Edward Conard

Top Ten New York Times Bestselling Author

  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…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 comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…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 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
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…a 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 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 should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Thursday, May 22, 2025

AI Summary. Yields on 40-year Japanese government bonds have risen by a full percentage point to nearly 3.7%, which the author attributes to inflation, long-term fiscal concerns, Japanese insurers largely halting purchases of very long-term bonds under new solvency rules, and the Bank of Japan shifting from buyer to net seller while still holding over 50% of the market.

Ajay Rajadhyaksha Financial Times
Date Posted:
Is Database:
Database

The Japanese yield curve is now the steepest in the developing world, reflecting worsening concern about high debt levels along with the BOJ’s switch from quantitative easing to tightening.

Why are long-term Japanese government bond yields rising sharply?

Core argument: The 40-year Japanese government bond yields nearly 3.7%, up a full percentage point since the beginning of April, and Japan's credit rating sits three notches below the US even after the recent US downgrade.

The 40-year Japanese bond now yields nearly 3.7%, up a full percentage point just since the beginning of April. Japan’s fiscal problems are well known, of course. The country has had a massive debt burden for many years. Its credit rating is three notches below the US even after the recent US downgrade. None of this is new. But several things have changed recently. First is inflation. Second, Japanese insurers have virtually stopped purchasing very long-term bonds, to satisfy new economic solvency ratios introduced recently. Third, long-term fiscal concerns are rising. Perhaps the most important change is from the Bank of Japan. The central bank still owns a staggering 50 per cent-plus of the Japanese government bond market. But with deflation now in the rear view, the BoJ has started quantitative tightening. And as this one massive buyer has become a net seller, Japanese bond yields are normalising — aka rising. [Strangely], the 40-year JGB now yields over 4.6% — almost 1% more than the “on-the-run” 40-year JGB simply because it is less liquid and “off-the-run.”  That kind of glitchy pricing is [further] evidence of the evaporating demand for longer-term Japanese debt.

Takeaways by Macro Roundup® AI

  1. The 40-year Japanese government bond yields nearly 3.7%, up a full percentage point since the beginning of April, and Japan's credit rating sits three notches below the US even after the recent US downgrade.
  2. The Bank of Japan still owns more than 50% of the Japanese government bond market but has begun quantitative tightening with deflation in the rear view, turning that massive buyer into a net seller as yields rise.
  3. An off-the-run 40-year JGB yields over 4.6%, almost a percentage point more than the on-the-run 40-year issue because it is less liquid, pricing the article cites as evidence of evaporating demand for longer-term Japanese debt.

Related Articles:

  • The Global Rise in Long-Term Yields — Long-term government bond yields have risen globally, with 30-year yields in the UK and Japan at their highest levels since 2000 and the US increase modest by comparison. Rising Japanese yields reduce the incentive for Japanese households to buy foreign bonds such as US Treasuries, adding upward pressure on US long-term rates.
  • 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.
  • Global Debt Report 2025 — About 60% of fixed-rate government debt in advanced economies maturing by 2027 — roughly $9tn — was issued before the recent interest-rate tightening, with weighted average yields below 2% versus projected 10-year rates near 3.6%, implying refinancing at nearly double the original cost. France, Spain, the UK, and the US face heightened vulnerability, with maturing debt exceeding 15% of GDP.

AI Summary. Thirty-year bond yields traded above 5% in the US, near their highest since 2007, while Japan's reached the highest since records began in 1999, with weak auction demand in both and selling pressure on long-dated UK, German and Australian debt. Deutsche Bank argues higher Japanese yields draw local buyers away from US Treasuries.

Alice Gledhill and Mia Glass Bloomberg
Date Posted:
Is Database:
Database

Long-dated bonds are under pressure globally as 10-year term premia hit a decadal high. US 30-year bond yields exceeded 5% for the first time since 2007, as a 100bps rise in Japanese yields further reduced the appeal of Treasurys.

