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
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “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
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


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
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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
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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
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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
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“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
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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
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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
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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.

Wednesday, May 28, 2025

AI Summary. Asia's 11 largest economies have accumulated $7.5tn in US stocks and bonds, but their annual capital flows into the US fell to $68bn, equal to just 11% of their trade surpluses with the US. Their major currencies, including the yen and yuan, trade on average 57% below exchange rates adjusted for living-cost differences.

Ruth Carson, Masaki Kondo, Rebecca Choong Wilkins, and Diana Li Bloomberg
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Asia’s 11 largest economies ran a surplus of more than $900B in 2024, and hold $7.5T of dollar assets. Their net capital flows into the US fell to $68B in 2024, and there is concern that outflows could “hit like an avalanche” to avoid FX losses.

Are Asian economies recycling less of their trade surpluses into US assets?

Core argument: Asia's 11 biggest economies have bought $4.7 trillion of US equities and bonds since 1997, bringing total investments to $7.5 trillion, according to a Bloomberg analysis of US Treasury Department capital flow data.

For decades, Asia’s export powerhouses had a simple financial strategy: Sell goods to the US, then invest the proceeds in American assets. The current-account surplus of Asia’s 11 biggest economies totaled more than $900 billion last year, according to official data tallied by Bloomberg. Collectively, the 11 biggest economies have bought $4.7 trillion of US equities and bonds since 1997, taking total investments to $7.5 trillion, according to a Bloomberg analysis of capital flow data from the US Department of the Treasury. By 2024, Asia’s capital inflows into [the US] had dropped to $68 billion, making up just 11% of [its] trade surpluses with the US that had continued to expand. There are indicators suggesting that Asian currencies are severely undervalued. On average, the region’s major currencies — including the yen and yuan — are trading at 57% weaker than exchange rates that take into account differences in the costs of living, according to data compiled by Bloomberg News going back to 2007. That’s close to an all-time low of 59% set in mid-2024.

Takeaways by Macro Roundup® AI

  1. Asia's 11 biggest economies have bought $4.7 trillion of US equities and bonds since 1997, bringing total investments to $7.5 trillion, according to a Bloomberg analysis of US Treasury Department capital flow data.
  2. Asian capital inflows into the US fell to $68 billion by 2024, just 11% of the region's expanding trade surpluses with the US, while the current-account surplus of Asia's 11 biggest economies topped $900 billion last year.
  3. Asia's major currencies, including the yen and yuan, trade on average 57% weaker than exchange rates accounting for cost-of-living differences, close to an all-time low of 59% set in mid-2024, according to Bloomberg data going back to 2007.

Related Articles:

  • Taiwan’s Markets Jolted as Currency Surges Most Since 1980s — Taiwan's dollar surged as much as 5% in a day, its largest move since 1988, as traders speculated authorities might permit appreciation to help secure a trade deal with the US. Taiwan's central bank attributed the two-day appreciation partly to market chatter and urged against irresponsible speculation.
  • 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.
  • 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. US federal interest payments were projected to rise from 18% of tax revenues to about 22% by 2034 under the Congressional Budget Office's prior baseline. The author estimates that if the yield curve stays at current levels and policy is unchanged, that ratio would exceed 25% by 2032 and approach 30% by 2035.

Chris Marsh Money Inside Out
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Interest as a share of Federal revenues will exceed its 1980’s peak shortly. If the yield curve remains at current levels rather than reverting towards the CBO benchmark, interest-to-revenues will exceed 25% by 2032 and 30% by 2035. @GeneralTheorist

How fast will interest payments consume federal tax revenues?

Core argument: Under the CBO's previous baseline yield curve assumptions, US interest payments as a share of tax revenues were projected to rise from 18% this year to about 22% by 2034.

Recent budget proposals will push the United States into entirely uncharted territory—and potentially do so much quicker than previously expected. In short, even with the yield curve assumptions implied in the CBO’s previous baseline, interest payments as a share of tax revenues were set to increase from 18% this year to about 22% by 2034. Reconciliation will lower projected tax revenues further, raising this ratio. But if the yield curve settles at current levels, then interest-to-revenues will exceed 25% already by 2032 and will be on the way to 30% by 2035 on unchanged policy. If the yield curve truly remains at current levels, interest-to-revenues will exceed one-quarter already in 2032—and, in nominal terms, will double from projected USD1.0 trillion in 2026 to exceed USD2.1 trillion already in 2034.

