Edward Conard

Top Ten New York Times Bestselling Author

  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…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 must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Thursday, March 27, 2025

AI Summary. Taxing capital inflows would weaken the dollar but could raise domestic interest rates and depress investment, harming long-term growth, while an interest rate cut absent recession would be inflationary and erode any real depreciation needed to durably improve the trade balance. Fiscal restraint could weaken the dollar and reduce the trade deficit.

Maurice Obstfeld Brookings Papers On Economic Activity
Date Posted:
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Obstfeld @PIIE argues that current account deficits have not been forcibly “imposed” on the US from abroad since 2002. Rejecting Pettis’ tax on capital flows and a Fed-induced contraction, he argues for fiscal adjustment to increase national savings.

Which policy can reduce the trade deficit without harming growth?

Core argument: A tax on capital inflows, as suggested by Pettis, would weaken the dollar, tax imports and subsidize exports, and push domestic interest rates above foreign rates, encouraging saving while reducing investment.

Different policy directions could, in principle, deliver palpable effects on the trade balance and on manufacturing. One is to tax capital inflows, as suggested by Pettis. A capital inflow tax would weaken the dollar, taxing imports and subsidizing exports, and it would raise the domestic interest rate above foreign rates, encouraging saving while reducing investment. Along with concomitant effects on the liquidity of U.S. financial markets, the macro effects on saving and investment could be harmful to long-term growth, as well as contractionary in the short run. [Another] route would be a Fed cut in interest rates. Unless the U.S. economy moves into recession, a substantial interest rate cut now would be inflationary, not only undesirable in itself. It would also erode the extent to which the dollar’s nominal depreciation was a real depreciation. And without real depreciation, there would be no durable boost in the trade balance or manufacturing employment. A final option that would weaken the dollar, spur employment in tradable industries, and reduce the trade deficit is fiscal restraint. This would have the collateral benefit of mitigating the biggest risk on the U.S. external balance sheet

Takeaways by Macro Roundup® AI

  1. A tax on capital inflows, as suggested by Pettis, would weaken the dollar, tax imports and subsidize exports, and push domestic interest rates above foreign rates, encouraging saving while reducing investment.
  2. The macro effects of a capital inflow tax on saving, investment, and U.S. financial market liquidity could harm long-term growth and prove contractionary in the short run.
  3. A substantial Fed rate cut absent recession would be inflationary and would erode the extent to which the dollar's nominal depreciation was real, and without real depreciation there would be no durable boost in the trade balance or manufacturing employment.

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.
  • The Evolution of Global Trade in 2024 — 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.
  • 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.

AI Summary. The US announced 25% tariffs on imports of foreign-made cars, and officials confirmed the tariffs will also apply to car parts including engines, transmissions, power-train parts and electrical components. The United Auto Workers union welcomed the tariffs as a step toward fixing trade deals it calls broken.

Aime Williams, Kana Inagaki and Claire Bushey Financial Times
Date Posted:

Donald Trump imposed a 25% tariff on foreign-made cars and parts that will go into effect April 2. The United Auto Workers union welcomed the tariffs. “Ending the race to the bottom in the auto industry starts with fixing our broken trade deals.”

Will new auto tariffs cover car parts as well as vehicles?

Core argument: Donald Trump said the US will impose 25% tariffs on imports of foreign-made cars effective April 2, the deadline he set for unveiling reciprocal tariffs against US trade partners.

The US will impose 25% tariffs on imports of foreign-made cars, Donald Trump said on Wednesday, as he announced a significant escalation in his trade war with America’s allies. The tariffs will go into effect on April 2, the US president’s self-imposed deadline for unveiling numerous reciprocal tariffs against US trade partners. A US official later confirmed the tariffs would apply to car parts as well as completed vehicles. A White House factsheet said parts subject to the tariffs would include engines, transmissions, power-train parts and electrical components. The United Auto Workers union welcomed the tariffs. “Ending the race to the bottom in the auto industry starts with fixing our broken trade deals,” said Shawn Fain, UAW president.