Are long-term bond yields rising across major economies on fiscal concerns?

Core argument: US 30-year bond yields traded above 5% this week, near their highest since 2007, while Japan's 30-year yields hit the most since records began in 1999, with auctions in both countries meeting tepid demand.

Thirty-year bond yields this week traded above 5% in the US, not far from their highest since 2007, while those in Japan reached the most since records began in 1999, with auctions in both countries running into tepid demand. Long-dated bonds in the UK, Germany and Australia have also come under selling pressure. The rising Japanese yields pose a threat to US Treasuries by making the notes more attractive to local buyers, according to Deutsche Bank AG. Pressure on bonds is likely to increase as Berlin starts to amp up issuance to pay for the investment later this year or next, particularly since changes to Dutch pension reforms from the start of 2026 will remove a major historic source of demand. While Germany’s traditional adherence to fiscal discipline means it has more capacity to ramp up borrowing than many other governments, the challenge is that it will be competing against higher long-end supply around the globe. “There’s clearly a lack of demand for long end duration everywhere,” said Shaniel Ramjee, co-head of multi-asset in London at Pictet Asset Management.

Takeaways by Macro Roundup® AI

  1. US 30-year bond yields traded above 5% this week, near their highest since 2007, while Japan's 30-year yields hit the most since records began in 1999, with auctions in both countries meeting tepid demand.
  2. Deutsche Bank argues rising Japanese yields threaten US Treasuries by making the notes more attractive to local buyers, as long-dated bonds in the UK, Germany and Australia also come under selling pressure.
  3. Pressure on bonds is likely to increase as Berlin ramps up issuance to fund investment later this year or next, particularly since Dutch pension reforms from the start of 2026 will remove a major historic source of demand.

Related Articles:

  • Record High US Long-Term Interest Rates — The 5-year, 5-year forward real US interest rate stands at 2.5%, the highest since 2010 and above levels seen during past periods of Federal Reserve tightening. Long-term real rates rising while the Federal Reserve contemplates further cuts is unusual and raises concerns for US debt sustainability.
  • 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.
  • 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.

AI Summary. The author argues the US could face a "sudden stop" — an abrupt cutoff of the foreign capital inflows that fund its large trade deficit — which would sharply lower the dollar's foreign exchange value. Because those inflows also finance much US domestic investment, their loss would push interest rates higher and cause a severe housing crash.

Paul Krugman Paul Krugman Substack
Date Posted:
Is Database:
Database

Krugman speculates that loss of confidence in the dollar might cause a “sudden stop” in capital flows from abroad and sharply higher interest rates, resulting in a “severe” housing crash as in the domestically triggered credit crisis of 2008.

What would an abrupt cutoff of foreign capital inflows do to housing?

Core argument: Krugman argues the United States may face an emerging-market-style "sudden stop," an abrupt cutoff of the foreign capital inflows that cover the large US trade deficit.

[The 2008 US financial crisis] was very different from the emerging-market crises I used to spend so much time on. And right now I’m worried that the U.S. might be facing an emerging-market-type crisis: A “sudden stop,” an abrupt cutoff of inflows of foreign capital. If we have a crisis like that it could, in particular, cause a severe housing crash. We have a big trade deficit covered by large inflows of capital. A sudden stop to capital flows into America would mean that there would no longer be money to cover those big trade deficits — and this would mean a sharp drop in the foreign exchange value of the dollar. The impact on interest rates could be especially ugly. The United States relies on inflows of capital from abroad to pay for a significant part of domestic investment spending. Losing any significant part of that money would force interest rates higher. And what would be hit if interest rates surge? The answer, overwhelmingly, is housing. A sudden stop in capital inflows would mean a severe housing crash.

