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


Monday, January 13, 2025

AI Summary. Using a century of monthly U.S. building permit data for all states and the 60 largest metro areas, the authors find volatility in residential building permit growth predicts aggregate and cross-sectional stock and corporate bond return volatility, even after controlling for corporate and household leverage and debt service ratios.

Gustavo Cortes and Cameron LaPoint Working Paper
Date Posted:
Is Database:
Database

US data since 1919 shows that volatility in building permits foreshadows financial market volatility. “Cities and states with more elastic housing supply consistently predict financial market downturns at 12-month horizons.” @cslapoint @CortesGustavoS

Does housing construction volatility predict stock and bond market volatility?

Core argument: Volatility in residential building permit growth predicts aggregate and cross-sectional stock and corporate bond return volatility, according to a hand-collected century-long database of monthly permit quantities and valuations for all U.S. states and the 60 largest MSAs.

Does the housing market lead the financial cycle? We address this question by creating a new hand-collected database spanning a century of monthly building permit quantities and valuations for all U.S. states and the 60 largest MSAs. We show that the option to build embedded in permits renders volatility in residential building permit growth (BPG) a strong predictor of aggregate and cross-sectional stock and corporate bond return volatility. This predictability remains even after conditioning on a battery of factors, including corporate and household leverage [thus arising] independently of the credit cycle] and firms’ exposure through their network of plants to other localized physical risks like natural disasters conditional on measures of corporate and household leverage and debt service ratios. Cities and states with more elastic housing supply consistently predict financial market downturns at 12-month horizons, resulting in new trading strategies to hedge against overbuilding risk.

Takeaways by Macro Roundup® AI

  1. Volatility in residential building permit growth predicts aggregate and cross-sectional stock and corporate bond return volatility, according to a hand-collected century-long database of monthly permit quantities and valuations for all U.S. states and the 60 largest MSAs.
  2. The predictive power of building permit growth volatility persists after conditioning on corporate and household leverage and debt service ratios, which the authors argue makes it independent of the credit cycle, and on firms' plant-network exposure to localized physical risks such as natural disasters.
  3. Cities and states with more elastic housing supply predict financial market downturns at 12-month horizons, which the authors use to construct trading strategies hedging against overbuilding risk.

Related Articles:

  • Credit Allocation and Macroeconomic Fluctuations — Credit expansions disproportionately channel credit to non-tradable sector firms and households, and the authors find that the sectoral allocation of credit predicts future GDP paths and the likelihood of systemic banking crises. Credit growth to non-tradable industries predicts boom-bust output patterns and elevated financial fragility, while credit to tradable industries is associated with higher future productivity growth.
  • The Great Mortgaging: Housing Finance, Crises, and Business Cycles — In advanced economies, about two-thirds of bank activity now involves channeling savings into household real estate purchases, so banks' business model resembles that of real estate funds. The authors find non-mortgage lending has held steady relative to GDP while mortgage booms have been a key source of post-war financial instability, with busts followed by slower growth even absent crises.
  • The Price of Housing in the United States — Real housing price appreciation in the United States has varied widely across regions, with West Coast cities rising earlier while prices in other regions remained comparable in real terms to decades earlier. The authors find essentially no relationship between real price growth and zoning restrictiveness in the earliest period studied, and progressively steeper gradients in later periods.

AI Summary. The term premium on 10-year government notes — the extra yield investors demand for holding longer-term debt — stands at a more than decade high, and a Federal Reserve model shows it accounting for an increasingly larger share of overall yields. Yields on longer-dated debt have climbed faster than short-term yields.

Michael Mackenzie and Ye Xie Bloomberg
Date Posted:

Since the start of 2023, the mean 10-year yield has been 4.1%, relative to 4.8% from 1998-2007 and 2.4% from 2008-2022.

Are investors demanding more extra yield to hold long-term government debt?

Core argument: The term premium on 10-year notes — the extra yield investors demand for holding longer-term debt — stands at a more than decade high.

The so-called term premium on 10-year notes — the extra yield investors demand to accept the risk of taking on longer-term debt — is now at a more than decade high and, according to a Fed model, has become an increasingly bigger component of overall yields. Yields on longer-dated debt have climbed faster than those of their short-term counterparts, a sign of concern for the long-term outlook.

Takeaways by Macro Roundup® AI

  1. The term premium on 10-year notes — the extra yield investors demand for holding longer-term debt — stands at a more than decade high.
  2. A Federal Reserve model shows the term premium has become an increasingly larger component of overall yields.
  3. Yields on longer-dated debt have climbed faster than those on short-term counterparts, a sign of concern for the long-term outlook.

