Edward Conard

Top Ten New York Times Bestselling Author

  • “…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 offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a 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 represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…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 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


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.

Tuesday, May 27, 2025

AI Summary. Estimates of the legislation's cost rest on a baseline assuming individual and business taxes would have been allowed to rise sharply as prior tax cuts expired. The Committee for a Responsible Federal Budget estimates the bill adds $3.1tn in incremental debt over 2026-2035, below its pre-election projections of $4tn and $7.8tn for the competing campaign agendas.

Matt Klein The Overshoot
Date Posted:
Is Database:
Database
Is Important:
Important

Matt Klein notes that the House Bill contains unexpectedly large spending cuts. Adding tariff revenue, “it is possible that the new budget could lead to almost no incremental increase in federal debt issuance compared to the ‘current law’ baseline!”

Does the tax bill add less debt than campaign proposals suggested?

Core argument: The Committee for a Responsible Federal Budget estimates the passed bill adds $3.1tn to debt relative to the current-law baseline, versus its late-October 2024 central projections of $7.8tn for the Trump agenda and $4tn for the Harris agenda in 2026–2035.

Most estimates of the total “cost” of the proposed legislation start from the absurd baseline that individual and business taxes would have been allowed to rise sharply in 2026 as the TCJA expired. That was never particularly likely. The main surprise, to the extent that there was one, was the severity of the spending cuts, although some of them may be moderated by the Senate. In fact, according to the Committee for a Responsible Federal Budget (CRFB), the current budget plan adds far less to the debt stock relative to the “current law” baseline over the next ten years than they had expected based on pre-election campaign promises. The CRFB’s “central” projection as of the end of October 2024 was that the Harris agenda would generate additional borrowing of $4 trillion in 2026-2035 relative to “current law” and that the Trump agenda would generate $7.8 trillion in extra debt. Their current estimate of the bill just passed is that it would add only $3.1 trillion in incremental debt. Add in reasonable estimates of the revenue impact of tariffs and it is possible that the new budget could lead to almost no incremental increase in federal debt issuance compared to the “current law” baseline!"

Takeaways by Macro Roundup® AI

  1. The Committee for a Responsible Federal Budget estimates the passed bill adds $3.1tn to debt relative to the current-law baseline, versus its late-October 2024 central projections of $7.8tn for the Trump agenda and $4tn for the Harris agenda in 2026–2035.
  2. Cost estimates for the legislation rest on a baseline assuming individual and business taxes rise sharply in 2026 as the Tax Cuts and Jobs Act expires, an outcome the author argues was never particularly likely.
  3. Adding reasonable estimates of tariff revenue could leave the new budget with almost no incremental increase in federal debt issuance relative to the current-law baseline, according to the author.

Related Articles:

  • Fiscal Space and Rising Yields — 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.
  • The Fiscal Impact of the Harris and Trump Campaign Plans — The national debt stands at 99% of Gross Domestic Product and is projected to reach 125% by 2035 under current law, exceeding the record 106% share set in 1946 within three years. Central estimates put debt at 134% of GDP under the Harris plan and 143% under the Trump plan.
  • 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. The House bill combines spending cuts concentrated in Medicaid, food stamps and student loans with an extension of all expiring tax cut provisions, revenue offsets including a scaled-back energy bill, new tax cuts on tips, overtime, seniors and state and local deductions, manufacturing incentives, and homeland security and defense funding.

Michael Cembalest J.P. Morgan
Date Posted:
Is Database:
Database
Is Important:
Important

JPM expects the Senate to pass the House bill without major changes; “adding $2.8 to $3.4T to deficits over the next ten years when including interest on the incremental debt” relative to CBO’s baseline.

How does the House bill balance spending cuts, tax cuts, defense?

Core argument: The House bill's major components comprise spending cuts concentrated in Medicaid, food stamps and student loans, extension of all TCJA tax cut provisions, revenue offsets, new tax cuts, manufacturing incentives, and funding for homeland security and defense.