Takeaways by Macro Roundup® AI

  1. Under the CBO's previous baseline yield curve assumptions, US interest payments as a share of tax revenues were projected to rise from 18% this year to about 22% by 2034.
  2. If the yield curve settles at current levels, US interest-to-revenues would exceed 25% by 2032 and approach 30% by 2035 on unchanged policy.
  3. Should the yield curve remain at current levels, nominal US interest payments would double from a projected USD1.0 trillion in 2026 to more than USD2.1 trillion by 2034.

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.
  • 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 Long-Term Budget Outlook: 2025 to 2055 — The Congressional Budget Office projects the 10-year Treasury note interest rate will average 3.8% over 2025–2055, close to its 3.7% average over the prior three decades, with the inflation-adjusted rate averaging 1.5%. It assesses that long-run rates are largely set by structural factors including demographics, saving and investment behavior, and federal debt.

AI Summary. The Congressional Budget Office projects that raising average annual productivity growth from 1.1% to 1.6% on a sustained basis would stabilize federal debt relative to GDP, but the authors find no evidence plausible policy changes could achieve that without significantly increasing the deficit. They identify seven areas—including immigration, housing, and permitting—where growth-enhancing changes could lower the debt trajectory.

Douglas Elmendorf, Glenn Hubbard and Zachary Liscow National Bureau of Economic Research
Date Posted:

Growth-enhancing policies in seven areas can “lower the trajectory of debt/GDP” but “almost certainly cannot” raise productivity growth from the current 1.1% to the 1.5% that would be required to stabilize the debt without tax or spending changes.

Can growth-enhancing policies alone stabilize federal debt?

Core argument: CBO projects that raising average annual productivity growth from 1.1 percent to 1.6 percent on a sustained basis would stabilize federal debt relative to GDP.

As policymakers consider ways to increase economic growth and to put federal debt on a sustainable path, policies that could contribute to both goals simultaneously might be high on the agenda. According to CBO’s projections, raising average annual productivity growth from 1.1 percent to 1.6 percent on a sustained basis would stabilize debt relative to GDP. We have found no evidence that such a large and sustained increase in productivity could be generated by plausible changes in government policy that would not themselves increase the deficit significantly. We conclude, therefore, that growth-enhancing policies almost certainly cannot stabilize federal debt on their own. However, some growth-enhancing policies can reduce the explicit tax hikes, spending cuts, or both that are needed to stabilize debt. Potential changes in seven areas—immigration, housing, the safety net, electricity transmission, R&D, taxes on business investment, and permitting - would boost economic growth, and some of those changes would do so at a low enough direct budgetary cost that they would lower the trajectory of debt relative to GDP.

Takeaways by Macro Roundup® AI

  1. CBO projects that raising average annual productivity growth from 1.1 percent to 1.6 percent on a sustained basis would stabilize federal debt relative to GDP.
  2. The authors found no evidence that such a large, sustained productivity increase could be generated by plausible policy changes that would not themselves significantly increase the deficit, and conclude that growth-enhancing policies almost certainly cannot stabilize federal debt on their own.
  3. Changes in seven areas—immigration, housing, the safety net, electricity transmission, R&D, taxes on business investment, and permitting—would boost economic growth, and some would do so at a low enough direct budgetary cost to lower the trajectory of debt relative to GDP.

Related Articles:

  • 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.
  • Productivity During and Since the Pandemic — Total factor productivity growth since early 2021 has run only slightly above its 2010–19 average, suggesting the 2020 productivity surge reflected cyclical dynamics layered on a continuation of the slow pre-pandemic trend. Productivity has since grown somewhat faster than the authors' analysis predicted, but remains well below the 1995–2004 pace.
  • Is The Great Stagnation Actually Just a ‘So-So’ Stagnation? — Long-running U.S. tests show population average reading scores moved from 255 to 256 out of 500 and math from 266 to 271, despite educational attainment rising more than three years. The author argues that if added schooling has not raised productivity, measured total factor productivity growth has been understated, shrinking the apparent "Great Stagnation" by about a third.

AI Summary. Recent college graduates aged 22–27 account for 12% of the 60 basis-point rise in US unemployment, more than twice their 5% share of the labor force. In computer and mathematical occupations, employment for that age group has fallen 8% since 2022 while older workers' employment grew 0.8%.

Matthew Martin Oxford Economics
Date Posted:
Is Database:
Database

Workers 22–27 with at least a college degree contributed 7 bps, or 12%, of the 60 bp rise in the US unemployment rate since mid-2023, 2x their weight in the labor force. Math and computer jobs for this group fell 8% since 2022.

Are recent college graduates driving a disproportionate share of rising unemployment?

Core argument: Recent college graduates aged 22–27 with a bachelor's degree or higher account for 7 bps, or 12%, of the 60 bp rise in the U.S. unemployment rate since mid-2023, more than twice their 5% share of the labor force.

