Edward Conard

Top Ten New York Times Bestselling Author

  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “…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 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
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “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, 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.

Wednesday, January 15, 2025

AI Summary. The authors find that fiscal expansion and the resulting rise in Treasury supply pushed convenience yields to zero on short-term Treasurys and below zero on long-term ones, reducing the revenue the U.S. earns from issuing safe, liquid assets. They argue shortening the debt's maturity structure cannot fully offset this, and that international investors may turn to alternative long-term safe assets.

Zhengyang Jiang, Robert Richmond and Tony Zhang Social Science Research Network
Date Posted:
Is Database:
Database

Jiang, et al. find that despite a shortened maturity structure, fiscal expansion over the last 2 decades has reduced the convenience yields of US Treasuries, which are now negative at the long end, undermining the “reserve currency status” of the dollar.

Has rising Treasury supply eroded the revenue from issuing safe assets?

Core argument: Fiscal expansion over the past two decades and the resulting rise in Treasury supply depressed convenience yields heterogeneously across maturities, driving them to zero for short-term Treasurys and into negative territory for long-term Treasurys, reducing the seigniorage revenue the U.S. earns from issuing safe, liquid assets.

The fiscal expansion in the past two decades and the resultant increase in Treasury supply depressed convenience yields heterogeneously across maturities-driving them to zero for short-term Treasurys and into negative territory for long-term Treasurys. As a result, the seigniorage revenue earned by the U.S. for issuing safe and liquid assets declined. Although the U.S. Treasury shortened its debt maturity structure in recent years, we show this adjustment is unable to fully offset the negative effect of debt quantity increase nor recover the seigniorage revenue that the U.S. historically earned. If the U.S. government’s capacity to issue long-term debt without eroding the convenience yield is limited, international investors may seek alternative safe assets to meet their long-term investment needs. This shift could reduce global demand for U.S. Treasurys, potentially impacting the U.S. dollar’s dominance in international finance and the benefits that accrue to the U.S. from its reserve currency status

Takeaways by Macro Roundup® AI

  1. Fiscal expansion over the past two decades and the resulting rise in Treasury supply depressed convenience yields heterogeneously across maturities, driving them to zero for short-term Treasurys and into negative territory for long-term Treasurys, reducing the seigniorage revenue the U.S. earns from issuing safe, liquid assets.
  2. The U.S. Treasury's shortening of its debt maturity structure does not fully offset the negative effect of the increase in debt quantity, nor does it recover the seigniorage revenue the U.S. historically earned.
  3. If the U.S. government's capacity to issue long-term debt without eroding the convenience yield is limited, international investors may seek alternative safe assets, potentially reducing global demand for Treasurys and affecting the dollar's dominance in international finance.

Related Articles:

  • The Macro-Finance Sitch: The Streams (of Falling Short-Term & Rising Long-Term U.S. Treasury Rates) Cross — The estimated term premium on long-term U.S. Treasury bonds has swung from about -0.9 percentage points, when buyers sacrificed yield to lock in rates, to about +0.5 percentage points, where they demand extra compensation for giving up flexibility. The author argues this shift reflects market microstructure and investor positioning rather than bond vigilantes reacting to fiscal policy.
  • Quantitative Tightening Around the Globe: What Have We Learned? — Announcements that central banks will shrink their balance sheets are associated with government bond yields rising 4–8 basis points at horizons of one year and longer, steepening the yield curve, with more limited effects on other financial indicators. Increased demand from domestic nonbank investors has largely offset reduced central bank bond holdings.
  • Foreign Investors and U.S. Treasuries — Foreign investors in U.S. Treasuries outperform domestic investors on a risk-adjusted basis, with private foreign investors earning 3.77% a year versus a 3.59% market return and 4.34% for U.S. private investors, whose longer-duration portfolios carry the most volatility. The authors argue this challenges the view that foreigners accept lower yields.

AI Summary. Foreign private investors increased their purchases of US Treasuries as yields rose following the Federal Reserve's interest rate increases. Japan is the largest foreign holder of US Treasuries, and recent data show continued strong Japanese demand.

Torsten Sløk Apollo
Date Posted:

Torsten Sløk notes foreign private buyers are still net buyers of Treasuries, with Japan as the largest foreign holder. The Fed has cut rates by 100 bps since September, but over the same period, 10-year interest rates are up 100 bps.

Do higher yields keep foreign demand for Treasuries strong?

