Have abortion bans reduced the number of women obtaining abortions?

Core argument: WeCount counted roughly 587,000 abortions in the United States in the first half of this year, an increase of more than 12% from the same period in 2023.

A WeCount analysis includes counts of abortions from all known abortion providers in the United States since April 2022. It also uses clinic survey data from the Guttmacher Institute on the number of women traveling between states for abortion care, and comparison data from 2020. In nearly every state that has banned abortion, the number of women receiving abortions increased between 2020 and the end of 2023. In the 13 states that enacted near-total abortion bans, the number of women receiving abortions increased in all but three. Some women traveled to clinics in states where abortions were legal. Others ordered abortion pills from U.S. doctors online, after doctors in other states started writing prescriptions under shield laws that protect them when they provide mail-order pills to patients in states with bans. The only states with bans where abortion fell during this period were Texas, where the decrease was small; Idaho, where it was larger; and Oklahoma, where the data showed an unusually large number of abortions in 2020. Nationwide, the study found that abortions have continued to rise. There were roughly 587,000 abortions in the first half of this year, an increase of more than 12% from the same period in 2023.

Takeaways by Macro Roundup® AI

  1. WeCount counted roughly 587,000 abortions in the United States in the first half of this year, an increase of more than 12% from the same period in 2023.
  2. In 10 of the 13 states with near-total abortion bans, the number of women receiving abortions rose between 2020 and the end of 2023, with declines only in Texas, Idaho and Oklahoma.
  3. Some women in states with bans traveled to clinics where abortion is legal, while others ordered abortion pills online from doctors prescribing under shield laws that protect them when they mail pills to patients in ban states.

Related Articles:

  • Abortions Have Become 6% Rarer Since the End of Roe V Wade — A report from the non-profit Society of Family Planning estimates there were 31,180 fewer abortions than prior rates would suggest over a six-month period, a 6% decline, even as abortions administered by virtual clinics rose. Abortions fell 63% across the 22 states that enacted new restrictions and rose 12% in more permissive states.
  • The Politics of Progress and Privilege: How America’s Gender Gap Is Reshaping the 2024 Election — Survey data show 35% of Americans say the term "feminist" describes them somewhat or very well, down from 51% earlier. Women are more likely than men to identify as feminist (42% vs 27%), with the widest gap among those age 18–29, where 55% of women but 31% of men claim the label.
  • The Data is Clear: People Are Having Less Sex — Survey data show every age group now reports less frequent sexual activity than counterparts in earlier decades, with roughly an 8 percentage point decline across age groups. Among people around age 25, the share reporting sex at least monthly fell from over 80% to 72%, while the peak years remain ages 30 to 40.

AI Summary. China caps individual foreign-exchange purchases at $50,000 a year and punishes violators with fines or prison, yet an estimated $254bn may have left the country illicitly over four quarters — more in dollar terms than during an earlier property-downturn episode, though smaller relative to China's now-larger economy.

Jason Douglas and Rebecca Feng Wall Street Journal
Date Posted:

The WSJ estimates that ~ $250B left China illegally in the four quarters through the end of June.

Are strict capital controls stopping money from leaving China?

Core argument: A Wall Street Journal data analysis suggests as much as $254 billion may have left China illicitly in the four quarters through the end of June, exceeding the 2015–2016 outflows in dollar terms.

Moving fortunes out of China is hard: The country imposes strict capital controls that cap individual purchases of foreign exchange at $50,000 a year. Violators can receive big fines, or even prison sentences, if they break the law. Nevertheless, the stampede for the exit in the past few years appears to dwarf the outflows that occurred in 2015 and 2016, when an earlier property downturn propelled what at the time was the biggest episode of capital flight from China, in dollar terms, according to economists and a Wall Street Journal data analysis. The Journal’s tally suggests as much as $254 billion might have left China illicitly in the four quarters through the end of June. That is a larger sum than fled the country almost a decade ago, when outflows raised fears of a possible financial crisis. However, estimates of such outflows are inherently imprecise and overall capital flight appears to be smaller today as a share of China’s overall economy, which is now much larger.

Takeaways by Macro Roundup® AI

  1. A Wall Street Journal data analysis suggests as much as $254 billion may have left China illicitly in the four quarters through the end of June, exceeding the 2015–2016 outflows in dollar terms.
  2. China caps individual purchases of foreign exchange at $50,000 a year, and violators can face big fines or prison sentences.
  3. Estimates of Chinese capital flight are inherently imprecise, and overall outflows appear smaller as a share of China's now much larger economy than during the 2015–2016 episode that raised fears of a financial crisis.

Related Articles:

  • 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.
  • China’s Unremitted Export Earnings — A substantial share of China's net export proceeds is never repatriated and cannot be accounted for; the authors attribute this to offshore holdings by private Chinese firms, overseas accumulation by state-owned entities, and reduced reinvestment by foreign exporters. They argue state-linked funds could be repatriated in a crisis, while lower foreign reinvestment is more structural.
  • Mapping Chinese Capital Flight via the Sinaloa Cartel — China’s official balance-of-payments data show a large gap between its customs and foreign-exchange agencies’ estimates of the goods trade balance, and reported returns on Chinese foreign assets have broken from their historical relationship with the 5-year US Treasury yield despite central banks raising interest rates. The author argues both anomalies are consistent with unrecorded capital flight.