Edward Conard

Top Ten New York Times Bestselling Author

  • “Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a 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
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…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
  • “…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
  • “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
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Tuesday, December 3, 2024

AI Summary. A randomized experiment giving 1,000 low-income Americans $1,000 monthly tax-free for three years, against controls receiving $50 monthly, found no effects on political participation, engagement, policy preferences, trust in government, polarization, or support for democracy. The authors argue this contrasts with prior findings that government transfers mobilize recipients, suggesting citizens' attribution of responsibility to the state drives those effects.

David Broockman, Elizabeth Rhodes, Alexander Bartik, et al. National Bureau of Economic Research
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An experiment in which a non-profit gave low-income Americans a tax-free $1k/month for 3 years showed little effect on political engagement, conservatism, or trust in democratic governance, but some increased belief in the value of work. @AlexBartik

Does giving low-income Americans cash change their political attitudes and behavior?

Core argument: A randomized field experiment giving 1,000 low-income Americans $1,000 per month tax-free for three years, against 2,000 control participants receiving $50 monthly, found no effects on political participation or engagement, ruling out effects the size of the observational turnout–income association.

A non-profit gifted 1,000 low-income Americans $1,000 per month for three years tax-free, and 2,000 control participants $50 monthly. Contrary to resource models of participation, we find no effects on political participation or engagement and rule out effects equivalent to the observational association between turnout and income. Political preferences largely do not change, with the estimates again distinguishable from the observational relationship that economic conservatism increases with income. Dispositions such as trust in government, polarization, and support for democracy also do not change. We do find effects consistent with mood misattribution: affect towards one's own racial group, other racial groups, and some politicians slightly improves. There is also some evidence that treated participants saw work as more important for individuals, society, or even as a requirement for accessing government programs. The contrast between our null findings and the mobilizing effects of government transfers found in prior studies reinforces the importance of citizens’ attribution of responsibility towards the state for generating the mobilizing effects of those transfers.

Takeaways by Macro Roundup® AI

  1. A randomized field experiment giving 1,000 low-income Americans $1,000 per month tax-free for three years, against 2,000 control participants receiving $50 monthly, found no effects on political participation or engagement, ruling out effects the size of the observational turnout–income association.
  2. Political preferences largely did not change in the cash transfer experiment, with estimates distinguishable from the observational relationship that economic conservatism rises with income, and trust in government, polarization, and support for democracy also unchanged.
  3. The researchers find effects consistent with mood misattribution, with slightly improved affect toward one's own and other racial groups and some politicians, plus some evidence treated participants viewed work as more important for individuals, society, or as a requirement for accessing government programs.

Related Articles:

  • The Great “Transfer”-mation — Government transfers rose from 8.2% of Americans' total personal income in 1970 to 17.6% in 2022, making them the third largest income source after work and investments. The share of U.S. counties drawing a quarter or more of personal income from transfers rose from under 1% in 1970 to 53% in 2022.
  • The Impact of Unconditional Cash Transfers on Consumption and Household Balance Sheets: Experimental Evidence from Two US States — In a randomized experiment giving 1,000 individuals $1,000 per month, the authors estimate spending rose in most categories, most for housing, food, and car expenses, along with increased housing moves. Debt rose steadily to $1,600 higher by the study's end, and estimated net worth effects turned to roughly -$2,800.
  • The Employment Effects of a Guaranteed Income: Experimental Evidence from Two U.S. States — In a randomized experiment, 1,000 low-income individuals received $1,000/month unconditionally for three years while a control group of 2,000 received $50/month, and the transfers reduced individual income excluding transfers by about $1,500/year. The authors find no significant effects on human capital investment and conclude the transfers produced a moderate labor supply reduction not offset by other productive activities.

AI Summary. The Draghi report notes that no European Union company with a market capitalization above €100bn was founded from scratch in the past fifty years, while all six US companies valued above €1tn were. The 13 EU companies founded in that period and worth at least $10bn total about $400bn, versus nearly $30tn for their US counterparts.

Andrew McAfee The Geek Way
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There are only 13 EU-based firms less than 50 years old with a market cap of > $10B, with a combined market cap of $400B. The comparable US cohort is worth $30T, 70x that of its EU equivalent. @amcafee

Has Europe produced any large companies from scratch in fifty years?

Core argument: The Draghi report states that no EU company with a market capitalization above €100bn has been founded from scratch in the past 50 years, while all six US companies valued above €1tn were created in that period.

