Edward Conard

Top Ten New York Times Bestselling Author

  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “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
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Friday, March 21, 2025

AI Summary. The Federal Reserve cut the monthly cap on Treasury securities allowed to roll off its balance sheet to $5bn from $25bn; because its purchases create interest-bearing bank reserves, slowing the runoff shortens the effective maturity of US public-sector debt. One argument holds this signals fragility in placing government debt amid worsening fiscal policy.

Chris Anstey Bloomberg
Date Posted:

.@LHSummers warns the Federal Reserve’s move to slow the shrinkage of its Treasury holdings indicates “limited absorption capacity in the markets for long-term bonds,” and may reflect preemptive efforts to avoid a debt crisis like the UK in 2022.

Does slowing the balance-sheet runoff signal fragility in placing government debt?

Core argument: The Federal Reserve cut its monthly cap on Treasury runoff to $5 billion from $25 billion, slowing quantitative tightening and shortening the maturity of collective US public-sector debt relative to what it would otherwise be.

The Fed on Wednesday slashed its cap for how much in Treasuries it lets roll off its balance sheet every month to $5 billion from $25 billion. Because the Fed creates bank reserves when it buys Treasuries — and those reserves pay interest at an overnight rate — slowing QT also has the effect of shortening the maturity of the collective debt owed by the US public sector compared with what it would otherwise be. “We’re finding it necessary, in order to place debt, to shorten up” the maturity structure of government obligations, Larry Summers said. “This is Fed policy to contain possible emerging Liz Truss risks — the kind of accident that took place in Britain,” Summers said. “And it’s a reflection of the fact that almost everything we’re hearing on fiscal policy is pointing towards things getting worse, not better.”

Takeaways by Macro Roundup® AI

  1. The Federal Reserve cut its monthly cap on Treasury runoff to $5 billion from $25 billion, slowing quantitative tightening and shortening the maturity of collective US public-sector debt relative to what it would otherwise be.
  2. Larry Summers called the slower runoff pace an alarming signal on debt fragility, saying that placing debt is making it necessary to shorten the maturity structure of government obligations.
  3. Summers described the move as Fed policy to contain possible emerging Liz Truss risks of the kind that occurred in Britain, adding that almost everything heard on fiscal policy points toward things getting worse, not better.

Related Articles:

  • Global Debt Report 2025 — About 60% of fixed-rate government debt in advanced economies maturing by 2027 — roughly $9tn — was issued before the recent interest-rate tightening, with weighted average yields below 2% versus projected 10-year rates near 3.6%, implying refinancing at nearly double the original cost. France, Spain, the UK, and the US face heightened vulnerability, with maturing debt exceeding 15% of GDP.
  • 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.
  • 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.

AI Summary. The US personal saving rate has fallen from levels usually above 10% in 1960–80 to below 5% on average post-pandemic, and with persistent federal budget deficits, total US saving is exceptionally low internationally while investment has not trended down — yielding a sizable, stubborn current account deficit.

Maurice Obstfeld Peterson Institute For International Economics
Date Posted:

Noting the US gross saving rate of 22% is one of the lowest among advanced countries, Maurice Obstfeld rejects @michaelxpettis’ argument that foreign savings “force” chronic US deficits. Foreign assets in the US are ~ equal to the US % of global GDP.

Does low US saving explain the persistent trade deficit?

Core argument: The US personal saving rate has fallen from levels usually above 10% during 1960–80 to an average below 5% in post-pandemic data, with persistent federal budget deficits another cause of the low national saving rate.

The US personal saving rate has fallen from levels usually above 10% during 1960–80 to an average below 5% in post-pandemic data. Persistent federal budget deficits are another cause of the low national saving rate. Total saving in the United States is exceptionally low by international standards. Because US investment has not trended downward, a sizable and stubborn current account deficit has emerged [reflecting the incontrovertible identity NX=S-I]. If it is accurate that countries have a strong preference for claims on America, then we would expect other countries to invest most of their external assets in the United States. This is nowhere close to true. Figure 3 shows the share of the rest of the world’s foreign assets invested in the United States. That share hovered around 19% for the first part of this century before rising to nearly 25% starting around 2014, as the dollar appreciated (raising the relative value of claims on the United States) and the US stock market outperformed. Broadly speaking, these shares track the US share in global GDP, which in 2023 was 25.8%.

