Edward Conard

Top Ten New York Times Bestselling Author

  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
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  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…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
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Monday, April 28, 2025

AI Summary. The cost of insuring against a US government default has surged while the cost for France, Germany, and Italy has remained broadly stable, leaving US debt twice as expensive to insure as Italian debt. Italy is the more indebted country, with public debt around 135% of GDP versus 121% for the US.

Jesper Rangvid Rangvid's Blog
Date Posted:

Since “Liberation Day” a 5-year CDS premium on US debt has risen sharply from 37bps to 52bps with little change in the price of insurance against Eurozone defaults. The premium remains well under the 2023 spike associated with the debt ceiling showdown.

Is US debt now more expensive to insure than Europe's?

Core argument: Insuring US debt against default now costs twice as much as insuring Italian debt, even though Italian public debt stands at about 135% of GDP versus 121% in the US.

A way to observe the loss of investor confidence [in the US] is by comparing the movements in US CDS premiums to those of other major economies. There has been virtually no change in the cost of insuring against a default by France, Germany, or even Italy since early April—CDS premiums for those countries have remained broadly stable. In stark contrast, the cost of insuring against a US default has surged. It is now twice as expensive to insure US debt as it is to insure Italian debt. This is striking, given that Italy is more indebted than the US: Italian public debt stands at around 135% of GDP, compared to 121% in the US.

Takeaways by Macro Roundup® AI

  1. Insuring US debt against default now costs twice as much as insuring Italian debt, even though Italian public debt stands at about 135% of GDP versus 121% in the US.
  2. Credit default swap premiums for France, Germany, and Italy have been broadly stable since early April, while the cost of insuring against a US default has surged.
  3. Comparing US credit default swap premiums with those of other major economies offers a way to observe the loss of investor confidence in the US.

Related Articles:

  • Are Foreigners Selling US Assets? — European and Japanese investors hold roughly 30% and 20% of their fixed income in foreign debt, versus under 10% for US investors, with US bonds making up about 15% of Eurozone and Japanese portfolios. Because foreign investors are less sticky than domestic ones, turmoil in US bond markets has greater potential to unsettle them.
  • 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.
  • The Dollar has Further to Fall — The author argues the dollar has considerably further to fall, noting Federal Reserve data show its real value nearly two standard deviations above its average since 1973, a level matched only twice before, each followed by depreciations of 25-30%. Financing the $1.1tn US current account deficit requires matching net capital inflows.

AI Summary. The author projects that new US tariffs will trigger a cascade: container departures from China slow, ship arrivals at US ports stop, trucking demand halts as shelves empty, and layoffs follow in trucking and retail. The projected end point is a recession.

Torsten Sløk Apollo
Date Posted:

Torsten Sløk argues the US will likely be in recession by this summer. The slowdown in shipping will drive a collapse in trucking demand starting in mid to late May, which in turn will lead to widespread layoffs in trucking/retail by early June.

Will tariffs set off a chain reaction from shipping to recession?

Core argument: Following the April 2 "Liberation Day" tariffs, container departures from China to the US slow rapidly, with container ship transit times of 20–40 days delaying the effect on US ports until early to mid-May.

April 2: "Liberation Day" tariffs. Container departures from China to the US slowing rapidly (20-40 days container ship transit time). Early May/Mid May: Container ships to US ports come to a stop. (1-10 days truck/rail transit time to cities). Mid-May/Late May: Trucking demand comes to a halt. (Empty shelves and companies respond to lower sales). Late May/Early June: Layoffs in trucking and retail industry. Summer 2025: Recession.

Takeaways by Macro Roundup® AI

  1. Following the April 2 "Liberation Day" tariffs, container departures from China to the US slow rapidly, with container ship transit times of 20–40 days delaying the effect on US ports until early to mid-May.
  2. The projected timeline has container ships to US ports coming to a stop in early to mid-May, followed by trucking demand halting in mid to late May, with truck and rail transit to cities taking 1–10 days.
  3. Empty shelves and companies responding to lower sales are projected to bring layoffs in the trucking and retail industries in late May and early June, followed by recession in summer 2025.

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. US ports and air freight are seeing weaker demand as importers draw down stockpiled inventories, hold goods in duty-free bonded warehouses, or divert them to nearby countries such as Canada rather than bring in new Chinese stock. One of the world's largest container shipping lines said Chinese customers cancelled roughly 30% of bookings out of China.