Recent college graduates, or those aged 22 to 27 who attained a bachelor's degree or higher, account for 7bps, or 12%, of the 60 bp rise in the national unemployment rate since mid-2023, contributing more than twice its 5% share of the total labor force. Job openings for professional and business services sharply declined since 2021 by more than 40%, which caused a marked increase in unemployment within the industry. Some of this could be related to a normalization in hiring after the post-pandemic expansion by tech companies, following the reopening of the economy, [but] computer and mathematical science occupations are disproportionately exposed to automation and displacement. A high adoption rate by information companies along with the sheer employment declines in these roles since 2022 suggested some displacement effect from AI. The largest displacement seems to be in entry-level jobs normally filled by recent graduates. While employment for those older than 27 in computer science and mathematical occupations has grown a modest 0.8% since 2022, employment for those aged 22-27, or recent graduates, has declined by 8%. This compares with a 2% rise for college graduates in all other occupations.

Takeaways by Macro Roundup® AI

  1. Recent college graduates aged 22–27 with a bachelor's degree or higher account for 7 bps, or 12%, of the 60 bp rise in the U.S. unemployment rate since mid-2023, more than twice their 5% share of the labor force.
  2. Employment in computer and mathematical science occupations for those aged 22–27 has declined 8% since 2022, while employment for those older than 27 in those occupations grew 0.8% and college graduates in all other occupations rose 2%.
  3. Job openings in professional and business services have fallen more than 40% since 2021, alongside a marked increase in unemployment within the industry, and high AI adoption by information companies suggests some displacement effect concentrated in entry-level roles.

Related Articles:

  • Something Alarming Is Happening To The Job Market — Young college graduates have almost always had a lower unemployment rate than the overall labor force over the past four decades, but that gap recently hit an all-time low. One interpretation is that firms are replacing young workers with machines, though the surge in productivity growth such a shift would imply is hard to find in the data.
  • 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.
  • 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.

AI Summary. Four of Europe's oldest industrial groups — Schneider Electric, Siemens AG, ABB and Legrand — have added a combined €151bn in market value amid soaring demand for data centres driven by the artificial intelligence boom. Data centres are their fastest-growing source of revenue, reflecting the computing power required by AI models, gaming, cloud computing and streaming.

Ian Johnston, Mercedes Ruehl and Patricia Nilsson Financial Times
Date Posted:

Schneider Electric is now more valuable than France’s Total, as the data center buildout drives the revenue of some of the oldest industrial groups in Europe that manufacture electric equipment.

Is the AI data centre boom lifting Europe's old industrial groups?

Core argument: Schneider Electric, Siemens AG, ABB and Legrand have added a combined €151bn in market value since the launch of ChatGPT in November 2022, with Siemens AG rising more than 60%.

Four of Europe’s oldest industrial groups have added more than €150bn to their market caps on the back of soaring demand for data centres driven by the boom in artificial intelligence. Investors have spotted the potential. Since the launch of ChatGPT in November 2022, the market valuations of Schneider Electric, Siemens AG, ABB and Legrand — four of the leading European groups in the sector — have grown a combined €151bn, rising more than 60% in the case of German-listed Siemens AG. The groups continue to provide electricity to residential buildings and industrial groups. But data centres are their fastest-growing source of revenue, driven by the volume of computing power required by AI models, as well as gaming, cloud computing and streaming.

Takeaways by Macro Roundup® AI

  1. Schneider Electric, Siemens AG, ABB and Legrand have added a combined €151bn in market value since the launch of ChatGPT in November 2022, with Siemens AG rising more than 60%.
  2. Data centres are the fastest-growing source of revenue for Schneider Electric, Siemens AG, ABB and Legrand, driven by the computing power required by AI models as well as gaming, cloud computing and streaming.
  3. Schneider Electric, Siemens AG, ABB and Legrand continue to provide electricity to residential buildings and industrial groups alongside their data centre business.

Related Articles:

  • Economic Growth Now Depends on Electricity, Not Oil — Average annual electricity load growth reached 3% and is projected to continue at that rate for five years, with utilities raising expected peak demand for 2029 by 12%, or 101 gigawatts, driven by data centers, new factories, electric vehicles, heat pumps, and hydrogen production.
  • Heliocentrism — An energy use must be electrified before green grid electricity can decarbonize it, and while US grid decarbonization continues at a steady pace, the electricity share of final US energy consumption has grown little. Transmission line growth runs well below Department of Energy targets for 2030 and 2035, and transformer delivery times have stretched from 4–6 weeks to 2–3 years.
  • Electricity 2025 — US electricity demand is projected to grow about 2% annually over 2025-2027, an upward revision from an earlier 1% forecast. A study commissioned by the US Department of Energy found data centre electricity use rose from about 60 TWh in 2014 to 176 TWh in 2023, and could reach 325-580 TWh by 2028.