Takeaways by Macro Roundup® AI

  1. Donald Trump said the US will impose 25% tariffs on imports of foreign-made cars effective April 2, the deadline he set for unveiling reciprocal tariffs against US trade partners.
  2. A US official confirmed the 25% tariffs will cover car parts as well as completed vehicles, with a White House factsheet listing engines, transmissions, power-train parts and electrical components.
  3. United Auto Workers president Shawn Fain welcomed the tariffs, saying that "ending the race to the bottom in the auto industry starts with fixing our broken trade deals.".

Related Articles:

  • Help for the Heartland? The Employment and Electoral Effects of the Trump Tariffs in the United States — The authors find that the combined effect of U.S.-China trade war import tariffs, retaliatory tariffs, and farm subsidies on employment in exposed U.S. locations was at best a wash and possibly mildly negative, while residents of tariff-protected areas became less likely to identify as Democrats and more likely to vote Republican.
  • Steel Productivity has Plummeted Since Trump’s 2018 Tariffs — Output per hour in the U.S. steel industry has fallen 32% since 2017, following the imposition of 25% tariffs on steel imports, while output per hour for the economy as a whole rose 15%. U.S. steel-using firms, which employ roughly 45x as many Americans as steel producers, pay about 75% more for steel than global competitors.
  • The Mysterious Slowdown in U.S. Manufacturing Productivity — US manufacturing labor productivity growth slowed broadly after the Great Recession, with the four largest firms in each industry averaging –0.5% growth from 2010 to 2022 versus 3.7% from 1987 to 2007, and smaller follower firms showing an identical 4.2 percentage-point decline. The authors find the slowdown spans all industries and firm sizes.

AI Summary. The Economic Innovation Group estimates the share of US counties drawing a quarter or more of total personal income from government transfers rose from about 10% to 53% over roughly two decades. Transfers were the fastest-growing major component of personal income, reaching 18% of the US total, or $3.8tn, more than double their 1970 share.

Guy Chazan Financial Times
Date Posted:
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In 2022 53% of US counties derived at least 25% of total personal income from federal transfer payments, up from 10% in 2000; the share of federal transfers has grown fastest in rural counties that tend to support the GOP.

How reliant have US counties become on government transfer income?

Core argument: The share of US counties deriving a quarter or more of total personal income from government transfers rose from 10.4% in 2000 to 53% in 2022, according to the Economic Innovation Group.

In 2000, according to the Economic Innovation Group just 10.4% of counties in the US derived a quarter or more of their total personal income from transfers. But by 2022, that had risen to 53% of counties in the US. Income from government transfers was the fastest-growing major component of Americans’ personal income, according to the EIG report last year. It said they made up 18% of all personal income in the US in 2022 — a total of $3.8tn — with the share more than doubling since 1970. Louisiana is a prime example of these trends. The state is as red as they come, choosing the Republican candidates in 12 of the past 14 presidential elections. In the congressional district of Mike Johnson, Republican Speaker of the House, 33% of people are enrolled in [Medicaid]. The federal government shoulders around 70% of the costs of Medicaid in the state. As Steve Bannon put it in a recent podcast: “Medicaid’s going to be a complicated one…a lot of Maga’s on Medicaid.”

Takeaways by Macro Roundup® AI

  1. The share of US counties deriving a quarter or more of total personal income from government transfers rose from 10.4% in 2000 to 53% in 2022, according to the Economic Innovation Group.
  2. Government transfers made up 18% of all US personal income in 2022, a total of $3.8tn, with the share more than doubling since 1970 and ranking as the fastest-growing major component of personal income, per the EIG report.
  3. In Louisiana, which backed Republican presidential candidates in 12 of the past 14 elections, 33% of people in Speaker Mike Johnson's congressional district are enrolled in Medicaid, with the federal government covering around 70% of the state's Medicaid costs.

Related Articles:

  • The Great “Transfer”-mation — Government transfers rose from 8.2% of Americans' total personal income in 1970 to 17.6% in 2022, making them the third largest income source after work and investments. The share of U.S. counties drawing a quarter or more of personal income from transfers rose from under 1% in 1970 to 53% in 2022.
  • The Economic and Political Dynamics of Rural America — Population growth in the average rural US county reached 0.4% and surpassed that of the average urban county, while the share of rural counties losing population fell from two-thirds in 2012 to under half. The growth is concentrated in rural counties near major urban centers and in recreation and retirement destinations.
  • America Is Uniquely Ill-Suited To Handle a Falling Population — U.S. population growth slowed to about 7.4% in the decade to 2020, the slowest since the Great Depression, as the fertility rate fell from above the 2.1 needed for a stable population to 1.67. Because local and regional authorities levy 48% of all U.S. taxes—versus 20% in France and 6% in Britain—shrinking local revenue forces service cuts or tax rises.