Takeaways by Macro Roundup® AI

  1. The US personal saving rate has fallen from levels usually above 10% during 1960–80 to an average below 5% in post-pandemic data, with persistent federal budget deficits another cause of the low national saving rate.
  2. Because US investment has not trended downward while total US saving is exceptionally low by international standards, a sizable and stubborn current account deficit has emerged, reflecting the identity that net exports equal saving minus investment.
  3. The share of the rest of the world's foreign assets invested in the United States hovered around 19% early this century before rising to nearly 25% around 2014 as the dollar appreciated and US stocks outperformed, broadly tracking the 25.8% US share of global GDP in 2023.

Related Articles:

  • Pettis on Obstfeld — Pettis argues that saving rates in China, Japan, South Korea, Germany, Russia and Saudi Arabia are driven by their own domestic policies and conditions, and in turn drive the US saving rate. He notes the US has an open capital account, deep financial markets, and limited intervention in credit allocation.
  • Trade Intervention for Freer Trade — The authors argue the United States should counter surplus countries' trade policies either by restricting their goods exports through tariffs or by restricting their capital inflows through taxes, volume limits, reserve requirements, transaction approvals, or investor eligibility rules. They contend capital controls are a more targeted alternative to uniform tariffs, which impose equal costs on more and less mercantilist countries.
  • 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.

AI Summary. China's commerce ministry has withheld the approval that domestic automakers need to manufacture abroad, holding up BYD's planned Mexican car plant, which the company said would create 10,000 jobs and build 150,000 vehicles a year. Officials are concerned that Mexico's proximity to the US could give Mexico, and possibly the US, access to BYD's advanced technology and knowhow.

Gloria Li, Cheng Leng, Thomas Graham and Kana Inagaki Financial Times
Date Posted:

Beijing is delaying approval for BYD’s announced Mexico facility due to worries about potential technology transfer to the US. BYD sold 40,000 cars in Mexico in 2024 and aims to “double sales volume and open 30 new dealerships in the country in 2025.”

Is China blocking overseas auto plants to keep technology from the US?

Core argument: BYD's planned Mexico plant, announced in 2023 with projections of 10,000 jobs and 150,000 vehicles a year, has not received the approval from China's commerce ministry that domestic automakers need to manufacture overseas, according to two people familiar with the matter.

BYD first announced plans for a car plant in Mexico in 2023, along with intentions to make cars in Brazil, Hungary and Indonesia. It said the Mexican plant would create 10,000 jobs and produce 150,000 vehicles a year. But domestic automakers require approval from China’s commerce ministry to manufacture overseas and it has yet to give approval, according to two people familiar with the matter. Authorities feared Mexico would gain unrestricted access to BYD’s advanced technology and knowhow, they said, even possibly allowing US access to it. “The commerce ministry’s biggest concern is Mexico’s proximity to the US,” said one of the people.

Takeaways by Macro Roundup® AI

  1. BYD's planned Mexico plant, announced in 2023 with projections of 10,000 jobs and 150,000 vehicles a year, has not received the approval from China's commerce ministry that domestic automakers need to manufacture overseas, according to two people familiar with the matter.
  2. Chinese authorities feared Mexico would gain unrestricted access to BYD's advanced technology and knowhow, possibly allowing US access to it, with one person familiar with the matter saying the commerce ministry's biggest concern is Mexico's proximity to the US.
  3. BYD announced plans in 2023 to build cars in Mexico, Brazil, Hungary and Indonesia.

Related Articles:

  • 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.
  • Analysis: Chinese Cars Pour In To Mexico, Rattling The USMCA — Mexico's 2020 decree cutting car import tariffs from 20% to 0% has been followed by a surge of Chinese vehicles, with China shipping close to 500,000 cars to Mexico this year and displacing the United States as Mexico's top supplier. One in three new cars sold in Mexico this year will be built in China, up from 4% in 2020.
  • Cheap Chinese Cars Are Taking Over Roads From Brazil to South Africa — Inexpensive cars from Chinese makers such as BYD, Chery, Great Wall and SAIC are gaining share in emerging markets, reaching nearly 10% of sales in South Africa, 8% in Turkey and close to a third in Chile. Chinese automakers' market share outside China is projected to rise to 13% by 2030 from 3%.

AI Summary. Boom Belt" states combine high birth rates with low death rates, led by Utah at 13.2 births and 6.3 deaths per 1,000 residents for a natural increase of 6.9 per 1,000. Texas records about 12.7 births versus 9.1 deaths per 1,000, with roughly half its population growth from natural increase.

Aziz Sunderji HomeEconomics
Date Posted:

Looking at natural population growth @AzizSunderji finds that all five metros with the highest natural population growth, births net deaths, in the entire country are in Texas and Utah.

Which states combine high birth rates with low death rates?