Related Articles:

  • The Move in Long Rates Is Very Unusual — The Federal Reserve has cut its policy rate by 100 basis points while 10-year interest rates have risen by 100 basis points over the same stretch, a highly unusual divergence. Possible explanations include fiscal worries, weaker foreign demand for U.S. debt, or rate cuts that were not justified.
  • There Is No “Reverse Conundrum” Driving Up Bond Yields — Resilient growth, persistent residual inflation, and Federal Reserve officials' greater comfort about employment risks explain the rebound in market-implied forward interest rates, rather than a shift in the term premium tied to fiscal, central-bank-independence, or constitutional concerns. The simultaneous rise in long-term rates and fall in short-term rates is normalizing a long-inverted yield curve.
  • Our Thoughts on Large US Deficits and Their Impact on Bond Yields — Total borrowing in the US is about average despite high government deficits, as high public borrowing has contributed to the need for higher interest rates that have depressed private sector borrowing. Risk premiums on long-dated debt look about average, with no market signs that economic or debt limits are currently being hit.

AI Summary. Analysts pushed back their Federal Reserve forecast to two rate cuts this year and one the next after a strong employment report eased concerns about labor market softening, with an unchanged terminal rate of 3.5–3.75%. That view is more dovish than market pricing because they expect inflation to keep falling toward 2%.

David Mericle, Will Marshall, and Bill Zu Goldman Sachs
Date Posted:

Goldman Sachs now expects two cuts this year (in June and December, down from its previous three), and one more in 2026. Mericle, et al forecast the terminal FFR will be 3.5-3.75%, 100+ bps higher than 2.16% in 2019, but well under 5.02% in 2007.

Does a strong employment report delay expected interest rate cuts?

Core argument: The authors pushed back the final three rate cuts in their Fed forecast after the strong December employment report, now expecting two cuts this year in June and December and one more in 2026, versus three this year previously.

We pushed back the final three rate cuts in our Fed forecast on Friday morning in response to the strong December employment report, which alleviated some of the lingering concerns about recent labor market softening. We now expect two cuts this year in June and December and one more in 2026 (vs. three this year previously) to an unchanged terminal rate of 3.5-3.75%. Our baseline forecast remains somewhat more dovish than market pricing mainly because we are more optimistic than many that the underlying inflation trend will continue to fall toward 2%.

Takeaways by Macro Roundup® AI

  1. The authors pushed back the final three rate cuts in their Fed forecast after the strong December employment report, now expecting two cuts this year in June and December and one more in 2026, versus three this year previously.
  2. The authors' terminal rate forecast remains unchanged at 3.5–3.75% despite the revised timing of the remaining cuts.
  3. The authors' baseline forecast remains somewhat more dovish than market pricing, mainly because they are more optimistic than many that the underlying inflation trend will continue to fall toward 2%.

Related Articles:

  • Fed Officials Really Don’t Want a Downturn — Federal Reserve officials project that inflation will not return to their 2% target until 2027 and that short-term interest rates will settle near 3-3.25%, above prior expectations. The projections suggest policymakers are willing to accept more inflation, faster real growth, and lower interest rates to keep unemployment from rising.
  • Economic Policy Before and After the 2024 Election — Market expectations for the Federal Reserve's interest-rate path have shifted, with the expected endpoint moving from about 2.8% to 3.8%. The author argues that enacting the campaign agenda—larger deficits from tax cuts, tariffs on all imports, a weaker currency, mass deportations, and pressure on central-bank independence—would produce a substantially larger inflation shock.
  • 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. Most of the decline in birth rates reflects a fall in the number of couples rather than childbearing decisions within couples; had US marriage and cohabitation rates held constant over the past decade, the US fertility rate would be higher today than it was then. The drop in relationship formation is steepest among the poorest and appears globally.

John Burn-Murdoch Financial Times
Date Posted:
Is Database:
Database

.@jburnmurdoch argues that recent declines in fertility are due more to a decline in marriage and cohabitation than couples’ decisions to have smaller families. “The central demographic story of modern times is the rising rates of singledom.”

Are falling birth rates driven by fewer couples forming?

Core argument: Most of the decline in birth rates stems from a marked fall in the number of couples rather than from childbearing decisions within couples, with the drop in relationship formation steepest among the poorest.

Most of the fall in birth rates is coming not from the decisions made by couples, but from a marked fall in the number of couples. Had US rates of marriage and cohabitation remained constant over the past decade, America’s total fertility rate would be higher today than it was then. The central demographic story of modern times is not just declining rates of childbearing but rising rates of singledom: a much more fundamental shift in the nature of modern societies. The drop in relationship formation is steepest among the poorest. The trend is global. From the US, Finland, and South Korea to Turkey, Tunisia and Thailand, falling birth rates are increasingly downstream of a relationship recession among young adults. Baby bonuses put the cart before the horse when a growing share of people are without a partner. Even in parts of Sub-Saharan Africa, similar trends may be under way.

