Edward Conard

Top Ten New York Times Bestselling Author

  • “…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 must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…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
  • “…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
  • “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
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Friday, February 14, 2025

AI Summary. The US has directed economic officials to calculate new country-by-country "reciprocal" tariffs based on the total tariff, tax, regulatory, currency and other barriers facing US exports, treating value-added taxes as a trade barrier. If value-added tax rates are added to existing tariff rates, India would face the highest rate at 29%, followed by Brazil and the European Union.

Shawn Donnan Bloomberg
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The US is preparing reciprocal tariffs that treat value-added taxes as barriers to US exports. @Brad_Setser notes that this “basically forecloses negotiation, as the EU and others aren’t in a fiscal position to negotiate away its tax base.”

Does counting value-added taxes as trade barriers raise reciprocal tariff rates?

Core argument: Trump ordered US economic officials to calculate country-by-country "reciprocal" tariffs based on the total tariffs plus tax, regulatory, currency and other barriers facing US exports, with reports due by April 1 examining first the economies where the US has the largest trade deficits.

Trump on Thursday ordered top economic officials to calculate new US tariffs based on the total tariffs and tax, regulatory, currency and any other barriers that US exports face. The new “reciprocal” duties would be calculated country by country. They will be laid out in a series of reports due by April 1 that officials said would first examine the economies with which the US has the largest trade deficits. Trump and his advisers argue [that] the ability to claim a VAT rebate when products are exported gives European companies an unfair advantage as imports from the US are charged VAT of 15-20% or higher depending on the member country. “Defining a VAT to be a trade barrier isn’t just questionable economics, it also basically forecloses negotiation, as the EU and others aren’t in a fiscal position to negotiate away its tax base,” argues Brad Setser, a senior fellow at the Council on Foreign Relations. If the US imposes reciprocal tariffs that add VAT rates and MFN tariff rates together, the countries most hit would be India with a rate of 29%, Brazil and the EU.

Takeaways by Macro Roundup® AI

  1. Trump ordered US economic officials to calculate country-by-country "reciprocal" tariffs based on the total tariffs plus tax, regulatory, currency and other barriers facing US exports, with reports due by April 1 examining first the economies where the US has the largest trade deficits.
  2. Trump and his advisers argue that the ability to claim a VAT rebate on exports gives European companies an unfair advantage, since imports from the US are charged VAT of 15-20% or higher depending on the member country.
  3. If the US imposes reciprocal tariffs adding VAT rates and most-favored-nation tariff rates together, the countries most affected would be India at 29%, Brazil and the EU.

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.
  • Fiscal, Macroeconomic, and Price Estimates of Tariffs Under Both Non-Retaliation and Retaliation Scenarios — The authors estimate the modeled tariff proposals would raise $1.2tn–$4.4tn over 10 years, or 0.3–1.2% of average GDP, with foreign retaliation cutting that revenue by 12–26%. They project consumer prices initially rise 1.2–5.1%, equal to $1,900–$7,600 of lost disposable income per household, with real GDP contracting 0.5–1.4% in the medium term.
  • What Trump’s Trade War Would Mean, in Nine Charts — Imports and exports make up about a quarter of U.S. gross domestic product, less than in Germany, Japan, and the United Kingdom, and U.S. imports come from a fairly broad set of countries. Trade accounts for roughly 70% of Canadian and Mexican output, giving the U.S. significant leverage in negotiations with both.

AI Summary. Inflation, inflation expectations, and the gap between nominal and inflation-indexed bond yields are all moving higher. The author argues that cutting interest rates too early raises the likelihood of repeating the 1970s, leaving the Federal Reserve no option but to hold rates higher for longer.

Torsten Sløk Apollo
Date Posted:

Torsten Sløk notes CPI is directionally tracking the 1974-1982 episode, though at a lower magnitude. “If the Fed cuts interest rates too early, it increases the likelihood that we will see a repeat of the 1970s.”

Does cutting rates too early risk repeating 1970s inflation?

Core argument: Inflation, inflation expectations, and breakevens between nominal and inflation-indexed bonds are all moving higher.

Inflation is moving higher, inflation expectations are moving higher, and breakevens [between nominal and index bonds] are moving higher. If the Fed cuts interest rates too early, it increases the likelihood that we will see a repeat of the 1970s. The Fed has no other options than to keep interest rates higher for longer.

Takeaways by Macro Roundup® AI

  1. Inflation, inflation expectations, and breakevens between nominal and inflation-indexed bonds are all moving higher.
  2. Cutting interest rates too early increases the likelihood of a repeat of the 1970s, the author argues.
  3. The Federal Reserve has no option other than keeping interest rates higher for longer, the author concludes.