AI Summary. Microsoft has walked away from new US and European data center projects totaling about 2 gigawatts of electricity capacity, which TD Cowen analysts attribute to an oversupply of computing capacity relative to current AI demand forecasts. Google and Meta picked up some of the freed European capacity, the analysts wrote.

Matt Day and Ryan Vlastelica Bloomberg
Date Posted:

Microsoft has walked away from new data center projects in the US and Europe that would have used the equivalent of 2 gigawatts of electricity. Microsoft remains on track to spend ~$80B building out data centers this fiscal year.

Is data center capacity outpacing current AI demand forecasts?

Core argument: Microsoft has abandoned new data center projects in the US and Europe totaling roughly 2 gigawatts of electricity capacity, which TD Cowen analysts attribute to an oversupply of the computer clusters that power AI.

Microsoft has walked away from new data center projects in the US and Europe that would have amounted to a capacity of about 2 gigawatts of electricity, according to TD Cowen analysts, who attributed the pullback to an oversupply of the clusters of computers that power artificial intelligence. Google had stepped in to grab some leases Microsoft abandoned in Europe, the analysts wrote, while Meta had scooped up some of the freed capacity in Europe. Microsoft says it remains on track to spend about $80 billion building out AI data centers in its fiscal year that ends in June. “We continue to believe the lease cancellations and deferrals of capacity points to data center oversupply relative to its current demand forecast,” TD Cowen analysts Michael Elias, Cooper Belanger and Gregory Williams wrote.

Takeaways by Macro Roundup® AI

  1. Microsoft has abandoned new data center projects in the US and Europe totaling roughly 2 gigawatts of electricity capacity, which TD Cowen analysts attribute to an oversupply of the computer clusters that power AI.
  2. TD Cowen analysts Michael Elias, Cooper Belanger and Gregory Williams wrote that Microsoft's lease cancellations and capacity deferrals point to data center oversupply relative to its current demand forecast.
  3. Microsoft says it remains on track to spend about $80 billion building out AI data centers in its fiscal year ending in June, while Google and Meta took up some of the leases and capacity Microsoft freed in Europe.

Related Articles:

  • A Severe Case of COVIDIA: Prognosis For An AI-Driven US Equity Market — Computing cycles move from infrastructure to platforms to applications, and NVIDIA data center revenues as a share of market-wide capital spending are projected to reach levels last seen at the 1969 mainframe peak and the dot-com boom. Large cloud providers spend more than twice as much training foundational models as running them for customers.
  • Microsoft Dropped Some AI Data Center Leases, TD Cowen Says — Microsoft has voided data center leases totaling a couple of hundred megawatts of capacity and stopped converting preliminary agreements into formal leases, according to brokerage TD Cowen's checks with supply chain providers. TD Cowen also says Microsoft is redirecting some planned international spending to the US, suggesting a material slowdown in international leasing.
  • Gen AI: Too Much Spend, Too Little Benefit? — The author argues generative AI is unlikely to drive revenue expansion because it helps employees find information faster rather than find better information. If AI's benefits remain limited to efficiency gains, competitors can adopt the same tools, so cost savings get arbitraged away rather than raising prices or margins.

AI Summary. Average annual electricity load growth reached 3% and is projected to continue at that rate for five years, with utilities raising expected peak demand for 2029 by 12%, or 101 gigawatts, driven by data centers, new factories, electric vehicles, heat pumps, and hydrogen production.

Greg Ip Wall Street Journal
Date Posted:
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In 2023, US fixed asset investment for electrical generation, storage, and distribution was $208.5B relative to $138B invested in oil, gas, and coal extraction. Grid Strategies estimates electric power investment growth at 3%/yr through 2030.

Is electricity demand growth accelerating enough to drive economic growth?

Core argument: Average annual electricity load growth reached 3% last year and will continue at that rate for the next five years, according to power-sector consulting firm Grid Strategies.