Takeaways by Macro Roundup® AI

  1. Most of the decline in birth rates stems from a marked fall in the number of couples rather than from childbearing decisions within couples, with the drop in relationship formation steepest among the poorest.
  2. Had US marriage and cohabitation rates held constant over the past decade, America's total fertility rate would be higher today than it was then.
  3. The relationship recession among young adults spans the US, Finland, South Korea, Turkey, Tunisia and Thailand, with similar trends possibly under way in parts of Sub-Saharan Africa, and baby bonuses put the cart before the horse when a growing share of people lack a partner.

Related Articles:

  • The Anti-Social Century — Americans spend less time with other people than in any period with reliable data back to 1965, with in-person socializing down more than 20% from 2003 to 2023 according to the Bureau of Labor Statistics' American Time Use Survey. Among unmarried men and people under 25, the decline exceeded 35%.
  • 1 in 3: A Record Share of Young Adults Will Never Marry — The share of Americans who have ever married is at historic lows at ages 35 and 45, with about 60% of 35-year-old men ever-married compared with 90% in 1980. The author projects that one-third of men and women reaching age 45 by 2050 will never have married.
  • 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's goods trade surplus reached a record $992bn, 21% above the prior year, driven by record exports alongside weak imports held down by sluggish domestic consumption and falling commodity prices. China sells more goods than it buys from more than 165 countries, with record surpluses versus Southeast Asian nations and nearly $250bn with the European Union.

Bloomberg Bloomberg Staff
Date Posted:

China ran a $1T dollar trade surplus in 2024, up 21% y/y. The bilateral surplus with the US fell to $361B – the lowest in 3 years, though well above pre-pandemic levels and the surplus with ASEAN countries reached a record level.

Is China's record trade surplus driven by weak domestic demand?

Core argument: China's trade surplus reached $992 billion in 2024, 21% higher than the prior year, on record exports combined with weak imports held down by sluggish domestic consumption and falling commodity prices, according to the customs administration.

The surplus jumped to an unprecedented $992 billion in 2024, according to a statement from the customs administration on Monday, 21% higher than the previous year. That was the result of record exports but also the continued weakness of imports, which have been dragged down by sluggish domestic consumption and falling commodity prices. China now sells more goods to more than 165 countries than it buys from them, according to Bloomberg calculations based on government data. The surplus with the US fell to $361 billion last year, the lowest in three years, but that was still well above the pre-pandemic levels. The surplus with the 10 Southeast Asian nations in ASEAN soared to a record, and that with the European Union rose to almost $250 billion.

Takeaways by Macro Roundup® AI

  1. China's trade surplus reached $992 billion in 2024, 21% higher than the prior year, on record exports combined with weak imports held down by sluggish domestic consumption and falling commodity prices, according to the customs administration.
  2. China's surplus with the US fell to $361 billion in 2024, the lowest in three years but still well above pre-pandemic levels, while its surplus with the 10 ASEAN nations hit a record and that with the European Union rose to almost $250 billion.
  3. China sells more goods to more than 165 countries than it buys from them, according to Bloomberg calculations based on government data.

Related Articles:

  • China’s Stunning 2024 Export Growth — Chinese export volumes are up 13% year-over-year while import volumes are up only 2%, a gap that with exports at about 20% of GDP implies a net exports contribution to Chinese growth of close to 2% of GDP. Falling Chinese export prices mean export volumes are growing much faster than the dollar value of exports.
  • China’s Record Manufacturing Surplus — China's manufacturing trade surplus has reached about 2% of world GDP, exceeding the peak surpluses of export powerhouses like Japan and Germany, and shows no signs of shrinking as policy continues to emphasize advanced manufacturing capacity. The main offsetting manufactured-goods deficit is in the United States rather than commodity exporters.
  • Will China Take Over the Global Auto Industry? — The global auto market has historically been regional, with most cars sold in a region also built there. Overcapacity in China's internal combustion sector, expanding electric-vehicle capacity, ample state bank credit, and a weaker yuan could concentrate global auto production in China absent restrictions such as the US 100% tariff on Chinese electric vehicles.

AI Summary. A White House economist argues that retaliatory tariffs by other nations can nullify the welfare benefits of tariffs for the US, and proposes deterring retaliation by declaring American defense commitments less binding for countries that retaliate. The US has no defense alliance with Mexico, Vietnam, or China, which account for half the US trade deficit.

Greg Ip Wall Street Journal
Date Posted:

.@greg_ip highlights CEA-designate @SteveMiran’s argument that retaliatory tariffs can be deterred by leveraging American security provisions; i.e. “the U.S. might not defend Japan, South Korea, or a fellow NATO member that retaliated.”

Can defense commitments be used to deter retaliatory tariffs?

Core argument: Miran acknowledged that "retaliatory tariffs by other nations can nullify the welfare benefits of tariffs for the U.S.," a scenario in which both sides lose, as when China, the European Union, Mexico, and Canada retaliated in 2018.