Of all the [hard-hitting statistics] in the Draghi report, though, the ones that most startled me were in this sentence: “there is no EU company with a market capitalisation over EUR 100 billion that has been set up from scratch in the last fifty years, while all six US companies with a valuation above EUR 1 trillion have been created in this period.” How many arriviste European companies are worth at least $10B (I’m switching from euros to dollars here)? We found 13 EU arrivistes worth at least $10B. The total market cap of this continental treize is about $400B. The US has a large and variegated population of valuable young from-scratch companies. The EU simply doesn’t. The American population of arrivistes worth at least $10B is collectively worth almost $30 trillion dollars — more than 70 times as much as its EU equivalent.

Takeaways by Macro Roundup® AI

  1. The Draghi report states that no EU company with a market capitalization above €100bn has been founded from scratch in the past 50 years, while all six US companies valued above €1tn were created in that period.
  2. Thirteen EU companies built from scratch worth at least $10bn have a combined market capitalization of roughly $400bn.
  3. US from-scratch companies worth at least $10bn are collectively valued at almost $30tn, more than 70 times their EU counterparts.

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.
  • 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.
  • 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. US labour productivity has grown by 30% since the 2008-09 financial crisis, more than three times the pace in the Eurozone and the UK, and the US accounts for 83% of venture capital funding across G7 economies over the past decade. Eurozone output is projected by the International Monetary Fund to expand by 0.8% this year.

Valentina Romei, William Crofton, and Colby Smith Financial Times
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Draghi noted that excluding the tech sector, “EU productivity growth over the past 20 years would be broadly at par with the US.” The US dominates global R&D, and per data from Preqin accounts for 83% of VC funding in G7 economies over the past decade.

Why is US productivity growth outpacing other advanced economies?

Core argument: US labour productivity has grown 30% since the 2008–09 financial crisis, more than three times the pace of the Eurozone and the UK, a gap visible for a decade.

US labour productivity has grown by 30% since the 2008-09 financial crisis, more than three times the pace in the Eurozone and the UK. That productivity gap, visible for a decade, is reshaping the hierarchy of the global economy. Economic growth in the Eurozone has been a third of the US’s since the pandemic, and output is set to expand by just 0.8% this year, according to the IMF. Similarly, the economies of Japan and the UK have grown only by 3% over the past five years. In fact, in productivity growth, the US is rapidly outstripping almost all advanced economies. According to data by Preqin, the US accounts for 83% of the amount of VC funding in G7 economies over the past decade. The country also attracted 14.6% of the world’s overall greenfield foreign direct investment in the first 10 months of 2024, according to fDi Markets data — a record high. Germany, by contrast, registered its lowest share of global FDI in 18 years.

Takeaways by Macro Roundup® AI

  1. US labour productivity has grown 30% since the 2008–09 financial crisis, more than three times the pace of the Eurozone and the UK, a gap visible for a decade.
  2. Eurozone growth since the pandemic has been a third of the US rate, with output set to expand 0.8% this year according to the IMF, while Japan and the UK have grown only 3% over five years.
  3. The US accounted for 83% of venture capital funding across G7 economies over the past decade, according to Preqin, and drew a record 14.6% of global greenfield foreign direct investment in the first 10 months of 2024, according to fDi Markets, while Germany registered its lowest share in 18 years.

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.
  • A Visualization of Europe’s Non-Bubbly Economy — The Draghi report notes that no European Union company with a market capitalization above €100bn was founded from scratch in the past fifty years, while all six US companies valued above €1tn were. The 13 EU companies founded in that period and worth at least $10bn total about $400bn, versus nearly $30tn for their US counterparts.
  • 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. Danish drugmakers' real output has risen 47% over the past year and 167% cumulatively since late 2019, driven largely by foreign demand for GLP-1 weight-loss drugs, especially in the United States. Danish corporate income tax receipts are running about 50% above pre-pandemic levels, and Denmark posted a budget surplus worth 3.3% of GDP, the highest in the European Union.

Joseph Politano Apricitas Economics
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Since 2021 Danish GDP has grown 3.6%, but excluding Novo Nordisk’s GLP-1 drugs Ozempic and Wegovy growth would have been flat. Danish corporate income tax receipts are up 50% from pre-Covid levels. @JosephPolitano

How are weight-loss drug exports transforming Denmark's output and public finances?

Core argument: Real output of Danish drugmakers rose 47% over the last year and 167% cumulatively since late 2019, with total real manufacturing output growing more in the last four years than in the prior 20.

