Edward Conard

Top Ten New York Times Bestselling Author

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

Macro Roundup


Wednesday, May 7, 2025

AI Summary. The Congressional Budget Office projects the 10-year Treasury yield will average 4.1% and decline gradually to 3.8%; if it instead averaged 4.4% with other Treasury yields rising equally, analysts estimate an additional $1.8tn in debt over a decade. Under that scenario interest costs would more than double to $2.1tn, approaching 5% of GDP.

Marc Goldwein Committee For A Responsible Federal Budget
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CBO’s current forecast has the 10-year yield falling to 3.8% over the next 6 years. If the 10-year Treasury yield settles at ~4.4%, it would add $1.8T to the debt over the next decade. @MarcGoldwein.

How much would modestly higher Treasury yields add to federal debt?

Core argument: If the 10-year Treasury yield averaged 4.4% instead of the Congressional Budget Office's projected 4.1% in 2025 falling to 3.8% by 2031, with other Treasury yields rising equally, the analysis estimates an additional $1.8 trillion in debt over the decade.

In its current law projections, the Congressional Budget Office estimates the 10-year yield will average 4.1% in 2025 and fall gradually to 3.8% by 2031. If 10-year yields were instead to average 4.4% over that period (and the yield of all other Treasuries increased by an equal amount), we estimate it would add an additional $1.8 trillion to the debt over the next decade. This roughly matches our estimate of the revenue that would be raised from reciprocal tariffs, assuming they are made permanent. Interest payments on the debt are already projected to exceed the record 3.2% of GDP this year and grow past $1 trillion next year. If long-term yields were to remain at 4.4% and all other yields increased equally, interest costs would more than double to $2.1 trillion by 2035, approaching 5% of GDP. Costs would rise even further if Congress were to enact a costly reconciliation bill.

Takeaways by Macro Roundup® AI

  1. If the 10-year Treasury yield averaged 4.4% instead of the Congressional Budget Office's projected 4.1% in 2025 falling to 3.8% by 2031, with other Treasury yields rising equally, the analysis estimates an additional $1.8 trillion in debt over the decade.
  2. The estimated $1.8 trillion in added debt roughly matches the analysis's estimate of revenue raised from reciprocal tariffs, assuming they are made permanent.
  3. Interest payments on the debt are projected to exceed the record 3.2% of GDP this year and grow past $1 trillion next year, and would more than double to $2.1 trillion by 2035, approaching 5% of GDP, if long-term yields remained at 4.4% and other yields increased equally.

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.
  • 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.
  • 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.

AI Summary. Investment firm Eurizon SLJ argues that Asian exporters have hoarded much of their trade surpluses in dollar deposits rather than repatriating them, creating an overhang the firm roughly estimates at $2.5tn in China plus more from Taiwan, Malaysia, and Korea, growing about $500bn a year. It predicts this raises the risk of a non-linear dollar sell-off.

Robin Wigglesworth Financial Times
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Stephen Jen warns of a potential “Avalanche’” of USD deposits. He argues dollar weakness could trigger large-scale, “non-linear” movement of up to $2.5T in dollar holdings to home currencies, particularly in East Asia.

Do hoarded Asian export dollars raise the risk of dollar sell-off?

Core argument: Eurizon SLJ's Stephen Jen conservatively guesstimates there could be $2.5tn of liquid dollar holdings in China, plus more from Taiwan, Malaysia, and Korea, rising by about $500bn a year.

Eurizon SLJ’s Stephen Jen reckons that the Taiwanese dollar's recent rollercoaster is a harbinger of a wider, violent repricing of Asian currencies; "We continue to believe the risks of investors being blindsided by such a non-linear sell-off in the dollar continue to rise. The sharp sell-off in USDTWD last week is such an example. There will be others, we predict. We have long warned about the ‘Avalanche’ risk for the dollar. There could be USD2.5 trillion worth of ‘snow’ in China and more from the likes of Taiwan, Malaysia, and Korea, rising at a pace of USD 500 billion a year — we conservatively guesstimate. Only a modest proportion of the very large trade surpluses these countries have earned have been repatriated back home, with the bulk of the export earnings being hoarded by exporters in USD deposits. The overhang of liquid dollar holdings is just too large if the dollar weakens, the Fed cuts interest rates, and China stages a cyclical rebound. In other words, both the push and pull factors that kept the export earnings in dollars outside the home countries in the past years will potentially flip signs in the coming quarters."