If other countries retaliate, as China, the European Union, Mexico, and Canada did in 2018, the tariff is no longer optimal: Both sides lose. “Retaliatory tariffs by other nations can nullify the welfare benefits of tariffs for the U.S.,” Miran acknowledged. To deter retaliation, he wrote that the Trump administration could “declare that it views joint defense obligations and the American defense umbrella as less binding or reliable for nations which implement retaliatory tariffs.” In other words, the U.S. might not defend Japan, South Korea, or a fellow NATO member that retaliated. The U.S. has no defense alliance with Mexico, Vietnam, or China which account for half the U.S. trade deficit.

Takeaways by Macro Roundup® AI

  1. Miran acknowledged that "retaliatory tariffs by other nations can nullify the welfare benefits of tariffs for the U.S.," a scenario in which both sides lose, as when China, the European Union, Mexico, and Canada retaliated in 2018.
  2. Miran wrote that the Trump administration could deter retaliation by declaring that it views joint defense obligations and the American defense umbrella as "less binding or reliable" for nations that implement retaliatory tariffs.
  3. Mexico, Vietnam, and China account for half the U.S. trade deficit, and the United States has no defense alliance with any of them.

Related Articles:

  • 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.
  • Tariffs and Exchange Rates (and Stephen Miran) — The author argues that a universal tariff would prompt enough dollar appreciation to make US exports more expensive abroad, reducing trade flows in both directions while leaving the trade deficit roughly unchanged. Attempting to offset the export drag through deregulation would shift production away from import-competing goods, again leaving a similar trade deficit.
  • 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.

AI Summary. Satellite images of a Chinese state-owned shipyard show six barge-like vessels with extendable ramps under construction, which analysts said could help an invasion force land heavy equipment such as tanks and artillery over Taiwan's mudflats, seawalls and concrete wave-breaking blocks onto firm ground.

Kathrin Hille Financial Times
Date Posted:

China is building at least 6 barges that can serve as mobile piers designed to give the PLA the capacity to conduct an amphibious assault on Taiwan. The barges are similar to the Mulberry harbors constructed for the Normandy invasion.

Is China building mobile piers to land heavy equipment on Taiwan?

Core argument: Satellite images reviewed by the Financial Times show six barge-like vessels with extendable ramps under construction at China's state-owned Guangzhou Shipyard, in three sizes, the largest 183 metres long with an eight-pylon design and a ramp extending another 128 metres.

Satellite images captured on Friday and reviewed by the Financial Times show six barge-like vessels equipped with extendable ramps under construction at China’s state-owned Guangzhou Shipyard. The vessels could help the People’s Liberation Army transport heavy military equipment such as tanks and artillery across mudflats or seawalls onto firm ground. Long stretches of the country’s coast are cliffs, reefs and rocks, while its flat western seaboard is lined with mudflats in which heavy equipment could easily get stuck. Most of the coastline is also separated from inland areas by concrete seawalls or wave-breaking concrete blocks. Shore-based lifting equipment such as the new barges could help an invasion force overcome such obstacles, analysts said. The satellite images showed mobile piers of three different sizes. The largest, with eight pylons, was 183 metres long and had a ramp extending another 128 metres.

Takeaways by Macro Roundup® AI

  1. Satellite images reviewed by the Financial Times show six barge-like vessels with extendable ramps under construction at China's state-owned Guangzhou Shipyard, in three sizes, the largest 183 metres long with an eight-pylon design and a ramp extending another 128 metres.
  2. The mobile piers could help the People's Liberation Army move heavy equipment such as tanks and artillery across mudflats or seawalls onto firm ground, analysts said.
  3. Long stretches of Taiwan's coast are cliffs, reefs and rocks, while its flat western seaboard is lined with mudflats in which heavy equipment could get stuck, and most of the coastline is separated from inland areas by concrete seawalls or wave-breaking blocks.

Related Articles:

  • China Is Rapidly Building Warships. Satellite Images Reveal The Scale — China's shipbuilding capacity now exceeds the United States' by such a margin that it can build more ships in a month than American yards build in a year, with a workforce estimated at nearly 5x the US level. Chinese yards handled more than 1,700 orders in a year, compared with fewer than five for American shipyards.
  • China’s Shipyards Are Ready for a Protracted War. America’s Aren’t — China produced more than half of the world's commercial shipbuilding output, while Europe accounts for about 5% and the US next to nothing, with most of the remainder built in South Korea and Japan. Analysts argue that in a protracted conflict China's wartime-scale yards could quickly accelerate production, replace lost ships, and repair damaged ones.
  • China’s Newest Nuclear Submarine Sank, Setting Back Its Military Modernization — U.S. officials say China's first Zhou-class nuclear-powered attack submarine, which features a distinctive X-shaped stern designed for greater maneuverability, sank at a shipyard near Wuhan, a setback for a priority weapons program that Chinese authorities sought to conceal.

Tuesday, January 14, 2025

AI Summary. The authors find that most extremely wealthy Americans fall out of the top tail within their lifetimes, and that grandparental wealth is associated with reaching the top 1% in a non-linear way. Still, over 90% of grandchildren of top 1% grandfathers did not reach that level.