The real output of Danish drugmakers has increased by 47% over the last year and has cumulatively risen by 167% since late 2019. That growth broke Danish industry out from a long period of relative stagnation, with total real manufacturing output growing by more in the last four years than it did during the prior 20. Most of that pharmaceutical production boom has gone towards meeting foreign demand for GLP-1 drugs, especially in the United States. Real Danish goods exports have increased by roughly 37% over the last four years, easily dwarfing the comparatively tepid growth in imports and thus netting Denmark a large increase in its trade surplus. Danish corporate income tax receipts are highly elevated as a result of the GLP-1 boom, now running at about 110B Kroner annualized, a 50% jump from pre-COVID levels. That helped propel Denmark to a budget surplus worth 3.3% of GDP last year, the highest in the EU, while driving national debt-to-GDP to the lowest level since the late 70s.

Takeaways by Macro Roundup® AI

  1. Real output of Danish drugmakers rose 47% over the last year and 167% cumulatively since late 2019, with total real manufacturing output growing more in the last four years than in the prior 20.
  2. Most of Denmark's pharmaceutical production boom served foreign demand for GLP-1 drugs, especially in the United States, with real Danish goods exports up roughly 37% over four years against tepid import growth and a large rise in the trade surplus.

Related Articles:

  • Today’s Most Important Technology — The share of patients taking semaglutide for weight control rather than type 2 diabetes rose from under 10% in 2019 to 41.7%. Obesity and overweight, affecting 1 in 8 people worldwide, cost the global economy $2tn — nearly 70 cents on the dollar from premature mortality and lost productivity — an impact projected to double by 2035 absent intervention.
  • We May Have Passed Peak Obesity — Newly released data show the US adult obesity rate fell by about two percentage points between 2020 and 2023, with the steepest decline among college graduates. The author argues the new generation of diabetes and weight-loss drugs is highly likely behind the reversal, as one in eight US adults have used them.
  • The Year of Ozempic — GLP-1 medications act on receptors in the gut, liver, muscles, and brain, and studies report they reduce heart attacks and strokes, slow kidney disease progression, and shrink liver fat deposits. Users have also reported diminished cravings for alcohol, tobacco, gambling, and other compulsive behaviors, though anecdotal reports outpace clinical studies.

AI Summary. The U.S. produces 60% more oil per day with 40% fewer workers than a decade ago, with annual productivity gains roughly 7x those of the average U.S. business. In the Permian, the break-even oil price has fallen to $40 a barrel from over $90, and AI tools that predict the most productive drilling locations should push it lower.

Avi Salzman Barrons
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The breakeven price per barrel in the Permian Basin has fallen from $90 in 2012 to $40. AI tools could generate a further drop, helping the industry reach its “holy grail” a recovery rate of over 10%.

Is AI raising oil industry productivity and lowering break-even prices?

Core argument: U.S. oil output per day rose 60% over the past decade with 40% fewer workers, and the industry's annual productivity gains were roughly seven times those of the average U.S. business and outpaced online retailers.

Over the past decade, the U.S. pumped out 60% more oil a day with 40% fewer workers. The industry’s annual productivity gains in that stretch outpaced even those of online retailers, and are roughly seven times as large as those of the average U.S. business. In the Permian [the largest oil-producing region in the U.S.], the “break-even” price for oil producers has fallen to $40 a barrel from over $90 in 2012, according to S&P Global Commodity Insights. AI should take that number even lower, boosting oil company margins and cash flow. Knowing where to frack can be an enormous advantage. The AI tools that Chevron has developed can predict which sections of the subsurface will yield the most oil, and which rock types will prove tricky to drill. Historically, oil companies have pulled out only about 10% of the recoverable oil in the sections of the Permian where they drill, a fraction of the recovery rate for conventional wells. Getting above that 10% level is considered the “holy grail” of Permian drilling.

Takeaways by Macro Roundup® AI

  1. U.S. oil output per day rose 60% over the past decade with 40% fewer workers, and the industry's annual productivity gains were roughly seven times those of the average U.S. business and outpaced online retailers.
  2. The break-even price for Permian oil producers has fallen to $40 a barrel from over $90 in 2012, according to S&P Global Commodity Insights, and AI should push that number lower, boosting oil company margins and cash flow.
  3. Oil companies have historically recovered only about 10% of the recoverable oil in the Permian sections they drill, while Chevron's AI tools can predict which subsurface sections will yield the most oil and which rock types will prove tricky to drill.

Related Articles:

  • Oil Was Written Off. Now It’s the Most Productive US Industry — US oil and gas extraction productivity nearly tripled in a decade, and crude output reached a record 13.3m barrels a day — 48% above Saudi Arabia — with under a third of the rigs. BloombergNEF projects production growth of 600,000 barrels a day on higher well productivity.
  • U.S. Energy Production Exceeded Consumption By Record Amount In 2023 — U.S. energy production rose 4% to nearly 103 quadrillion British thermal units while consumption fell 1% to 94, leaving production exceeding consumption by 9 quadrillion British thermal units, the widest gap in records dating to 1949. Dry natural gas, crude oil, natural gas plant liquids, and renewables all reached record output.
  • US Shale: The Marginal Supplier Matures — The responsiveness of US oil supply to prices has declined and is estimated to be much smaller for publicly traded producers than private ones, with a 10% price increase raising US liquids output by roughly 1%, or 200,000 barrels a day. That implies US supply would offset only about 20-25% of a geopolitical supply shock.