Peter Foster, Chan Ho-him, Patricia Nilsson, Rafe Uddin, et al. Financial Times
Date Posted:

The Port of Los Angeles, the primary entry point for goods from China, expects arrivals next week to be down a third year-over-year. Firms are running down stockpiles in anticipation of a US-China deal leading to a tariff reduction.

Are tariffs cutting shipping demand at US ports and air freight?

Core argument: Hapag-Lloyd, one of the world's largest container shipping lines, said Chinese customers had cancelled roughly 30% of its bookings out of China.

Nathan Strang, ocean freight director at US logistics group Flexport, said companies were waiting to ship goods in anticipation of Washington and Beijing agreeing a deal to mitigate the levies. US importers are looking to use up stockpiled inventories before importing fresh stock from China, said logistics executives. They are also holding stock in bonded warehouses where inventory can be stored duty-free with taxes paid on withdrawal, or diverting it to other nearby countries such as Canada. “They’re sitting on goods at origin, sitting on goods at destination,” Strang said, warning that if a deal was done to cut tariffs, shipping rates would then jump sharply. Hapag-Lloyd, one of the world’s largest container shipping lines, said Chinese customers had cancelled roughly 30% of its bookings out of China.

Takeaways by Macro Roundup® AI

  1. Hapag-Lloyd, one of the world's largest container shipping lines, said Chinese customers had cancelled roughly 30% of its bookings out of China.
  2. Nathan Strang, ocean freight director at Flexport, said companies were delaying shipments in anticipation of a US–China deal to mitigate the levies, sitting on goods at both origin and destination, and warned shipping rates would jump sharply if tariffs were cut.
  3. US importers are using up stockpiled inventories before importing fresh Chinese stock, holding goods in bonded warehouses where duties are paid on withdrawal, or diverting shipments to nearby countries such as Canada, according to logistics executives.

Related Articles:

  • Probability of VTRR 90% — 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.
  • 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. Reported cancellations of about 2GW of Microsoft datacenter capacity cover only non-binding letters of intent, while the company holds roughly 5GW of pre-leased capacity under binding contracts slated to begin operating between 2025 and 2028. The authors estimate Microsoft accounted for more than 60% of all newly leased turnkey datacenter capacity over a recent six-quarter stretch.

Dylan Patel, Jeremie Eliahou Ontiveros and Maya Barkin Semianalysis
Date Posted:

Microsoft accounted for more than 60% of new data center leased turnkey capacity between 2023 Q1 and 2024 Q2. The market’s focus on “2GW of lease cancellations,” which involve non-binding LOIs, not firm contracts, is misplaced.

Do reported datacenter lease cancellations overstate the pullback in capacity?

Core argument: Microsoft accounted for more than 60% of all new leased turnkey datacenter capacity from Q1 2023 through Q2 2024, by estimate, while also locking up non-binding letters of intent across the market.

Microsoft significantly ramped up its self-build efforts, acquiring tens of thousands of acres around the US and the globe, accelerating construction of existing sites and securing gigawatts of power for future sites. Taken together, these moves signaled Microsoft’s preparation for what was the most ambitious infrastructure buildout in history. The market has been focusing on “2GW of lease cancellations” which only covers non-binding LOIs, not firm contracts. This fails to mention that Microsoft has ~5GW of pre-leased capacity under binding contracts that will start operations between 2025 and 2028. Microsoft singlehandedly drove the leasing market in 2023 and the first half of 2024. Not only was it aggressively signing deals, but it was also effectively “freezing” the market by locking up non-binding LOIs across the board. Our estimates suggest Microsoft accounted for more than 60% of all new leased turnkey capacity from Q1 2023 through Q2 2024. In June 2024, Microsoft’s pre-leased capacity was larger than that of the four other major hyperscalers combined.

Takeaways by Macro Roundup® AI

  1. Microsoft accounted for more than 60% of all new leased turnkey datacenter capacity from Q1 2023 through Q2 2024, by estimate, while also locking up non-binding letters of intent across the market.
  2. The widely cited "2GW of lease cancellations" at Microsoft covers only non-binding letters of intent, not the roughly 5GW of pre-leased capacity under binding contracts set to begin operations between 2025 and 2028.
  3. Microsoft's pre-leased datacenter capacity in June 2024 exceeded that of the four other major hyperscalers combined, alongside acquisitions of tens of thousands of acres in the US and globally and gigawatts of secured power.