The chart shows the major widgets of the House bill: first some spending cuts which are mostly Medicaid, food stamps and student loans; then extension of all TCJA tax cut provisions; then some offsets to raise revenue, mostly assorted tax hikes (including a retaliatory tax on companies from other countries[such as Canada, the UK, France and Australia] that impose digital services taxes on large US tech companies. Such taxes are poorly disguised service sector tariffs, and a reflection of Europe’s inability to develop its own cohort of thriving large cap tech companies.]) and a sharply scaled back energy bill; then some new tax cuts (on tips, overtime, seniors, SALT etc) and some manufacturing incentives; and then at the end of the chart, funding for homeland security and defense.

Takeaways by Macro Roundup® AI

  1. The House bill's major components comprise spending cuts concentrated in Medicaid, food stamps and student loans, extension of all TCJA tax cut provisions, revenue offsets, new tax cuts, manufacturing incentives, and funding for homeland security and defense.
  2. The bill's revenue offsets consist mostly of assorted tax hikes plus a sharply scaled back energy bill, including a retaliatory tax on companies from countries such as Canada, the UK, France and Australia that impose digital services taxes on large US tech companies.
  3. New tax cuts in the House bill cover tips, overtime, seniors and SALT.

Related Articles:

  • Breaking Down the One Big Beautiful Bill — 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.
  • 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.
  • The Worrying Rise in Long-Term US Yields — US long-term real interest rates, measured as the five-year forward five-year real rate, have not declined alongside weakening US economic activity and remain far above the equivalent Euro zone rate derived from interest rate swaps. The author argues this divergence indicates a potentially large fiscal risk premium forming in US yields.

AI Summary. Rising bond yields outside the US appear to be drawing foreign investors back to home markets, where they can earn high yields without currency risk and higher returns than on currency-hedged US Treasuries. Higher Japanese yields reflect above-target inflation and the Bank of Japan's bond-portfolio runoff, while European yields reflect anticipated fiscal spending and issuance.

Joseph Wang Fed Guy Blog
Date Posted:
Is Database:
Database

Since 2023, foreign investors have bought a net $1.2T of coupon Treasuries, or 1/3 of the net private coupon supply. The falling dollar and rising yields abroad will likely reduce foreign demand for Treasuries and “ultimately force lower fiscal spending.”

Are rising foreign bond yields pulling investors away from Treasuries?

Core argument: Rising yields abroad appear to be drawing foreign investors back to their home markets, where they can earn higher returns without currency risk than on FX-hedged Treasuries.

Rising yields abroad appear to be drawing foreign investors back home where they can earn high yields without currency risk. Global yields are rising in part due to rising Treasury yields, but there are also country specific reasons for the rising yields. Japanese yields are rising in part due to persistently above target inflation and the BOJ’s QT program. Fiscal spending in Europe has led to a rise in European bond yields as the market anticipates an increase in issuance and stronger growth. Foreign investors can earn higher returns at home than with FX hedged Treasuries. Note that the potential success of Trump’s policy to reduce the trade deficit would itself also imply less foreign demand for Treasuries as it reduces the amount of dollars flowing abroad.

Takeaways by Macro Roundup® AI

  1. Rising yields abroad appear to be drawing foreign investors back to their home markets, where they can earn higher returns without currency risk than on FX-hedged Treasuries.
  2. Japanese yields are rising in part due to inflation persistently above target and the Bank of Japan's quantitative tightening program, while European yields are rising as markets anticipate more issuance and stronger growth from fiscal spending.
  3. Success of Trump's policy to reduce the U.S. trade deficit would itself imply weaker foreign demand for Treasuries, since fewer dollars would flow abroad.

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.
  • 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 US dollar's 10% decline from its peak includes about 4 percentage points attributable to euro strength following Germany's surprise fiscal stimulus, leaving the dollar roughly flat on an adjusted basis. Because reserve currency status took decades to build and has persisted through past policy swings, the author argues the weakness reflects a cyclical rerating rather than terminal decline.