Takeaways by Macro Roundup® AI

  1. Eurizon SLJ's Stephen Jen conservatively guesstimates there could be $2.5tn of liquid dollar holdings in China, plus more from Taiwan, Malaysia, and Korea, rising by about $500bn a year.
  2. Jen argues that only a modest proportion of these countries' large trade surpluses has been repatriated, with the bulk of export earnings hoarded by exporters in USD deposits.
  3. Jen predicts further episodes like the sharp sell-off in USDTWD, warning that the push and pull factors keeping export earnings in dollars could flip signs if the dollar weakens, the Fed cuts rates, and China stages a cyclical rebound.

Related Articles:

  • Why Didn’t Tariffs Push up the U.S. Dollar? — The US dollar was exceptionally strong at a level implying an ever-shrinking export base and an ever-growing trade deficit, requiring continually larger foreign inflows at ever more inflated dollar and US equity valuations to sustain. Even after its recent slide, the dollar remains strong by almost all measures.
  • 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.
  • 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.

AI Summary. China accounts for about 7% of total annual revenue at S&P 500 companies, with US firms generating $1.2tn selling to Chinese consumers — roughly 4x the size of the US-China goods trade deficit. US exposure to China runs through in-country sales as well as goods trade, including McDonald's 6,820 Chinese restaurants and 43m iPhones sold there in a year.

Torsten Sløk Apollo
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US companies generated $1.2T in revenue selling to Chinese consumers, ~4X the trade deficit in goods between China and the US. “If the US has to decouple completely from China, it would result in a significant decline in earnings for S&P 500 companies.”

How large is US corporate revenue exposure to China?

Core argument: US companies generated $1.2 trillion in revenue selling to Chinese consumers, about four times the size of the US-China goods trade deficit.

The trade war is all about goods. However, the US is also connected with China via sales of American products in China to Chinese consumers. For example, McDonald’s has 6,820 restaurants in China, Walmart operates 364 stores in China, and Apple sold 43 million iPhones in China in 2024. Calculations from FactSet’s Geographic Revenue Exposure Database show that China makes up about 7% of total annual revenue in S&P 500 companies. Comparing the magnitude of the trade deficit with the revenue generated by S&P 500 companies in China shows that US companies made $1.2 trillion in revenue selling to Chinese consumers—about four times more than the size of the trade deficit in goods between China and the US.

Takeaways by Macro Roundup® AI

  1. US companies generated $1.2 trillion in revenue selling to Chinese consumers, about four times the size of the US-China goods trade deficit.
  2. China accounts for about 7% of total annual revenue at S&P 500 companies, according to calculations from FactSet's Geographic Revenue Exposure Database.
  3. US corporate presence in China includes McDonald's 6,820 restaurants, Walmart's 364 stores, and the 43 million iPhones Apple sold in China in 2024.

Related Articles:

  • Our Outlook and the Threats We See to Portfolios, with Co-CIO Karen Karniol-Tambour — Recent moves in stocks, bond yields, the yield curve, and the dollar are small relative to the 15-year run in asset prices and to the scale of underlying shifts underway. The US share of world stock market value went from 50% to almost 75%, and recent underperformance barely undoes a couple of months of that gain.
  • 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.
  • The Trade War Will Pound Stocks — Efforts to cut U.S. trade deficits and escalate tensions with allies risk deterring foreign capital, and foreigners need only stop buying U.S. assets to hit prices, as China and Russia already have. Bridgewater estimates nonfinancial U.S. firms capture 39% of global profits though the U.S. is 15% of world output.

AI Summary. The authors model a 10 percentage point tariff increase and estimate US output falls 3% on impact—5% if other countries retaliate—converging to a steady state 1% lower, with the US trade balance deteriorating rather than improving. A unilateral tariff raises US welfare through better terms of trade, but retaliation eliminates that gain.

Stéphane Auray, Michael Devereux, and Aurélien Eyquem National Bureau of Economic Research
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A calibrated New Keynesian model suggests that unilateral tariffs can increase US welfare due to sharply lower prices for imported goods, despite lower GDP and higher inflation. Retaliation would negate the welfare gain.

How do tariffs and foreign retaliation affect US output and welfare?

Core argument: In the authors' model, a 10 percentage point tariff increase lowers US output by 3% on impact — 5% under global retaliation — and converges to a steady state GDP 1% lower, with smaller output declines in the rest of the world.