Core argument: Foreign private investors stepped up their Treasury purchases after the Federal Reserve began raising interest rates in March 2022, attracted by the higher level of yields.

When the Fed started raising interest rates in March 2022, foreign private investors started buying a lot more Treasuries because they liked the higher level of yields. Japan is the biggest foreign holder of US Treasuries. With rates higher for longer, the latest data shows continued strong demand from Japan.

Takeaways by Macro Roundup® AI

  1. Foreign private investors stepped up their Treasury purchases after the Federal Reserve began raising interest rates in March 2022, attracted by the higher level of yields.
  2. Japan is the largest foreign holder of US Treasuries, and the latest data show continued strong Japanese demand as rates stay higher for longer.

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. The Congressional Budget Office projects the U.S. population will grow from 350m to 372m over three decades, an average of 0.2% per year, less than a quarter of the 0.9% average annual rate from 1975 to 2024. Deaths are projected to exceed births beginning in 2033, with net immigration more than accounting for population growth thereafter.

Daniel Crown and Katherine Starkey Congressional Budget Office
Date Posted:

.@USCBO updated population estimates forecast that beginning in 2033 annual death rates in the US will outpace annual birth rates, with subsequent population growth from 350mm in 2025 to 372mm by 2055 driven entirely by immigration.

Will immigration account for all U.S. population growth in coming decades?

Core argument: CBO projects the U.S. population rises from 350 million in 2025 to 372 million in 2055, an average 0.2% annual growth rate, less than one-quarter of the 0.9% average pace from 1975 to 2024.

In CBO’s projections, the population increases from 350 million people in 2025 to 372 million people in 2055, growing at an average rate of 0.2% per year. That rate is less than one-quarter of the average growth rate seen from 1975 to 2024 (0.9% per year). The annual number of births is projected to exceed the annual number of deaths through 2032. Those net births account for about one-sixth of projected population growth during that period; net immigration accounts for the rest. Beginning in 2033, annual deaths exceed annual births in CBO’s projections, and net immigration is projected to more than account for the population growth from 2033 to 2055.

Takeaways by Macro Roundup® AI

  1. CBO projects the U.S. population rises from 350 million in 2025 to 372 million in 2055, an average 0.2% annual growth rate, less than one-quarter of the 0.9% average pace from 1975 to 2024.
  2. CBO projects annual births exceed annual deaths through 2032, with net births accounting for about one-sixth of population growth in that period and net immigration the rest.
  3. Beginning in 2033, annual deaths exceed annual births in CBO's projections, and net immigration more than accounts for U.S. population growth from 2033 to 2055.

Related Articles:

  • Babies and the Macroeconomy — Fertility rates have fallen in nearly every country, but timing differed: some developed nations fell below the 2.1 replacement level as early as the 1970s, while others dropped to "lowest low" levels below 1.3. The author argues nations with rapid, discontinuous growth saw sharper declines as women's expectations outpaced tradition-bound men's willingness to share family time.
  • Recent Immigration Surge Has Been Largest in U.S. History — An analysis of government data finds the recent U.S. immigration surge is the largest on record, with net migration averaging 2.4m people a year from 2021 to 2023 and the foreign-born share of the population reaching 15.2% in 2023, up from 13.6% in 2020. About 60% of immigrants arriving since 2021 entered without legal authorization.
  • The Power of Demography and the Fate of East Asia — East Asia's total population has peaked and is projected to decline for at least a generation, with the pace of decline likely accelerating each decade, while US population is projected to keep growing for decades. The author argues such sustained divergence can shift the global balance of power.

AI Summary. A growing youth deficit puts earlier-aging regions on a path to declining hours worked per person and slower GDP per capita growth through 2050 than the prior quarter century. Offsetting this drag requires combining labor intensity, productivity, and age-mix measures, with productivity growth of 1–2% a year needed in most of these countries.

Anu Madgavkar, Marc Canal Noguer, Chris Bradley, Olivia White, Sven Smit, and TJ Radigan McKinsey Global Institute
Date Posted:
Is Database:
Database

A McKinsey analysis argues that given the demographic headwinds facing advanced economies, US productivity growth will have to rise at 2.3x the trend rate of 2012-2023 to maintain the growth in GDP per capita over the last 25 years.

How can aging countries offset demographic drag on growth?

Core argument: A youth deficit has set "first wave" regions on a trajectory of declining hours worked per person and slower GDP per capita growth through 2050 than over the past quarter century.