Robin Brooks Robin Brooks Substack
Date Posted:

“Dollar weakness isn’t quite as bad as it at first looks,” @robin_brooks argues. With 4pp of the dollar’s 10% decline explained by German fiscal stimulus, recent moves may not be out of the range of the “usual up and down in global currency markets.”

Is the dollar's decline cyclical rather than a terminal decline?

Core argument: The dollar has fallen 10% from its post-election peak, but four percentage points of that decline reflect Euro strength following Germany's surprise fiscal stimulus rather than dollar weakness.

Dollar weakness isn’t quite as bad as it at first looks.The chart shows the 2y2y forward rate differential (blue line), which many people track as one of the key determinants of Dollar moves. The fall in the Dollar from its post-election peak is therefore 10%, but four percentage points in that decline have nothing to do with Dollar weakness. They’re about Euro strength after Germany’s surprise fiscal stimulus. When you adjust for that, the Dollar is flat since November 5: it rose 6% through January 20, whereafter it fell 6% on US tariff announcements in February and April. The underlying question is whether Dollar weakness is temporary - a cyclical rerating as markets ditch US “exceptionalism” - or whether it’s the start of a terminal decline. US reserve currency status took many decades to build and has been stable through many past ups and downs in US policy making. Whatever is going on with US policy now, it’s thus unlikely to erode reserve currency status - even a little bit - any time soon. That leaves a cyclical rerating as the most likely explanation for recent Dollar weakness and - in my mind at least - means that recent Dollar declines are just part of the usual up and down in global currency markets.

Takeaways by Macro Roundup® AI

  1. The dollar has fallen 10% from its post-election peak, but four percentage points of that decline reflect Euro strength following Germany's surprise fiscal stimulus rather than dollar weakness.
  2. Adjusted for Euro strength, the dollar is flat since November 5, having risen 6% through January 20 before falling 6% on US tariff announcements in February and April.
  3. US reserve currency status took many decades to build and has been stable through past swings in US policymaking, leaving a cyclical rerating as the most likely explanation for recent dollar weakness rather than a terminal decline.

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.
  • Tariffs, the Dollar, and Equities: High-Frequency Evidence from the Liberation Day Announcement — Following a sweeping US tariff announcement, the dollar's effective exchange rate depreciated rather than appreciating as standard international macroeconomic models predict: all G10 currencies gained against the dollar while the most freely floating emerging market currencies gained less or fell. The authors read this as advanced economies rebalancing away from dollar assets.

AI Summary. Germany overtook Japan as the world's largest creditor nation, with net external assets of ¥569.7tn versus Japan's ¥533.05tn ($3.7tn), ending Japan's run at the top that began in 1991; China ranked third at ¥516.3tn. Germany's rise reflects a current account surplus of €248.7bn driven largely by strong trade performance.

Erica Yokoyama Bloomberg
Date Posted:
Is Database:
Database

Despite Japan’s external assets increasing 13% y/y to $3.7T in 2024, an all-time high, Germany assumed Japan’s position as the largest creditor nation due to its current account surplus of ~€250B and the euro’s appreciation.

Has Germany overtaken Japan as the world's largest creditor nation?

Core argument: Germany's net external assets of ¥569.7tn overtook Japan's ¥533.05tn ($3.7tn) at the end of 2024, ending Japan's 34-year run as the world's top creditor nation that began when it passed Germany in 1991.

Japan’s net external assets reached ¥533.05 trillion ($3.7 trillion) at the end of 2024, rising about 13% from the previous year, according to data released Tuesday by the Ministry of Finance. While the figure marked an all-time high, it was overtaken by Germany, whose net external assets totaled ¥569.7 trillion. China stayed in third place with net assets of ¥516.3 trillion. Japan began its streak at the top by overtaking Germany in 1991. Germany’s ascent reflects its substantial current account surplus, which reached €248.7 billion in 2024 thanks largely to a strong trade performance. Japan’s surplus in turn was ¥29.4 trillion according to the finance ministry, equivalent to around €180 billion. Last year the euro-yen rate rose around 5%, exaggerating the increase in German assets versus Japanese in yen terms.