We consider an arbitrary 10 percentage point increase in tariffs. The tariff is contractionary, whether imposed unilaterally by the US or by all countries as part of global retaliation. In the baseline case, output falls by 3% on impact in the US – 5% under retaliation - and converges to a lower steady state GDP by 1%. Output also falls in the rest of the world, but to a lesser extent than in the US. While the aim of the tariffs is to eliminate the US trade balance, in our model the US trade balance deteriorates on impact. This holds true – and is further amplified – when the rest of the world retaliates with equal tariffs to the US. While a unilateral tariff improves overall welfare for the US, as it generates a strong terms-of-trade improvement, this welfare gain is fully eliminated in the case of tariff retaliation, and global welfare is lower in the long run. The response to a permanent tariff is much larger in the short run than in the long run, due to a response of monetary policy to the burst of CPI inflation following the tariff shock. Finally, the presence of global supply chains in the form of imported intermediate goods is critical for the scale effect of the tariff response.

Takeaways by Macro Roundup® AI

  1. In the authors' model, a 10 percentage point tariff increase lowers US output by 3% on impact — 5% under global retaliation — and converges to a steady state GDP 1% lower, with smaller output declines in the rest of the world.
  2. The authors find the US trade balance deteriorates on impact despite the tariff's aim of eliminating it, an effect amplified when the rest of the world retaliates with equal tariffs.
  3. A unilateral US tariff raises overall US welfare through a strong terms-of-trade improvement, but that gain is fully eliminated under retaliation, and global welfare is lower in the long run, per the authors' model.

Related Articles:

  • The Fiscal and Economic Effects of the Revised April 9 Tariffs — The authors estimate that 2025 tariffs bring the average effective tariff rate on consumers to 27%, the highest since 1903, raising short-run prices by 2.9%, equivalent to an average household loss of $4,700. They project the US economy remains 0.6% smaller over the long run and that the tariffs raise $2.4tn over 2026–35.
  • 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.

AI Summary. China has discontinued public reporting of weekly tuberculosis vaccination data, which economists had used as an alternative gauge of births because every newborn in China is required to be vaccinated. In one year 5.4m such vaccines were administered, while Chinese authorities reported 12.1m births.

Rebecca Feng and Jason Douglas Wall Street Journal
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China has stopped publishing hundreds of data points including land sales measures, foreign investment data, and unemployment indicators. Soy sauce production reports and vaccination data have also been culled.

Is China withholding data used to estimate its birth numbers?

Core argument: China administered 5.4 million tuberculosis vaccines in 2020, according to data compiled by the private Chinese think tank Forward Business and Intelligence, against the 12.1 million births Chinese authorities reported for that year.

The country’s low fertility rate has become a major economic liability—and some data pointing to it is gone, too. In the mid-2000s, an economist named Yi Fuxian questioned the accuracy of China’s population data and argued that tuberculosis vaccinations were a better measure of population growth because every newborn in China is required to be vaccinated. In 2020, 5.4 million such vaccines were administered, according to data compiled by the private Chinese think tank Forward Business and Intelligence. Chinese authorities said the country recorded 12.1 million births that year. A year later, the National Institutes for Food and Drug Control discontinued the weekly data release of tuberculosis vaccines administered, along with other vaccine data.

Takeaways by Macro Roundup® AI

  1. China administered 5.4 million tuberculosis vaccines in 2020, according to data compiled by the private Chinese think tank Forward Business and Intelligence, against the 12.1 million births Chinese authorities reported for that year.
  2. Economist Yi Fuxian questioned the accuracy of China's population data, arguing that tuberculosis vaccinations are a better measure of population growth because every newborn in China is required to be vaccinated.

Related Articles:

  • China is Suffering its Own ‘China Shock’ — Academic analysis of 12 labour-intensive Chinese manufacturing industries estimates average employment fell about 14%, or nearly 4mn jobs, between 2011 and 2019, with textile roles down 40%; a further analysis of the same sectors found 3.4mn more jobs lost through 2023. Researchers argue industrial upgrading and automation are cutting demand for lower-skilled workers and depressing their wages.
  • Xi Jinping Calls for Quality Jobs for Youth Instead of ‘Bitterness’ — China's leadership has ordered that providing "high-quality full employment" be an economic priority, with youth unemployment running at nearly three times the overall rate. Unemployment among 16-24 year-olds, excluding students, stood at 14.7% against an urban unemployment rate of 5%.
  • Was Made in China 2025 Successful? — Chinese firms have narrowed the gap with foreign competitors across targeted industries, with China's share of global patents rising by more than 4 percentage points in electric vehicles, new materials, electronics, and robotics. Gaps remain in areas such as advanced semiconductors, where Chinese firms still lag the global frontier.