Core argument: Utah leads the nation with both the highest birth rate (13.2 per 1,000) and the lowest death rate (6.3 per 1,000), yielding a natural population increase of 6.9 per 1,000 residents.

“Boom Belts”—our name for the states that dominate the top right quadrant of the schematic shown above—are where birth rates are high and death rates are low. Propelled by a culture that encourages early marriage and big families, Utah leads the nation with both the highest birth rate (13.2 per 1,000) and lowest death rate (6.3 per 1,000), creating an impressive natural population increase of 6.9 per 1,000 residents. Meanwhile, Texas tallies about 12.7 births per 1,000 people versus only 9.1 deaths, thanks to an influx of young families and a relatively small senior share. The Houston metropolitan area, for example, maintains a birth rate (12.7 per 1,000) that's more than double its death rate (6.2 per 1,000). Even as a strong economy and affordable housing attract migrants from across the country and abroad, fueling population growth, about half of Texas’s growth still comes from natural increase.

Takeaways by Macro Roundup® AI

  1. Utah leads the nation with both the highest birth rate (13.2 per 1,000) and the lowest death rate (6.3 per 1,000), yielding a natural population increase of 6.9 per 1,000 residents.
  2. Texas records about 12.7 births per 1,000 people against 9.1 deaths, attributed to an influx of young families and a relatively small senior share.
  3. About half of Texas's population growth comes from natural increase, while a strong economy and affordable housing attract migrants from across the country and abroad.

Related Articles:

  • Where is Standard of Living the Highest? Local Prices and the Geography of Consumption — The authors estimate that geographical differences in cost of living are especially large for low-income US households, and that expensive cities offer college graduates a standard of living similar to affordable cities while offering less-educated households a lower one. A high school dropout household moving from the most affordable to the most expensive commuting zone would see consumption fall 18.5%.
  • Homes For Young Families: A Pro-Family Housing Agenda — The authors' Young Family Median Multiple, comparing median incomes of 20-34 year-olds to local median home values, finds that virtually every US metro area met a basic affordability standard in 1969 versus just 21% in 2018-2022. New housing completions trailed new household formations by 3.8m units.
  • Young Families Have Continued Leaving Big Cities Post-Pandemic — Large urban counties have continued to lose population of young children even as their overall population growth resumed, driven by immigration. Birth rates in large urban counties have declined twice as fast as in rural counties over the past decade, and the number of children under five fell in 58% of all US counties.

AI Summary. The six largest U.S. pharmaceutical companies by revenue reported a combined U.S. corporate income tax provision of zero or less for their profits, with only Eli Lilly setting aside a significant sum of roughly $1bn. The author attributes this to holding intellectual property offshore, producing patent-protected drugs offshore, and booking profits on U.S. sales offshore.

Brad Setser Council on Foreign Relations
Date Posted:

6 of the top 7 US pharma firms expect negative US federal tax bills in 2024, as several report tax losses. @Brad_Setser asserts this is “a direct function of keeping intellectual property offshore and booking the profit on U.S. sales offshore.”

Why do the largest U.S. drugmakers owe no U.S. corporate income tax?

Core argument: The top six U.S. pharmaceutical companies by revenue set aside zero — less than zero, as several report tax losses — out of their 2024 profit for U.S. corporate income tax, with only Eli Lilly provisioning roughly $1 billion.

Most of the major U.S. pharmaceutical companies (AbbVie, Amgen, Bristol Myers Squibb, Eli Lilly, Johnson and Johnson, Merck, and Pfizer) have reported the amount they have set aside out of their 2024 profit to pay their U.S. corporate income tax bill. That number—when the provisions of the top six U.S. companies by revenue is summed—is zero. Less than zero, actually—as several companies report tax losses. Only Eli Lilly actually set aside a significant sum (roughly $1 billion) for its tax payments to the U.S. Treasury. It is a direct function of keeping intellectual property offshore, investing to produce valuable patent protected drugs offshore, and booking the profit on U.S. sales offshore. In other words, it’s the predictable result of the tax and production structures that most large U.S. pharmaceutical companies have adopted following the 2017 Tax Cut and Jobs Act. The lack of tax payments in the U.S. should not be a surprise. The typical large U.S. pharmaceutical company reports losing money on their U.S. operations. Lots of money apparently.

Takeaways by Macro Roundup® AI

  1. The top six U.S. pharmaceutical companies by revenue set aside zero — less than zero, as several report tax losses — out of their 2024 profit for U.S. corporate income tax, with only Eli Lilly provisioning roughly $1 billion.
  2. The absence of U.S. tax payments follows from keeping intellectual property offshore, investing to produce patent-protected drugs offshore, and booking the profit on U.S. sales offshore.
  3. The typical large U.S. pharmaceutical company reports losing money on its U.S. operations, a predictable result of the tax and production structures adopted after the 2017 Tax Cuts and Jobs Act.