[Average Annual Electricity Load] growth jumped to 3% last year and will continue at that rate for the next five years [according to] Grid Strategies, a power-sector consulting firm. The firm estimates that since 2022, utilities have raised expected peak demand for summer 2029 by 12%, or 101 gigawatts. The drivers are data centers for AI, cloud computing and cryptocurrency; new factories; and the gradual adoption of electric vehicles, heat pumps, and hydrogen production. Most of the cost of oil and gas is the fuel itself, whereas for electricity it is the generation, transmission, storage and distribution infrastructure. Oil-and-gas extraction and refining contribute twice as much to gross domestic product as utilities, but electric utilities alone invest 50% more in plant, equipment and technology.

Takeaways by Macro Roundup® AI

  1. Average annual electricity load growth reached 3% last year and will continue at that rate for the next five years, according to power-sector consulting firm Grid Strategies.
  2. Grid Strategies estimates that since 2022 utilities have raised expected peak demand for summer 2029 by 12%, or 101 gigawatts, driven by data centers for AI, cloud computing and cryptocurrency, new factories, electric vehicles, heat pumps and hydrogen production.
  3. Oil-and-gas extraction and refining contribute twice as much to gross domestic product as utilities, yet electric utilities alone invest 50% more in plant, equipment and technology, with most electricity cost lying in generation, transmission, storage and distribution infrastructure rather than fuel.

Related Articles:

  • Heliocentrism — An energy use must be electrified before green grid electricity can decarbonize it, and while US grid decarbonization continues at a steady pace, the electricity share of final US energy consumption has grown little. Transmission line growth runs well below Department of Energy targets for 2030 and 2035, and transformer delivery times have stretched from 4–6 weeks to 2–3 years.
  • How Tariffs Could Shock America’s Power System — US electricity prices have risen at a compound annual rate of 5.7% over five years, after being roughly flat in the prior five years. Transformers could become a chokepoint: analysts estimate only about 20% of US transformer demand can be met domestically, with prices up 70%–100% on higher electrical steel and copper costs.
  • Electricity 2025 — 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.

AI Summary. China's top financial regulator has urged Chinese banks to expand consumer lending as part of an effort to boost consumption, which comprises roughly 56% of GDP. More consumer lending may raise consumption in the short term largely by pulling future consumption forward, so today's gains could be offset by tomorrow's costs.

Michael Pettis Carnegie Endowment for International Peace
Date Posted:

China is pressuring banks to expand consumer lending. But per @michaelxpettis, this mainly shifts future consumption forward. “Over the longer term, however, what will matter is the impact of these positive short-term outcomes on overall confidence.”

Does expanding consumer lending raise consumption beyond the short term?

Core argument: China's National Financial Regulatory Administration on March 14 urged banks to expand consumer loans as part of Beijing's effort this year to boost consumption.

On March 14, China’s National Financial Regulatory Administration, the country’s top financial regulator, urged Chinese banks to expand consumer loans as part of Beijing’s attempt this year to boost consumption. With consumption currently comprising roughly 56% of GDP, the consumption share of GDP can only rise in years in which the consumption contribution to growth exceeds 56%. Because it came in more than ten percentage points lower last year, the consumption share of GDP actually declined in 2024. While encouraging more consumer lending may help boost consumption in the short term, it mostly does so by moving future consumption forward. This could create a problem if it simply moves consumption that would have occurred anyway a few months forward. The benefits today would be erased by the costs tomorrow. Over the longer term, however, what will matter is the impact of these positive short-term outcomes on overall confidence.

Takeaways by Macro Roundup® AI

  1. China's National Financial Regulatory Administration on March 14 urged banks to expand consumer loans as part of Beijing's effort this year to boost consumption.
  2. With consumption at roughly 56% of GDP, the consumption share can rise only when consumption's contribution to growth exceeds 56%; in 2024 that contribution came in more than ten percentage points lower, so the share declined.
  3. Encouraging consumer lending may boost consumption in the short term mainly by pulling future consumption forward, so today's benefits would be erased by tomorrow's costs if the spending would have occurred anyway, with longer-term effects hinging on overall confidence.