AI Summary. The Inflation Reduction Act has directed billions of dollars to renewable-energy projects, with Republican-led states receiving the largest share of the funding. Congressional observers and former Trump administration energy officials say there likely is not enough support in Congress to repeal the law, as Republican lawmakers favor reviewing it rather than full repeal.

Scott Patterson Wall Street Journal
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Biden’s Inflation Reduction Act passed without a single GOP vote, but the lion’s share of the act’s spending is in Republican congressional districts, complicating repeal. Critics may target scaling back federal clean energy tax credits.

Will Republican lawmakers repeal the climate law funding their own states?

Core argument: The Inflation Reduction Act has channeled billions of dollars to renewable-energy projects, with Republican-led states receiving the largest share of the funding, despite no House or Senate Republican voting for the Democratic package.

Donald Trump’s campaign-trail vow to end President Biden’s signature climate law is running into a cold reality: Too many Republican lawmakers want to keep it. The Inflation Reduction Act has channeled billions of dollars to renewable-energy projects across the country, with Republican-led states getting the lion’s share of the funding. Even though not a single Republican in the House or Senate backed the Democratic package, today there likely isn’t enough support in Congress to pass a repeal, according to Capitol Hill watchers and former Trump administration officials who worked on energy policy. Rep. Buddy Carter (R, GA) said that while he thought the IRA was a bad idea, he doesn’t support full repeal. “We need to just look at it instead of taking a sledgehammer to it,” he said. “We need to dissect it carefully to see what might be in there that’s working.” Carter’s home state, Georgia, has among the highest number of clean-energy projects and jobs funded by the IRA.

Takeaways by Macro Roundup® AI

  1. The Inflation Reduction Act has channeled billions of dollars to renewable-energy projects, with Republican-led states receiving the largest share of the funding, despite no House or Senate Republican voting for the Democratic package.
  2. Capitol Hill watchers and former Trump administration energy-policy officials say Congress likely lacks enough support to pass a repeal of the Inflation Reduction Act, despite Donald Trump's campaign vow to end it.
  3. Rep. Buddy Carter (R, GA), whose state has among the highest number of clean-energy projects and jobs funded by the IRA, called the law a bad idea but opposes full repeal, urging lawmakers to "dissect it carefully" rather than take "a sledgehammer to it.".

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.
  • Republican Districts Dominate US Clean Technology Investment Boom — A Financial Times analysis found that more than 80% of pledged investment in large-scale clean energy and semiconductor manufacturing is destined for Republican congressional districts. The analysis attributes this partly to those districts' available land and cheap labor, and to state-level tax breaks and subsidies in states such as Georgia and Ohio.
  • ‘Transformational Change’: Biden’s Industrial Policy Begins to Bear Fruit — Financial Times research identified more than 75 large-scale US manufacturing announcements following the passage of American semiconductor and clean-energy subsidy laws, with companies committing roughly $204bn to boost semiconductor and clean-tech production and promising at least 82,000 jobs. That is almost double the capital spending commitments made in those sectors two years earlier.

AI Summary. Proposed US tariff measures are projected to raise the average tariff, weighted by 2023 import composition, to 7.8% from 2.6% — the steepest increase since the Smoot-Hawley tariffs of 1930. Overall US trade would fall 11%, with China losing 83% of its sales to the US.

Shawn Donnan and Anna Wong Bloomberg
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Bloomberg projects average U.S. tariffs will triple from 2.6% in 2023 to 7.8% by 2026, driven by heavy levies on China and smaller hikes for other partners. This could shrink US trade in goods from 21% of the global total to 18%.

How much would proposed tariffs raise average rates and cut trade?

Core argument: The measures would raise the US average tariff, weighted by 2023 import composition, to 7.8% from 2.6% — the steepest increase since the Smoot-Hawley tariffs of 1930, though far short of the most extreme scenarios implied by Trump's threats.