Related Articles:

  • US Inflation Tops Forecasts, Bolstering Case for Fed to Hold — The US consumer price index rose 0.5% in a month, with shelter accounting for nearly 30% of the advance, according to the Bureau of Labor Statistics. Grocery prices led the increase, and two-thirds of that gain came from higher egg prices following a deadly bird flu outbreak.
  • The Cost of Money is Part of the Cost of Living: New Evidence on the Consumer Sentiment Anomaly — Variation in the University of Michigan consumer sentiment index that inflation and unemployment cannot explain is strongly correlated with growth in consumer borrowing costs, such as mortgage and car loan rates. The authors estimate that including interest payments and homeownership costs in the consumer price index would raise measured inflation from 3% to 9%.
  • Data Update 4 for 2025: Interest Rates, Inflation and Central Banks! — Interest rates are ultimately driven by macroeconomic fundamentals, with an "intrinsic risk-free rate" defined as the sum of the inflation rate and real GDP growth tracking the observed 10-year Treasury bond yield closely. On this view, central banks' influence comes from preferential access to data on those fundamentals, their capacity to alter them, and their credibility.

AI Summary. Government debt of about 100% of GDP, versus 25% in 1980, makes it harder for monetary policy to contain inflation, since each percentage-point rise in interest rates raises debt interest payments by roughly one percentage point of GDP. Supply shocks force a choice between accommodating inflation and softening the economy.

John Cochrane The Grumpy Economist
Date Posted:

.@JohnHCochrane notes that in the 1970s, tight monetary policy partially offset the inflationary effects of supply shocks. With debt/GDP now 100% rather than 20%, he argues, it will be harder for the Fed to contain inflation via higher rates.

Does high government debt make it harder to contain inflation?

Core argument: U.S. debt at 100% of GDP, versus 25% in 1980, makes it harder for monetary policy to contain inflation, since each percentage-point rise in interest rates raises interest payments on the debt by one percentage point of GDP.

The situation is also different. We have much more debt and an intractable deficit. Debt to GDP in 1980 was 25%, not 100%. That makes it harder for monetary policy to contain inflation, as each point of interest rate rise raises interest payments on the debt by one percentage point of GDP. The resurgence of inflation in 1979 is usually attributed not to the Fed directly stoking the fire, but to “supply shocks.” Supply shocks do not directly cause inflation, but they lead the Fed to a difficult choice: accommodate inflation or soften the economy. Stagflation of the 1970s was its choice to take a little bit of both pain. We may be in for adverse supply shocks from trade. Or we may be in for hugely beneficial supply shocks from energy, AI, and deregulation. Buckle up.

Takeaways by Macro Roundup® AI

  1. U.S. debt at 100% of GDP, versus 25% in 1980, makes it harder for monetary policy to contain inflation, since each percentage-point rise in interest rates raises interest payments on the debt by one percentage point of GDP.
  2. The 1979 resurgence of inflation is usually attributed to supply shocks rather than to the Fed directly stoking it; supply shocks do not themselves cause inflation but confront the Fed with a choice between accommodating inflation and softening the economy.
  3. The stagflation of the 1970s reflected the Fed's choice to accept some of both pains, and the economy may face either adverse supply shocks from trade or beneficial ones from energy, AI, and deregulation.

Related Articles:

  • Economic and Fiscal Effects of the February 2025 Proposed Tariffs on China — The Budget Lab estimates that a 10% tariff on Chinese goods raises the overall US price level by just over 0.1%, equivalent to an average decline in disposable income of $223 per household. The policy is projected to raise roughly $400bn over 10 years, less after accounting for a 0.1% lower level of GDP.
  • Brazil’s Slow-Burning Economic Crisis Might Be the U.S. Future — Brazil illustrates a feedback loop in which higher interest rates raise debt-servicing costs—now over 7% of GDP—which in turn lift risk premia and inflation expectations, making fiscal policy less sustainable still. U.S. long-term rates have not fallen despite Federal Reserve cuts, partly reflecting an $11tn debt increase and markets pricing the risk that debt is managed through higher inflation.
  • Expectations and the Neutrality of Interest Rates, Final Version — Under the combined new-Keynesian and fiscal theory of the price level view, inflation is stable, determinate, and long-run neutral with respect to an interest rate target, much like a money growth target. The author argues this implies that a perpetually higher interest rate peg eventually produces correspondingly higher inflation, even if the short run moves the other way.

AI Summary. Lower earnings inequality in the Nordic countries relative to the U.S. and U.K. is mostly explained by a compressed distribution of hourly wages, which accounts for over 70% of the earnings gap versus the U.S. The authors attribute nearly all of that wage compression to a smaller skill premium rather than workforce composition, consistent with centralized bargaining and wage coordination.

