Edward Conard

Top Ten New York Times Bestselling Author

  • “Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…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 very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Thursday, April 17, 2025

AI Summary. Standard interest-rate parity implies a 50 basis-point rise in U.S. long-term yields relative to European yields should appreciate the dollar about 5%, yet the dollar depreciated 3.6%, leaving an 8.6% gap. The authors argue investors have reduced their willingness to pay for the safety and liquidity of all dollar-denominated assets, not only U.S. Treasury securities.

Zhengyang Jiang, Arvind Krishnamurthy, Hanno Lustig, Robert Richmond, and Chenzi Xu Working Paper
Date Posted:

The dollar fell 3.4% btw April 4th and the 14th despite a 50 bps rise in the yield spread btw the 10-year Treasury and the 10-year Bund. Relative to historical behavior, this implies a flight from private dollar assets, not merely Treasuries.

Why did the dollar depreciate as US yields rose?

Core argument: Under long-run uncovered interest rate parity, a 50 bps rise in U.S. long-term yields relative to European yields implies about 5% dollar appreciation, yet the dollar depreciated 3.6%, leaving an 8.6% gap.

With long-run uncovered interest rate parity as the benchmark, a 50 bps increase in U.S. long-term yields relative to European yields should immediately appreciate the dollar by about 5%. Yet, we observed 3.6% depreciation, leaving a surprising gap of 8.6%. Back of the envelope calculation suggests investors have permanently decreased their willingness to pay for the safety and liquidity not just of US Treasurys, but of all dollar-denominated assets. If investors had only revised their willingness to pay for the safety of Treasurys, then we would have only predicted a much smaller 83 bps depreciation of the dollar. Figure 3 plots the dollar exchange rate against the fitted value with the yield spread and with the convenience yield, measured by the 1 year basis. When we include the basis, the fitted value tracks the actual exchange rate dynamics quite well. The model without the basis completely misses the dollar depreciation between April 4 and 14. [The degree of] sensitivity of the dollar exchange rate to the widening of the Treasury basis suggests that investors are fleeing from the dollar, not just from Treasurys

Takeaways by Macro Roundup® AI

  1. Under long-run uncovered interest rate parity, a 50 bps rise in U.S. long-term yields relative to European yields implies about 5% dollar appreciation, yet the dollar depreciated 3.6%, leaving an 8.6% gap.
  2. A back-of-the-envelope calculation suggests investors have permanently decreased their willingness to pay for the safety and liquidity of all dollar-denominated assets, not just U.S. Treasurys, which alone would imply only 83 bps of depreciation.
  3. Adding the convenience yield, measured by the 1-year basis, lets the fitted exchange rate track actual dollar dynamics quite well, while the model without the basis misses the dollar depreciation between April 4 and 14.

Related Articles:

  • Dollar Downgrade — The author argues that rising 10- and 30-year US Treasury yields do not show up in long-term inflation expectations, judging by the spread between inflation-indexed and non-indexed Treasury bonds. The author attributes the increase instead to a shift in demand away from long-dated US debt, reinforcing higher long-term real interest rates.
  • Tariffs, the Dollar, and Equities: High-Frequency Evidence from the Liberation Day Announcement — Following a sweeping US tariff announcement, the dollar's effective exchange rate depreciated rather than appreciating as standard international macroeconomic models predict: all G10 currencies gained against the dollar while the most freely floating emerging market currencies gained less or fell. The authors read this as advanced economies rebalancing away from dollar assets.
  • The Great European Disentanglement From US Stocks Has Only Just Started — Federal Reserve data show European investors held about $9tn in US stocks, roughly 17% of the total value of the US market. After inflation, a dollar invested in the US at the start of 2000 was worth $3.28 by the end of 2024, versus $1.63 for the rest of the world.

AI Summary. The dollar has weakened to fresh lows against the euro, Japanese yen and Swiss franc, with the ICE U.S. Dollar Index down 8% this year, the worst start to a year in its four-decade history. Some on Wall Street worry China will push the yuan lower to offset trade-war effects.