Takeaways by Macro Roundup® AI

  1. Krugman argues the United States may face an emerging-market-style "sudden stop," an abrupt cutoff of the foreign capital inflows that cover the large US trade deficit.
  2. A sudden stop in capital inflows would sharply lower the dollar's foreign exchange value, since the money covering large US trade deficits would no longer be available.
  3. Because the United States relies on foreign capital to fund a significant part of domestic investment spending, Krugman argues that losing that money would force interest rates higher and cause a severe housing crash.

Related Articles:

  • 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.
  • Without Spending Cuts, Brace for Slow Growth — The author argues that US trade deficits have funded debt-financed consumption rather than domestic business investment, noting that since 2000 real interest rates have tended to fall as trade deficits widen while business investment has been uncorrelated with both. If tariffs shrink trade deficits, interest rates could rise and worsen America's fiscal balance.
  • The Global Rise in Long-Term Yields — Long-term government bond yields have risen globally, with 30-year yields in the UK and Japan at their highest levels since 2000 and the US increase modest by comparison. Rising Japanese yields reduce the incentive for Japanese households to buy foreign bonds such as US Treasuries, adding upward pressure on US long-term rates.

AI Summary. Starlink has launched more than 8,417 satellites, 39% of all satellites launched since the first artificial satellite reached orbit, and its roughly 7,300 operational satellites make up almost two-thirds of all operational spacecraft. It delivers low-latency broadband to over 5mn customers in 125 countries and is projected to generate $12bn in revenue and $2bn in free cash flow this year.

Peggy Hollinger Financial Times
Date Posted:

Starlink is generating $12B in revenue and $2B in free cash flow. New entrants like Amazon and China’s Guowang and SpaceSail may compress margins. Further, the Chinese firms’ “goals are not necessarily designed for profit.”

Does one satellite network now dominate orbit and broadband from space?

Core argument: Musk has launched more than 8,417 satellites since 2019, equal to 39% of all satellites launched since Sputnik, with an ultimate target of flying more than 40,000.

Since 2019, Musk has launched more than 8,417 satellites — 39% of all those launched since Sputnik, the first artificial satellite to be sent into orbit. Starlink has about 7,300 operational satellites circling the Earth, representing almost two-thirds of all operational spacecraft, according to Jonathan McDowell, astrophysicist and space flight historian. Today it is delivering low-latency broadband to more than 5mn customers in 125 countries and is expected to generate $12bn in revenue and $2bn in free cash flow this year, according to consultancy Quilty Space. Ultimately, it aims to fly more than 40,000 satellites.

Takeaways by Macro Roundup® AI

  1. Musk has launched more than 8,417 satellites since 2019, equal to 39% of all satellites launched since Sputnik, with an ultimate target of flying more than 40,000.
  2. Starlink operates about 7,300 satellites, almost two-thirds of all operational spacecraft, according to astrophysicist and space flight historian Jonathan McDowell.
  3. Starlink delivers low-latency broadband to more than 5mn customers across 125 countries and is expected to generate $12bn in revenue and $2bn in free cash flow this year, according to consultancy Quilty Space.

Related Articles:

  • It’s Not a Space Race, It’s the Space Olympics — The US operates 81% of commercial satellites in orbit and 86% of global effective launch capacity, with NATO allies second in satellites at 11% and China second in launch capacity at 9%. China is pursuing mega satellite constellations and reusable rockets, in many cases copying approaches already proven by US companies.
  • Building an Enduring Advantage in the Third Space Age — The United States and China each logged their highest-ever annual launch rates, at 103 and 66 launches, while Russia fell to 19 and Europe recorded three. The US accounted for roughly half of global launches but 81% of effective launch capacity, since Falcon 9 and Falcon Heavy comprised 93% of US launches.
  • Space: The Missing Element of Your Strategy — Private-sector funding of space-related companies has topped $10bn, close to a tenfold rise over the past decade, though the US government remains the largest source of space funding. If current momentum continues, commercial funding for space ventures could surpass government funding within 20 years.