Magne Mogstad, Kjell Salvanes, and Gaute Torsvik National Bureau of Economic Research
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Mogstad et al find that over 70% of the difference in earnings variability between the Nordic countries and the US/UK is due to a lower skill premium rather than skill variability, likely the result of wage compression due to collective bargaining.

Why is earnings inequality lower in the Nordic countries?

Core argument: Over 70% of the difference in the variance of log earnings between the Nordic countries and the U.S. is explained by the relatively low variance of log hourly wages in the Nordics.

Earnings inequality is relatively low in the Nordics because of compression of the hourly wage distribution, a lower dispersion in hours of work, and a smaller covariance between hours of work and hourly wages. Compression of hourly wages matters the most, explaining a large majority of the difference in earnings inequality between Nordic countries and the U.S.and U.K. Over 70% of the difference in the variance in log earnings between the Nordics and the U.S. is explained by the relatively low variance of log hourly wages in Nordic Countries. A decomposition shows that almost all of the differences in the inequality of hourly wages between the Nordic countries and the U.S. can be accounted for by differences in the skill premium rather than differences in the composition of the workforce by skills and other characteristics. To understand why, it is useful to return to how wages are set in the Nordic countries. Both cross-sectional and panel data suggest that centralized bargaining and wage coordination in the Nordic countries strongly compress the distribution of wages compared to the distribution of labor productivity.

Takeaways by Macro Roundup® AI

  1. Over 70% of the difference in the variance of log earnings between the Nordic countries and the U.S. is explained by the relatively low variance of log hourly wages in the Nordics.
  2. A decomposition attributes almost all of the gap in hourly wage inequality between the Nordic countries and the U.S. to differences in the skill premium rather than workforce composition by skills and other characteristics.
  3. Lower Nordic earnings inequality reflects compressed hourly wages, less dispersion in hours worked, and a smaller covariance between hours and wages, with cross-sectional and panel data suggesting centralized bargaining and wage coordination compress wages relative to labor productivity.

Related Articles:

  • Rich Norwegians Flee to Low-Tax Switzerland as Wealth Levy Bites — Public filings to Norway's population registry show at least 30 billionaires and millionaires with a combined fortune of NKr29bn ($3bn), who paid NKr550m in tax, moved from Norway to lower-tax Switzerland in a single year, more than in the previous 13 years combined. Norway levies a wealth tax on net fortunes above NKr1.7m ($173,000), at 1.1% for the richest.
  • Do Adults Have the Skills They Need to Thrive in a Changing World? — An international assessment of adult skills describes numeracy proficiency levels ranging from counting objects and adding small whole numbers at the lowest level, to extracting information from tables and graphs and performing basic arithmetic with money and percentages at Level 1, up to analysing complex mathematical information and critically evaluating whether data support a claim at Level 5.
  • The Plateauing of Cognitive Ability Among Top Earners — Measured cognitive ability plateaus at higher wage levels, flattening around an annual wage of about €60,000 ($64,200) at under one standard deviation above average. The authors find no significant ability differences across the top three income percentiles, even though top-percentile earners make more than double those in the 98th percentile.

AI Summary. New evidence indicates that in complex tasks such as research and management, high performers are best positioned to work with AI, since evaluating model output requires expertise and judgment. AI is likely to widen workforce divides rather than narrow them, commoditising skills and automating the repetitive tasks of lower-skilled roles such as customer service.

Economist Staff The Economist
Date Posted:

Studies suggest “AI is likely to widen workforce divides, much like past technological revolutions” that benefited more talented workers. “Low-skilled workers may face a future akin to cashiers. Their repetitive tasks are susceptible to automation.”

Does AI widen rather than narrow workforce skill divides?

Core argument: Amit Zavery of ServiceNow estimates that more than 85% of customer-service cases for some clients no longer require human involvement, a figure likely to rise as AI advances, leaving fewer agents handling only the most complex cases.

In complex tasks such as research and management, new evidence indicates that high performers are best positioned to work with AI. Evaluating the output of models requires expertise and good judgment. Rather than narrowing disparities, AI is likely to widen workforce divides, much like past technological revolutions. The case for AI as an equaliser was supported by research showing that the tech enhances output most for less experienced workers. The problem is that this is swamped by another effect. A job can be considered as a bundle of tasks, which tech may either commoditise or assist with. Customer-service agents and other low-skilled workers may face a future akin to cashiers. Their repetitive tasks are susceptible to automation. Amit Zavery of ServiceNow, a business-software company, estimates that more than 85% of customer-service cases for some clients no longer require human involvement. As AI advances, this figure will probably rise, leaving fewer agents to handle only the most complex cases. Although AI may at first boost productivity, its long-term impact will be to commoditise skills and automate tasks.