AI Summary. Florida home prices are 3% below their peak and falling about 3% year over year, the fastest decline of any state, while most other states that slipped below their peaks are seeing prices rise again. The author argues the factors behind Florida's downturn are idiosyncratic enough that it likely does not foreshadow a national decline.

Aziz Sunderji Home Economics
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While Florida home prices continue to decline as prices in most other states rise, @AzizSunderji argues “Florida’s downturn is unlikely to be a harbinger of things to come” nationally, due to factors idiosyncratic to the state.

Does one state's falling home prices signal a national decline?

Core argument: Florida home prices stand 3% below their May 2024 peak and are falling 3% y/y, the fastest rate among the handful of states where prices are still declining.

Home prices in Florida are now 3% below the peak they reached in May 2024. This in itself is not particularly meaningful. About half of the states are now below their recent peaks. What does make Florida uniquely worrying is that—while most states that have fallen below their peaks are now recovering, with prices rising y/y—prices in Florida continue to decline and by much more than everywhere else. In only a handful of states are home prices falling y/y. In Florida they’re falling at the fastest rate (-3%). Our sense is that the factors responsible for the downturn in Florida [rising new supply, higher insurance costs, and weakening demand] are sufficiently idiosyncratic that it's more likely than not that the price pressures we see there are not a sign of what's to come for the rest of the country. But it’s a close call.

Takeaways by Macro Roundup® AI

  1. Florida home prices stand 3% below their May 2024 peak and are falling 3% y/y, the fastest rate among the handful of states where prices are still declining.
  2. About half of U.S. states sit below their recent home-price peaks, but most are recovering with prices rising y/y, leaving Florida's continued decline an outlier.
  3. The author attributes Florida's downturn to rising new supply, higher insurance costs, and weakening demand, judging it more likely than not that these idiosyncratic factors do not signal what's to come nationally, while calling it a close call.

Related Articles:

  • The Great Florida Migration Is Coming Undone — Florida's housing market is cooling amid excess inventory and weaker buyer demand, with analysts warning some cities could see a price correction. Home insurance premiums in parts of the state are up as much as 400% over five years, pricing out some homeowners and prompting institutional investors to sell properties.
  • Snow Belt to Sun Belt Migration: End of an Era? — The correlation between US county population growth or net migration and historical extreme heat and cold days has declined over roughly the past 50 years, and in 2010–2020 was essentially zero. The authors argue this pivoting is likely to continue and reverse the 20th-century Snow Belt to Sun Belt migration pattern.
  • Inflation Adjusted House Prices 0.8% Below 2022 Peak — Inflation-adjusted US house prices stand 0.8% below their 2022 peak, according to an affordability index built from median income, a 15% down payment, the Case-Shiller National Index, and 30-year fixed mortgage rates. With prices up 36% over four years and rates at 6.84%, the monthly payment on the same house rose 117%.

AI Summary. Investment in European defense and related technology start-ups rose 24% to $5.2bn, defying a broader downturn in European venture capital funding. Global aerospace and defense deal value rose 37% to $36.8bn, with 274 transactions marking the highest deal count of the past decade, according to PitchBook data.

Sylvia Pfeifer, Alexandra Heal and Ivan Levingston Financial Times
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Investment in European start-ups working on defence and related technologies jumped 24% y/y to $5.2B. A Bain & Company analysis finds venture investment in defence has increased 18-fold globally over the past decade.

Is private capital increasing its funding of defense start-ups?

Core argument: Investment in European defence and related-technology start-ups rose 24% last year to $5.2bn, with companies such as AI software group Helsing and drone maker Tekever defying the broader downturn in European venture capital funding.