Related Articles:

  • Big Pharma’s Big Tax Dodge — Six major US pharmaceutical firms reported $215bn in US sales versus $170bn abroad, yet attributed $90bn of their combined $100bn in profits to foreign operations and only $10bn to the US. That implies a 5% profit margin in the US and over 50% abroad.

AI Summary. US drone maker Skydio has produced 45,000 drones in total, while Chinese rival DJI likely makes that many every few weeks — a scale gap that matters because production costs fall predictably with cumulative output. The Pentagon's Defense Innovation Unit says that at attrition rates observed in Ukraine, the US military would exhaust its entire drone supply in five days.

Drake Bennett and Ashlee Vance Bloomberg
Date Posted:

The leading US drone manufacturer Skydio has built a cumulative 45,000 drones, a quantity that Chinese drone leader DJI builds every few weeks. The production gap gives DJI a major edge under Wright’s Law: cost declines with cumulative production.

Can US drone makers close the production scale gap with China?

Core argument: Skydio has produced 45,000 drones in total, while DJI, which does not release numbers, in all likelihood makes that many every few weeks, leaving Skydio further behind on Wright's law cost curve.

In the 1920s and ’30s, an aeronautical engineer named Theodore Wright noticed that, as factories made more planes, their production costs steadily declined by a calculable percentage. The dynamic is now referred to as Wright’s law. A challenge for Skydio is that its biggest competitor is a lot further along Wright’s curve. Skydio has produced a total of 45,000 drones; DJI doesn’t release numbers, but in all likelihood it makes that many every few weeks. The American company is doing whatever it can to close the gap: Engineers in its San Mateo offices use a CT scanner to X-ray DJI drones to see how they’re made. According to Trent Emeneker, a program manager for the Pentagon’s Defense Innovation Unit, at the attrition rate currently observed in Ukraine, the US military would exhaust its entire drone supply in five days. Military strategists who focus on drones talk about “attritable mass”: In the future, they argue, war will be waged not by nine-figure next-generation aircraft but by ones that are cheap enough to be disposable.

Takeaways by Macro Roundup® AI

  1. Skydio has produced 45,000 drones in total, while DJI, which does not release numbers, in all likelihood makes that many every few weeks, leaving Skydio further behind on Wright's law cost curve.
  2. At the drone attrition rate observed in Ukraine, the US military would exhaust its entire drone supply in five days, according to Trent Emeneker, a program manager for the Pentagon's Defense Innovation Unit.
  3. Engineers at Skydio's San Mateo offices use a CT scanner to X-ray DJI drones to see how they are made, part of the company's effort to close the gap.

Related Articles:

  • Chinese Sanctions Hit US Drone Maker Supplying Ukraine — China imposed sanctions on Skydio, the largest US drone maker and a supplier to Ukraine's military, barring Chinese firms from supplying it with critical components including batteries from its sole provider. The company is seeking alternative suppliers and has asked the US government for help.
  • 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.
  • US Efforts to Contain Xi’s Push for Tech Supremacy Are Faltering — Research by Bloomberg Economics and Bloomberg Intelligence finds that of 13 key technologies tracked, China has reached global leadership in five and is catching up in seven others, with clear leads in electric vehicles, automotive software and lithium battery technology. China still struggles to develop manufacturing processes for advanced semiconductors, the main focus of US export controls.

Monday, March 24, 2025

AI Summary. The authors estimate that Treasury yields rise on days when official cost estimates reveal deficit-increasing legislation, with a one-time 1 percentage point increase in the deficit-to-GDP ratio raising the 10-year yield by 0.75 basis points, or 6.75 basis points for a persistent deficit shock. The response reflects higher expected inflation and term premia alongside lower convenience yields.

Roberto Gomez Cram, Howard Kung, and Hanno Lustig National Bureau of Economic Research
Date Posted:
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Market reaction to CBO scoring of legislative proposals on “large negative proposal days” implies the 10-year rises by 0.75 bps for a one-time 1 ppt increase in deficits/GDP, cumulating to 6.75 bps for a persistent deficit shock. @HannoLustig

Do Treasury yields rise when new legislation raises projected deficits?

Core argument: High-frequency estimates imply that a one-time 1 percentage point increase in deficits/GDP raises the 10-year nominal Treasury yield by 0.75 bps, equivalent to 6.75 bps for a persistent deficit shock.