AI Summary. China invested $500bn in research and development, triple the level of 2012, and spends nearly as much on R&D as the U.S. after adjusting for purchasing power, according to the Organization for Economic Cooperation and Development. One study found Chinese government venture-capital funds invested nearly $200bn across 9,600 artificial intelligence firms between 2000 and 2023.

Brian Spegele Wall Street Journal
Date Posted:
Is Database:
Database

Since Xi took office in 2012, China’s R&D spending has tripled. Chinese R&D spending in 2023, adjusted for PPP, was only ~5 percent less than that of the US.

Has China's R&D spending grown to nearly match the US?

Core argument: China invested $500 billion in research and development last year, triple its level when Xi Jinping took office in 2012.

Last year, China invested $500 billion on research and development, triple from when Xi took office in 2012. China spends nearly as much on R&D as the U.S., adjusting for purchasing power parity, according to the Organization for Economic Cooperation and Development. Investment in AI is a major focus. One study last year found that Chinese government venture-capital funds invested nearly $200 billion across 9,600 AI firms between 2000 and 2023.

Takeaways by Macro Roundup® AI

  1. China invested $500 billion in research and development last year, triple its level when Xi Jinping took office in 2012.
  2. China spends nearly as much on R&D as the U.S. when adjusted for purchasing power parity, according to the Organization for Economic Cooperation and Development.
  3. One study found that Chinese government venture-capital funds invested nearly $200 billion across 9,600 AI firms between 2000 and 2023, with artificial intelligence a major focus of China's investment.

Related Articles:

  • 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.
  • China Has Become a Scientific Superpower — China tops the Nature Index, which counts contributions to papers in a set of prestigious peer-reviewed journals, after ranking second at the index's launch with less than a third of America's contribution. Six Chinese universities or institutions rank in the world's top ten by research output in the Leiden Ranking, and seven by the Nature Index.
  • Paper Tiger? Chinese Science and Home Bias in Citations — Researchers disproportionately cite work from their own country, and measured against a benchmark that distributes world citations by the size of citing and cited countries, every country studied shows some home bias. The authors estimate China is a clear outlier at 42.3%, followed by Iran and India at 23.2% each and the US at 15.9%.

Friday, May 23, 2025

AI Summary. China's top global ranking on the international PISA exams for 15-year-olds covers only four regions, Beijing, Shanghai, Jiangsu, and Zhejiang, while over 85% of China's population lives in regions whose scores Beijing does not disclose. The authors' statistical estimate places China's overall student achievement on par with other upper-middle-income economies such as Turkey and Mauritius.

Nicholas Eberstadt American Enterprise Institute
Date Posted:
Is Database:
Database

Nicholas Eberstadt argues China’s “knowledge capital” as measured by PISA test scores, may be overstated, as testing is limited to four high income provinces/municipalities, excluding 85% of the population.

Do China's top test scores represent the whole country's students?

Core argument: Over 85% of China's population, and an even larger share of its student population, live in regions for which Beijing does not disclose PISA achievement scores.

In 2019 the world’s leading authority on the testing and evaluation of educational performance all around the world, the Program on International Student Achievement (PISA), announced stunning results from its latest round of global examinations of 15 year olds: China was number one, all across the board. China may well be punching above its developmental weight in student achievement, like most of the rest of East Asia. Evidence at hand, however, does not yet make such a case. Over 85% of China’s national population—and even more of its student population—reside in regions for which Beijing does not disclose achievement scores. There is reason to think scores in these regions—and thus for China overall—could be far lower than those reported for “China B-S-J-Z” (the acronym for the amalgam of Mainland regions, Beijing, Shanghai, Jiangsu and Zhejiang, that participated in the most recent round of international PISA exams). Global relationships we estimate statistically offer a central estimate for China’s knowledge and skills that would place student achievement in that great country on par with places like Turkey and Mauritius—other developing societies the World Bank likewise classifies as “upper middle income” economies.