Takeaways by Macro Roundup® AI

  1. Germany's net external assets of ¥569.7tn overtook Japan's ¥533.05tn ($3.7tn) at the end of 2024, ending Japan's 34-year run as the world's top creditor nation that began when it passed Germany in 1991.
  2. Japan's net external assets rose about 13% in 2024 to an all-time high of ¥533.05tn, according to Ministry of Finance data, with China third at ¥516.3tn.
  3. Germany's current account surplus reached €248.7bn in 2024, largely on strong trade performance, versus Japan's ¥29.4tn (about €180bn), while a roughly 5% rise in the euro-yen rate exaggerated the gain in German assets measured in yen.

Related Articles:

  • The Challenge of Using Excess Global Savings — China, Germany and Japan together ran current account surpluses of $884bn in 2024, with the top 10 surplus countries at $1.568tn, offset by a US current account deficit of $1.134tn and a UK deficit of $123bn. The author argues surplus savings are funding government borrowing in creditworthy-currency countries rather than productive investment elsewhere.
  • The U.S. Trade Deficit: Myths and Realities — Taxing capital inflows would weaken the dollar but could raise domestic interest rates and depress investment, harming long-term growth, while an interest rate cut absent recession would be inflationary and erode any real depreciation needed to durably improve the trade balance. Fiscal restraint could weaken the dollar and reduce the trade deficit.
  • Exportweltmeister: The Low Returns on Germany’s Capital Exports — Germany's annual returns on foreign assets were 2 to 5 percentage points lower than those of comparable countries and last among the G7, while domestic German assets returned about 3 percentage points more per year than foreign holdings. Its external wealth also provides limited consumption insurance and little demographic diversification.

AI Summary. Extending working lives is the most effective way to offset population aging's impact on dependency ratios, and the trend is already underway: in developed economies median effective working life has risen 12% (34 to 38 years) versus a 5% gain in life expectancy, with employment's share of population up from 46.0% to 48.3%.

Kevin Daly, Mambuna Njie and Johan Allen Goldman Sachs
Date Posted:
Is Database:
Database

Since 2000, median life expectancy in developed economies has increased 5% to 82 years, but has been outpaced by a 12% rise in the median effective working life from 34 to 38 years.

Can longer working lives offset the effects of population aging?

Core argument: Median effective working life in developed economies has risen 12% since 2000 (from 34 to 38 years), outpacing the 5% rise in median expected life expectancy (from 78 to 82 years).

It is far from clear that the economic drawbacks of population aging are as intractable as they are commonly depicted. Although rising public sector pension costs remain a concern for some economies, the most effective means of counteracting the impact of aging on dependency ratios is to extend working lives. Fortunately, this trend is already in motion: while median expected life expectancy in developed economies has increased by 5% since 2000 (from 78 to 82 years), the median effective working life has risen by 12% (from 34 to 38 years) and the share of the total population in employment has increased from 46.0% to 48.3%. In other words, despite the large decline in DM working-age ratios that has already taken place, DM dependency ratios have actually fallen. This trend towards extending working lives shows little sign of abating and is taking place in countries with minimal changes to pension laws, suggesting an adaptive response to increased longevity.

Takeaways by Macro Roundup® AI

  1. Median effective working life in developed economies has risen 12% since 2000 (from 34 to 38 years), outpacing the 5% rise in median expected life expectancy (from 78 to 82 years).
  2. Developed-market dependency ratios have fallen despite a large decline in working-age ratios, as the share of the total population in employment increased from 46.0% to 48.3%.
  3. Extending working lives is the most effective means of counteracting aging's impact on dependency ratios, and the trend is occurring in countries with minimal changes to pension laws, suggesting an adaptive response to increased longevity.