Priti Kalsi and Zachary Ward National Bureau of Economic Research
Date Posted:
Is Database:
Database

Dynastic persistence of ultra-high wealth in the US was limited even in periods of high inequality like 1850-1940. “Over 90% of the grandchildren of top 1% wealth grandfathers did not achieve that level”. @EconZach

How persistent is elite wealth across American generations?

Core argument: Among grandchildren of grandfathers at the 100th wealth percentile, 13.5% reached the top 1%, compared with 9.9% at the 99.9th percentile, 3.7% at the 98th, and 1.9% at the 90th.

Using various wealth proxies and data tracking tens of millions of individuals, we find that most extremely wealthy individuals drop out of the top tail within their lifetimes. Yet, elite wealth still matters. We find a non-linear association between grandparental wealth and being in the top 1%, such that having a rich grandparent exponentially increases the likelihood of reaching the top 1%. Still, over 90% of the grandchildren of top 1% wealth grandfathers did not achieve that level. In our data, 1.9% of individuals with a grandfather at the 90th percentile ended up in the top 1%, which is double the average for the group. This percentage increases to 3.7% for those with grandfathers at the 98th percentile. For grandchildren of those at the 99.9th percentile, the percentage rises to 9.9%, and for those at the very top (100th percentile), it reaches 13.5%. Elite wealth, even within the top 1%, matters. However, the relationship is not deterministic. Even among grandchildren from the wealthiest backgrounds, the vast majority did not maintain a position in the top 1%.

Takeaways by Macro Roundup® AI

  1. Among grandchildren of grandfathers at the 100th wealth percentile, 13.5% reached the top 1%, compared with 9.9% at the 99.9th percentile, 3.7% at the 98th, and 1.9% at the 90th.
  2. Over 90% of the grandchildren of top 1% wealth grandfathers did not themselves reach the top 1%, and most extremely wealthy individuals drop out of the top tail within their own lifetimes.
  3. Using wealth proxies and data tracking tens of millions of individuals, the authors find a non-linear association between grandparental wealth and reaching the top 1%, with a rich grandparent exponentially increasing that likelihood.

Related Articles:

  • Family, Education, and Sources of Wealth Among the Richest Americans — Analysis of the Forbes 400 finds that fewer of the richest Americans inherited their wealth or grew up wealthy than in the 1980s and 1990s, with more starting businesses from upper-middle-class backgrounds. The authors link this shift to education and skills applied in scalable industries such as technology, finance, and mass retail.
  • 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.
  • The Inheritance Of Social Status: England, 1600 to 2022 — Using a genealogical database of 422,374 English people with rarer surnames, the authors find social status persists strongly even among distant relatives, with status correlations declining by a constant factor of 0.79 per step in the lineage across all status measures and eras studied. The authors argue this constancy suggests social interventions have modest effects.

AI Summary. A global model of 12 advanced economies estimates that slower growth and population aging account for about half of the 3 percentage point decline in the US real natural interest rate from 1970 to its mid-2010s trough, with global spillovers explaining over a third. The authors project enduring 10-year Treasury yields above 4%.

Martin Ademmer and Jamie Rush Oxford Open Economics
Date Posted:

Slow growth and aging account for ~½ of the ~3pp drop in the US natural rate R* between 1970 and the mid-2010s and “global spillovers” for ⅓. R* is now up 50+bps from the mid-2010s, “partly reflecting extraordinary fiscal stimulus.”

What drove the decades-long decline in the natural interest rate?

Core argument: A global model of 12 advanced economies estimates that slower growth and population age structure accounted for about half of the three-percentage-point decline in the US real natural rate of interest between 1970 and its mid-2010s trough, with global spillovers explaining a bit more than a third.

Long-term borrowing costs have been on a path of near continuous decline for the last several decades. We have estimated a global model that brings together an extensive set of drivers of the natural rate of interest for 12 advanced economies, using data spanning half a century. We find that slower growth and the age structure of the population accounted for about half of the three percentage point decline in the real natural rate for the USA between 1970 and a trough in the mid-2010s. Global spillovers account for a bit more than a third of the decline. Our model suggests the natural rate in the USA has climbed more than half a percentage point since the trough, partly reflecting extraordinary fiscal stimulus in the US. The model suggests 10-year treasury yields in excess of 4% can be expected to endure. Monetary policy has increasingly relied on squeezing the whole yield curve to support demand. When viewed through a longer-term lens, US monetary policy does not look as tight as it does when looking at short-term rates alone. This may help to explain why the economy has been so resilient to the post-pandemic hiking cycle.