Chelsey Dulaney and Alistair MacDonald Wall Street Journal
Date Posted:

Since the start of the year, the dollar is down 8% against a broad basket of currencies, 8.9% against the Euro, 9.2% against the Yen. Wall Street is concerned China may “push the yuan even lower, [which] could ripple across financial markets.”

How does a weakening dollar affect the global economy?

Core argument: The ICE U.S. Dollar Index has slipped 8% this year, the worst start to a year in the index's four-decade trading history, with the dollar hitting fresh lows against the euro, the Japanese yen and the Swiss franc.

The U.S. currency resumed its rapid weakening Wednesday, hitting fresh lows against the euro, the Japanese yen and the Swiss franc. The dollar decline has been historic, with the ICE U.S. Dollar Index, a measure of the greenback against a basket of currencies, slipping 8% this year, the worst start to a year in the index’s four-decade trading history. China has let its currency move close to its weakest level against the dollar in years. Some on Wall Street worry Beijing will push the yuan even lower to offset the effects of the trade war, a move that could ripple across financial markets.

Takeaways by Macro Roundup® AI

  1. The ICE U.S. Dollar Index has slipped 8% this year, the worst start to a year in the index's four-decade trading history, with the dollar hitting fresh lows against the euro, the Japanese yen and the Swiss franc.
  2. China has let the yuan move close to its weakest level against the dollar in years, and some on Wall Street worry Beijing will push the currency even lower to offset the effects of the trade war, a move that could ripple across financial markets.

Related Articles:

  • Dollar Upheaval: This Time is Different — Standard interest-rate parity implies a 50 basis-point rise in U.S. long-term yields relative to European yields should appreciate the dollar about 5%, yet the dollar depreciated 3.6%, leaving an 8.6% gap. The authors argue investors have reduced their willingness to pay for the safety and liquidity of all dollar-denominated assets, not only U.S. Treasury securities.
  • China Offers First Hint of Devaluation With Weak Renminbi Fix — China's central bank set the renminbi's daily fixing rate just below 7.2 to the dollar, its weakest level in 18 months, signaling it may permit depreciation to offset US tariffs. Many economists believe Beijing will avoid a large devaluation because it would risk capital outflows and domestic instability.
  • Tariffs, the Dollar, and Equities: High-Frequency Evidence from the Liberation Day Announcement — Following a sweeping US tariff announcement, the dollar's effective exchange rate depreciated rather than appreciating as standard international macroeconomic models predict: all G10 currencies gained against the dollar while the most freely floating emerging market currencies gained less or fell. The authors read this as advanced economies rebalancing away from dollar assets.

AI Summary. The estimated return to a college degree has held between 12–13% for three decades, reaching 12.5% recently, compared with long-term returns of about 8% for stocks and 4% for bonds. Median earnings for bachelor's degree holders were about $80,000 versus $47,000 for high school graduates, a premium near its all-time high.

Jaison Abel and Richard Deitz Federal Reserve Bank of New York
Date Posted:
Is Database:
Database

The median college graduate earns $80k annually relative to $47k for the median high school graduate, leaving the college wage premium close to its all-time high.

Does a college degree still deliver a high return on investment?

Core argument: The return to college was 12.5% in 2024 and has held between 12–13% for three decades after rising in the 1980s and early 1990s, compared with about 8% for the stock market and 4% for bonds.

After rising significantly in the 1980s and early 1990s, the return to college has held between 12 -13% for the past three decades and was 12.5% in 2024—easily exceeding the threshold for a sound investment. Indeed, by comparison, the stock market has provided a long-term return of about 8% and bonds have returned around 4%. In recent years, the median college graduate with just a bachelor’s degree earned about $80,000, compared to $47,000 for the median worker with only a high school diploma. This means a typical college graduate earned a premium of over $32,000 per year, or about 68%—near its all-time high. Real wages for both groups have generally been rising over the past decade, as tight labor markets benefited high school graduates and college graduates. Indeed, median wages for college graduates increased more, rising 7% compared to 5% for high school graduates. This increase was a noteworthy change for high school graduates, who saw their median wages stagnate from 1994 to 2014, though it represented a continuing trend for college graduates, whose wages have been trending upward for three decades.