In aggregate the measures would boost the US’s average tariff weighted using the 2023 import composition to 7.8% from 2.6% — the steepest increase since Congress passed the notorious Smoot-Hawley tariffs in 1930 and yet one far short of the most extreme scenarios possible based on Trump’s threats. Among US trade partners, the biggest losers would be China — which faces the steepest tariff hike — and Canada and Mexico, which have the greatest dependence on trade with the US. Overall US trade would drop by 11% and China would say goodbye to 83% of its sales to the US. Under what former staff still call the “Hassett algorithm” — named after former Council of Economic Advisers Chair Kevin Hassett, who oversaw the compilation of the initial tariff lists against China — levies targeted mainly parts and machinery to minimize the impact on inflation and GDP. They also focused on goods for which American buyers could find substitutes.

Takeaways by Macro Roundup® AI

  1. The measures would raise the US average tariff, weighted by 2023 import composition, to 7.8% from 2.6% — the steepest increase since the Smoot-Hawley tariffs of 1930, though far short of the most extreme scenarios implied by Trump's threats.
  2. Overall US trade would drop by 11%, with China losing 83% of its sales to the US and facing the steepest tariff hike, while Canada and Mexico, the most dependent on US trade, would also be among the biggest losers.
  3. Under what former staff call the "Hassett algorithm," named for former Council of Economic Advisers Chair Kevin Hassett, who oversaw the initial China tariff lists, levies targeted mainly parts, machinery and goods with available substitutes to minimize the impact on inflation and GDP.

Related Articles:

  • Fiscal, Macroeconomic, and Price Estimates of Tariffs Under Both Non-Retaliation and Retaliation Scenarios — The authors estimate the modeled tariff proposals would raise $1.2tn–$4.4tn over 10 years, or 0.3–1.2% of average GDP, with foreign retaliation cutting that revenue by 12–26%. They project consumer prices initially rise 1.2–5.1%, equal to $1,900–$7,600 of lost disposable income per household, with real GDP contracting 0.5–1.4% in the medium term.
  • Can Trump Reduce the Trade Deficit? — A world of widespread tariffs would also shrink international capital flows, and because the US trade deficit is the counterpart of large capital inflows, reduced capital mobility would narrow that deficit. The author argues this would occur largely by reducing overall investment in the US economy.
  • A User’s Guide to Restructuring the Global Trading System — During the 2018–2019 U.S.–China trade war, the effective tariff rate on Chinese imports rose 17.9 percentage points while the renminbi depreciated 13.7% against the dollar, leaving after-tariff import prices in dollars up just 4.1%. The author argues this currency offset of more than three-fourths of the tariff explains why inflation pressure was negligible.

Wednesday, December 4, 2024

AI Summary. The authors find that a news-based index of economic policy uncertainty across 21 foreign countries has incremental power to predict excess U.S. stock returns 6 to 12 months ahead. They estimate that adverse foreign uncertainty shocks work through expected cash flows rather than discount rates, with corporate investment, payouts, and credit demand declining.

Mohammad Jahan-Parvar, Yuriy Kitsul, Jamil Rahman et al. Federal Reserve Board
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Federal Reserve research finds that an increase in foreign economic policy uncertainty is associated with excess US stock returns over the following 6-12 months. These excess returns are attributable to news about cash flows rather than discount rates.

Does foreign policy uncertainty predict U.S. stock returns through expected cash flows?

Core argument: Foreign economic policy uncertainty, measured from news article counts across 21 countries, has significant incremental predictive power for excess U.S. stock returns in aggregate and for portfolios sorted on firm characteristics at 6- to 12-month-ahead horizons.

The policy uncertainty index combines news article counts in 21 countries that reflect uncertainty about a broad range of policies, including those by fiscal and monetary authorities, but also the potential economic effects of policies that are not traditionally viewed as economic, such as military actions. We document that foreign economic policy uncertainty [EPU] has significant incremental predictive power for excess U.S. stock returns both in aggregate and for returns of portfolios constructed on firm characteristics, for 6 to 12-months-ahead horizons. We find that [unlike US domestic EPU shocks] foreign EPU shocks operate through a cash-flow news channel; they do not affect discount rates or equity premia. Aggregate credit demand and investment outlays respond significantly to an adverse foreign EPU shock. Corporate investment outlays, payouts, and aggregate credit demand decline in response to such a shock.

Takeaways by Macro Roundup® AI

  1. Foreign economic policy uncertainty, measured from news article counts across 21 countries, has significant incremental predictive power for excess U.S. stock returns in aggregate and for portfolios sorted on firm characteristics at 6- to 12-month-ahead horizons.
  2. Foreign economic policy uncertainty shocks operate through a cash-flow news channel and do not affect discount rates or equity premia, unlike U.S. domestic policy uncertainty shocks.
  3. Corporate investment outlays, payouts, and aggregate credit demand decline in response to an adverse foreign economic policy uncertainty shock.