Related Articles:

  • The Wealth of Working Nations — Because of population aging, growth in GDP per capita and GDP per working-age adult have diverged across advanced economies; from 1998 to 2019 Japan's accumulated growth per working-age adult was 31.9% versus 29.5% in the US. The authors find a standard neoclassical growth model calibrated to each country's working-age population tracks output per working-age adult in most economies.
  • Workforce Participation for Older Americans: Warning Lights Flashing — Labor force participation for Americans 55 and older remains almost two percentage points below pre-pandemic levels, while participation for youth, prime-age women, and prime-age men has recovered or exceeded earlier levels. Participation among 55–64 year-olds in the US has been overtaken by the OECD average and Europe.
  • Thoughts and Comments on Demographic Aging and Shrinking — As an arithmetic matter, the greying of societies is driven much more by smaller families than by longer lives, which the author attributes to a withering away of the family. Demographic simulations project that by 2040 couples in their 60s in China will likely have at least one living parent to care for, and many will have two or three.

AI Summary. An analysis of US county-level presidential voting found that Republicans increased their vote share in each of three consecutive elections in 1,433 counties, home to about 42.7m voting-age Americans, versus 57 counties for Democrats, home to roughly 8.1m. Overall, 2,678 counties shifted Republican by an average of 13.3 percentage points, against 435 shifting Democratic by 8.8 points.

Shane Goldmacher New York Times
Date Posted:
Is Database:
Database

In 2016–2024, 1,433 of ~3,100 counties moved towards Trump in all three presidential elections. Of those counties, only 3 had a median income above $100,000, while 18 of the 57 counties that moved towards the Democrats had a median income > $100,000.

How many US counties have shifted Republican across three consecutive elections?

Core argument: Donald Trump increased the Republican share of the presidential vote in each of his three elections in 1,433 counties — close to half of all U.S. counties — while Democrats gained steadily across all three in only 57 of more than 3,100 counties, according to a New York Times analysis.

Mr. Trump has increased the Republican Party’s share of the presidential vote in each election he’s been on the ballot in close to half the counties in America — 1,433 in all — according to an analysis by The New York Times. Democrats have steadily expanded their vote share in those three elections in only 57 of the nation’s 3,100-plus counties. The scale of Mr. Trump’s expanding support is striking. While roughly 8.1 million Americans of voting age live in triple-trending Democratic counties, about 42.7 million live in Republican ones. 435 counties voted more Democratic in 2024 than did so in 2012, by an average improved margin of 8.8 percentage points. And 2,678 counties became more Republican, by an average of 13.3 percentage points. That’s six times as many counties moving toward the G.O.P. than toward the Democratic Party — and by a substantially wider margin.

Takeaways by Macro Roundup® AI

  1. Donald Trump increased the Republican share of the presidential vote in each of his three elections in 1,433 counties — close to half of all U.S. counties — while Democrats gained steadily across all three in only 57 of more than 3,100 counties, according to a New York Times analysis.
  2. About 42.7 million voting-age Americans live in counties trending Republican across all three Trump elections, compared with roughly 8.1 million in triple-trending Democratic counties.
  3. Comparing 2024 with 2012, 2,678 counties became more Republican by an average of 13.3 percentage points while 435 became more Democratic by an average of 8.8 points, six times as many counties shifting toward the Republican Party.

Related Articles:

  • What Happened In 2024 — Democratic two-way presidential support fell 3 points from 52% to 49% between the two most recent elections, with larger declines among overlapping demographic groups: 12 points among young Latinos, 16 among young Latino men, and 17 among young Latino men who vote irregularly.
  • How To Get Rich in 2025 — Academic estimates compiled by The Economist indicate inheritances, after falling over the 20th century, were worth about 10% of GDP on average by the end of the 2010s, with roughly $6tn inherited across the rich world in a year. Falling family sizes mean each inheritance is spread across fewer heirs.
  • Zero-Sum Thinking and the Roots of U.S. Political Divides — Zero-sum thinking — viewing gains for one group as losses for another — is associated with greater support for liberal economic policies, stronger alignment with the Democratic Party, and weaker alignment with the Republican Party. The authors also find it linked to believing the QAnon conspiracy theory holds some truth and to sympathy for the attack on the U.S. Capitol.