Takeaways by Macro Roundup® AI

  1. The return to college was 12.5% in 2024 and has held between 12–13% for three decades after rising in the 1980s and early 1990s, compared with about 8% for the stock market and 4% for bonds.
  2. The median worker with just a bachelor's degree earned about $80,000 versus $47,000 for the median worker with only a high school diploma, a premium of over $32,000 a year, or about 68%, near its all-time high.
  3. Median wages rose 7% for college graduates and 5% for high school graduates over the past decade, a noteworthy change for high school graduates, whose median wages stagnated from 1994 to 2014.

Related Articles:

  • Do Adults Have the Skills They Need to Thrive in a Changing World? — An international assessment of adult skills describes numeracy proficiency levels ranging from counting objects and adding small whole numbers at the lowest level, to extracting information from tables and graphs and performing basic arithmetic with money and percentages at Level 1, up to analysing complex mathematical information and critically evaluating whether data support a claim at Level 5.
  • Talent Disrupted: Underemployment, College Graduates, and the Way Forward — A study classifying college graduates as underemployed when their occupation does not typically require a bachelor's degree finds that of every 100 graduates with a terminal bachelor's degree, 48 hold college-level jobs one year after graduation and 55 do at both five and 10 years. Graduates who start underemployed largely remain so.
  • When College Might Not Be Worth It — A college degree does not appear to have paid off for at least a quarter of graduates in recent decades, even at average costs. Returns can be lower when a college charges above-average tuition, financial aid is limited, students live on campus, degrees take five or six years, or earnings fall below the median.

AI Summary. A college degree does not appear to have paid off for at least a quarter of graduates in recent decades, even at average costs. Returns can be lower when a college charges above-average tuition, financial aid is limited, students live on campus, degrees take five or six years, or earnings fall below the median.

Jaison Abel and Richard Deitz Federal Reserve Bank of New York
Date Posted:
Is Database:
Database

Students who take longer to graduate, attend expensive schools, or choose “soft” majors experience a lower return on investment in college education. In recent decades, a college degree hasn’t paid off for 25% of students.

Does a college degree pay off for all graduates?

Core argument: Even at average costs, a college degree does not appear to have paid off for at least a quarter of college graduates in recent decades.

There are many circumstances under which college graduates do not earn a high return. Some colleges are much more expensive than average, and financial aid is not guaranteed no matter which college a student attends. In addition, the potentially high cost of living on campus was not factored into our estimates. Some students also may take five or six years to finish their degrees, which can significantly increase costs. Further, our calculations were based on median wages over a working life, but half of college graduates earn less than the median. Indeed, even when paying average costs, we find that a college degree does not appear to have paid off for at least a quarter of college graduates in recent decades.

Takeaways by Macro Roundup® AI

  1. Even at average costs, a college degree does not appear to have paid off for at least a quarter of college graduates in recent decades.
  2. Estimates of college's return rest on median wages over a working life, yet half of college graduates earn less than the median, and financial aid is not guaranteed at any college.
  3. The estimates exclude the potentially high cost of living on campus, and students who take five or six years to finish a degree can face significantly higher costs.

Related Articles:

  • Standardized Test Scores and Academic Performance at Ivy-Plus Colleges — An analysis of admissions and transcript records at Ivy-Plus colleges finds standardized test scores predict first-year college grades with a normalized slope 4x greater than high school grade point average, controlling for race, gender, and socioeconomic status. The authors find no evidence test scores underpredict college performance for students from less advantaged backgrounds.
  • Returns to Specific Graduate Degrees: Estimates Using Texas Administrative Records — Using Texas administrative records, researchers estimate that program rank matters for business and law degrees: a 20-place ranking improvement is associated with returns higher by 0.026 for an MBA (average return 0.125) and 0.07 for a law degree (average return 0.453). Returns to nursing, social work, and pharmacy degrees show no such ranking dependence.
  • And Is College Still Worth It? — The estimated return to a college degree has held between 12–13% for three decades, reaching 12.5% recently, compared with long-term returns of about 8% for stocks and 4% for bonds. Median earnings for bachelor's degree holders were about $80,000 versus $47,000 for high school graduates, a premium near its all-time high.