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.
  • 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. Value creation among large American companies has become concentrated in a newer cohort of firms: businesses founded after World War II accounted for 8% of the top 50 companies' total market value in 1990 but 77% by 2024. The leading 20th-century incumbents are fading as this newer group takes over.

Andrew McAfee The Geek Way
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From 1930-90, the market capitalization of the top 50 US companies was dominated by firms founded in the 19th century. Since 1990, the market cap from companies founded after WWII has risen from 8% to 77% in 2024. @amcafee

Are newer firms displacing the largest 20th-century incumbents?

Core argument: Companies founded after the end of World War II accounted for 77% of the top 50 U.S. market cap in 2024, up from 8% in 1990.

Value creation among American big businesses became strikingly concentrated in the 21st century, and largely left out the giants of the 20th. In 1990 companies founded after the end of WWII were responsible for only 8% of total top 50 market cap. In 2024, the equivalent figure was 77%. The incumbents of the 20th are fading and an entirely new cohort, the most prominent members of which are not yet 50, is taking over.

Takeaways by Macro Roundup® AI

  1. Companies founded after the end of World War II accounted for 77% of the top 50 U.S. market cap in 2024, up from 8% in 1990.
  2. Value creation among American big businesses became concentrated in the 21st century, largely leaving out the corporate giants of the 20th century.
  3. A new cohort of firms, whose most prominent members are not yet 50 years old, is taking over from fading 20th-century incumbents.

Related Articles:

  • 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.
  • 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. Real GDP per head in other large high-income countries sits below the US level and has fallen further behind this century, with Germany at 84% of the US level (down from 92%) and the UK at 73% (down from 82%). Whether US pathologies such as higher inequality and lower life expectancy are a necessary price of that dynamism is unclear.

Martin Wolf Financial Times
Date Posted:

Martin Wolf contrasts US companies’ outperformance relative to Europe against the backdrop of the greater US social inequalities and asks if US dynamism requires the “rugged, nay dog-eats-dog, individualism of the US. It is a sobering possibility.”

How far have other high-income countries fallen behind US income?

Core argument: German real GDP per head was 84% of US levels in 2023, down from 92% in 2000, while the UK's fell to 73% from 82%, leaving large high-income countries further behind the US this century.

The sustained prosperity of the US is astounding. Real GDP per head in the larger high-income countries is below the US average. Moreover, these countries have fallen further behind in this century. In 2023, German real GDP per head was 84% of US levels, down from 92% in 2000. The UK’s was 73% of US levels, down from 82% in 2000. This relative outperformance is remarkable if one considers how big and diverse the US is or that one would have expected catch-up, not relative decline, by poorer countries elsewhere. A big question for non-Americans, notably Europeans, is whether pathologies [higher inequality, lower life expectancy] are the necessary price of economic dynamism? Logically, it is not clear why an innovative economy cannot be combined with a more harmonious and healthier society. One might hope that the scale of the US market, its relatively light regulation, the quality of its science and its attractions to high-quality immigrants are the explanations. But there is this lingering fear that the technologically dynamic society Draghi and other Europeans now seek might require the rugged, nay dog-eats-dog, individualism of the US. It is a sobering possibility.

Takeaways by Macro Roundup® AI

  1. German real GDP per head was 84% of US levels in 2023, down from 92% in 2000, while the UK's fell to 73% from 82%, leaving large high-income countries further behind the US this century.
  2. The relative decline of other large high-income economies runs counter to the expectation that poorer countries would catch up, and is notable given the size and diversity of the US.
  3. Possible explanations for US outperformance include the scale of its market, relatively light regulation, the quality of its science and its attractions to high-quality immigrants, though the technological dynamism Europeans seek may require US-style individualism.

Related Articles:

  • A Visualization of Europe’s Non-Bubbly Economy — The Draghi report notes that no European Union company with a market capitalization above €100bn was founded from scratch in the past fifty years, while all six US companies valued above €1tn were. The 13 EU companies founded in that period and worth at least $10bn total about $400bn, versus nearly $30tn for their US counterparts.
  • 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.
  • 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. Researchers find that economic prospects for working-class and poor white Americans are declining while improving for Black Americans in the same economic tier, narrowing the income gap. Among children born to parents at the 25th income percentile, the Black-white earnings gap at age 27 shrank from about $12,994 to $9,521 in 2023 dollars.

Arian Campo-Flores Wall Street Journal
Date Posted:

Raj Chetty’s research finds that white children born in the bottom income quintile in 1992 had a 29.7% chance of staying there, up from 24.9% in 1978, and only an 11.9% chance of rising to the top quintile, down from 13.7%. @WSJ

Is the Black-white income gap narrowing among lower-income Americans?