Investment in European start-ups working on defence and related technologies jumped 24% last year to $5.2bn as investor appetite for companies such as software AI group Helsing and drone maker Tekever defied the broader downturn in European VC funding. The funding gap in Europe was “growing because of current questions around America’s commitments to Nato and there is also a European desire to fund more of Ukrainian defence”, said Michael Sion, partner at consultants Bain & Co, and author of a recent report that showed the value of venture capital deals in the defence sector has increased 18-fold in the past decade. Recent data from PitchBook showed that the deal count in the global aerospace and defence sector increased last year, with 274 transactions — the most of any year in the past decade. The total value of the deals in the sector in 2024 was $36.8bn — up $10bn, or 37%, from 2023.

Takeaways by Macro Roundup® AI

  1. Investment in European defence and related-technology start-ups rose 24% last year to $5.2bn, with companies such as AI software group Helsing and drone maker Tekever defying the broader downturn in European venture capital funding.
  2. Bain & Co partner Michael Sion said Europe's defence funding gap is growing because of questions around America's commitments to Nato and a European desire to fund more of Ukrainian defence; his report showed defence venture capital deal value up 18-fold over the past decade.
  3. PitchBook data showed 274 global aerospace and defence transactions last year, the most of any year in the past decade, with 2024 deal value reaching $36.8bn, up $10bn or 37% from 2023.

Related Articles:

  • The Costly End of Europe’s ‘Peace Dividend’ — European leaders are debating raising defence spending to 3.5% of GDP or more, a level not seen in continental Europe since the late 1960s. Sustaining that share from 1995 to 2023 would have required an extra $387bn a year across EU member states and $35bn a year for the UK, according to Financial Times calculations.
  • U.S. Advances Toward China in Hypersonic Weapons Race — U.S. startups have flown a reusable hypersonic test aircraft, the Talon-A, on fully autonomous flights exceeding five times the speed of sound, according to the Defense Department. The U.S. military had not flown a reusable hypersonic aircraft since closing its X-15 program, while China built some of the most advanced hypersonic missiles.
  • A US Drone Maker Tries to Take Back the Country’s Skies — US drone maker Skydio has produced 45,000 drones in total, while Chinese rival DJI likely makes that many every few weeks — a scale gap that matters because production costs fall predictably with cumulative output. The Pentagon's Defense Innovation Unit says that at attrition rates observed in Ukraine, the US military would exhaust its entire drone supply in five days.

Thursday, May 8, 2025

AI Summary. An analysis of US company market values finds that roughly 62% of net market-cap growth across all US companies since 2000 came from a narrow cluster of young West Coast technology firms, including Uber, Meta, Amazon, Netflix, NVIDIA, Apple and Microsoft. The author argues this concentration shows how fast, broad, and deep the shifts in US value creation have been.

Andrew McAfee The Geek Way
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The center of gravity of the American economy has shifted west; 70% of the top 50 public companies’ market cap growth occurred on the west coast btw 2000 and 2024 as well as 62% of the net market cap growth of all US companies. @amcafee

How concentrated has US market-cap growth been since 2000?

Core argument: Fully 70% of the graph's total market cap growth sits within a single "15 x 75" box, which also contains about 62% of net market cap growth across all US companies between 2000 and 2024.

There are still some smallish flakes of confetti floating around the rest of the economy, but the main party is clearly happening with the 15 x 75 box. That box is so densely populated it's hard to see all of its contents, even after making the bubbles partially see-through. Uber, Meta, Amazon, Netflix, NVIDIA, Apple and Microsoft are all there, and they have plenty of company. It looks like the Mountain Time Zone finally incubated a green bubble during this time, but no: Palantir’s headquarters is now in Denver, but the company was born in Palo Alto and spent more than fifteen years there before moving east shortly before its 2020 IPO. Fully 70% of the graph’s total market cap growth is contained within the 15 x 75 box, as is about 62% of the net market cap growth in all US companies between 2000 and 2024. It's hard for me to escape the conclusion that we went from having a diversified economy to having a diversified economy with a concentrated tech sector to, in the first quarter of the 21st century, having a young, West Coast tech sector with a national economy attached to it. That’s an exaggeration, of course, but it does capture how fast, broad, and deep the shifts in value creation have been in the second machine age.

Takeaways by Macro Roundup® AI

  1. Fully 70% of the graph's total market cap growth sits within a single "15 x 75" box, which also contains about 62% of net market cap growth across all US companies between 2000 and 2024.
  2. Uber, Meta, Amazon, Netflix, NVIDIA, Apple, and Microsoft all fall inside the densely populated 15 x 75 box, alongside many other companies.
  3. Palantir's Denver headquarters does not mark a Mountain Time Zone origin: the company was born in Palo Alto and spent more than fifteen years there before moving shortly before its 2020 IPO.