Takeaways by Macro Roundup® AI

  1. Amit Zavery of ServiceNow estimates that more than 85% of customer-service cases for some clients no longer require human involvement, a figure likely to rise as AI advances, leaving fewer agents handling only the most complex cases.
  2. In complex tasks such as research and management, new evidence indicates that high performers are best positioned to work with AI, since evaluating model output requires expertise and good judgment.
  3. Research showing that AI enhances output most for less experienced workers is swamped by the commoditisation of repetitive tasks, so AI is likely to widen workforce divides rather than narrow them, much like past technological revolutions.

Related Articles:

  • 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.
  • Generative AI at Work — A study of 5,179 customer support agents finds that access to a generative AI conversational assistant raised issues resolved per hour by 14% on average, with the largest gains for novice and low-skilled workers and minimal effect on experienced, highly skilled ones. The authors also find AI assistance improved customer sentiment, reduced requests for managerial intervention, and improved employee retention.

AI Summary. Researchers report that China began building 94.5GW of coal-fired power capacity in a year, the most since 2015, alongside a record 356GW of new wind and solar capacity. The report argues clean energy is being layered on top of continued reliance on coal rather than replacing it.

Joe Leahy, Wenjie Ding, and Attracta Mooney Financial Times
Date Posted:
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In 2024, China added a record 356GW of wind and solar capacity, but also started building 94.5GW of coal power capacity – the most since 2015. Last year, 93% of new global coal power construction was in China.

Is China adding clean energy on top of coal, not replacing it?

Core argument: China began construction of 94.5GW of coal-fired power capacity in 2024, the most since 2015, alongside the resumption of suspended projects with another 3.3GW, according to a report by CREA and Global Energy Monitor.

China’s coal plant construction surged last year to the highest level in almost a decade, conflicting with President Xi Jinping’s promise that carbon emissions would peak before 2030, researchers have said. In a report released on Thursday, the think-tank Centre for Research on Energy and Clean Air (CREA) and Global Energy Monitor (GEM) said that while China added a record 356GW of wind and solar electricity-generating capacity in 2024, it also began building coal power plants with 94.5GW of capacity, the most since 2015. The new construction, as well as the resumption of suspended projects with another 3.3GW capacity, boosted coal’s role in the power system of the world’s second-largest economy despite its push into renewables, the report said. “Instead of replacing coal, clean energy is being layered on top of an entrenched reliance on fossil fuels,” said the report, [whose lead authors are] Qi Qin, China analyst at Helsinki-based Crea, and Christine Shearer of California-based GEM. “The parallel expansion of coal and renewables risks undermining China’s clean energy transition.”

Takeaways by Macro Roundup® AI

  1. China began construction of 94.5GW of coal-fired power capacity in 2024, the most since 2015, alongside the resumption of suspended projects with another 3.3GW, according to a report by CREA and Global Energy Monitor.
  2. China added a record 356GW of wind and solar generating capacity in 2024, yet the report's authors say clean energy is being layered on top of an entrenched reliance on fossil fuels rather than replacing coal.
  3. The CREA and GEM researchers say the coal build-out conflicts with Xi Jinping's pledge that China's carbon emissions would peak before 2030, and that parallel expansion of coal and renewables risks undermining the country's clean energy transition.

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 Energy Transition Is Powered By — Wait for It — Coal — The International Energy Agency now estimates coal consumption in 2030 will be 6% higher than it projected a year earlier — an increase equal to Japan's entire coal use — and above 2010 levels. Fossil fuels met two-thirds of the recent global increase in energy demand.

AI Summary. The top US military commander in the Indo-Pacific says China's military activity around Taiwan has grown so extensive that it is becoming difficult to distinguish large-scale exercises from actual preparations for an attack. He characterizes the maneuvers as rehearsals for forced unification of Taiwan with the mainland rather than exercises.

Demetri Sevastopulo Financial Times
Date Posted:

Samuel Paparo, head of the US Indo-Pacific Command, characterized recent PLA operations around Taiwan not as exercises, but as “rehearsals for the forced unification of Taiwan to the mainland.”

Are military exercises near Taiwan becoming indistinguishable from attack preparations?

Core argument: US Navy Admiral Samuel Paparo, the top US commander in the Indo-Pacific, said China's military exercises around Taiwan have grown extensive enough that they could soon serve as a "fig leaf" concealing an attack on the island.

China’s military exercises around Taiwan have become so extensive that they could soon be used as a “fig leaf” to conceal an attack on the island, according to the top US military commander in the Indo-Pacific. The People’s Liberation Army had significantly increased activity around Taiwan in recent years, leaving it more difficult to distinguish between large-scale exercises and actual preparations for an attack, US Navy Admiral Samuel Paparo said. “We’re very close to that [point] where on a daily basis the fig leaf of an exercise could very well hide operational warning,” he said. “Their aggressive manoeuvres around Taiwan right now are not exercises as they call them, they are rehearsals. They are rehearsals for the forced unification of Taiwan to the mainland.”