Related Articles:

  • Economist Michael Pettis on China’s Consumption Paradox and the Pitfalls of a Trade War — 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.
  • Chinese “Overcapacity” Is Not the Problem. Underconsumption Is. — Chinese households spend only 37% of national income on goods and services, the lowest share in the world, while employee compensation at Chinese nonfinancial corporations is about 44% of gross value added versus roughly 60% in the US, Europe, and Japan. Chinese manufacturers appear to be adding production capacity far faster than actual output.
  • 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.

Friday, March 28, 2025

AI Summary. The Congressional Budget Office projects the 10-year Treasury note interest rate will average 3.8% over 2025–2055, close to its 3.7% average over the prior three decades, with the inflation-adjusted rate averaging 1.5%. It assesses that long-run rates are largely set by structural factors including demographics, saving and investment behavior, and federal debt.

Molly Dahl, Robert Arnold, Devrim Demirel, et al. Congressional Budget Office
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Debt as a % of GDP will hit an all-time high of 107% in 2029 up from 98% of GDP in 2024, @USCBO forecasts. The forecast assumes 10-year Treasuries will yield 4.1% this year and fall to 3.8% by 2035, close to their 1995-2024 mean of 3.7%.

How high will long-term interest rates average over the next thirty years?

Core argument: CBO projects the interest rate on 10-year Treasury notes will average 3.8% over 2025–2055, similar to the 3.7% average of the past three decades, and stay roughly flat at 3.9% in the first decade and 3.8% in the third.

In CBO’s projections for the 2025–2055 period, the interest rate on 10-year Treasury notes averages 3.8%—similar to the 3.7% average recorded over the past three decades. The interest rate on 10-year Treasury notes remains roughly flat over the 30-year projection period, averaging 3.9% in the first decade and 3.8% in the third decade. The real interest rate on 10-year Treasury notes (calculated by subtracting the percentage increase in the consumer price index from the nominal yield on those notes) is projected to average 1.5% over the 2025–2055 period, 0.3 ppts higher than the average from 1995 to 2024. (Since 2008, the real interest rate on 10-year Treasury notes has averaged 0.1%.) In CBO’s assessment, interest rates are largely determined over the long run by structural factors, including demographic trends, people’s saving and investment behavior, and the amount of federal debt. CBO expects continued downward pressure on interest rates through 2055 because of changes such as slower growth of the labor force, more private domestic and foreign savings available for investment, and slower total factor productivity growth, relative to their averages over the past 3 decades.

Takeaways by Macro Roundup® AI

  1. CBO projects the interest rate on 10-year Treasury notes will average 3.8% over 2025–2055, similar to the 3.7% average of the past three decades, and stay roughly flat at 3.9% in the first decade and 3.8% in the third.
  2. CBO projects the real interest rate on 10-year Treasury notes will average 1.5% over 2025–2055, 0.3 percentage points above the 1995–2024 average, compared with an average of 0.1% since 2008.
  3. In CBO's assessment, interest rates are largely determined over the long run by structural factors including demographic trends, saving and investment behavior, and federal debt, with continued downward pressure expected through 2055 from slower labor force growth, more available private savings, and slower total factor productivity growth.

Related Articles:

  • 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.
  • Larry Summers and Bob Rubin Join Our CIOs to Discuss the Surprising Economic Cycle — Adopting the Simpson-Bowles fiscal consolidation when interest rates were at zero would have risked excessive disinflation, since long rates had no room to fall to provide an offsetting expansionary impulse. After the large run-up in debt and rise in real interest rates, the developing fiscal situation risks inflationary pressure, Treasury market disruption, or crowding out of private investment.
  • The Long-Term Budget Outlook Under Alternative Scenarios for the Economy and the Budget — The Congressional Budget Office projects that if private investment were more sensitive to federal deficits, debt held by the public would exceed 250% of GDP and real national income per person would be 18% ($21,300) lower than its baseline, with the average interest rate on federal debt 2pp higher.

AI Summary. The authors argue the Federal Reserve could relieve Treasury market strain by buying cash Treasuries while fully hedging with offsetting short positions in Treasury derivatives, taking the other side of hedge funds' unwinding of hedged positions. Because this removes no net duration from the market, it distinguishes market-functioning purchases from quantitative easing.