Core argument: The Black-white income gap at age 27 for children born to parents at the 25th percentile narrowed from $12,994 for the 1978 birth cohort to $9,521 for the 1992 cohort, in 2023 dollars.

A big shift is under way in American life: The prospects for working-class and poor white Americans are declining, while they are improving for Black Americans in the same economic tier. The change in economic mobility the researchers traced—which shrank the amount by which Black Americans’ income lags behind white Americans’ income—occurred between 2005, when many Gen Xers were in their late 20s, and 2019, when many millennials reached the same age. Nationwide, a Black child born to parents at the 25th percentile of income in 1992 made $9,521 less at age 27 than a white child born at the 25th percentile. A Black child born in 1978 made $12,994 less at age 27, adjusted to 2023 dollars.

Takeaways by Macro Roundup® AI

  1. The Black-white income gap at age 27 for children born to parents at the 25th percentile narrowed from $12,994 for the 1978 birth cohort to $9,521 for the 1992 cohort, in 2023 dollars.
  2. Researchers traced the change in economic mobility between 2005, when many Gen Xers were in their late 20s, and 2019, when many millennials reached the same age.
  3. Prospects for working-class and poor white Americans are declining while improving for Black Americans in the same economic tier.

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.
  • Two Cheers for Shrinking Black-White Opportunity Gaps — Research finds outcomes for Black adults raised poor worsened on several measures including household income, marriage, and mortality, but declined less than for whites raised poor, narrowing the racial gap. Among children raised poor, 4% of Black and 15% of white adults reach the top fifth of household income.
  • 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. Immigrants make up more than half of construction trade workers in Texas, California, New Jersey, and the District of Columbia, and undocumented workers are estimated at 13% of the construction industry, more than twice their share of the overall workforce. Roughly 130,000 newly arrived immigrants have joined the industry, bringing foreign-born construction employment to a record.

Elizabeth Findell and Gina Heeb Wall Street Journal
Date Posted:

Undocumented workers make up an estimated 13% of the American construction industry. Since 2022, at least 130,000 immigrants, legal and illegal, have entered the sector.

Does the construction industry depend heavily on immigrant workers?

Core argument: Undocumented workers make up an estimated 13% of the U.S. construction industry, more than twice their share of the overall workforce, according to a Pew Research Center estimate.

In Texas, California, New Jersey, and the District of Columbia, immigrants make up more than half of construction trade workers, according to Riordan Frost, a senior research analyst at the Harvard Joint Center for Housing Studies. Undocumented workers make up an estimated 13% of the construction industry—more than twice that of the overall workforce, according to a recent estimate from Pew Research Center. Since 2022, some 130,000 newly arrived immigrants have joined the construction industry, pushing the number of foreign-born construction workers to a record, according to the NAHB.

Takeaways by Macro Roundup® AI

  1. Undocumented workers make up an estimated 13% of the U.S. construction industry, more than twice their share of the overall workforce, according to a Pew Research Center estimate.
  2. Immigrants account for more than half of construction trade workers in Texas, California, New Jersey, and the District of Columbia, according to Riordan Frost of the Harvard Joint Center for Housing Studies.
  3. Some 130,000 newly arrived immigrants have joined the construction industry since 2022, pushing the number of foreign-born construction workers to a record, according to the National Association of Home Builders.

Related Articles:

  • Why Has Construction Productivity Stagnated? The Role of Land-Use Regulation — Homes built per construction worker boomed after World War II and fell after 1970, a decline the authors link to local land-use regulation that limits project size and keeps construction firms small and less productive. They estimate US residential builders would be roughly 60% more productive if their size distribution matched manufacturing.
  • The Strange and Awful Path of Productivity in the U.S. Construction Sector — U.S. construction sector labor productivity and total factor productivity grew faster than the whole economy in the 1950s and 1960s, then fell, ending 2020 below their 1950 levels while economywide labor productivity and total factor productivity were 290% and 230% higher. Construction labor productivity fell about 1% a year from 1970 to 2020.
  • How Gen Z Is Becoming the Toolbelt Generation — Enrollment in vocational-focused community colleges rose 16% to its highest level since tracking began, with construction-trades programs up 23% and heating, ventilation, air conditioning and vehicle repair programs up 7%. Federal data show the number of carpenters and electricians grew over the past decade even as their median ages fell.

AI Summary. Water availability has been rising on about 54% of land in the contiguous United States and falling on 46%, with a slight net decline equal to 0.04% of average annual U.S. rainfall. Losses are concentrated in central and southern California and the Ogallala aquifer region, while land east of the Mississippi has been stable to gaining.