Takeaways by Macro Roundup® AI

  1. A global model of 12 advanced economies estimates that slower growth and population age structure accounted for about half of the three-percentage-point decline in the US real natural rate of interest between 1970 and its mid-2010s trough, with global spillovers explaining a bit more than a third.
  2. The model estimates the US natural rate has climbed more than half a percentage point since its trough, partly reflecting extraordinary US fiscal stimulus, and suggests 10-year Treasury yields above 4% can be expected to endure.
  3. US monetary policy looks less tight when viewed through a longer-term lens than when judged by short-term rates alone, which may help explain the economy's resilience to the post-pandemic hiking cycle.

Related Articles:

  • Global Natural Rates in the Long Run: Postwar Macro Trends and the Market-Implied r* in 10 Advanced Economies — Estimates for 10 advanced economies show natural interest rates have declined over the long run, though not steadily: as recently as the 1990s they ranged from 100 to 600 basis points, while by the end of the sample 4 of 10 countries had a negative natural rate and most others fell between 0 and 50 basis points.
  • Economic Policy Before and After the 2024 Election — Market expectations for the Federal Reserve's interest-rate path have shifted, with the expected endpoint moving from about 2.8% to 3.8%. The author argues that enacting the campaign agenda—larger deficits from tax cuts, tariffs on all imports, a weaker currency, mass deportations, and pressure on central-bank independence—would produce a substantially larger inflation shock.
  • 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.

AI Summary. Population growth in the average rural US county reached 0.4% and surpassed that of the average urban county, while the share of rural counties losing population fell from two-thirds in 2012 to under half. The growth is concentrated in rural counties near major urban centers and in recreation and retirement destinations.

August Benzow Economic Innovation Group
Date Posted:

The pandemic may have stabilized the rural population in 2023 with 0.4% y/y population growth for rural counties compared to 0% in 2019. The share of rural counties losing population dropped from ⅔ in 2012 to less than half in 2023. @AugustBenzow

Is rural population growth outpacing that of urban counties?

Core argument: Rural counties' year-over-year population growth reached 0.4% in 2023, up from 0% in 2019, with the average rural county's growth rate surpassing that of the average urban county.

Year-over-year population growth for rural counties was 0.4% in 2023, compared to 0% in 2019. Last year, in fact, the population growth rate of the average rural county surpassed that of the average urban county. (Suburban counties are growing their populations at the fastest rates, a continuation of longstanding historical trends.) The share of rural counties losing population has also declined significantly, dropping from two-thirds in 2012 to less than half in 2023. The return of population growth is undoubtedly encouraging for many rural counties, but the trend remains highly concentrated in specific states and regions. The recent population growth has been most pronounced in rural counties near major urban centers or in popular recreation and retirement destinations.

Takeaways by Macro Roundup® AI

  1. Rural counties' year-over-year population growth reached 0.4% in 2023, up from 0% in 2019, with the average rural county's growth rate surpassing that of the average urban county.
  2. The share of rural counties losing population fell from two-thirds in 2012 to less than half in 2023, though the growth remains concentrated in specific states and regions.
  3. Rural population growth has been most pronounced in counties near major urban centers or in popular recreation and retirement destinations, while suburban counties grow fastest, continuing longstanding historical trends.

Related Articles:

  • Changes in the U.S. Economy and Rural-Urban Employment Disparities — Long-term shifts in the US economy — technological innovation and automation, declines in some energy extraction, greater globalization, and the move to a knowledge-based economy — have coincided with disproportionately negative employment outcomes in rural communities, especially for prime working-age men and those without a high school degree.
  • How Big-City Expats Might Reshape the Politics Of Rural America — Rural population growth accelerated to 1.4% from 0.7%, a gain of nearly 1m residents, while large urban areas shifted from 1.5% growth to a 0.5% decline, losing more than 500,000 residents. About a third of new residents in rural counties that voted Republican came from Democratic-leaning counties, rising to 40% in rural counties within urban commuting zones.
  • 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.

AI Summary. Southern European economies including Spain, Italy, Portugal and Greece have grown about 1.3% a year on average since 2020 and stand nearly 6% larger than before the pandemic, while Germany recorded no increase in economic activity over four years. The Bundesbank warns German stagnation may persist.

Olaf Storbeck, Eleni Varvitsioti, Barney Jopson, and Amy Kazmin Financial Times
Date Posted:

Since 2020, the economies of Spain, Italy, Portugal, and Greece have grown by nearly 6%, while Germany had no increase in economic activity. “The Bundesbank has warned that this stagnation may drag on well into 2025.”

Is southern Europe now growing faster than Germany?

Core argument: Spain, Italy, Portugal and Greece have expanded by an average 1.3% a year since 2020, leaving the four economies nearly 6% larger on average than at the start of the pandemic.

In the 15 years to the pandemic, German GDP on average grew by 1.5% a year while the four southern states eked out just 0.3% on average. Since 2020, Spain, Italy, Portugal and Greece have on average expanded by 1.3% a year — underwhelming compared to the booming US economy — but, on average, the four economies are nearly 6% larger than they were at the start of the pandemic. Meanwhile, Europe’s largest economy Germany had no increase in economic activity at all over the past four years, and the Bundesbank has warned that this stagnation may drag on well into 2025. By contrast, the EU commission expects that Spain and Greece will grow by 2.3% this year, Portugal by 1.9% and Italy by 1%.