A growing youth deficit has already set first wave regions on a trajectory for declining hours of work per person and thus slower GDP per capita growth through 2050 compared with the past quarter century. Maintaining past economic progress, let alone increasing it, will require measures to address the impact of demographic headwinds. We explore the three levers available—labor intensity, productivity, and age mix—to neutralize the drag on economic growth caused by shifting age mix. Pulling on only one of these three levers will be insufficient to achieve this goal in most countries, so using some combination of all three will be needed to maintain growth and raise living standards Assuming hours worked per capita grow at the same rate as in the past quarter century, productivity in most first wave countries would need to grow between 1 and 2% a year to maintain past GDP per capita growth. That level of increase may seem modest, but in Germany, for example, it means doubling the past decade’s average rate of annual productivity growth of 0.7%.

Takeaways by Macro Roundup® AI

  1. A youth deficit has set "first wave" regions on a trajectory of declining hours worked per person and slower GDP per capita growth through 2050 than over the past quarter century.
  2. Assuming hours worked per capita grow at their past quarter-century rate, productivity in most first wave countries would need to grow between 1 and 2% a year to maintain past GDP per capita growth.
  3. Germany would need to double its past decade's average annual productivity growth of 0.7%, and most countries will require some combination of all three levers—labor intensity, productivity, and age mix—since one alone is insufficient.

Related Articles:

  • Productivity During and Since the Pandemic — Total factor productivity growth since early 2021 has run only slightly above its 2010–19 average, suggesting the 2020 productivity surge reflected cyclical dynamics layered on a continuation of the slow pre-pandemic trend. Productivity has since grown somewhat faster than the authors' analysis predicted, but remains well below the 1995–2004 pace.
  • Technological Disruption in the Labor Market — The authors measure US labor market structure since 1880 and find 1990–2017 less disruptive than any earlier period, because past changes from general-purpose technologies like steam and electricity were so profound. They identify four recent signs of accelerating change, including a 50%+ rise in science and technology employment share since 2010.
  • 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. International Energy Agency data covering nearly 70 countries show a correlation between higher shares of solar and wind and higher average household and industry electricity prices, with costs about 12 cents a kilowatt-hour where solar and wind are minimal and rising more than 5 cents for each 10% increase in their share.

Bjorn Lomborg Wall Street Journal
Date Posted:
Is Database:
Database

.@BjornLomborg argues “real energy costs of solar and wind are far higher than what green campaigners claim,” citing heavy reliance on coal for new electrical generation capacity in price-sensitive developing countries like China, India, and Bangladesh.

Do higher shares of solar and wind mean higher electricity prices?

Core argument: International Energy Agency data from 2022 covering nearly 70 countries show a correlation between higher solar and wind shares and higher household and industry energy prices, with each 10% rise in solar and wind share associated with more than 5 cents per kilowatt-hour.

The real energy costs of solar and wind are far higher than what green campaigners claim. The International Energy Agency’s latest data (from 2022) on solar and wind power generation costs and consumption across nearly 70 countries shows a clear correlation between more solar and wind and higher average household and industry energy prices. In a country with little or no solar and wind, the average electricity cost is about 12 cents a kilowatt-hour (in today’s money). For every 10% increase in solar and wind share, the electricity cost increases by more than 5 cents a kilowatt-hour. This isn’t an outlier; these results are substantially similar to 2019, before the effects of the pandemic and the war in Ukraine. In poorer countries, where electricity consumption rose almost 5% from 2022 to 2023, most of the additions came from fossil fuels, with coal contributing more than all solar and wind additions. China during that period added more new coal than new solar and wind. Bangladesh added 13 times as much coal as solar and wind. Despite India’s ambitious solar targets, it added three times as much coal as solar and wind.

Takeaways by Macro Roundup® AI

  1. International Energy Agency data from 2022 covering nearly 70 countries show a correlation between higher solar and wind shares and higher household and industry energy prices, with each 10% rise in solar and wind share associated with more than 5 cents per kilowatt-hour.
  2. In countries with little or no solar and wind, average electricity costs about 12 cents a kilowatt-hour in today's money, and the 2022 pattern is substantially similar to 2019, before the pandemic and the war in Ukraine.
  3. Electricity consumption in poorer countries rose almost 5% from 2022 to 2023, with coal contributing more than all solar and wind additions; China added more new coal than solar and wind, Bangladesh 13 times as much, and India three times as much.