Treasury markets respond to the news in CBO cost estimates of individual bills about the future funding requirements from pending legislation. Treasury yields increase on days with major deficit increasing bills, driven by an increase in expected inflation and nominal term premia, along with a decrease in convenience yields. Our high frequency estimates imply that a 1 percentage point one-time increase in deficits/GDP increases the 10-year nominal yield by 0.75 bps. This effect is equivalent to a 6.75 bps increase in yields for a persistent shock to deficits. The Treasury response is related to an increase in expected inflation and nominal term premia, along with a decrease in convenience yields. The effects are three times larger for cost revisions for emergency spending proposals, which are unfunded and have a high ex-ante probability of passing, allowing us to better isolate the cash flow news component. The Treasury value responses are magnified by a factor of three for cost revisions relating to emergency spending proposals.

Takeaways by Macro Roundup® AI

  1. High-frequency estimates imply that a one-time 1 percentage point increase in deficits/GDP raises the 10-year nominal Treasury yield by 0.75 bps, equivalent to 6.75 bps for a persistent deficit shock.
  2. Treasury yields rise on days with major deficit-increasing bills, alongside higher expected inflation and nominal term premia and lower convenience yields.
  3. Treasury value responses are three times larger for cost revisions tied to emergency spending proposals, which are unfunded and carry a high ex-ante probability of passing, better isolating the cash flow news component.

Related Articles:

  • Can U.S. Treasury Markets Add and Subtract? — Congressional Budget Office cost estimates of spending and tax legislation with large projected deficits lowered the valuation of outstanding U.S. Treasury securities by more than 20% over the period studied, with effects concentrated at longer maturities. The authors estimate 57 cents of every dollar of fiscal expansion is unbacked and passed through to Treasury valuations.
  • Summers Says Slowing Balance-Sheet Runoff Pace Is ‘Alarming’ Signal on Debt Fragility — The Federal Reserve cut the monthly cap on Treasury securities allowed to roll off its balance sheet to $5bn from $25bn; because its purchases create interest-bearing bank reserves, slowing the runoff shortens the effective maturity of US public-sector debt. One argument holds this signals fragility in placing government debt amid worsening fiscal policy.
  • Global Debt Report 2025 — About 60% of fixed-rate government debt in advanced economies maturing by 2027 — roughly $9tn — was issued before the recent interest-rate tightening, with weighted average yields below 2% versus projected 10-year rates near 3.6%, implying refinancing at nearly double the original cost. France, Spain, the UK, and the US face heightened vulnerability, with maturing debt exceeding 15% of GDP.

AI Summary. The Congressional Budget Office estimates that in a scenario where the 2017 tax act's provisions are extended and the average interest rate on federal debt gradually rises, macroeconomic feedback would push that rate to 5.4% in the last year debt held by the public stays below 250% of GDP — 1.7 percentage points above its extended baseline.

Phillip Swagel Congressional Budget Office
Date Posted:

CBO finds that an unfunded permanent expansion of the TCJA would raise debt to 113% of GDP by 2029. Assuming an average interest rate on federal debt of 3.5% in 2025, rising to 3.6% by 2029, the deficit would be 7% of GDP in 2029, up from 6.4% in 2024.

How much would extending tax cuts raise federal borrowing rates?

Core argument: CBO estimates that under a scenario extending the 2017 tax act with higher borrowing costs, the average interest rate on federal debt reaches 5.4% in 2052, 1.7 percentage points above the extended baseline once macroeconomic feedback effects are included.

CBO [analyzed] the effects of a scenario in which provisions of the 2017 tax act were extended and the average interest rate on federal debt increased until it was 1 percentage point higher than in the extended baseline—before accounting for macroeconomic feedback effects that would further increase interest rates. Accounting for those macroeconomic effects, CBO estimates that the rate in 2052 (the last year federal debt held by the public is below 250% of GDP) would be 5.4%, 1.7 percentage points higher than in the extended baseline. To construct that estimate, CBO modeled a gradual increase in the average interest rate on federal debt, raising the rate in the baseline projections by 5 basis points in 2025 and by another 5 basis points in each year thereafter until it was 1 percentage point higher than in the extended baseline (in 2044).

Takeaways by Macro Roundup® AI

  1. CBO estimates that under a scenario extending the 2017 tax act with higher borrowing costs, the average interest rate on federal debt reaches 5.4% in 2052, 1.7 percentage points above the extended baseline once macroeconomic feedback effects are included.
  2. CBO identifies 2052 as the last year federal debt held by the public remains below 250% of GDP in the scenario combining extension of the 2017 tax act with higher interest rates.
  3. To construct the scenario, CBO raised the average interest rate on federal debt by 5 basis points in 2025 and by another 5 basis points each year thereafter until it stood 1 percentage point above the extended baseline in 2044.