Related Articles:

  • Microsoft Pulls Back on Data Centers From Chicago to Jakarta — Microsoft has halted talks for or delayed data center projects in Indonesia, the UK, Australia, Illinois, North Dakota and Wisconsin. It is unclear how much of the pullback reflects expectations of weaker demand for artificial intelligence and cloud services versus construction constraints such as shortages of power and building materials.
  • The Alchemists — NVIDIA's share of all US capital spending is projected to approach two 20th-century peaks by 2026, and large cloud providers would need $400–500bn in new revenue to earn their traditional 50% gross margin on roughly $250bn of annual data center spending. After the dot-com collapse, Corning's fiber optic revenues did not surpass 2000 levels until 2018 in nominal terms.
  • 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.

AI Summary. Sub-Saharan Africa's working-age population is projected to roughly double, rising about 700m by 2050, and by 2030 roughly half of new entrants to the global labor force will come from the region. About 15m people enter its labor market each year against just 3m formal jobs created.

Economist Staff The Economist
Date Posted:
Is Database:
Database

The sub-Saharan African working age population will rise by ~ 700mm over the next 25 years. Currently, the region creates only 3mm jobs annually for the 15mm people entering the labor market.

Will Africa's working-age population growth reshape the global labor force?

Core argument: Sub-Saharan Africa's working-age population is projected to rise by around 700m by 2050, roughly doubling, with the region decades behind in its demographic transition.

The region is decades behind in its “demographic transition”. Its working-age population will rise by around 700m by 2050, roughly doubling. By 2030 roughly half of new workers entering the global labour force will be from sub-Saharan Africa. They will struggle to find work at home. Sub-Saharan Africa sees around 15m people enter the labour market every year but just 3m formal jobs created. 94% of sub-Saharan Africans—1.1bn people—live in countries with a GDP per person of less than $10,000.

Takeaways by Macro Roundup® AI

  1. Sub-Saharan Africa's working-age population is projected to rise by around 700m by 2050, roughly doubling, with the region decades behind in its demographic transition.
  2. By 2030 roughly half of new workers entering the global labour force will come from sub-Saharan Africa, where 94% of people—1.1bn—live in countries with GDP per person below $10,000.

Related Articles:

  • Europe Hopes Barbed Wire Will Keep Migrants Out. It Won’t — The total length of border fences in the European Union grew from 315km to 2,163km over roughly a decade, yet unauthorised crossings made up just 0.13% of all external crossings into the EU. Most migrants arrive via the Mediterranean rather than the Balkans or the eastern land border.
  • Changing Sub-Saharan Africa’s Growth Trajectory — Sub-Saharan Africa's working-age population is growing nearly 3% a year, versus close to zero in much of the world, and is projected to exceed China's within about a decade and reach a quarter of the global total. With modest productivity growth near 2%, the region is likely among the world's fastest-growing.
  • Exploring the Implications of Sub-Saharan Africa’s Demographic Explosion — Sub-Saharan Africa is projected to hold a quarter of the world's working-age population within a few decades and to surpass China's working-age population in roughly a decade. Even with modest productivity growth near 2%, the region's growth is estimated at 4.5–5.5%, raising its share of global output from about 3% while remaining small.

AI Summary. China's productive capacity is three times that of the United States and exceeds the next nine countries combined, with its share of global manufacturing quintupling to 30% while the U.S. share halved to about 15%. The authors argue Washington must convert its alliances into a platform for pooled capacity building.

Kurt Campbell and Rush Doshi Foreign Affairs
Date Posted:
Is Database:
Database

“China possesses scale, and the [US] does not.” @RushDoshi argues the US can balance China only by “transforming its alliance architecture” to gain scale by pooling the collective capacity of the EU, India, and Japan, which “China cannot match alone.”

How can the US match China's manufacturing scale?

Core argument: China's productive capacity is three times that of the United States and exceeds that of the next nine countries combined, which the article calls a decisive advantage in military and technological competition.

