Edward Conard

Top Ten New York Times Bestselling Author

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

Macro Roundup


Monday, June 2, 2025

AI Summary. Current Population Survey estimates indicate America's foreign-born population surpassed 50m for the first time and exceeded 15% of the national population, above the prior peak of 14.8% recorded in 1890. Mass immigration during that earlier wave was associated in contemporary opinion with widening income and wealth gaps and depressed wages for less-skilled native-born men, and sweeping national restrictions followed.

Nicholas Eberstadt and Patrick Norrick American Enterprise Institute
Date Posted:
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The US foreign-born population reached 51.4mm, or 15.4% of the population in 2024, Nicholas Eberstad notes, surpassing the prior peak of 14.8% set in 1890.

Has America's foreign-born share risen above its previous historical peak?

Core argument: America's foreign-born population surpassed 50 million for the first time in 2024, according to Current Population Survey estimates.

In 2024, according to CPS estimates, America’s total foreign-born population surpassed the 50 million mark for the first time. No less significant, the CPS series indicates that the foreign-born now exceed 15% of the national population for the first time since such figures were first collected (in the 1850 census). The previous high water mark for percentage of foreign-born was in 1890—during what we might call America’s first wave of mass immigration, when the fraction peaked at 14.8%. The immigration restrictions enacted in the 1920s reflected the deep unpopularity of mass immigration at that time among influential political constituencies. Strong anti-immigration sentiment had been evident in America since at least the 1890s; sweeping national restrictions on immigration were very nearly enacted in 1905. Mass immigration was associated in the contemporary mentality with the widening income and wealth gaps and depressed wages for less skilled native-born men that characterized the First Gilded Age. It is a reminder that stringent curbs on immigration have occurred in the USA before.

Takeaways by Macro Roundup® AI

  1. America's foreign-born population surpassed 50 million for the first time in 2024, according to Current Population Survey estimates.
  2. The CPS series indicates the foreign-born now exceed 15% of the U.S. population for the first time since such figures were first collected in the 1850 census, above the prior peak of 14.8% in 1890.
  3. Mass immigration was associated in the contemporary mentality of the First Gilded Age with widening income and wealth gaps and depressed wages for less-skilled native-born men, and sweeping national restrictions were nearly enacted in 1905 before the 1920s curbs.

Related Articles:

  • Foreign-Born Number and Share of U.S. Population at All-Time Highs in January 2025 — The U.S. foreign-born population reached 53.3m, or 15.8% of the population, the highest level in American history, exceeding the shares recorded in 1890 (14.8%) and 1910 (14.7%) during the "Great Wave" of immigration. A four-year increase of 8.3m is larger than that of any four-year period in American history and exceeds the 7.9m increase over the prior 12 years.
  • U.S. Immigrant Population in 2023 Saw Largest Increase In More Than 20 Years — The U.S. immigrant population rose by about 1.6m to a record 47.8m, the largest single-year increase since 2000, according to a Pew Research Center analysis of U.S. Census Bureau data. Immigrants made up 14.3% of the total U.S. population, up from 4.7% in 1970 but below the 1890 record of 14.8%.
  • and — The U.S. immigrant population rose by about 1.6m to a record 47.8m, the largest single-year increase since 2000, according to a Pew Research Center analysis of U.S. Census Bureau data. Immigrants made up 14.3% of the total U.S. population, up from 4.7% in 1970 but below the 1890 record of 14.8%.
  • The Demographic Outlook: 2025 to 2055 — The U.S. immigrant population rose by about 1.6m to a record 47.8m, the largest single-year increase since 2000, according to a Pew Research Center analysis of U.S. Census Bureau data. Immigrants made up 14.3% of the total U.S. population, up from 4.7% in 1970 but below the 1890 record of 14.8%.

AI Summary. Roughly 250,000 recent graduates work in the U.S. under Optional Practical Training, which lets student-visa holders stay on after finishing studies and could be ended, and about 90% of Chinese-born science and engineering PhDs remain long-term. Tightening student and skilled-worker rules would worsen U.S. failure to retain graduates it trains.

Connor O'Brien Agglomerations
Date Posted:
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Only 37% of international graduates earning BA’s, master’s, or PhD’s btw 2012 and 2021 remain in the US. Roughly 90% of Chinese STEM PhD graduates do remain in the U.S. long-term, though that is subject to changes contemplated by the Dept of State.

Would tighter student visa rules worsen U.S. retention of foreign graduates?

Core argument: Nearly 250,000 recent graduates are working in the U.S. under Optional Practical Training (OPT), a program allowing F-1 visa holders to work after finishing their studies, which may come to an end.