AI Summary. The European Union is preparing a proposal to restrict some exports to the US as a deterrent, to be used only if trade negotiations fail, after the US imposed new tariffs on roughly €380bn ($432bn) of EU goods. Such restrictions typically target goods that are critical and difficult to replace.

Alberto Nardelli Bloomberg
Date Posted:

The EU is considering export restrictions if the US and EU are unable to reach a trade deal. Typically, these types of restrictions target goods that are critical to the country and difficult to replace. In 2023, the EU ran a €51.8 net surplus with the US.

Is Europe preparing export restrictions as leverage against US tariffs?

Core argument: The European Union is preparing a proposal to restrict some exports to the US as possible retaliation in the trade war, after the US imposed new tariffs on around €380 billion ($432 billion) of EU goods, according to people familiar with the plan.

The European Union is working on a proposal to introduce restrictions on some exports to the US as a possible retaliatory tactic in the expansive trade war President Donald Trump initiated last month. The restrictions would be used as a deterrent and only if negotiations with the US — which has put new tariffs on around €380 billion ($432 billion) of EU goods — fail to produce a satisfactory outcome, according to people familiar with the plan. Typically these types of restrictions target goods critical to the country and that would be difficult to replace.

Takeaways by Macro Roundup® AI

  1. The European Union is preparing a proposal to restrict some exports to the US as possible retaliation in the trade war, after the US imposed new tariffs on around €380 billion ($432 billion) of EU goods, according to people familiar with the plan.
  2. The EU would deploy the export restrictions as a deterrent and only if negotiations with the US fail to produce a satisfactory outcome, according to people familiar with the plan.
  3. Restrictions of this type typically target goods that are critical to the country concerned and difficult to replace.

Related Articles:

Monday, April 21, 2025

AI Summary. Across countries, a one-standard-deviation rise in self-made billionaires' wealth relative to GDP is associated with 1.87 percentage points faster total factor productivity growth over the next seven years, while the same rise in inherited billionaire wealth is associated with a 1.28-point decline.

Bordin Bordeerath Social Science Research Network
Date Posted:
Is Database:
Database

Forbes data on billionaires from 57 countries over 1986-2011 show that a 1 standard deviation in founders’ aggregate wealth/GDP yields a 1.87 ppt rise in TFP growth over the next 7 yrs, vs. 1.28-ppt lower TFP growth for a 1 standard deviation rise in billionaire heirs’ wealth/GDP. Via Jim Pethokoukis.

Does the source of billionaire wealth determine productivity growth?

Core argument: A one-standard-deviation rise in billionaire founders' aggregate wealth relative to GDP is associated with a 1.87-percentage-point increase in total-factor productivity growth over the following seven years.

I demonstrate that inequality impedes economic efficiency when it arises from rent-seeking by entrenched elites. However, I also show that inequality can be beneficial when driven by creative destruction. A one-standard-deviation increase in the ratio of billionaire founders' aggregate wealth to GDP is associated with a 1.87-percentage-point (ppt) rise in total-factor productivity (TFP) growth over the next seven years. In contrast, a one-standard-deviation increase in billionaire heirs' wealth ratio correlates with a 1.28-ppt decline in TFP growth over the same period. Further the positive relationship between founders' wealth and TFP is stronger in more financially developed countries. By contrast, consistent with the rent-seeking equilibrium, the negative relationship between heirs' wealth and TFP is more pronounced in countries that are less financially developed, less open to foreign capital, and less democratic. One way to [further] identify the sources of wealth driving inequality might be to examine the institutional settings that enable the rich to amass their fortunes.

Takeaways by Macro Roundup® AI

  1. A one-standard-deviation rise in billionaire founders' aggregate wealth relative to GDP is associated with a 1.87-percentage-point increase in total-factor productivity growth over the following seven years.
  2. A one-standard-deviation rise in billionaire heirs' wealth-to-GDP ratio correlates with a 1.28-percentage-point decline in total-factor productivity growth over the same seven-year horizon.
  3. The positive founders' wealth–productivity relationship is stronger in more financially developed countries, while the negative heirs' wealth relationship is more pronounced in countries that are less financially developed, less open to foreign capital, and less democratic.