China’s productive capacity is three times as large as that of the United States—a decisive advantage in military and technological competition—and exceeds that of the next nine countries combined. In the two decades after China joined the World Trade Organization, its share of global manufacturing quintupled to 30% while the U.S. share halved to roughly 15%; the United Nations has estimated that, by 2030, the imbalance will grow to 45% and 11%. China leads in many traditional industries—producing 20x as much cement, 13x as much steel, three times as many cars, and twice as much power as the United States—and increasingly in advanced sectors as well. To achieve scale, Washington must transform its alliance architecture from a collection of managed relationships to a platform for integrated and pooled capacity building across the military, economic, and technological domains. In practical terms, that might mean Japan and Korea help build American ships and Taiwan builds American semiconductor plants while the United States shares its best military technology with allies, and all come together to pool their markets behind a shared tariff or regulatory wall erected against China.

Takeaways by Macro Roundup® AI

  1. China's productive capacity is three times that of the United States and exceeds that of the next nine countries combined, which the article calls a decisive advantage in military and technological competition.
  2. In the two decades after China joined the World Trade Organization, its share of global manufacturing quintupled to 30% while the U.S. share halved to roughly 15%; the United Nations has estimated the gap will widen to 45% versus 11% by 2030.
  3. China produces 20 times as much cement, 13 times as much steel, three times as many cars, and twice as much power as the United States, and increasingly leads in advanced sectors as well.

Related Articles:

  • America Is Missing The New Labor Economy – Robotics Part 1 — Building an identical robotic arm in the US costs about 2.2x more than in China, and US-labeled components still depend heavily on Chinese parts and materials with no scalable alternative. The author argues China is the only country positioned to capture full-scale intelligent robotic automation, which would let it outcompete the US across production.
  • Ship Wars — US shipyards had just five commercial ships under construction compared with 1,749 in China, and China's naval fleet is projected to grow from 370 to 475 vessels in a decade versus 297 to between 305 and 317 for the US Navy, whose major shipbuilding programs are behind schedule.
  • and — US shipyards had just five commercial ships under construction compared with 1,749 in China, and China's naval fleet is projected to grow from 370 to 475 vessels in a decade versus 297 to between 305 and 317 for the US Navy, whose major shipbuilding programs are behind schedule.
  • How South Korea’s Shipyards Could Save the US Navy — US shipyards had just five commercial ships under construction compared with 1,749 in China, and China's naval fleet is projected to grow from 370 to 475 vessels in a decade versus 297 to between 305 and 317 for the US Navy, whose major shipbuilding programs are behind schedule.

Tuesday, April 29, 2025

AI Summary. The authors find that rising male non-participation across generations reflects both "pull" factors — schooling beyond high school, which explains much of the gap at younger ages, and caretaking, whose effect is larger for later generations — and "push" factors such as falling demand for less-skilled workers tied to import competition and technology.

Leila Bengali, Mary Daly, Evgeniya Duzhak and Cindy Zhao Federal Reserve Bank of San Francisco
Date Posted:
Is Database:
Database

The share of prime-age men not in the labor force rose from 2.9% to 10.9% btw 1950 to 2023. The decline is due to an increase in time spent in education and childcare as well as “push factors” such as increased disability and fewer available manual jobs.

Are men leaving the labor force by choice or lack of opportunity?

Core argument: Increased educational attainment beyond high school explains a large portion of the gap between Millennial and Baby Boomer male nonparticipation rates at younger ages, a pattern common across most racial/ethnic groups, with the gap shrinking to near zero around age 40.

We explore two potential classes of factors that could help explain rising non-participation across generations: 1) not participating or delaying labor market entry due to the draw of other opportunities or obligations (pull factors), and 2) leaving (or not entering) the labor force due to the lack of opportunities (push factors). Educational attainment beyond high school (e.g., college and vocational and technical training) has increased over time. Figure 8 illustrates how this is reflected in higher temporary absence from the labor force due to schooling. Examining the difference between Millennials’ and Baby Boomers’ nonparticipation rates shows that education explains a large portion of the gap at younger ages, a pattern common across most racial/ethnic groups. This gap shrinks at older ages, reaching near zero at around age 40. Our results [also] support the idea that caretaking pulls prime-age men out of the labor force. Coefficients are notably larger for later generations, suggesting that the caretaking pull factor has strengthened. Millennial men are more likely than their counterparts in earlier generations to identify being out of the labor force due to disability. [Finally] falling demand for less-skilled workers as a reason for increases in the non-participation rate, attributing the decline in demand in part to import competition and technology advancements. The resulting decline in wages associated with this falling demand could provide further disincentive for labor force participation for prime-age men whose skills have become less sought after.