Related Articles:

  • We’re Burning More Coal Than Ever Thanks to China — The International Energy Agency estimates global coal demand reached an all-time high of 8,771m metric tons, up 1% from the prior year, as electricity demand rose faster than expected. China consumes nearly 30% more coal than the rest of the world combined, and its coal demand is projected to set records annually through at least 2027.
  • The Climate Short: Hedge Funds Pile Up Huge Bets Against Green Future — An analysis of positions voluntarily disclosed by roughly 500 hedge funds found more funds are net short batteries, solar, electric vehicles and hydrogen than long them, while more are net long fossil fuels than short oil, gas and coal. This comes despite large green stimulus programs in the US, Europe and China.
  • Growing Pains: The Renewable Transition in Adolescence — In an illustrative scenario, a California system with 20 GW of wind, 150 GW of solar and 75 GW of storage would provide only 50 GW of reliable capacity, since each added renewable unit contributes less to reliability. Levelized cost measures ignore this, so grid operators and utilities instead assess effective load-carrying capability.

AI Summary. The US Framework for Artificial Intelligence Diffusion imposes export restrictions aimed at preventing China from accessing the computing power needed to build frontier AI models. It sorts the world into three tiers — the US and 18 allies, 23 arms-embargoed nations plus Macau, and all other countries — with differing access to AI chips and caps on graphics processor purchases.

Dylan Patel, Daniel Nishball, Myron Xie, AJ Kourabi, Jeremie Eliahou Ontiveros, Reyk Knuhtsen and Ivan Chiam Semianalysis
Date Posted:

.@dylan522p @SemiAnalysis_ argues that new US export controls are “unprecedented in scope and scale. The regulation at its core is targeted at preventing China from accessing AI compute to build frontier models.”

How do new AI export rules restrict global chip access?

Core argument: The US Framework for Artificial Intelligence Diffusion divides the world into three tiers: Tier 1 for the US and 18 major allies and security partners, Tier 3 for 23 arms-embargoed nations plus Macau, and Tier 2 for all other countries.

The US government lobbed the largest salvo in the new technology cold war with its new Framework for Artificial Intelligence Diffusion. These new export restrictions are completely unprecedented in scope and scale, with many calling the efforts overzealous or misguided. The regulation at its core is targeted at preventing China from accessing AI compute to build frontier models. The AI Diffusion Framework divides the world into three tiers of countries with varying levels of access to AI Chips and strict caps for purchasing of GPUs: Tier 1 for the US and 18 major allies and security partners. Tier 3 for 23 Arms Embargoed Nations plus Macau. Tier 2 for all other countries – with varying degrees of relations with the US: ranging from Singapore who gets to buy F35s to Yemen who bombs US tankers!

Takeaways by Macro Roundup® AI

  1. The US Framework for Artificial Intelligence Diffusion divides the world into three tiers: Tier 1 for the US and 18 major allies and security partners, Tier 3 for 23 arms-embargoed nations plus Macau, and Tier 2 for all other countries.
  2. The AI Diffusion Framework is aimed at preventing China from accessing AI compute to build frontier models, and sets strict caps on GPU purchases.
  3. The export restrictions are unprecedented in scope and scale, with many calling the effort overzealous or misguided, and Tier 2 groups countries as disparate as Singapore and Yemen.

Related Articles:

  • The Year-End Wake-Up: The ‘Chinese Sputnik’ That Demands Our Attention — Chinese AI company DeepSeek trained its Version 3 large language model for roughly $5.6m, about 100x cheaper than Meta's Llama 3, with performance comparable to Claude 3.5 Sonnet and interface access costing 12x less than Anthropic's. The author argues US chip export controls backfired by spurring leaner engineering, and that the gap between open-source and closed-source models is narrowing rapidly.
  • Chinese Tech Groups Build AI Teams In Silicon Valley — Chinese technology groups including Alibaba, ByteDance and Meituan are expanding California offices to build artificial intelligence teams and recruit US talent, despite US export bans on the highest-end Nvidia AI chips. US-based entities owned by Chinese tech companies face no restrictions on accessing high-end AI chips through US data centres.
  • Chinese Companies Resort To Repurposing Nvidia Gaming Chips For AI — Chinese firms are developing artificial intelligence tools using processors stripped from Nvidia consumer gaming graphics cards and remounted on new circuit boards, after US export controls blocked sales of high-performance chips. Industry experts describe the practice as a rough workaround for China's shortage of high-end processors.