Related Articles:

  • Global Debt Report 2025 — About 60% of fixed-rate government debt in advanced economies maturing by 2027 — roughly $9tn — was issued before the recent interest-rate tightening, with weighted average yields below 2% versus projected 10-year rates near 3.6%, implying refinancing at nearly double the original cost. France, Spain, the UK, and the US face heightened vulnerability, with maturing debt exceeding 15% of GDP.
  • Summers Says Slowing Balance-Sheet Runoff Pace Is ‘Alarming’ Signal on Debt Fragility — The Federal Reserve cut the monthly cap on Treasury securities allowed to roll off its balance sheet to $5bn from $25bn; because its purchases create interest-bearing bank reserves, slowing the runoff shortens the effective maturity of US public-sector debt. One argument holds this signals fragility in placing government debt amid worsening fiscal policy.
  • The Inflationary Risks of Rising Federal Deficits and Debt — Simulations of the Federal Reserve's main macroeconomic model estimate that debt-financed deficits raise core prices about 0.2 percentage points over five years absent a central-bank response. With the central bank reacting, the cost shifts to interest rates: short rates roughly 0.25% higher, mortgage rates 23 basis points higher, and real household wealth 1.2% lower.

AI Summary. Chief rates strategists at Barclays, Royal Bank of Canada and Societe Generale have lowered their year-end forecasts for 10-year US Treasury yields, citing the Treasury's campaign to push yields down. They point not only to public statements but to available tools such as limiting 10-year debt auction sizes, looser bank rules to boost bond demand, and deficit cuts.

Ye Xie and Liz Capo McCormick Bloomberg
Date Posted:

The US Treasury might reduce the size of 10-year auctions to boost demand for 10-year Treasuries as part of Treasury Secretary Besset’s yield control strategy.

Can the Treasury push down 10-year yields?

Core argument: Chief rates strategists at Barclays, Royal Bank of Canada and Societe Generale have cut their year-end 10-year yield forecasts, citing in part Bessent's campaign to drive those yields lower.

Chief rates strategists at Barclays, Royal Bank of Canada and Societe Generale have cut their year-end forecasts for 10-year yields in part, they said, because of Bessent’s campaign to drive them lower. It’s not just the jawboning, they added, but the fact that Bessent can follow it up with concrete action like limiting the size of 10-year debt auctions or advocating for looser bank regulations to boost bond demand or backing Elon Musk’s frantic campaign to cut the budget deficit. “The administration has almost kind of capped 10-year yields,” Blake Gwinn, head of US rates strategy at RBC Capital Markets said. “They’re kind of implicitly saying, if 10-year start to move higher or the economy starts to stumble and the Fed’s not playing ball, we’re just going to go out and slash 10-year issues.”

Takeaways by Macro Roundup® AI

  1. Chief rates strategists at Barclays, Royal Bank of Canada and Societe Generale have cut their year-end 10-year yield forecasts, citing in part Bessent's campaign to drive those yields lower.
  2. The strategists said Bessent's jawboning carries weight because he can follow it with concrete action, including limiting 10-year debt auction sizes, advocating looser bank regulations to boost bond demand, or backing Elon Musk's campaign to cut the budget deficit.
  3. Blake Gwinn, head of US rates strategy at RBC Capital Markets, said the administration has "almost kind of capped" 10-year yields, implicitly signaling it will slash 10-year issuance if yields move higher or the economy stumbles.

Related Articles:

  • In Search of Safe Havens: The Trust Deficit and Risk-free Investments! — Plotting US Treasury bond rates against a crude fundamental risk-free rate—actual inflation plus real GDP growth—undercuts the argument that central banks set interest rates. Central banks can nudge rates at the margin but cannot override the fundamentals of inflation and real growth.
  • 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.
  • Global Debt Report 2025 — About 60% of fixed-rate government debt in advanced economies maturing by 2027 — roughly $9tn — was issued before the recent interest-rate tightening, with weighted average yields below 2% versus projected 10-year rates near 3.6%, implying refinancing at nearly double the original cost. France, Spain, the UK, and the US face heightened vulnerability, with maturing debt exceeding 15% of GDP.

AI Summary. Global trade imbalances consist of one very large surplus and one very large deficit: China's goods surplus exceeds $1tn a year, while the U.S. non-petroleum deficit drives the Asian surplus. The author argues a Chinese surplus this large can be sustained only alongside a large U.S. deficit.