Takeaways by Macro Roundup® AI

  1. Over 85% of China's population, and an even larger share of its student population, live in regions for which Beijing does not disclose PISA achievement scores.
  2. China's top-ranked 2019 PISA results came from "China B-S-J-Z," an amalgam of Beijing, Shanghai, Jiangsu and Zhejiang, and scores in undisclosed regions could be far lower.
  3. Statistical estimates of global relationships place China's central estimate of student knowledge and skills on par with Turkey and Mauritius, other economies the World Bank classifies as upper middle income.

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.
  • Have Humans Passed Peak Brain Power? — The share of Americans reporting they read a book in the past year has fallen below half, alongside declining performance in numeracy and problem-solving in most countries. The share of adults unable to use mathematical reasoning to evaluate the validity of statements averages 25% in high-income countries and 35% in the US.
  • 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.

AI Summary. The House reconciliation bill known as the One Big Beautiful Bill Act is estimated to add $2.5tn to primary deficits over a decade, or $3.1tn to the debt including interest. If its temporary provisions were extended without offsets, the estimated debt increase including interest would be $5.1tn.

Marc Goldwein Committee For A Responsible Federal Budget
Date Posted:

The House reconciliation bill is heading to the Senate. A @MarcGoldwein analysis finds that, inclusive of interest, the bill, which contains almost $800B in Medicaid cuts, will expand the debt by $3.1T over the next decade

How much would the House reconciliation bill add to the debt?

Core argument: The House of Representatives' FY2025 reconciliation bill, the One Big Beautiful Bill Act of 2025, would add $2.5 trillion to primary deficits over the coming decade.

The House of Representatives’ Fiscal Year (FY) 2025 reconciliation bill – titled the One Big Beautiful Bill Act of 2025 (OBBBA) – would add $2.5 trillion to primary deficits over the coming decade, adding $3.1 trillion to the debt including interest. If its temporary provisions are extended without offsets, we estimate it would add $5.1 trillion to the debt including interest.

Takeaways by Macro Roundup® AI

  1. The House of Representatives' FY2025 reconciliation bill, the One Big Beautiful Bill Act of 2025, would add $2.5 trillion to primary deficits over the coming decade.
  2. Including interest, the One Big Beautiful Bill Act of 2025 would add $3.1 trillion to the debt over the coming decade.
  3. If the One Big Beautiful Bill Act's temporary provisions are extended without offsets, the bill is estimated to add $5.1 trillion to the debt including interest.

Related Articles:

  • The Great “Transfer”-mation — Government transfers rose from 8.2% of Americans' total personal income in 1970 to 17.6% in 2022, making them the third largest income source after work and investments. The share of U.S. counties drawing a quarter or more of personal income from transfers rose from under 1% in 1970 to 53% in 2022.
  • The Economic Geography Of The 2024 Elections — Counties where government transfer programs such as Social Security, Medicare, Medicaid, and unemployment insurance make up at least a quarter of personal income gave Trump 63% of the vote, while counties where transfers account for less than 15% gave Harris 56%. Transfers supplied 18% of total US personal income.
  • Saved by Medicaid: New Evidence on Health Insurance and Mortality from the Universe of Low-Income Adults — Using linked Census and tax records for 37m low-income adults, the authors estimate that state Medicaid expansions raised enrollment by 12 percentage points and cut mortality among low-income adults by 2.5%, implying a 21% reduction in the mortality hazard of new enrollees. They estimate direct budgetary costs of $5.4m per life saved and $179,000 per life-year saved.

AI Summary. The Bank of Japan purchased all of Japan's net new government debt issuance, and more, for over a decade under its bond-buying and yield curve control programs, meaning Japanese yields were set by the central bank rather than by markets. With the central bank no longer absorbing all new issuance, yields may need to rise further to attract private buyers.

Robin Brooks Robin Brooks Substack
Date Posted:

Japan’s government debt is 240% of its GDP. Quite apart from the BOJ’s cessation of debt purchases, “The underlying truth is that Japan has severely depleted its fiscal space. This shows up either in rising yields or currency debasement.” @robin_j_brooks

Must yields rise when a central bank stops buying government debt?