Cheikh Fall, Christian Hilgemann and Ishan Nath Federal Reserve Bank of San Francisco
Date Posted:

A @sffed analysis finds that US aggregate water resources were stable between 2003 and 2022, but California, Texas, and the Southwest experienced sharp declines, with some areas “in the top 1% for water depletion among all global arable land.”

Is U.S. water availability rising or falling across the country?

Core argument: Water availability has been rising on about 54% of land in the contiguous United States and falling on 46%, with drying regions losing more than moistening regions gain, leaving aggregate net losses equal to 0.04% of average annual U.S. rainfall.

Overall, water availability has been rising on about 54% of the land in the contiguous United States and decreasing on 46%. On net, total U.S. water volumes have declined slightly as the drying regions have lost more water than the moistening regions have gained, though aggregate losses are only 0.04% of average annual U.S. rainfall. Most of the western and southwestern United States has been losing substantial quantities of water: Almost all of the land in the bottom 10% of water trends are located in central and southern California and the Ogallala aquifer region at the intersection of Texas, Oklahoma, Kansas, New Mexico, and Colorado. Some of these regions are in the top 1% for water depletion among all global arable land. By contrast, the Great Plains and upper Midwest have largely been gaining water resources, and the vast majority of land east of the Mississippi River has seen stable to increasing water resources over time.

Takeaways by Macro Roundup® AI

  1. Water availability has been rising on about 54% of land in the contiguous United States and falling on 46%, with drying regions losing more than moistening regions gain, leaving aggregate net losses equal to 0.04% of average annual U.S. rainfall.
  2. Almost all U.S. land in the bottom 10% of water trends lies in central and southern California and the Ogallala aquifer region at the intersection of Texas, Oklahoma, Kansas, New Mexico, and Colorado, with some of these areas in the top 1% for water depletion among all global arable land.
  3. The Great Plains and upper Midwest have largely gained water resources, and the vast majority of land east of the Mississippi River has seen stable to increasing water resources.

Related Articles:

  • Global Water Scarcity: H2O No! — Less than 1% of the planet's water is usable; water demand has risen about 40% over 40 years and is estimated to increase another 25% by 2050, while supply has more than halved since 1970. Some 57% of global freshwater aquifers are beyond their tipping point, and one-third of piped fresh water is lost to leakage.
  • America Is Using Up Its Groundwater Like There’s No Tomorrow — An analysis of 84,544 groundwater monitoring wells across the United States found that nearly half declined significantly over the past 40 years as more water was pumped out than nature replenished. Four of every 10 sites hit all-time lows in the past decade.
  • Arizona Is Running Out of Cheap Water. Investors Saw It Coming — Phoenix-area suburbs are paying sharply higher prices for water rights from a basin west of the city, with one suburb approving $80m for 6,000 acre-feet — more than double the per-acre-foot price another suburb paid earlier. Arizona's groundwater replenishment assessments rose from $154 to $768 per acre-foot.

AI Summary. SpaceX is in talks to sell insider shares in a transaction valuing the rocket and satellite maker at about $350bn, up from a previously discussed $255bn valuation and roughly $210bn in an earlier tender offer.

Gillian Tan and Katie Roof Bloomberg
Date Posted:

SpaceX is considering a tender offer that would value the firm at $350B, up from $210B in June.

Is a private rocket and satellite maker's valuation rising sharply?

Core argument: SpaceX is in talks to sell insider shares in a transaction valuing the rocket and satellite maker at about $350 billion, according to people familiar with the matter.

SpaceX is in talks to sell insider shares in a transaction valuing the rocket and satellite maker at about $350 billion, according to people familiar with the matter, a massive jump highlighting the post-election gains across Elon Musk’s business empire. That would be a significant premium to a previously mulled valuation of $255 billion as reported by Bloomberg News and other media outlets just last month. SpaceX was last valued at about $210 billion in a tender offer earlier this year.

Takeaways by Macro Roundup® AI

  1. SpaceX is in talks to sell insider shares in a transaction valuing the rocket and satellite maker at about $350 billion, according to people familiar with the matter.
  2. The discussed $350 billion valuation is a significant premium to the $255 billion level previously mulled, as reported by Bloomberg News and other media outlets.
  3. SpaceX was last valued at about $210 billion in an earlier tender offer, and the jump to roughly $350 billion highlights post-election gains across Elon Musk's business empire.

Related Articles:

  • SpaceX Launches Starship Rocket as Trump and Musk Look On — SpaceX's Starship, the largest and most powerful rocket ever developed, is under contract as a lunar lander for NASA's effort to return people to the moon and is central to plans for a Mars settlement. SpaceX says the fully reusable design will be far cheaper to fly and will eventually replace its Falcon 9 and Falcon Heavy rockets.
  • 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.
  • 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.