Brad Setser Council on Foreign Relations
Date Posted:
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.@Brad_Setser argues “the broad increase in U.S. imports actually precedes the rush to front-run tariffs. A global economy with this large a Chinese surplus can be sustained only with a large U.S. deficit.”

Does China's trillion-dollar surplus depend on a large U.S. deficit?

Core argument: China's trade surplus now exceeds $1 trillion a year, within a global economy that contains just one really big surplus and one really big deficit.

[The] pattern of trade imbalances implies a deeper and more persistent interdependence: a global economy with this large a Chinese surplus can be sustained only with a large U.S. deficit. At a global level, though, there is just one really big surplus and one really big deficit. The U.S. non-petrol deficit still drives the Asian surplus which, in fact, largely remains a Chinese surplus. The most salient feature about China is that its surplus now exceeds $1 trillion a year. Since the broader Asian surplus (apart from Japan, which generates its current account surplus through the returns on its overseas investment) remains, Asia collectively must run a massive surplus with the rest of the world.

Takeaways by Macro Roundup® AI

  1. China's trade surplus now exceeds $1 trillion a year, within a global economy that contains just one really big surplus and one really big deficit.
  2. The U.S. non-petroleum deficit drives the Asian surplus, which largely remains a Chinese surplus, implying that a Chinese surplus this large can be sustained only alongside a large U.S. deficit.
  3. Asia collectively runs a massive surplus with the rest of the world, with Japan generating its current account surplus through the returns on its overseas investment.

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  • Mar-a-Lago Accord, Schmar-a-Lago Accord — Sustainably weakening the dollar would require the Federal Reserve to cut interest rates while foreign central banks raise theirs, which is unlikely given US inflation above the Federal Reserve's 2% target and weak foreign economies. Tariff threats and security-umbrella pressure might sway Japan and Europe, but China would be less willing to comply.
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AI Summary. The US Trade Representative has proposed port-call fees on Chinese-built and Chinese-operated vessels, reaching up to $3.5m per call under a formula based on a fleet's share of Chinese-built ships and new orders. The proposal also requires a share of US exports to move on US-flagged, US-built, US-crewed ships.

Laura Curtis, Weilun Soon, and James Attwood Bloomberg
Date Posted:

A new rule proposed by USTR would put levies of as much as $3.5mm per port call on Chinese-built ships that dock in the US to incentivize domestic shipbuilding. The fees could generate between $40-52B/year according to Clarksons Research Services.

Would port fees on Chinese-built ships disrupt US shipping and exports?

Core argument: The USTR proposal would charge up to $3.5 million per port call for Chinese-built vessels operated by a Chinese firm that also has a ship on order from a Chinese manufacturer.

The imposition of levies and additional export requirements are designed “to create leverage to obtain the elimination of China’s targeting of these sectors for dominance,” according to the initial proposals issued by the USTR [US Trade Representative.] Firms would be penalized using a formula based on their fleet’s existing share of Chinese-built ships, as well as others on order. Some vessels could attract fees of up to $3.5 million per port call if they are Chinese-built with a Chinese operator which also has a ship on order from a Chinese manufacturer. The proposal also requires a share of US products — including agricultural, chemical, energy and consumer goods — to move on US-flagged, crewed, and built ships in coming years.

Takeaways by Macro Roundup® AI

  1. The USTR proposal would charge up to $3.5 million per port call for Chinese-built vessels operated by a Chinese firm that also has a ship on order from a Chinese manufacturer.
  2. Penalties under the USTR proposals would be calculated by a formula based on a shipping firm's share of Chinese-built vessels in its existing fleet plus those on order.
  3. The USTR proposal would require a share of US products, including agricultural, chemical, energy and consumer goods, to move on US-flagged, US-crewed and US-built ships in coming years.

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  • Ship Wars — Shipyards tied to China's defense industrial base account for 15% of the country's active shipyards but 40% of commercial output by tonnage, with over 75% of their production built for firms outside China and Hong Kong. The authors argue these commercial revenues offset fixed costs and effectively subsidize China's naval expansion.
  • China’s Shipyards Are Ready for a Protracted War. America’s Aren’t — China produced more than half of the world's commercial shipbuilding output, while Europe accounts for about 5% and the US next to nothing, with most of the remainder built in South Korea and Japan. Analysts argue that in a protracted conflict China's wartime-scale yards could quickly accelerate production, replace lost ships, and repair damaged ones.
  • Fear That China Rules the Waves Jolts U.S. to Pursue Maritime Revival — Bipartisan legislation proposed in the US Congress, the Shipbuilding and Harbor Infrastructure for Prosperity and Security for America Act, would be the first major maritime law since 1936, aiming to revitalize shipbuilding and shipping over more than a decade while rebuilding the merchant marine. It calls for resources and White House-level involvement comparable to policies on energy, semiconductors, and aviation.