Takeaways by Macro Roundup® AI

  1. Spain, Italy, Portugal and Greece have expanded by an average 1.3% a year since 2020, leaving the four economies nearly 6% larger on average than at the start of the pandemic.
  2. Germany recorded no increase in economic activity over the past four years, and the Bundesbank has warned that this stagnation may drag on well into 2025.
  3. In the 15 years to the pandemic, German GDP grew by an average 1.5% a year while the four southern states averaged just 0.3%.

Related Articles:

  • Germany Is Unraveling Just When Europe Needs It Most — After five years of stagnation, Germany's economy is 5% smaller than if its pre-pandemic growth trend had continued, and Bloomberg Economics estimates most of that shortfall will be hard to recover given the loss of cheap Russian energy and German automakers struggling against Chinese rivals.
  • 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.
  • Why the U.S. Economy Is Trouncing Europe’s — Only about 12% of Americans score at the highest levels on international academic tests versus 34% at the lowest, yet the U.S. has created nearly 250 companies worth over $10bn ($30tn in value) against Europe's 14, and median U.S. disposable household income is 25% above Germany's. The author argues expanding high-skilled immigration is the fastest way to accelerate growth.

AI Summary. Spain has proposed a 100% tax on residential property purchases by buyers from outside the European Union who are not residents of the bloc, part of a package of 12 measures intended to improve housing affordability by deterring foreign purchases. Non-Spaniards, including EU citizens, accounted for about 15% of Spanish property purchases.

Barney Jopson and Carmen Muela Financial Times
Date Posted:

Spain plans to impose a 100% tax on real estate purchases by non-EU buyers. In Q3 of 2024, non-Spaniards accounted for 15% of all Spanish real estate purchases.

Will taxing foreign homebuyers make housing more affordable?

Core argument: Spain plans a 100% tax on real estate purchases by non-EU citizens who are not residents of the bloc, including UK buyers, to deter foreign purchases and improve housing affordability.

Spain is planning to impose a 100% tax on real estate purchases for buyers from non-EU countries such as the UK in a bid to improve housing affordability by deterring foreign purchases. Prime Minister Pedro Sánchez announced the plan for the punitive property tax, which would apply to non-EU citizens who are not residents of the bloc, as part of a raft of measures aimed at tackling a “grave” housing crisis. Spain is one of many European countries where public anger is mounting over the difficulty of finding affordable housing to buy or rent as property prices soar and new construction lags far behind demand. “The west faces a decisive challenge: to not become a society divided into two classes, the rich landlords and the poor tenants,” said Sánchez as he unveiled a set of 12 measures. In the third quarter of 2024, non-Spaniards including EU citizens bought 24,700 properties in Spain, accounting for 15% of all real estate purchases in the country.

Takeaways by Macro Roundup® AI

  1. Spain plans a 100% tax on real estate purchases by non-EU citizens who are not residents of the bloc, including UK buyers, to deter foreign purchases and improve housing affordability.
  2. Non-Spaniards, including EU citizens, bought 24,700 properties in Spain in the third quarter of 2024, accounting for 15% of all real estate purchases in the country.
  3. Spanish Prime Minister Pedro Sánchez unveiled 12 measures to address what he called a "grave" housing crisis, warning that the west risks becoming a society divided between rich landlords and poor tenants.

Related Articles:

  • Global Capital And Local Assets: House Prices, Quantities and Elasticities — The authors estimate that a 1% increase in foreign capital inflows raises local house prices by 0.27% but housing supply by only 0.004%, indicating highly inelastic local housing markets. U.S. zip codes with large foreign-born Chinese populations saw house prices grow 8% more amid Chinese capital inflows, a pattern that reversed with U.S.-China trade tensions.
  • Rich Chinese Eye Australia Homes as 700,000 to Leave by 2025 — A real estate firm estimates about 712,000 people will migrate from China to the US, Canada, and Australia over a three-year period, a sustained exodus likely to keep driving Chinese property purchases abroad. Capital flight from mainland China could reach $150bn in a year as people move money offshore.

AI Summary. China has stepped up customs scrutiny of production equipment and materials exported by Apple and other American technology companies, citing dual-use export controls on goods with both military and commercial applications. The stricter reviews have delayed shipments to Vietnam and India by days or weeks, hampering supply chain diversification.

Lauly Li Nikkei Asia
Date Posted:

China has increased customs checks on exports of “dual use” production equipment to Southeast Asia and India, hampering efforts by Apple and other American firms to diversify supply chains away from China.

Is China using export controls to slow supply chain diversification?

Core argument: Chinese customs have delayed shipments of production equipment and materials bound for Vietnam and India by days or even weeks, hampering efforts by Apple and other American tech companies to expand production in Southeast Asia and India.