Takeaways by Macro Roundup® AI

  1. US Navy Admiral Samuel Paparo, the top US commander in the Indo-Pacific, said China's military exercises around Taiwan have grown extensive enough that they could soon serve as a "fig leaf" concealing an attack on the island.
  2. Paparo said the People's Liberation Army's significantly increased activity around Taiwan in recent years has made it more difficult to distinguish large-scale exercises from actual preparations for an attack.
  3. Paparo characterized China's maneuvers around Taiwan as rehearsals rather than exercises, calling them rehearsals for the forced unification of Taiwan with the mainland.

Related Articles:

  • China Building New Mobile Piers That Could Help Possible Taiwan Invasion — 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.
  • China Builds Huge New Wartime Military Command Centre in Beijing — Satellite imagery shows China's military constructing a roughly 1,500-acre complex southwest of Beijing that US intelligence assesses will serve as a wartime command center at least 10x the size of the Pentagon. Military experts assess the site's deep excavations will house hardened bunkers to shield Chinese military leaders during conflict, including potentially nuclear war.
  • Xi Jinping Says He Is Preparing China for War — China's leadership has emphasized war readiness, announcing a 7.2% increase in the defense budget—which has doubled over the past decade—and plans to reduce dependence on foreign grain imports. China has also opened National Defense Mobilization recruitment offices across the country, while cities in Fujian Province opposite Taiwan build or upgrade air-raid shelters.

Tuesday, February 18, 2025

AI Summary. The International Monetary Fund estimates Europe's internal barriers are equivalent to tariffs of 45% on manufacturing and 110% on services, leaving trade across European Union countries at less than half the level of trade across US states. Regulation of digital services is estimated to have cut profits for small European tech firms by up to 12%.

Mario Draghi Financial Times
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The IMF estimates that Europe’s internal barriers act like tariffs of 45% on manufacturing and 110% on services, “a sector that makes up around 70% of EU GDP;” such barriers limit trade across EU countries to less than half that across US states.

How much do Europe's internal barriers cost its own economy?

Core argument: The IMF estimates Europe's internal barriers are equivalent to tariffs of 45% for manufacturing and 110% for services, and trade across EU countries is less than half the level of trade across US states.

The IMF estimates that Europe’s internal barriers are equivalent to a tariff of 45% for manufacturing and 110% for services. These effectively shrink the market in which European companies operate: trade across EU countries is less than half the level of trade across US states. And as activity shifts more towards services, their overall drag on growth becomes worse. At the same time, the EU has allowed regulation to track the most innovative part of services — digital — hindering the growth of European tech firms and preventing the economy from unlocking large productivity gains. The costs of complying with GDPR, for example, are estimated to have reduced profits for small European tech firms by up to 12%. Europe has been effectively raising tariffs within its borders and increasing regulation on a sector that makes up around 70% of EU GDP. This failure to lower internal barriers has also contributed to Europe’s unusually high trade openness. Since 1999, trade as a share of GDP has risen from 31% to 55% in the eurozone, whereas in China it rose from 34% to 37% and in the US from 23% to just 25%. This openness was an asset in a globalising world. But now it has become a vulnerability. The paradox is that while internal barriers remained high, external barriers fell as globalisation accelerated. EU companies looked abroad to substitute for lack of domestic growth and imports became relatively more attractive.

Takeaways by Macro Roundup® AI

  1. The IMF estimates Europe's internal barriers are equivalent to tariffs of 45% for manufacturing and 110% for services, and trade across EU countries is less than half the level of trade across US states.
  2. Compliance costs from GDPR are estimated to have reduced profits for small European tech firms by up to 12%, with EU regulation falling on services, a sector making up around 70% of EU GDP.
  3. Eurozone trade as a share of GDP rose from 31% in 1999 to 55%, versus 34% to 37% in China and 23% to 25% in the US, an openness that was an asset in a globalising world but has become a vulnerability.

Related Articles:

  • The Future of European Competitiveness – A Competitiveness Strategy for Europe — A European Union competitiveness report attributes the EU's labour productivity growth gap with the US largely to weaker activity in information and communications technology and large-scale digital services; excluding main ICT sectors, EU productivity was broadly at par with the US from 2000-2019. It estimates Europe's investment share must rise about 5 percentage points of GDP.
  • 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.
  • How German Industry Can Survive the Second China Shock — The European Union has 30mm manufacturing jobs, and China has grown from a $4tn economy producing under 15% of global manufacturing output to an $18tn economy producing over a third, with well over 50% of global capacity in many sectors. European tariffs on Chinese electric vehicles limit import competition but do not offset lost export markets.