Related Articles:

  • The Economics of Inequality in High-Wage Economies — Information technology created investment opportunities exceeding the supply of properly trained talent, while trade with low-wage economies, low-skilled immigration, trade deficits, and aging demographics eased constraints on low-skilled labor and risk-averse savings. The author argues this framework, rather than rising cronyism, explains high returns to success, slowing productivity growth, and low interest rates.
  • How To Get Rich in 2025 — Academic estimates compiled by The Economist indicate inheritances, after falling over the 20th century, were worth about 10% of GDP on average by the end of the 2010s, with roughly $6tn inherited across the rich world in a year. Falling family sizes mean each inheritance is spread across fewer heirs.
  • A Preliminary Report on Taxing the Great Wealth Transfer: Revenue and Distributional Effects of Taxes on Estates, Inheritances, and Unrealized Capital Gains at Death — The authors argue that replacing the estate tax, paid by those who die, with an inheritance tax, paid by recipients, could raise more revenue and increase progressivity because it targets large individual transfers rather than estates divided among several family members. They also note unrealized capital gains held until death escape income tax entirely.

AI Summary. The author estimates a 90% chance of a US recession triggered by an abrupt shift to very high tariffs, which importers must pay when goods arrive. Small businesses lacking the working capital to cover tariffs face canceled orders and bankruptcies, and account for more than 80% of US employment and capital spending.

Torsten Sløk Apollo
Date Posted:

Torsten Sløk argues if tariffs aren’t deferred, there is a 90% chance of a “Voluntary Trade Reset Recession” since “small businesses account for 80% of US employment and capex,” and with limited working capital are unequipped to make rapid adjustments.

Will an abrupt shift to very high tariffs cause a recession?

Core argument: The author puts the probability of a "Voluntary Trade Reset Recession" at 90%, tied to the overnight imposition of extremely high tariffs on US businesses.

There is now a 90% chance of what can be called a Voluntary Trade Reset Recession (“VTRR”). Implementing extremely high tariffs overnight hurts many businesses; particularly small businesses because the tariff must be paid by the business when the imported goods arrive in the US. Small businesses that have for decades relied on a stable US system will have to adjust immediately and do not have the working capital to pay tariffs. Expect ships to sit offshore, orders to be canceled, and well-run generational retailers to file for bankruptcy. To make exceptions for large businesses that have the flexibility and resources to handle unforeseen expenses but not small businesses does not make sense. The challenges for small- and medium-sized enterprises are now a macro problem for the US economy, where small businesses account for more than 80% of US employment and capex.

Takeaways by Macro Roundup® AI

  1. The author puts the probability of a "Voluntary Trade Reset Recession" at 90%, tied to the overnight imposition of extremely high tariffs on US businesses.
  2. Small businesses must pay tariffs when imported goods arrive in the US and lack the working capital to do so, leading the author to expect ships sitting offshore, canceled orders, and generational retailers filing for bankruptcy.
  3. Small businesses account for more than 80% of US employment and capital expenditure, which the author argues makes the strains on small- and medium-sized enterprises a macro problem for the US economy.

Related Articles:

  • ‘This Mindless Flailing Creates Recessions’: Four Economists Dissect Trump’s Tariffs — Economists argue the tariffs will shrink the US trade deficit by making the country an unattractive destination for capital, since foreign capital inflows require a trade deficit. They warn the policies could mark a break for the dollar comparable to the Suez crisis for the British pound, portending higher borrowing costs, less investment and more stagnation.
  • Bear Market Anatomy – The Path and Shape of the Bear Market — Cyclical and event-driven bear markets have both averaged declines of roughly 30%, but cyclical ones last about two years and take five to recover, versus about eight months and one year for event-driven; structural bear markets average 60% declines over three-plus years and take a decade to recover.
  • Consumer Confidence Is Weaker than During the 2008 Financial Crisis — The University of Michigan survey of consumers shows sentiment declining among households earning both above and below $100,000, job-loss worries at levels normally seen in recessions, a record-high share saying business conditions are worsening, falling income expectations, and rapidly rising inflation expectations. The concern is that weak sentiment spills over into weaker actual spending.

AI Summary. High tariffs on direct US-China trade combined with lower tariffs on third countries will likely re-route goods through hubs such as Mexico, Singapore, and Vietnam, leaving China's overall trade surplus and the aggregate US trade deficit little changed. Efforts to decouple the two economies would mainly make existing transactions more inconvenient.