Related Articles:

  • A Visualization of Europe’s Non-Bubbly Economy — The Draghi report notes that no European Union company with a market capitalization above €100bn was founded from scratch in the past fifty years, while all six US companies valued above €1tn were. The 13 EU companies founded in that period and worth at least $10bn total about $400bn, versus nearly $30tn for their US counterparts.
  • The Long Goodbye? Incumbent Competitiveness in the 21st Century — Value creation among large American companies has become concentrated in a newer cohort of firms: businesses founded after World War II accounted for 8% of the top 50 companies' total market value in 1990 but 77% by 2024. The leading 20th-century incumbents are fading as this newer group takes over.
  • 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.

AI Summary. If the 1,000 largest public companies automated half of the roles with a high probability of automation, the authors estimate 1.7 million fewer jobs and $207bn in annual labor-cost savings. They project customers capture $72bn, suppliers $48bn, and companies retain $87bn as added profit, a 5% rise in the group's operating profit pool.

Michael Mauboussin and Dan Callahan Morgan Stanley
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Morgan Stanley estimates that the largest public firms will see their EBIT profit pool rise 5% as AI diffuses through the economy. Their model implies that the profit pool of the top quartile of firms by adaptation will rise by 16%.

How are automation labor-cost savings split among customers, suppliers, and companies?

Core argument: If the 1,000 largest public companies automated half of the roles with a high probability of automation, employment would fall by an estimated 1.7 million and annual labor costs by $207 billion, excluding implementation costs, time frame, and growth expectations.

We estimate that if the 1,000 largest public companies automated away half of their roles with a “high probability of automation,” it would result in 1.7 million fewer jobs—enabling companies to reduce labor costs by $207 billion annually. These estimates do not account for the cost of implementing technologies, specify a time frame, or factor in the growth expectations of these companies, but provide a sense of scale regarding how these technologies might reshape the corporate landscape. Using our surplus allocation framework across the index of the 1,000 largest public companies, we estimate that customers will capture $72 billion in savings through lower labor and supply costs, suppliers will capture $48 billion, and companies will retain the remaining $87 billion in surplus as incremental profit, [and] would represent a 5% increase in the operating EBIT profit pool for the combined group. Efficiency gains [won’t] be evenly distributed. For the top 25% of companies in terms of estimated efficiency gain capture, the profit pool is projected to expand by 16%, increasing from $311 billion to $361 billion.

Takeaways by Macro Roundup® AI

  1. If the 1,000 largest public companies automated half of the roles with a high probability of automation, employment would fall by an estimated 1.7 million and annual labor costs by $207 billion, excluding implementation costs, time frame, and growth expectations.
  2. Under the authors' surplus allocation framework, customers capture $72 billion of the savings through lower labor and supply costs, suppliers $48 billion, and companies retain $87 billion as incremental profit, a 5% increase in the combined operating EBIT profit pool.
  3. Efficiency gains are projected to be unevenly distributed, with the top 25% of companies by estimated efficiency-gain capture seeing their profit pool expand 16%, from $311 billion to $361 billion.

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.
  • 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 Summary. Inflation-adjusted median weekly earnings for full-time workers with a high school diploma and no college degree reached their highest level on record in the latest data, rising 11% since 2000. Every US state recorded positive real median wage growth over that period.

Jeremy Horpedahl Economist Writing Every Day
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Real median earnings for a full-time worker with a high school degree are at an all-time high and have risen 11% since 2000, prior to the “China Shock.” @jmhorp notes “Every single state had positive real median wage growth from 2001 to 2024.”

Have real wages for workers without college degrees risen since 2000?

Core argument: Real median weekly earnings for full-time workers with a high school diploma and no college degree reached their highest level in the series in 2024, adjusted for inflation with the PCE Price Index.

Here’s what that data on median weekly earnings for full-time workers with a high school diploma, but no college degree look like, adjusted for inflation with the PCE Price Index. Notice that the latest data point is for 2024, which is the highest they have ever been in this data series, and likely higher than any point in the past. While many point to about the year 2000 as when troubles for the working class started (this is when manufacturing employment really fell off a cliff, and China joined the WTO in 2001), inflation-adjusted earnings have risen 11% for this group of workers since then. You might say that’s not a lot of growth — and you would be correct! But this group is better off economically than in the year 2000. Every single state had positive real median wage growth from 2001 to 2024. Every single one!