Anil Kashyap, Jeremy Stein, Jonathan Wallen, and Joshua Younger Brookings Paper on Economic Activity
Date Posted:

Stein et al argue that in a repeat of the March 2020 crisis in which hedge funds rapidly unwound leveraged Treasury basis trades (long cash bonds, short futures), the Fed should undertake hedged interventions rather than outright purchases of Treasuries.

Can the Fed calm Treasury markets without removing duration?

Core argument: The hedge-fund fire sale that strained dealer balance sheets was an unwinding of hedged long-cash-Treasuries/short-derivatives positions rather than an outright liquidation of cash Treasuries.

In response to the Treasury-market turmoil positions of March 2020, the Federal Reserve initiated an extraordinarily aggressive program of buying cash Treasuries: between the beginning of March and the end of May, the Fed bought approximately $1.6 trillion of Treasury bonds. A more surgical approach may have advantages over cash purchases of cash securities by the Fed. The fire sale by hedge funds, which in turn creates the severe strain on dealer balance sheets, is not an outright liquidation of cash Treasuries [but] an unwinding of a hedged long-cash Treasuries/short-derivatives position. To relieve stress on dealers, the Fed [could simply] take the other side of this hedge-fund unwind, purchasing cash Treasuries, and fully hedging this purchase with an offsetting short position in Treasury derivatives. [In this case the Fed] is not removing net duration from the market, and hence to a first approximation not attempting to exert downward pressure on long-term interest rates. This draws a key distinction between market functioning purchases, which are designed to stabilize market conditions by providing a buyer of last resort over the short term, and quantitative easing.

Takeaways by Macro Roundup® AI

  1. The hedge-fund fire sale that strained dealer balance sheets was an unwinding of hedged long-cash-Treasuries/short-derivatives positions rather than an outright liquidation of cash Treasuries.
  2. The Federal Reserve could take the other side of that unwind by buying cash Treasuries fully hedged with an offsetting short position in Treasury derivatives, removing no net duration and distinguishing market-functioning purchases from quantitative easing.

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.
  • 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.

AI Summary. An analysis of US employment data finds that occupations flagged as highly exposed to automation — including accounting clerks, insurance underwriters, travel agents and legal secretaries — have stayed within their usual employment ranges, while writers and software developers show employment falling away from trend. Both occupations involve linear, self-contained tasks and high freelancing rates.

John Burn-Murdoch Financial Times
Date Posted:

US employment in two fields—software programmers/developers and writers—has broken from trends. @jburnmurdoch attributes this to LLM disruption, noting both roles involve “structured, self-contained tasks” that map closely to AI strengths.

Which jobs are actually losing employment to AI so far?

Core argument: Employment among accounting clerks, insurance underwriters, travel agents and legal secretaries has remained within its usual range despite generative AI's proliferation, even though their daily tasks overlap almost entirely with the capabilities of large language models.

I carried out a fine-grained analysis of US employment data, comparing recent trends in job numbers against a list of occupations identified as at especially high risk of automation. The daily tasks undertaken by accounting clerks, insurance underwriters, travel agents and legal secretaries all overlap almost entirely with LLMs’ capabilities. But the numbers of workers in these roles have all remained within their usual range even as generative AI has proliferated. There are two notable exceptions, however. Writers — of words, not code — and software developers both show tell-tale signs of LLM-related disruption, with employment falling sharply away from trend in the past two years. What sets programmers and writers apart is that these are occupations where the entire job from start to finish — not just discrete constituent parts — is about as close as possible to what AI excels at: nice, clean, linear and sequential tasks, exam-style questions and essay assignments. Notably, both jobs also have high rates of contracting or freelancing. So an AI assistant such as Anthropic’s Claude can be swapped in for a non-staff copywriter without HR getting involved.

Takeaways by Macro Roundup® AI

  1. Employment among accounting clerks, insurance underwriters, travel agents and legal secretaries has remained within its usual range despite generative AI's proliferation, even though their daily tasks overlap almost entirely with the capabilities of large language models.
  2. Writers and software developers are the two occupations showing signs of disruption from large language models, with employment in both falling sharply away from trend over the past two years.
  3. Writers and programmers stand out, the analysis argues, because their entire jobs — not just discrete parts — consist of clean, linear, sequential tasks resembling exam questions and essay assignments, and because both have high rates of freelancing or contracting.