AI Summary. Eleven studies find declines in life satisfaction and happiness among young adults in the US, Australia, Canada, Ireland, New Zealand, and the UK. In these countries life satisfaction now rises with age across the lifespan, as young people's life satisfaction dropped sharply while that of people 45 and over stayed flat.

Jean Twenge and David Blanchflower National Bureau of Economic Research
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.@jean_twenge and David Blanchflower cite 11 studies confirming a decline in life satisfaction particularly among the unmarried young. “The U-shape in wellbeing by age that used to exist…is now gone, replaced by a crisis in wellbeing among the young.”

Is life satisfaction falling among young adults in English-speaking countries?

Core argument: Eleven studies show declining life satisfaction and happiness among young adults over the past decade or so in the U.S., Australia, Canada, Ireland, New Zealand, and the UK.

Eleven studies show declines in life satisfaction and happiness among young adults in the last decade or so. We found evidence for this in the U.S, and in Australia, Canada, Ireland. New Zealand and the UK. There is broad evidence across all of these English-speaking countries that happiness and life satisfaction since 2020 rise with age. There is an initial hump in the data in the early 20s before the life satisfaction declines to a low in midlife and then picks up. This is shown in Chart 1 using single year of age data. By 2022-2024 life satisfaction rises in age across the lifespan. Parts 2 and 3 of the table report data for the married and the nonmarried. The evidence of the initial hump is present for the married but not the non-married, where there is an obvious U-shape through 2015-2018. These phenomena have not been observed in any other country, which in general had lower marriage and divorce rates. [But] by 2022-2024 everything had changed, and both the married and unmarried show rising satisfaction in age. The life satisfaction of the young dropped sharply between 2016-2018 and 2022-2024. For those age 45 and over it remained basically flat.

Takeaways by Macro Roundup® AI

  1. Eleven studies show declining life satisfaction and happiness among young adults over the past decade or so in the U.S., Australia, Canada, Ireland, New Zealand, and the UK.
  2. Life satisfaction of the young dropped sharply between 2016–2018 and 2022–2024, while for those aged 45 and over it remained basically flat.
  3. Through 2015–2018 an initial hump in life satisfaction in the early 20s appeared among the married but not the non-married, who showed a U-shape; by 2022–2024 both groups show satisfaction rising with age.

Related Articles:

  • The Declining Mental Health of the Young in the UK — The authors find the incidence of mental ill-health in the UK has been rising, especially among young people and particularly in Scotland, with well-being of the young declining sharply from around 2013 and women most affected. Because the growth began in the 1990s, the authors argue smartphones cannot account for all of the increase.
  • 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%.
  • Gen Z Really Does Have a Work Ethic Problem — Long-running nationally representative surveys of U.S. 12th graders show the share saying they want to do their best at a job "even if this sometimes means working overtime" fell from 54% to 36%, a relative drop of 33% in two years, after work ethic measures had recovered among Gen Z in the 2010s.

AI Summary. US electricity demand is projected to grow about 2% annually over 2025-2027, an upward revision from an earlier 1% forecast. A study commissioned by the US Department of Energy found data centre electricity use rose from about 60 TWh in 2014 to 176 TWh in 2023, and could reach 325-580 TWh by 2028.

Eren Çam, Marc Casanovas and John Moloney International Energy Agency
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.@IEA expects US electricity demand growth of 2% annually from 2025-2027, up from a prior 1% forecast, largely driven by data centers. Currently, data centers consume 4% of US electricity and could reach between 6.7-12% of total demand by 2028.

How fast is US electricity demand growing as data centers expand?

Core argument: US electricity demand is forecast to grow about 2% annually over 2025–2027, an upward revision from the 1% growth projected for 2025–2026 in January 2024, putting 2026 demand roughly 100 TWh higher than previously forecast.

We expect US electricity demand to grow at an average annual rate of about 2% over the period 2025-2027. This is an upwards revision from our forecast in January 2024, which had projected 1% growth for the 2025-2026 period. With this revision, forecast US electricity demand in 2026 is now around 100 TWh higher than in our previous forecast a year ago. A recent study commissioned by the U.S. Department of Energy highlights the strong growth in electricity consumption by data centres, which rose from about 60 TWh in 2014 to 176 TWh in 2023, and constituted more than 4% of the country's total electricity use. Their scenarios indicate this consumption could rise by an additional 150 TWh to 400 TWh by 2028, reaching about 325 TWh to 580 TWh, and accounting for 6.7% to 12% of total US electricity demand. The growth trend is supported by the record pace of new data centre announcements. In the first half of 2024 alone, announced data centre projects were associated with nearly 24 GW of power capacity needs – triple the amount stated during the same period in 2023.