Takeaways by Macro Roundup® AI

  1. Increased educational attainment beyond high school explains a large portion of the gap between Millennial and Baby Boomer male nonparticipation rates at younger ages, a pattern common across most racial/ethnic groups, with the gap shrinking to near zero around age 40.
  2. Caretaking pulls prime-age men out of the labor force, with coefficients notably larger for later generations, suggesting this pull factor has strengthened; Millennial men are also more likely than earlier generations to cite disability for nonparticipation.
  3. Falling demand for less-skilled workers, attributed in part to import competition and technology advancements, is offered as a reason for rising nonparticipation, and the associated wage decline could further disincentivize participation among prime-age men whose skills are less sought after.

Related Articles:

  • Post-Pandemic Recovery for America’s Prime Age Labor Force: A Tale of Two Sexes — Prime-age women's labor force participation climbed about 5 points above its pre-pandemic level over a decade, while prime-age men's rose barely a point, only just regaining pre-pandemic levels. Despite economic expansion and labor shortages, work rates for prime-age American men are barely as high as at the trough of the severe Reagan-era recession.
  • America’s Young Men Are Falling Even Further Behind — Labor force participation among US men ages 25 to 34 has not grown in a decade, standing at 89%, which one analysis of Bureau of Labor Statistics data estimates is more than 700,000 fewer participants than at 2004 rates; women's participation in that age group is up 6 percentage points over 10 years, to 79%.
  • Bringing Home the Bacon: Have Trends in Men’s Pay Weakened the Traditional Family? — Using the 25th percentile of pretax earnings among married sole-breadwinner fathers aged 25–29 as a marriageability threshold, the author estimates the share of young single men earning below it moved from 63% to 58% over four decades. Using an earlier baseline year instead yields a larger change, from 72% to 57%.

AI Summary. Final sales to private domestic purchasers" — personal consumption plus business and residential fixed investment, excluding net exports, inventories and government spending — gives a more stable read on underlying growth than headline GDP. S&P Global estimates the US economy contracted at a 0.2% annual rate while this core measure grew 2.4%.

Jason Furman Financial Times
Date Posted:

Given the noise from the trade war, @jasonfurman proposes looking at the sum of consumer spending and fixed investment – “core GDP” – as a more reliable guide for tracking economic performance.

Does core GDP give a more stable read on underlying growth?

Core argument: S&P Global forecasts that US GDP contracted at a 0.2% annual rate in the first quarter while core GDP — final sales to private domestic purchasers — grew 2.4%, a more reliable guide to the economy's strength.

“Final sales to private domestic purchasers” is simply the growth of personal consumption and fixed investment, including business and residential investment. These tend to be inertial, with stable readings over time, just like the core consumer price index. What it excludes: net exports, inventories and government spending. This is important now because the trade war is having a huge transitory impact, especially on net exports and inventories, both in reality and in the difficulty of measuring the unusual movements. Current estimates for US first quarter growth suggest weak and possibly even negative growth. For now, the S&P Global forecast predicts that the economy contracted at a 0.2 percent annual rate. But its estimate for core GDP growth is 2.4%, a more reliable guide to the economy’s strength in the first part of this year, although tariffs could result in significant weakening going forward.

Takeaways by Macro Roundup® AI

  1. S&P Global forecasts that US GDP contracted at a 0.2% annual rate in the first quarter while core GDP — final sales to private domestic purchasers — grew 2.4%, a more reliable guide to the economy's strength.
  2. Final sales to private domestic purchasers, the growth of personal consumption and fixed investment including business and residential investment, excludes net exports, inventories and government spending, and tends to be inertial with stable readings over time.
  3. The trade war is having a large transitory impact on net exports and inventories, both in reality and in the difficulty of measuring those unusual movements, while tariffs could result in significant weakening going forward.

Related Articles:

  • How Are US Consumers and Firms Responding to Tariffs? — The author projects that new US tariffs will trigger a cascade: container departures from China slow, ship arrivals at US ports stop, trucking demand halts as shelves empty, and layoffs follow in trucking and retail. The projected end point is a recession.
  • ‘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.