Related Articles:

  • The Rapid Adoption of Generative AI — A nationally representative U.S. survey found 39% of people aged 18-64 used generative AI, with more than 24% of workers using it in the prior week and nearly one in nine using it every workday. The authors estimate 0.5-3.5% of U.S. work hours are currently assisted by generative AI.
  • 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.

AI Summary. Tariffs can raise the size of the US manufacturing sector but carry two short-term costs: elevated uncertainty weighs on household and corporate spending, and higher production costs weigh on corporate earnings. The author argues weakness in survey-based measures should spill over into hard economic data, a negative for the S&P 500.

Torsten Sløk Apollo
Date Posted:

Torsten Sløk finds that within 24 months of the start of a 10% correction in the S&P 500, the S&P is up ~ 10% if there is no recession. If a recession occurs, the S&P remains down ~ 10%.

Do tariffs expand manufacturing while imposing short-term costs on spending and earnings?

Core argument: Tariffs can boost the size of the US manufacturing sector but carry two short-term negative effects: elevated uncertainty depressing household and corporate spending decisions, and higher production costs weighing on corporate earnings.

Tariffs can be used to boost the size of the US manufacturing sector. But tariffs, unfortunately, have two short-term negative effects on the economy: 1. Elevated uncertainty has a negative impact on household and corporate spending decisions. 2. Tariffs have a negative impact on corporate earnings as companies experience higher production costs. Uncertainty may have declined modestly in recent weeks, but the next step is for tariffs to begin to have a negative impact on corporate earnings over the coming quarters. Combined with the risk of retaliation, this is negative for the S&P 500. The bottom line is that the incoming data remains solid, but the soft data is deteriorating. With tariffs not going away, the observed weakness in the soft data should be expected to spill over to weakness in the hard data over the coming months. The performance of the S&P 500 will depend on the size of the adjustment costs as companies adjust to a new situation with permanently higher tariffs,

Takeaways by Macro Roundup® AI

  1. Tariffs can boost the size of the US manufacturing sector but carry two short-term negative effects: elevated uncertainty depressing household and corporate spending decisions, and higher production costs weighing on corporate earnings.
  2. Tariffs are expected to begin hurting corporate earnings over the coming quarters, which, combined with the risk of retaliation, is negative for the S&P 500.
  3. Incoming hard data remains solid while soft data is deteriorating, and with tariffs not going away, the soft-data weakness should be expected to spill over into the hard data over the coming months.

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AI Summary. The White House warned chief executives of major U.S. automakers that it would look unfavorably on raising car prices in response to tariffs, leaving some executives concerned about retaliation. Automakers depend on federal regulators for critical approvals, though it is unclear what action the administration could take.

Josh Dawsey and Ryan Felton Wall Street Journal
Date Posted:

The WSJ reports that President Trump is jawboning American automakers in an effort to deter them from passing along tariff-related costs; the “White House would look unfavorably on such a move,” leaving some automakers rattled.

Can the White House pressure automakers not to raise prices?

Core argument: President Trump warned CEOs of top U.S. automakers on a call that the White House would look unfavorably on any decision to raise car prices in response to tariffs, according to people with knowledge of the call.

When President Trump convened CEOs of some of the country’s top automakers for a call earlier this month, he issued a warning: They better not raise car prices because of tariffs. Trump told the executives that the White House would look unfavorably on such a move, leaving some of them rattled and worried they would face punishment if they increased prices, people with knowledge of the call said. It is unclear what the Trump administration could do if automakers raise their prices. Trump has targeted disfavored law firms with executive orders, and automakers rely on federal regulators for critical approvals.

Takeaways by Macro Roundup® AI

  1. President Trump warned CEOs of top U.S. automakers on a call that the White House would look unfavorably on any decision to raise car prices in response to tariffs, according to people with knowledge of the call.
  2. Some automaker executives were left rattled by Trump's warning and worried they would face punishment if they raised prices, though it is unclear what the administration could do in response.
  3. Automakers rely on federal regulators for critical approvals, and Trump has targeted disfavored law firms with executive orders.