AI Summary. Nippon Steel is considering granting the U.S. government a "golden share" in U.S. Steel to advance its acquisition, a special class of stock whose holder can control board composition and wield influence over major management decisions. U.S.-listed companies generally cannot issue golden shares, but Nippon Steel plans to delist U.S. Steel.

Naoki Matsuda Nikkei Asia
Date Posted:

In its effort to gain approval for the acquisition of US Steel, Nippon Steel is considering granting to the federal government a unique class of stock that would give it considerable control, including over the composition of the Board of Directors.

Can a "golden share" for the government clear a foreign steel acquisition?

Core argument: Nippon Steel is considering granting the U.S. government a "golden share" in U.S. Steel, a stock class whose holder gains special rights including control over the composition of the board of directors.

Nippon Steel is considering handing a "golden share" to the U.S. government as a way to proceed with its acquisition of U.S. Steel. Golden shares are a unique class of stock that grants their holder special rights, including the right to control the composition of the board of directors. If Washington ends up holding a golden share in U.S. Steel, it would wield considerable power over important management decisions for the company even after the acquisition -- something that U.S. President Donald Trump has emphasized. U.S.-listed companies generally are not allowed to issue golden shares. If the acquisition is approved, Nippon Steel plans to buy all of U.S. Steel's shares and delist the company. It appears there are no restrictions if a golden share is issued after delisting and then transferred to the U.S. government.

Takeaways by Macro Roundup® AI

  1. Nippon Steel is considering granting the U.S. government a "golden share" in U.S. Steel, a stock class whose holder gains special rights including control over the composition of the board of directors.
  2. A U.S. government golden share would give Washington considerable power over important management decisions at U.S. Steel even after the acquisition, an outcome President Donald Trump has emphasized.
  3. U.S.-listed companies generally cannot issue golden shares, but Nippon Steel plans to buy all U.S. Steel shares and delist the company, and no restrictions appear to apply if a golden share is issued after delisting and transferred to the U.S. government.

Related Articles:

  • Biden Blocks Nippon Steel’s $14.1 Billion Takeover of US Steel — The US government blocked Nippon Steel's $14.1bn takeover of US Steel, a victory for the United Steelworkers union's leadership, which opposed the deal even as some rank-and-file members backed it. The decision leaves US Steel potentially needing to restart a sale process, and it could struggle to find a buyer for the entire company.
  • “No Inventions; No Innovations,” A History of US Steel — US Steel lagged in adopting steelmaking technology, only moving into minimills through an acquisition and a new Alabama plant, with minimills now making about 25% of its domestic output. Rival minimill producer Nucor passed US Steel in output and is now the largest US steel producer.
  • 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. A SpaceX Starship test flight ended in a mid-flight rupture, and the reused Super Heavy booster — a step toward a rapidly reusable launch system — was also destroyed before its planned splashdown. Starship's door failed to open to release dummy satellites meant to test deployment of upgraded Starlink internet satellites.

Sana Pashankar and Eric Johnson Bloomberg
Date Posted:

SpaceX’s Starship failed mid-flight. SpaceX’s reusable launch system also failed. The test foiled efforts to deploy dummy satellites, a crucial test of the company’s ability to deploy upgraded satellites to expand SpaceX’s Starlink.

Does a failed test flight set back reusable rocket development?

Core argument: SpaceX's Starship ruptured mid-flight, and Elon Musk vowed to increase the pace of Starship launches after the failure.

While SpaceX had managed to refurbish and launch a previously flown Super Heavy booster — a key step to developing Musk’s dream of a rapidly reusable launch system — it, too, was destroyed before it could splash down in the Gulf of Mexico as planned. Even worse, Starship’s door failed to open and deploy the dummy satellites that were part of a crucial test of the company’s ability to deploy upgraded satellites designed to expand SpaceX’s Starlink internet unit.

Takeaways by Macro Roundup® AI

  1. SpaceX's Starship ruptured mid-flight, and Elon Musk vowed to increase the pace of Starship launches after the failure.
  2. SpaceX refurbished and launched a previously flown Super Heavy booster, a step toward Musk's goal of a rapidly reusable launch system, but the booster was destroyed before its planned splashdown in the Gulf of Mexico.
  3. Starship's door failed to open and deploy dummy satellites in a test of SpaceX's ability to deploy upgraded satellites designed to expand its Starlink internet unit.

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.
  • Has Starlink Already Won the New Space Race? — 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.