Takeaways by Macro Roundup® AI

  1. Real median weekly earnings for full-time workers with a high school diploma and no college degree reached their highest level in the series in 2024, adjusted for inflation with the PCE Price Index.
  2. Inflation-adjusted median earnings for full-time workers with a high school diploma and no college degree rose 11% since 2000, the year many cite as the start of working-class troubles, when manufacturing employment fell sharply and before China joined the WTO in 2001.
  3. Every U.S. state recorded positive real median wage growth from 2001 to 2024.

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  • Understanding Trends in Worker Pay over the Past 50 Years — Productivity growth has been unequal across industries, across firms within industries, and across workers within firms, slowing growth in both the productivity and the pay of the median worker. The authors argue that working- and middle-class men earlier received "breadwinner rents"—pay above their marginal value to employers—and then endured slow wage growth as women's workforce participation rose.
  • They Used to Be Ahead in the American Economy. Now They’ve Fallen Behind — An analysis of census and American Community Survey microdata compares the average income of full-time workers in specific demographic groups and occupations with the national average for full-time workers, showing how each group's relative economic standing has shifted over the decades.

AI Summary. Generation X households earned 16% more in inflation-adjusted terms between ages 36 and 40 than the preceding generation at the same ages, the smallest generational improvement of any cohort. Earnings typically rise quickly in people's 30s and 40s as they move into managerial roles, but labour markets were weak when Generation X reached those ages.

The Economist Economist Staff
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Americans ages 44–59 (Gen X) saw income gains at a slower pace than both Millennials and Gen Zers. They also lag in home ownership. By age 31, Millennials/Gen Z had 2x the wealth that Gen X experienced at the same age.

Did one generation see the smallest income gain over its predecessor?

Core argument: Gen Xers' real household incomes at ages 36–40 were only 16% higher than the previous generation at the same age, the smallest improvement of any cohort.

Gen Xers do earn more after inflation than earlier generations—the continuation of a long historical trend, and one from which both millennials and Gen Zers also benefit. But their progress has been slow. From the ages of 36 to 40 Gen Xers’ real household incomes were only 16% higher than the previous generation at the same age, the smallest improvement of any cohort. People’s earnings typically rise fast in their 30s and 40s, as they move into managerial roles. Unfortunately for Gen Xers, when they were in that age range labour markets were weak, following the global financial crisis of 2007-09.

Takeaways by Macro Roundup® AI

  1. Gen Xers' real household incomes at ages 36–40 were only 16% higher than the previous generation at the same age, the smallest improvement of any cohort.
  2. Gen Xers earn more after inflation than earlier generations, continuing a long historical trend that millennials and Gen Zers also benefit from, but their progress has been slow.
  3. Earnings typically rise fast in people's 30s and 40s as they move into managerial roles, but Gen Xers reached that age range when labour markets were weak following the global financial crisis of 2007-09.

Related Articles:

  • Has Intergenerational Progress Stalled? Income Growth Over Five Generations of Americans — Using post-tax, post-transfer income data, the authors find each of the past four US generations was better off than the prior one, with Millennials' real median household income at ages 36–40 18% above the previous generation's, versus 34% for the Silent Generation, 27% for Baby Boomers, and 16% for Generation X.
  • Young Americans Continue to Build Wealth, Across the Distribution — Younger Americans now hold about double the average wealth Generation X had at the same age, roughly matching what Generation X and Baby Boomers had 5-6 years later in life. Generation X and Baby Boomers currently have roughly equal average wealth at the same age, after Generation X had been about $100,000 ahead.
  • Assets and Debt Across Generations — Comparing households by birth cohort in inflation-adjusted dollars, both Generation X (born 1965-1980) and millennials (born 1981-1996) held more debt than baby boomers (born 1946-1964). Generation X held the most mortgage debt, alongside the highest home values, while millennials held nearly 2x as much educational debt as Generation X.

AI Summary. Chinese goods exporters have accumulated substantial foreign currency onshore, with onshore foreign-currency deposits rising $14bn/month since December versus -$1bn/month in the prior twelve months. The authors speculate state banks are using these deposits to inject dollar liquidity onshore, which would imply currency intervention of up to $135bn in one quarter rather than $31bn.