China is increasing its scrutiny of exports by Apple and other American tech companies, hampering their efforts to expand production in Southeast Asia and India. Sources said the supply chain started encountering sporadic cases in August last year of Chinese customs holding their exports of production equipment bound for Southeast Asia or India for days without giving a specific reason. The situation has escalated since early December, with Chinese customs officials citing the new export controls as the reason for stricter reviews, two of the people said. The tighter customs checks are related to dual-use technology export controls Beijing introduced in early December and have resulted in delays of days or even weeks on shipments of production equipment and materials to Vietnam and India. Dual-use refers to items or technologies that can be used for both military and commercial applications.

Takeaways by Macro Roundup® AI

  1. Chinese customs have delayed shipments of production equipment and materials bound for Vietnam and India by days or even weeks, hampering efforts by Apple and other American tech companies to expand production in Southeast Asia and India.
  2. Chinese customs began sporadically holding exports of production equipment bound for Southeast Asia or India in August of last year without giving a specific reason, according to sources, with the situation escalating since early December.
  3. Chinese customs officials cited dual-use technology export controls Beijing introduced in early December — covering items usable for both military and commercial applications — as the reason for stricter reviews, two of the people said.

Related Articles:

  • 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.
  • China Is Cutting Off Drone Supplies Critical to Ukraine War Effort — Manufacturers in China have begun limiting sales to the US and Europe of key components used to build drones, a prelude to broader export restrictions on drone parts that Western officials expect Beijing to enforce. China controls nearly 80% of the commercial drone market, according to the Center for Strategic and International Studies.
  • China and India Decoupling — After decades of moving together, the business cycles of China and India have decoupled.

AI Summary. Cleveland-Cliffs and Nucor plan a joint bid for US Steel after a $15bn takeover by Japan's Nippon Steel was blocked on national security grounds. Cleveland-Cliffs would buy US Steel for cash at under $40 a share — below Nippon's agreed $55 — then sell its Big River Steel unit to Nucor.

Amelia Pollard, Oliver Barnes, Maria Heeter, and James Fontanella-Khan Financial Times
Date Posted:

Cleveland-Cliffs and Nucor are launching a $40/share bid to buy US Steel after Biden blocked Nippon’s offer, which was priced 38% higher. The CEO of Cleveland-Cliffs argued “China is bad. China is evil. China is horrible. But Japan is worse.”

Do domestic bidders offer less after a foreign takeover is blocked?

Core argument: Cleveland-Cliffs plans to offer less than $40 a share for US Steel, significantly below the $55 a share Nippon Steel had agreed to pay before President Joe Biden blocked that deal, according to people briefed on the matter.

Cleveland-Cliffs and Nucor are set to launch a joint bid to acquire US Steel just weeks after US President Joe Biden blocked the $15bn takeover of the Pennsylvania-based group by Japan’s Nippon Steel, said people briefed on the matter. As part of the planned offer, Cleveland-Cliffs will buy all of US Steel in cash and then sell the target’s Big River Steel unit to Nucor, said the people briefed about the matter. Cleveland-Cliffs plans to offer less than $40 a share to buy US Steel, significantly below the $55 a share that Nippon Steel had agreed to pay last year before Biden killed the transaction over national security concerns.

Takeaways by Macro Roundup® AI

  1. Cleveland-Cliffs plans to offer less than $40 a share for US Steel, significantly below the $55 a share Nippon Steel had agreed to pay before President Joe Biden blocked that deal, according to people briefed on the matter.
  2. Under the planned joint bid, Cleveland-Cliffs would buy all of US Steel in cash and then sell the target's Big River Steel unit to Nucor, said people briefed on the matter.
  3. The Cleveland-Cliffs and Nucor bid follows President Joe Biden's decision to block Japan's Nippon Steel from completing its $15bn takeover of Pennsylvania-based US Steel over national security concerns.

Related Articles:

  • Biden Blocks Nippon Steel’s $14.1 Billion Takeover of US Steel — The US government blocked Nippon Steel's $14.1bn takeover of US Steel, a victory for the United Steelworkers union's leadership, which opposed the deal even as some rank-and-file members backed it. The decision leaves US Steel potentially needing to restart a sale process, and it could struggle to find a buyer for the entire company.
  • “No Inventions; No Innovations,” A History of US Steel — US Steel lagged in adopting steelmaking technology, only moving into minimills through an acquisition and a new Alabama plant, with minimills now making about 25% of its domestic output. Rival minimill producer Nucor passed US Steel in output and is now the largest US steel producer.
  • Chinese Overcapacity is Crushing the Global Steel Industry — China produces about 1bn tonnes of steel a year, as much as the rest of the world combined, and its exports reached 90m tonnes in 2023, up 35% from the prior year. With Chinese mills selling abroad cheaply, foreign steelmakers' profits have fallen and some are seeking anti-dumping duties.