AI Summary. China's low household consumption share of GDP is not an oversight but is integral to its manufacturing competitiveness, so raising one requires lowering the other. Japan's experience shows consumption share fell for five years after it pledged to raise it, then took 17 years to rise 10 percentage points as manufacturing's share shrank.

Carol Yang South China Morning Post
Date Posted:
Is Database:
Database

.@michaelxpettis argues that China’s low consumption isn’t a policy failure—it’s the flip side of its manufacturing edge. When Japan tried to raise the consumption share of GDP in the 1980s, it took 17 years and cost global manufacturing market share.

Does raising household consumption require giving up manufacturing competitiveness?

Core argument: Michael Pettis argues that China's low consumption share of GDP is not an accident but fundamental to its manufacturing competitiveness, so raising the consumption share requires changing that competitiveness.

The key point is that a low consumption share of GDP is not an accident, or an oversight. It is fundamental to China’s manufacturing competitiveness. To change one means changing the other. That is why raising the consumption share is so challenging. Japan faced the same problem in the 1980s. It proposed in 1986, with the Maekawa Commission report, to solve the problem by raising the household share of Japanese GDP. But for the next five years the consumption share of Japan’s GDP declined, after which it took 17 years to raise the consumption share of GDP by 10 percentage points. Of course, it is not a coincidence that during this time, the manufacturing share of Japan’s GDP declined from 27% to around 20%, even as Japan’s share of global GDP declined from 17% to 7%. The point is that weak consumption and a globally competitive manufacturing sector are often different sides of the same coin.

Takeaways by Macro Roundup® AI

  1. Michael Pettis argues that China's low consumption share of GDP is not an accident but fundamental to its manufacturing competitiveness, so raising the consumption share requires changing that competitiveness.
  2. Japan's 1986 Maekawa Commission report proposed raising the household share of GDP, yet Japan's consumption share declined for the next five years and then took 17 years to rise by 10 percentage points.
  3. Japan's manufacturing share of GDP fell from 27% to around 20% while its share of global GDP fell from 17% to 7%, which Pettis presents as no coincidence.

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AI Summary. An analysis of census data by the Aspen Economic Strategy Group finds 51.4% of US women ages 18 to 40 were single—neither married nor cohabitating—up from 41.8% in 2000. Research estimates marriage rates by age 45 for women without a college degree fell from 79% to 52% across those born between 1930 and 1980.

Rachel Wolfe Wall Street Journal
Date Posted:
Is Database:
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51.4% of US women aged 18-40 were single in 2023 up from 41.8% in 2000 according to the Aspen Economic Strategy Group. Ben Goldman notes “There simply aren’t enough [men] with steady jobs and earnings for non-college women to date.”

Are more American women staying single than in past decades?

Core argument: The share of U.S. women ages 18–40 who are single, neither married nor cohabitating, reached 51.4% in 2023, up from 41.8% in 2000, according to an Aspen Economic Strategy Group analysis of census data.

The share of women ages 18 to 40 who are single—that is, neither married nor cohabitating with a partner—was 51.4% in 2023, according to an analysis of census data by the Aspen Economic Strategy Group, up from 41.8% in 2000. Over half of single women said they believed they were happier than their married counterparts in a 2024 AEI survey of 5,837 adults. Just over a third of surveyed single men said the same. A 2022 Pew survey of single adults showed only 34% of single women were looking for romance, compared with 54% of single men, down from 38% and 61% in 2019. Men were also more likely than women to say they were worried that nobody would want to date them. Men’s economic struggles seem to be having the biggest effect on women without a college degree, whose marriage rates by age 45 have plummeted from 79% to 52% for those born between 1930 and 1980, according to research by Cornell University economist Benjamin Goldman. “Young men without a degree are struggling so much as a group that there simply aren’t enough with steady jobs and earnings for non-college women to date,” said Goldman.

Takeaways by Macro Roundup® AI

  1. The share of U.S. women ages 18–40 who are single, neither married nor cohabitating, reached 51.4% in 2023, up from 41.8% in 2000, according to an Aspen Economic Strategy Group analysis of census data.
  2. Research by Cornell University economist Benjamin Goldman finds marriage rates by age 45 among women without a college degree fell from 79% to 52% between those born in 1930 and 1980, which he attributes to too few non-college men with steady jobs and earnings.
  3. A 2022 Pew survey of single adults found 34% of single women were looking for romance versus 54% of single men, down from 38% and 61% in 2019.

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