AI Summary. Because Chinese AI chips are less powerful, matching a 100,000-chip Nvidia B200 cluster could require roughly 300,000 Chinese Ascend 910Cs, raising energy use and the engineering complexity of distributing AI workloads, alongside a gap in Nvidia's software and networking ecosystem. With about 10x China's compute, the US can deploy proportionally more AI "virtual employees.

Lennart Heim ChinaTalk
Date Posted:
Is Database:
Database

American export controls are forcing China to build less efficient AI clusters. @ohlennart argues this will lead to an enduring American edge in broad compute capacity which in turn will “compound into a broader economic advantage over time.”

How does a compute advantage translate into broader economic advantage?

Core argument: Matching a cluster of 100,000 Nvidia B200s might require roughly 300,000 Ascend 910Cs in China, raising energy consumption and the engineering complexity of distributing AI workloads across chips.

If current trends in AI training continue—shifting from two chips in 2012 to clusters of hundreds of thousands in 2025—export controls may eventually bite harder. China would need to build significantly larger clusters to compensate for less powerful chips: a cluster of 100,000 Nvidia B200s (a leading U.S. AI chip) might require a Chinese equivalent of 300,000 Ascend 910Cs (China's leading chip), resulting in higher energy consumption and greater engineering complexity for distributing AI workloads. Compounding this hardware gap is Nvidia's sophisticated software and networking ecosystem—crucial for orchestrating massive AI chip clusters and currently unmatched by Chinese alternatives. Think of AI systems as “virtual employees” that can perform cognitive labor, replacing remote colleagues you’ve never met in person. The number of AI employees an economy can deploy hinges directly on its compute resources. With roughly 10 times more compute capacity than China, the U.S. can field proportionally more AI employees across its economy, in sectors as diverse as drug discovery, logistics optimization, industrial robotics, and AI research itself. This compute advantage therefore compounds into a broader economic advantage over time.

Takeaways by Macro Roundup® AI

  1. Matching a cluster of 100,000 Nvidia B200s might require roughly 300,000 Ascend 910Cs in China, raising energy consumption and the engineering complexity of distributing AI workloads across chips.
  2. With roughly 10 times China's compute capacity, the U.S. can field proportionally more AI "virtual employees" across drug discovery, logistics optimization, industrial robotics, and AI research itself.
  3. AI training has scaled from two chips in 2012 to clusters of hundreds of thousands in 2025, and export controls may bite harder as that trend continues, compounded by Nvidia's software and networking ecosystem that Chinese alternatives have yet to match.

Related Articles:

  • Microsoft’s Datacenter Freeze – 1.5GW Self-Build Slowdown & Lease Cancellation Misconceptions — Reported cancellations of about 2GW of Microsoft datacenter capacity cover only non-binding letters of intent, while the company holds roughly 5GW of pre-leased capacity under binding contracts slated to begin operating between 2025 and 2028. The authors estimate Microsoft accounted for more than 60% of all newly leased turnkey datacenter capacity over a recent six-quarter stretch.
  • A Critical Juncture Amid Policy Shifts — US artificial-intelligence-producing sectors' value added quadrupled from $278bn to $1.13tn in constant 2017 dollars between 2010 and 2023, raising their share of GDP from 2.4% to 3.5% while manufacturing's share fell 1.5 percentage points. The authors attribute the data-processing sector's productivity gains largely to elevated physical capital investment and complementary intermediate inputs, including energy.
  • AI Frenzy Leads US Venture Capital to Biggest Splurge In Three Years — Large US venture rounds are concentrated in a few high-growth, well-known companies such as OpenAI and Anduril, while most start-ups cannot access similar capital. Industry researchers describe this as an untested departure from traditional venture investing, which backs very early companies on the expectation that one outsized winner covers portfolio losses.

AI Summary. Commodities trading house Mercuria estimates China's copper inventories could be drawn down to zero within months, calling it one of the greatest tightening shocks in the market's history. US buyers rushing to secure copper ahead of potential US tariffs are pulling imports away from the rest of the world, putting the US in direct competition with China for supplies.

Tom Wilson and Camilla Hodgson Financial Times
Date Posted:

Chinese stocks of copper are on pace to hit zero over the summer as American demand surges in an effort to get ahead of tariffs.

Are US tariff fears draining China's copper inventories to zero?

Core argument: Mercuria's head of metals and mining research Nicholas Snowdon told the Financial Times that China's copper inventories could deplete to zero by the middle of June at the current pace of draws.