Matt Klein The Overshoot
Date Posted:

China-US trade flows will likely persist even with punitive tariffs in both countries, due in part to re-routing of goods through Mexico, Singapore, and Vietnam. @M_C_Klein

Do high tariffs on direct trade actually shrink trade imbalances?

Core argument: Punitive tariffs on direct U.S.–China trade combined with modest tariffs on third countries will likely re-route goods through transit hubs such as Mexico, Singapore, and Vietnam, leaving China's overall trade surplus and the aggregate U.S. trade deficit largely unchanged.

Despite the apparent best efforts of policymakers in both countries, trade between China and the U.S. is likely to persist. The combination of punitive tariffs imposed on direct cross-border trade and relatively modest tariffs on trade with third countries will likely encourage the re-routing of goods through transit hubs such as Mexico, Singapore, and Vietnam. This would have little to no impact on the size of China’s overall trade surplus, nor on the size of the aggregate U.S. trade deficit. The good news is that this should reduce the impact on prices and shortages relative to a literalist interpretation. The bad news is that those aiming for a “conscious uncoupling” of two of the world’s largest economies will probably only succeed in making existing transactions marginally more inconvenient. U.S. agricultural and energy exports will still end up contributing to the satisfaction of Chinese demand one way or another even if the Chinese curtail their direct purchases of U.S. goods.

Takeaways by Macro Roundup® AI

  1. Punitive tariffs on direct U.S.–China trade combined with modest tariffs on third countries will likely re-route goods through transit hubs such as Mexico, Singapore, and Vietnam, leaving China's overall trade surplus and the aggregate U.S. trade deficit largely unchanged.
  2. Re-routing of China–U.S. trade through third countries should reduce the impact on prices and shortages relative to a literalist interpretation of the tariffs, while making existing transactions only marginally more inconvenient.
  3. U.S. agricultural and energy exports will likely still contribute to satisfying Chinese demand even if China curtails direct purchases of U.S. goods, leaving proponents of a "conscious uncoupling" of the two economies unlikely to succeed.

Related Articles:

  • 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.
  • Pettis On New Round Of American Tariffs — Bilateral tariffs mostly divert trade rather than shrink the overall US trade deficit, because they address neither the internal imbalances driving surplus countries' surpluses nor the US role in accommodating them. After an earlier round of US tariffs, the US deficit with China fell while both the overall US deficit and China's overall surplus rose.

AI Summary. Foreign funds pulled an estimated $14.2bn from U.S. Treasuries and corporate bonds over a two-week period, while U.S.-based funds saw $11.4bn of outflows from U.S. fixed income. Analysts note that large institutions such as pension funds and insurers often take many months to implement such portfolio shifts.

Patti Domm Barron’s
Date Posted:

While foreigners resumed buying US stocks, bond investors continued selling through April 16, contributing to the dollar depreciation. Insurance companies and pension funds are not hedge funds, and do not make quick asset reallocations. @jnordvig

Are investors pulling money out of U.S. bonds?

Core argument: Foreign funds pulled an estimated $14.2bn from U.S. Treasuries and corporate bonds in the two weeks ending April 16, while U.S.-based funds recorded $11.4bn of outflows from U.S. fixed income over the same period.

Foreign funds sold $10.7 billion in U.S. stocks between April 3 and April 9, when Trump announced a 90-day pause on some tariffs. U.S.-based funds were net buyers of $37.5 billion in U.S. stocks in that period. Bond sales were more consistent. Foreign funds pulled an estimated $14.2 billion from U.S. Treasuries and corporate bonds in the two weeks ending April 16. In the same period, U.S.-based funds had outflows of $11.4 billion from U.S. fixed income. U.S.-based stock funds, meanwhile, saw outflows of $9.5 billion from U.S. equities in the week that ended April 16, while foreign funds were net buyers of $8.5 billion. Jens Nordvig, CEO of Exante Data,“When these big institutions like pension funds and insurance companies move, it often takes many months before they really implement the shift…It’s not like a hedge fund where they make a decision and a couple of hours later, they have shifted.”