Takeaways by Macro Roundup® AI

  1. US electricity demand is forecast to grow about 2% annually over 2025–2027, an upward revision from the 1% growth projected for 2025–2026 in January 2024, putting 2026 demand roughly 100 TWh higher than previously forecast.
  2. US data centre electricity consumption rose from about 60 TWh in 2014 to 176 TWh in 2023, more than 4% of total US electricity use, according to a study commissioned by the U.S. Department of Energy.
  3. Data centre projects announced in the first half of 2024 were associated with nearly 24 GW of power capacity needs, triple the amount stated in the same period of 2023.

Related Articles:

  • Electricity 2024 — More than 8,000 data centers operate globally, with about 33% in the United States, 16% in Europe, and close to 10% in China. US data center electricity use is projected to rise from roughly 200 TWh in 2022, about 4% of US electricity demand, to almost 260 TWh, or 6% of total demand.
  • Grid Infrastructure Investments Drive Increase in Utility Spending Over Last Two Decades — Annual spending by major US utilities to produce and deliver electricity rose 12% over two decades to $320bn in inflation-adjusted terms, driven mainly by capital investment in infrastructure, which more than doubled. Capital spending on the distribution system that delivers power to end users increased 160%, or $31.4bn.
  • World Energy Outlook 2024 — U.S. electricity demand grew 4.4% from 2011 to 2023 but is projected to rise 25% by 2035 under current stated policies, an increase of nearly 1,000 terawatt-hours. Electric vehicles account for nearly 60% of that projected growth, followed by industry, while data centres tied to artificial intelligence contribute a modest share.

AI Summary. More than 354 companies reached $1bn valuations in a single year, but only six have since held initial public offerings, four went public via blank-check mergers, and 10 were acquired, several for less than $1bn. Fewer than 30% of that cohort has raised financing in the past three years, and nearly half of those did so at lower valuations.

Katie Roof Bloomberg
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.@Katie_Roof describes “the era of the zombie unicorn,” noting that of 354 VC-backed firms newly valued over $1B in 2021, only 10 went public via IPOs or SPACs. Many are now facing “down rounds” at lower valuations or worse—becoming “unicorpses.”

Are billion-dollar startups struggling to go public or raise new funding?

Core argument: Of the more than 354 companies that reached billion-dollar valuations in 2021, only six have since held IPOs, four went public via SPACs, and 10 were acquired, several for less than $1 billion, says Stanford's Ilya Strebulaev.

In 2021 more than 354 companies received billion-dollar valuations, thus achieving unicorn status. Only six of them have since held IPOs, says Ilya Strebulaev, a professor at Stanford Graduate School of Business. Four others have gone public through SPACs, and another 10 have been acquired, several for less than $1 billion. Fewer than 30% of the unicorns from 2021 have raised financing in the past three years, according to data provided by Carta Inc., a financial technology company working with startups. Of those, almost half have done so-called down rounds, where investors value their companies at lower levels than they’d received in the past. There are a record 1,200 venture-backed unicorns that have yet to go public or get acquired, according to CB Insights, a researcher that tracks the venture capital industry.

Takeaways by Macro Roundup® AI

  1. Of the more than 354 companies that reached billion-dollar valuations in 2021, only six have since held IPOs, four went public via SPACs, and 10 were acquired, several for less than $1 billion, says Stanford's Ilya Strebulaev.
  2. Fewer than 30% of 2021's unicorns have raised financing in the past three years, and almost half of those did down rounds at valuations below prior levels, according to Carta Inc. data.
  3. CB Insights counts a record 1,200 venture-backed unicorns that have yet to go public or be acquired.

Related Articles:

  • Monetary Policy and Innovation — The authors estimate that a 100bps monetary tightening reduces investment in intellectual property by about 1%, research and development spending at public firms by about 3%, venture capital investment by up to 25%, and patenting in important technologies by up to 9%.
  • AI Investments Are Booming, but Venture-Firm Profits Are at a Historic Low — U.S. venture firms returned $26bn worth of shares to their investors in a year, the lowest amount since 2011, according to data provider PitchBook, and invested $60bn more than they collected — the largest such deficit in 26 years of PitchBook data. Investment remains high while acquisitions and initial public offerings are few.
  • Data Update 6 for 2025: From Macro to Micro – The Hurdle Rate Question — Valuation errors stem mainly from mistaken forecasts of growth, profitability, or reinvestment rather than from the discount rate, and no great company achieved greatness by finessing its cost of capital. The author suggests valuing a mature US company using the 8.35% median cost of capital and focusing analysis on growth and profit prospects.

AI Summary. Startup fundraising split by stage on the Carta platform: seed-stage capital raised fell 12.5% and Series A fell 6.7% year over year, while Series B rose 17.3%, Series C rose 41.8%, and Series D rose 78.8%. Across all stages, startups raised $89bn, an 18.4% increase.