Martin Lynge Rasmussen Money: Inside and Out
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Dollar repatriations by Chinese exporters through state banks are propping up the RMB, @martin_lynge infers. “Goods traders are being asked/required to repatriate FX earnings to help increase onshore FX liquidity and thereby ease depreciation pressure.”

Are exporter dollar deposits funding undisclosed currency intervention?

Core argument: Onshore FX deposits in China have risen $14bn/month since December, versus -$1bn/month over the prior twelve months, as Chinese goods traders accumulate foreign exchange onshore.

We examine whether dollar repatriation by Chinese exporters is funding banks’ FX reverse repos, something that might have helped the renminbi shrug off tariffs. In recent months, Chinese goods traders have begun to accumulate a substantial amount of FX onshore. As a result, onshore FX deposits have increased $14bn/month since December vs. -$1bn/month in the prior twelve months. We wonder whether goods traders are being asked/required to repatriate FX earnings to help increase onshore FX liquidity and thereby ease depreciation pressure. We find that banks' FX reverse repo activity, which injects FX into markets, began to correlate with onshore FX accumulation by goods traders in 2022. Given the large role of state banks in stabilizing FX markets, we speculate that goods traders' FX deposits are being used by state banks to inject dollar liquidity into onshore markets. If true, it would imply that FX intervention added up to $135bn in Q1 instead of the $31bn implied by our intervention estimates; this is a dramatic difference, and we are still in the process of evaluating whether to include bank FX reverse repos in our intervention tracking.

Takeaways by Macro Roundup® AI

  1. Onshore FX deposits in China have risen $14bn/month since December, versus -$1bn/month over the prior twelve months, as Chinese goods traders accumulate foreign exchange onshore.
  2. State banks may be using goods traders' FX deposits to inject dollar liquidity into onshore markets, as banks' FX reverse repo activity began to correlate with goods traders' onshore FX accumulation in 2022.
  3. Counting bank FX reverse repos as intervention would imply Chinese FX intervention of up to $135bn in the first quarter, rather than the $31bn implied by existing estimates.

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  • The Coming Asian FX ‘Avalanche’ — Investment firm Eurizon SLJ argues that Asian exporters have hoarded much of their trade surpluses in dollar deposits rather than repatriating them, creating an overhang the firm roughly estimates at $2.5tn in China plus more from Taiwan, Malaysia, and Korea, growing about $500bn a year. It predicts this raises the risk of a non-linear dollar sell-off.
  • 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. Strategists argue risk asset markets have already priced in a modest economic upside surprise and warn against chasing the rally ahead of what they expect to be significant price increases, supply chain disruptions, and job losses. Their strongest market views are a weaker dollar and a higher gold price.

Jan Hatzius Goldman Sachs
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Jan Hatzius expects the US tariff rate on China to “drop from ~160% to ~60% relatively soon,” and expects China to reduce tariffs by a similar amount. He continues to estimate a 12-month recession risk of 45%.

Have risk assets already priced in the modest economic upside surprise?

Core argument: Equity, credit, and cross-market strategists are wary of chasing the rally, since risk assets have already taken credit for a modest economic surprise ahead of what looks likely to be significant price hikes, supply chain disruptions, and job losses.

This is a tricky time for investors. While the economy has held up a touch better than expected so far, it’s very early and risk asset markets have already taken a lot of credit for the modest surprise. Further relaxation is certainly possible, especially if we do see trade deals over the next few weeks, but our equity, credit, and cross-market strategists are wary of chasing the rally on the eve of what looks likely to be significant price hikes, supply chain disruptions, and job losses. Our strongest views across markets remain a weaker dollar and a higher gold price. Beyond these two, we are bullish on UK rates, copper, and US natural gas, but bearish on oil.

Takeaways by Macro Roundup® AI

  1. Equity, credit, and cross-market strategists are wary of chasing the rally, since risk assets have already taken credit for a modest economic surprise ahead of what looks likely to be significant price hikes, supply chain disruptions, and job losses.
  2. The strongest cross-market views are a weaker dollar and a higher gold price, alongside bullish positions on UK rates, copper, and US natural gas and a bearish view on oil.
  3. Further market relaxation is possible, especially if trade deals are reached over the next few weeks.

Related Articles:

  • 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.
  • 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.
  • 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.