Takeaways by Macro Roundup® AI

  1. Foreign funds pulled an estimated $14.2bn from U.S. Treasuries and corporate bonds in the two weeks ending April 16, while U.S.-based funds recorded $11.4bn of outflows from U.S. fixed income over the same period.
  2. Foreign funds sold $10.7bn of U.S. stocks between April 3 and April 9, when Trump announced a 90-day pause on some tariffs, while U.S.-based funds bought a net $37.5bn.
  3. Jens Nordvig, CEO of Exante Data, says large institutions such as pension funds and insurance companies often take many months to implement portfolio shifts, unlike hedge funds that move within hours.

Related Articles:

  • The Great European Disentanglement From US Stocks Has Only Just Started — Federal Reserve data show European investors held about $9tn in US stocks, roughly 17% of the total value of the US market. After inflation, a dollar invested in the US at the start of 2000 was worth $3.28 by the end of 2024, versus $1.63 for the rest of the world.
  • Dollar Upheaval: This Time is Different — Standard interest-rate parity implies a 50 basis-point rise in U.S. long-term yields relative to European yields should appreciate the dollar about 5%, yet the dollar depreciated 3.6%, leaving an 8.6% gap. The authors argue investors have reduced their willingness to pay for the safety and liquidity of all dollar-denominated assets, not only U.S. Treasury securities.
  • Tariffs, the Dollar, and Equities: High-Frequency Evidence from the Liberation Day Announcement — Following a sweeping US tariff announcement, the dollar's effective exchange rate depreciated rather than appreciating as standard international macroeconomic models predict: all G10 currencies gained against the dollar while the most freely floating emerging market currencies gained less or fell. The authors read this as advanced economies rebalancing away from dollar assets.

AI Summary. The authors argue globalization requires a new trade regime in which countries resolve their production, consumption, and investment imbalances domestically rather than exporting them to trade partners. They propose starting with a customs-union-style bloc of major deficit countries, which would force surplus countries to raise domestic consumption or investment or cut overproduction.

Michael Pettis Foreign Affairs
Date Posted:

“American trade policy must either reverse the savings imbalance in the rest of the world, or it must limit Washington’s role in accommodating it.” @michaelxpettis argues “Bilateral tariffs do neither.”

How should a new trade regime handle countries' domestic imbalances?

Core argument: The authors argue globalization can thrive only under a regime where countries export in order to import and resolve production, consumption, and investment imbalances domestically rather than shifting them onto trade partners.

If globalization is to thrive, the world must revert to a kind of globalization where countries export in order to import and where a country’s production, consumption, and investment imbalances are resolved domestically—not foisted onto trade partners. The world requires, in other words, a new global trade regime where countries agree to restrain their domestic imbalances and match domestic demand with domestic supply. Only then will states no longer be forced to absorb one another’s internal imbalances. Organizers could start by gathering a small group of countries that comprise the bulk of global trade deficits—such as Canada, India, Mexico, the United Kingdom, and the United States—and bringing them into it. The result would be like a customs union, initially proposed by Keynes at Bretton Woods. These states would have every incentive to join, and once they did, the rest of the world would eventually have to participate. If deficit countries refuse to run permanent deficits, after all, surplus countries cannot run permanent surpluses. They would instead be forced to raise domestic consumption or domestic investment—either of which would be good for global demand—or they would have no choice but to reduce domestic overproduction.

Takeaways by Macro Roundup® AI

  1. The authors argue globalization can thrive only under a regime where countries export in order to import and resolve production, consumption, and investment imbalances domestically rather than shifting them onto trade partners.
  2. The proposal would begin by gathering a small group of countries accounting for the bulk of global trade deficits—Canada, India, Mexico, the United Kingdom, and the United States—into an arrangement resembling the customs union Keynes proposed at Bretton Woods.
  3. If deficit countries refuse to run permanent deficits, surplus countries cannot run permanent surpluses, and would instead have to raise domestic consumption or investment—either of which would support global demand—or cut domestic overproduction.

Related Articles:

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AI Summary. China's Ministry of Commerce warned that it opposes any country reaching a trade deal with the US at the expense of Chinese interests and will take reciprocal countermeasures if that occurs.