Ashley Neville and Kevin Dowd Carta
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.@cartainc finds venture valuations have undergone a reset in the last two years with the rate of “down rounds” running ~ 20% in the last two years up from ~ 10% between 2019 and mid-2022.

Is startup fundraising rising at later stages while early stages decline?

Core argument: Startups on Carta raised $89 billion across all stages in 2024, an 18.4% increase from 2023.

The venture fundraising landscape of 2024 was a tale of two markets. In the early-stage market, fundraising activity pulled back slightly from the year before, even as median valuations ticked up. Seed-stage startups on Carta raised 12.5% less capital in 2024 than they did in 2023. At Series A, capital raised decreased by 6.7%. In the middle- and late-stage markets, on the other hand, 2024 was a year of recovery. Capital invested at Series B rose by 17.3% last year. Series C startups raised 41.8% more capital than the year before, while Series D saw a 78.8% spike. Back in 2022 and 2023, these more-mature companies felt the sharpest pains from the post-pandemic slowdown in fundraising activity. In 2024, they experienced what could be the beginnings of a resurgence. And if we take the market as a whole, the impact of this resurgence is clear. Across all stages, startups on Carta combined to raise $89 billion in new funding in 2024, an 18.4% increase from 2023.

Takeaways by Macro Roundup® AI

  1. Startups on Carta raised $89 billion across all stages in 2024, an 18.4% increase from 2023.
  2. Middle- and late-stage fundraising on Carta recovered in 2024, with capital invested rising 17.3% at Series B, 41.8% at Series C, and 78.8% at Series D.
  3. Early-stage fundraising on Carta pulled back in 2024, with seed-stage capital raised down 12.5% and Series A down 6.7% from 2023, even as median valuations ticked up.

Related Articles:

  • State of Private Markets: Q3 2024 — More than 20% of new venture investments on the Carta platform were down rounds, in which startups raise capital at reduced valuations, one of the highest quarterly shares since at least 2019. Venture-backed valuations have undergone a reset after reaching all-time highs, and the average interval between priced rounds has lengthened.
  • Monetary Policy and Innovation — The authors estimate that a 100bps monetary tightening reduces investment in intellectual property by about 1%, research and development spending at public firms by about 3%, venture capital investment by up to 25%, and patenting in important technologies by up to 9%.
  • The Alchemists — NVIDIA's share of all US capital spending is projected to approach two 20th-century peaks by 2026, and large cloud providers would need $400–500bn in new revenue to earn their traditional 50% gross margin on roughly $250bn of annual data center spending. After the dot-com collapse, Corning's fiber optic revenues did not surpass 2000 levels until 2018 in nominal terms.

AI Summary. China's imports of manufactured goods have grown by an average of only $15bn a year over six years — flat after inflation — while its manufactured exports have grown by over $150bn a year, with export volume rising three times as fast as global trade. The article argues this leaves other countries unable to compete and dependent on Chinese-made goods.

Brad Setser New York Times
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.@Brad_Setser notes that China’s exports of manufactured goods have grown over $150B/year over the past six years, while its imports have grown only $15B/year, and argues “Mr. Xi has a one-way vision of trade.”

Is China's manufacturing trade a one-way street that leaves others dependent?

Core argument: China's manufactured exports grew by over $150 billion a year over the past six years, more than 10 times the $15 billion average annual rise in its imports of such goods, which is essentially flat after inflation.

Over the past six years, China’s imports of such goods increased by an average of only $15 billion a year, essentially no change at all when inflation is taken into account. Its manufactured exports, on the other hand, have grown more than 10 times as fast, by over $150 billion a year. When it comes to manufactured goods, trade with China is virtually a one-way street. All told, Chinese export volume is growing three times as fast as global trade. This means China’s success is directly coming at the expense of manufacturers in other countries, which increasingly cannot compete and face pressure to abandon sectors that China targets. With China’s real estate market still in the doldrums, the pattern shows no signs of changing. This points to a world economy in which China has no need for the industrial inputs of other countries while leaving those countries dependent on Chinese-made goods — and vulnerable to Beijing’s political and economic pressure.

Takeaways by Macro Roundup® AI

  1. China's manufactured exports grew by over $150 billion a year over the past six years, more than 10 times the $15 billion average annual rise in its imports of such goods, which is essentially flat after inflation.
  2. Chinese export volume is growing three times as fast as global trade, which the author argues comes at the expense of manufacturers elsewhere that cannot compete and face pressure to abandon sectors China targets.
  3. With China's real estate market still in the doldrums, the author sees the pattern continuing toward a world economy in which China does not need other countries' industrial inputs while those countries depend on Chinese-made goods and are vulnerable to Beijing's political and economic pressure.

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.
  • 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.
  • 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.