Core argument: The Bank of Japan's QQE bond purchases absorbed all of Japan's net new government debt issuance, and then some, between 2012 and 2024.

The chart shows net new issuance of Japanese government debt (black line) and who’s been buying that debt, focusing on key buyers like the BoJ (blue bars), Japanese banks (orange bars) and foreigners (pink bars). The key point is that the BoJ via its bond purchase program - called QQE - bought all of Japan’s net new debt issuance (and then some) between 2012 and 2024. That’s important because it means that Japanese yields haven’t been set by markets, but were essentially equivalent to a currency peg: the central bank was intervening to keep yields low. In fact, the 10-year yield was pegged at zero for much of this time under the BoJ’s yield curve control (YCC) program. It’s only very recently that the BoJ stopped buying all of Japan’s net new debt issuance, so - for the first time in over a decade - we’re now in a situation where markets are doing price discovery. Even with the recent dramatic rise in yields, it’s possible yields may need to rise still further to entice private buyers.

Takeaways by Macro Roundup® AI

  1. The Bank of Japan's QQE bond purchases absorbed all of Japan's net new government debt issuance, and then some, between 2012 and 2024.
  2. Japanese government bond yields were not set by markets during the QQE period but were essentially equivalent to a currency peg, with the 10-year yield pegged at zero for much of that time under yield curve control.
  3. With the Bank of Japan no longer buying all of Japan's net new debt issuance, markets are conducting price discovery in Japanese government bonds for the first time in over a decade, and yields may need to rise further to entice private buyers.

Related Articles:

  • The Japanese Government Bond Market is in Trouble — Yields on 40-year Japanese government bonds have risen by a full percentage point to nearly 3.7%, which the author attributes to inflation, long-term fiscal concerns, Japanese insurers largely halting purchases of very long-term bonds under new solvency rules, and the Bank of Japan shifting from buyer to net seller while still holding over 50% of the market.
  • Long-Term Bond Yields Soar Globally on Fiscal Policy Fears — Thirty-year bond yields traded above 5% in the US, near their highest since 2007, while Japan's reached the highest since records began in 1999, with weak auction demand in both and selling pressure on long-dated UK, German and Australian debt. Deutsche Bank argues higher Japanese yields draw local buyers away from US Treasuries.

AI Summary. The U.S. federal deficit topped 6% of GDP last year and is projected by independent estimates to exceed 7% for a decade under the House Republican budget plan, higher than any sustained stretch in U.S. history and than almost any other advanced economy. The International Monetary Fund projects the U.S. will account for two-thirds of advanced economies' deficits.

Greg Ip Wall Street Journal
Date Posted:

Greg Ip finds that prior to 2023, the US accounted for half of advanced economies’ deficits; from 2023 through 2030, the US deficit will make up two-thirds of the borrowing of advanced economies.

Is the U.S. deficit an outlier among advanced economies?

Core argument: The U.S. federal deficit topped 6% of GDP last year and, under the budget plan approved by House Republicans before final amendments, is expected to exceed 7% for a decade, according to independent estimates.

Deficits are an issue everywhere, but the U.S. is still an outlier. The federal shortfall topped 6% of GDP last year, and under the budget plan approved by House Republicans early this week (but before final amendments), is expected to top 7% for a decade, according to independent estimates. That would be higher than any other sustained stretch in U.S. history, and more than almost any other advanced economy. Because of the U.S.’s size, this has an outsize global impact. Before 2023, it accounted for half of advanced economies’ deficits, according to the International Monetary Fund. From 2023 through 2030, it will be two-thirds.

Takeaways by Macro Roundup® AI

  1. The U.S. federal deficit topped 6% of GDP last year and, under the budget plan approved by House Republicans before final amendments, is expected to exceed 7% for a decade, according to independent estimates.
  2. A sustained stretch of U.S. deficits above 7% of GDP would exceed any other in U.S. history and nearly any other advanced economy.
  3. The U.S. accounted for half of advanced economies' deficits before 2023 and will account for two-thirds from 2023 through 2030, according to the International Monetary Fund.