Josh Xiao and Lucille Liu Bloomberg
Date Posted:

China has warned countries currently negotiating new trade agreements with the US that Beijing “resolutely opposes any party reaching a deal at the expense of China’s interests,” and gave notice of potential “reciprocal countermeasures.”

Will China retaliate against countries striking US trade deals harming its interests?

Core argument: China's Ministry of Commerce said Beijing "resolutely opposes any party reaching a deal at the expense of China's interests" and will "resolutely take reciprocal countermeasures" against countries that do so.

China warned countries against striking deals with the US that could hurt Beijing’s interests, upping the ante in the trade war with Washington and showing how others risk getting caught in the middle. While it respects nations resolving their trade disputes with the US, Beijing “resolutely opposes any party reaching a deal at the expense of China’s interests,” the Ministry of Commerce said in a statement Monday. If that happens, Beijing “will never accept it and will resolutely take reciprocal countermeasures,” the ministry added. “China is willing to strengthen solidarity and coordination with all parties, jointly respond and resist unilateral bullying acts.

Takeaways by Macro Roundup® AI

  1. China's Ministry of Commerce said Beijing "resolutely opposes any party reaching a deal at the expense of China's interests" and will "resolutely take reciprocal countermeasures" against countries that do so.
  2. China's Ministry of Commerce said Beijing respects other nations resolving their own trade disputes with the US, while warning that agreements harming Chinese interests will never be accepted.
  3. China's Ministry of Commerce said Beijing is willing to strengthen "solidarity and coordination with all parties" to jointly respond to and resist unilateral bullying acts.

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AI Summary. Monthly Border Patrol arrests for illegal crossings fell from a record peak of about 250,000 to roughly 48,000 and then to just over 7,000. The administration credits deploying thousands of active-duty troops to the border and ending an appointment program migrants used to request asylum, leaving tens of thousands stranded in Mexico.

Kejal Vyas, Elizabeth Findell and Santiago Pérez Wall Street Journal
Date Posted:
Is Database:
Database

Crossings at the MX border have now dropped to their lowest level since the 1960s. The change seemingly implies the surge in illegal immigration via the southern border during Biden’s first three years was a policy choice.

Have tougher enforcement policies sharply reduced illegal border crossings?

Core argument: Border Patrol arrests fell from a peak of 250,000 in a single month to about 48,000 in December, the last full month of Joe Biden's term, and to just over 7,000 in March.

Illegal border crossings declined significantly in the final year of the Biden administration, from a period of record highs that at one point saw 250,000 Border Patrol arrests in a single month. That number dropped to around 48,000 in December, the last full month of former President Joe Biden’s term, and to just over 7,000 in March.The administration has credited the drop in crossings to its decision to send thousands of active duty troops to the border as a deterrent and its move to shut down a program known as CBP One, which migrants used to make appointments to ask for asylum. As a result, tens of thousands of migrants who were awaiting a turn are now stranded in Mexico. Many are now heading back to their communities.

Takeaways by Macro Roundup® AI

  1. Border Patrol arrests fell from a peak of 250,000 in a single month to about 48,000 in December, the last full month of Joe Biden's term, and to just over 7,000 in March.
  2. The Trump administration credits the decline in crossings to deploying thousands of active duty troops to the border as a deterrent and shutting down CBP One, the program migrants used to schedule asylum appointments.
  3. Tens of thousands of migrants awaiting asylum appointments are stranded in Mexico after CBP One was shut down, and many are heading back to their communities.

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  • Recent Immigration Surge Has Been Largest in U.S. History — An analysis of government data finds the recent U.S. immigration surge is the largest on record, with net migration averaging 2.4m people a year from 2021 to 2023 and the foreign-born share of the population reaching 15.2% in 2023, up from 13.6% in 2020. About 60% of immigrants arriving since 2021 entered without legal authorization.
  • How Trump’s Hard-Line Tactics Are Driving Down Migration — U.S. Border Patrol apprehensions of people crossing the southern border illegally have fallen to about 8,300 a month, down from a record of more than 225,000 in a single month. Crossings through the Darién Gap, the land bridge between South and Central America, fell to 408 from more than 37,000 a year earlier.