China’s copper stockpiles are on track to dwindle to nothing in just a few months, as the market suffers “one of the greatest tightening shocks” in its history on fears of US tariffs, according to senior executives at commodities trading house Mercuria. Huge US demand, as buyers rush to get their hands on copper ahead of the potential imposition of levies by the Trump administration, was sucking imports of the metal into the country from the rest of the world and setting it up in direct competition with China for supplies, said the Geneva-based group. Chinese stocks of copper have rapidly declined over the past few weeks, and “at the current pace of draws, those Chinese inventories could deplete [to zero] by the middle of June”, Nicholas Snowdon, Mercuria’s head of metals and mining research, told the Financial Times.

Takeaways by Macro Roundup® AI

  1. Mercuria's head of metals and mining research Nicholas Snowdon told the Financial Times that China's copper inventories could deplete to zero by the middle of June at the current pace of draws.
  2. Mercuria executives describe the copper market as suffering "one of the greatest tightening shocks" in its history, driven by fears of US tariffs.
  3. US buyers rushing to secure copper ahead of potential Trump administration levies are pulling imports from the rest of the world, putting the US in direct competition with China for supplies, according to Mercuria.

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AI Summary. The Swiss Re Institute projects insured losses from natural catastrophes could reach $145bn this year, above the 10-year average, with severe thunderstorms, floods and wildfires as the main drivers and about $40bn from Los Angeles wildfires. The report attributes intensifying risks to population growth, urban sprawl and climate change.

Gautam Naik Bloomberg
Date Posted:

Reinsurer Swiss Re estimates natural disasters could cause $145B of insured losses in 2025, including $40B from losses related to the Los Angeles wildfires.

Are insured catastrophe losses rising above their ten-year average?

Core argument: Swiss Re Institute projects insured losses from natural catastrophes could reach $145 billion in 2025, well above the 10-year average, citing population growth, urban sprawl and climate change.

Insured losses from natural catastrophes could soar to $145 billion this year — well above the 10-year average — as population growth, urban sprawl and climate change combine to supercharge risks, according to a report by Swiss Re Institute. Severe thunderstorms, floods and wildfires are the main drivers behind this year’s loss estimate, the reinsurer said in a report on Tuesday. The figure is based on a long-term growth trend of 5% to 7% each year and includes about $40 billion in losses from the Los Angeles wildfires. As natural disasters become more frequent, the US is bearing the brunt of insured losses. In 2024, America accounted for almost 80% of the global total, with losses concentrated in Florida, Texas, California, Louisiana and Colorado.

Takeaways by Macro Roundup® AI

  1. Swiss Re Institute projects insured losses from natural catastrophes could reach $145 billion in 2025, well above the 10-year average, citing population growth, urban sprawl and climate change.
  2. Swiss Re's $145 billion estimate rests on a long-term loss growth trend of 5% to 7% a year and includes about $40 billion from the Los Angeles wildfires, with severe thunderstorms, floods and wildfires the main drivers.
  3. The US accounted for almost 80% of global insured catastrophe losses in 2024, concentrated in Florida, Texas, California, Louisiana and Colorado, according to Swiss Re Institute.

Related Articles:

  • The World Is Getting Riskier. Americans Don’t Want to Pay for It — Americans' resistance to paying to insure against risks from illness, old age, and natural and financial disasters is growing alongside those risks; JPMorgan estimated wildfires around Los Angeles caused $50bn in losses, of which only $20bn were insured. Socializing risk removes the price signal that encourages the insured to mitigate their own exposure.
  • Reinsurers Little Exposed to LA Fires After Retreat From Disaster Risks — Citi analysts estimate reinsurers could absorb less than 3% of insured losses from the Los Angeles wildfires. Reinsurers' share of modelled catastrophe risk has fallen from about 46% over the past 25 years to 33%, following years of wildfire losses that led major reinsurers to reduce their appetite for such risks.
  • Catastrophe Bonds Look Set to Dodge Losses as LA Fires Rage — Catastrophe bonds, which insurers use to transfer risk to capital markets and which pay out only when cumulative losses over a year exceed a preset threshold, are unlikely to incur significant losses from wildfires in Los Angeles. The Swiss Re Global Cat Bond Index gained more than 17% in 2024, following a record near-20% return in 2023.