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.
  • Long-Term Bond Yields Soar Globally on Fiscal Policy Fears — Thirty-year bond yields traded above 5% in the US, near their highest since 2007, while Japan's reached the highest since records began in 1999, with weak auction demand in both and selling pressure on long-dated UK, German and Australian debt. Deutsche Bank argues higher Japanese yields draw local buyers away from US Treasuries.
  • 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.

AI Summary. An analysis of more than 6,500 companies' stock prices over four decades finds a median maximum drawdown of 85% taking 2.5 years from peak to trough, with the median stock recovering only to 90% of its prior peak and about 54% never returning to their previous high.

Michael Mauboussin and Dan Callahan Morgan Stanley
Date Posted:

Btw 1985 and 2024, the median drawdown for 6,500 US stocks was 85%, with a duration of 2.5 years from peak to trough, and another 2.5 years to recovery. More than one-half of all stocks never recover to their prior highs. @mjmauboussin

How deep do typical stock drawdowns run, and do stocks recover?

Core argument: Across more than 6,500 companies from 1985 to 2024, the median maximum stock price drawdown was 85 percent, taking 2.5 years from peak to trough, while the average drawdown was 81 percent over 3.9 years.

Exhibit 1 shows the maximum drawdown and recovery results for the stocks of more than 6,500 companies from 1985 to 2024. We calculate the drawdowns using price changes rather than total returns. The median drawdown was 85 percent and the time from peak to trough was 2.5 years. The average drawdown was a little lower, 81 percent, and took 3.9 years. The median stock’s recovery from its maximum drawdown is 90 percent of the prior peak price (par), which means it fails to return to its past high. In fact, about 54 percent of stocks never return to par after hitting bottom. The median time to go from trough to par, 2.5 years, is the same as it took to go from peak to trough. The average recovery, at nearly 340 percent of par, is a lot higher than the median recovery because of the skewness in the data. This tells you that some stocks produced very high returns off of the bottom. As with the medians, the time it takes to drop from peak to trough is roughly the same as it takes to recover.

Takeaways by Macro Roundup® AI

  1. Across more than 6,500 companies from 1985 to 2024, the median maximum stock price drawdown was 85 percent, taking 2.5 years from peak to trough, while the average drawdown was 81 percent over 3.9 years.
  2. The median stock recovers to 90 percent of its prior peak price after its maximum drawdown, and about 54 percent of stocks never return to par, based on price changes rather than total returns.
  3. The average recovery, at nearly 340 percent of par, far exceeds the median recovery because of skewness in the data, indicating that some stocks produced very high returns off the bottom.

Related Articles:

  • Which U.S. Stocks Generated the Highest Long-Term Returns? — Of the 29,078 U.S. common stocks in a database spanning nearly a century, 51.6% had negative cumulative returns, while 17 stocks returned more than 5m% — led by Altria at 265m%. Those top performers averaged annualized returns of just 13.47%, underscoring the value of time invested.
  • Do Stocks Outperform Treasury Bills? — Five firms—Exxon Mobil, Apple, Microsoft, General Electric, and IBM—accounted for 10% of total US stock market wealth creation from 1926 to 2016, and just 4% of firms generated all net stock market gains. Most listed firms had lifetime buy-and-hold returns below those of one-month Treasury bills.
  • Long-Term Shareholder Returns: Evidence From 64,000 Global Stocks — A study of about 64,000 global stocks estimates net global stock market wealth creation of $75.7tn, with returns highly concentrated: the top 159 firms (0.25%) account for half of net wealth creation and the top 1,526 (2.39%) account for all of it. Fewer than half of stocks beat one-month US Treasury bills, 42.6% of non-US and 44.8% of US stocks.