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  • The Mysterious Slowdown in U.S. Manufacturing Productivity — US manufacturing labor productivity growth slowed broadly after the Great Recession, with the four largest firms in each industry averaging –0.5% growth from 2010 to 2022 versus 3.7% from 1987 to 2007, and smaller follower firms showing an identical 4.2 percentage-point decline. The authors find the slowdown spans all industries and firm sizes.
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AI Summary. The European Union is identifying concessions it is willing to offer the US administration to secure partial removal of US tariffs on the bloc's exports. EU officials argue that its value-added tax applies equally to domestic and imported goods, and that the bloc imports large volumes of American services despite running a goods trade surplus with the US.

Alberto Nardelli and Shawn Donnan Bloomberg
Date Posted:

The EU is preparing concessions to minimize Trump’s reciprocal tariffs. In 2023 the EU ran a €155.8B goods surplus with the US, partially offset by a €104B services deficit for a net €51.8B goods and service surplus with the US.

Will the EU offer concessions to win partial tariff relief?

Core argument: The European Union is identifying concessions to the Trump administration to win partial removal of US tariffs already hitting EU exports and set to increase after April 2.

The European Union is identifying concessions it’s willing to make to Donald Trump’s administration to secure the partial removal of the US tariffs that have already started hitting the bloc’s exports and that are set to increase after April 2. The reciprocal tariffs are meant to strike out against what Trump considers to be unfair levies on US goods as well as non-tariff barriers, such as domestic regulations and how countries collect taxes, including the bloc’s value-added tax, digital taxes and regulations. The EU says its VAT is a fair, non-discriminatory tax that applies equally to domestic and imported goods. European officials have tried stressing that even though the EU has a goods trade surplus with the US, the 27-nation bloc imports a lot of American services ranging from ecommerce and social media sites to Internet search engines — all part of the US’s Big Tech industry that has recently cozied up to Trump and his circle of advisers. EU and US firms have more than €5 trillion ($5.4 trillion) worth of investment in each other’s markets, according to the commission.

Takeaways by Macro Roundup® AI

  1. The European Union is identifying concessions to the Trump administration to win partial removal of US tariffs already hitting EU exports and set to increase after April 2.
  2. Trump's reciprocal tariffs target what he considers unfair levies on US goods plus non-tariff barriers including the EU's value-added tax, digital taxes and regulations, which the EU defends as a fair, non-discriminatory tax applied equally to domestic and imported goods.
  3. EU and US firms hold more than €5 trillion ($5.4 trillion) of investment in each other's markets, according to the European Commission, and EU officials stress the bloc imports many American services despite its goods trade surplus with the US.

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AI Summary. Canada's prime minister said the country's old relationship with the US is over, pledged a broad renegotiation of the two countries' trade agreement, and promised retaliatory trade actions designed for maximum impact in the US and minimum impact at home. The Bank of Canada's governor has said US tariffs would probably push Canada into recession.

Ilya Gridneff Financial Times
Date Posted:

Canada’s Prime Minister Mark Carney said there will be a “broad renegotiation of our security and trade relationship” with the US. “Canada will fight American tariffs with retaliatory trade actions”.

Is Canada's old trade relationship with the US over?

Core argument: Canadian Prime Minister Mark Carney said Canada's old relationship with the US is "over" and pledged a "broad renegotiation" of the trade agreement between the two countries.

Prime Minister Mark Carney said on Thursday that Canada’s old relationship with the US was “over” and vowed that there would be a “broad renegotiation” of the trade agreement between the countries. Carney said Canada would fight American tariffs with retaliatory trade actions of its own “that will have maximum impact in the US and minimum impacts in Canada”. The prime minister said the Canadian economy and its supply chains in critical sectors such as the auto industry would have to fundamentally change to insulate themselves from further tariffs and US hostility. “We are gonna have to do some things very differently,” he said. Tiff Macklem, governor of the Bank of Canada, has said US tariffs would probably put Canada in a recession.

Takeaways by Macro Roundup® AI

  1. Canadian Prime Minister Mark Carney said Canada's old relationship with the US is "over" and pledged a "broad renegotiation" of the trade agreement between the two countries.
  2. Carney said Canada would answer American tariffs with retaliatory trade actions designed for "maximum impact in the US and minimum impacts in Canada".
  3. Bank of Canada governor Tiff Macklem has said US tariffs would probably push Canada into a recession, and Carney said the Canadian economy and supply chains in sectors such as autos would have to fundamentally change.

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