The Optional Practical Training (OPT) program, which allows recent graduates on F-1 visas to work in the U.S. after finishing their studies may come to an end. Nearly 250,000 recent graduates are currently working on OPT. Chinese-born graduates are a key source of technical talent for the United States; roughly 90 percent of Chinese STEM PhD graduates remain in the U.S. long-term. However, economic espionage and intellectual property theft linked to the Chinese Communist Party are serious, ongoing concerns. Last week, the State Department announced it would “aggressively revoke” visas for Chinese students, “including those with connections to the Chinese Communist Party or studying in critical fields,” in addition to revising visa criteria to “enhance scrutiny of all future visa applications from the People's Republic of China and Hong Kong.” These moves to tighten restrictions on international students and high-skilled workers would worsen one of the biggest problems with America’s immigration system: we fail to keep most students we train.

Takeaways by Macro Roundup® AI

  1. Nearly 250,000 recent graduates are working in the U.S. under Optional Practical Training (OPT), a program allowing F-1 visa holders to work after finishing their studies, which may come to an end.
  2. Roughly 90 percent of Chinese-born STEM PhD graduates remain in the U.S. long-term, making them a key source of technical talent, even as economic espionage and intellectual property theft linked to the Chinese Communist Party remain ongoing concerns.
  3. The State Department announced it would "aggressively revoke" visas for Chinese students, including those with connections to the Chinese Communist Party or studying in critical fields, and enhance scrutiny of all future applications from China and Hong Kong.

Related Articles:

  • Most International Graduates of American Universities Ultimately Leave The U.S. — An analysis of the National Survey of College Graduates finds that only 41% of international students who graduated from American universities between 2012 and 2020 were still living in the country as of 2021, including 17% of bachelor's degree recipients. Scarce visas for skilled workers are cited as one reason.
  • The US Is The World’s Science Superpower — But For How Long? — International students on temporary visas received more than a third of US science and engineering doctorates, including 59% in computer science, with most coming from China and India, and 77% of Chinese doctoral recipients said they intended to stay in the US. The US hosts 15% of the world's international students, down from 23%.
  • Third-Country Effects of U.S. Immigration Policy — U.S. H-1B visa denial rates rose from about 6% to 16%, and the authors estimate a 10 percentage point rise in denials increases Canadian applications by 30%, roughly one Canadian application per four forgone visas. More exposed Canadian firms increased sales and hired about 0.5 native workers per immigrant.

AI Summary. Italy's official statistics agency reports that nearly 191,000 people left the country in a year, the highest in 25 years, with the share of emigrants holding at least a college degree rising from one in three a decade earlier to half. Italy's working-age population is forecast to fall another 5mn by 2040.

Amy Kazmin and Giuliana Ricozzi Financial Times
Date Posted:

Italy’s population decline is among the most acute in Europe, per Istat, and ~191k people left the country in 2024, the highest level in 25 years. 50% of leavers in 2023 held a college degree, creating “a significant deficit of qualified human capital.”

How is emigration of college graduates deepening Italy's population decline?

Core argument: About 156,000 Italians left Italy in 2024 for Germany, Spain, the UK and elsewhere, a 36.5% increase over 2023, with total departures of just under 191,000 marking the highest level in a quarter of a century, according to Istat.

About 156,000 Italians left the country last year for Germany, Spain, the UK and elsewhere, a 36.5% increase over the number who emigrated in 2023. At just under 191,000, the total number of people who left Italy in 2024 was at the highest level in a quarter of a century, according to Italy’s official statistics agency, Istat. Italy’s population decline is among the most acute in Europe, after decades of plummeting birth rates. At present, about a quarter of Italy’s 59mn people are over the age of 65, while just 12% of the population are children aged 14 and under. The working age population is forecast to drop by another 5mn people by 2040. Of those who emigrated, more than a third — 367,000 people — were between 25 and 35-years-old, including 146,000 college graduates. The exodus of educated youth has only gained momentum with time. In 2014, only one in three Italian emigrants were college educated, while in 2023 — the last year for which such detailed breakdowns are available — half of those who left held at least a college degree, Istat said. “The migration balance of young graduates has been consistently negative, with a net loss of about 97,000 over the decade, a significant deficit of qualified human capital.”

Takeaways by Macro Roundup® AI

  1. About 156,000 Italians left Italy in 2024 for Germany, Spain, the UK and elsewhere, a 36.5% increase over 2023, with total departures of just under 191,000 marking the highest level in a quarter of a century, according to Istat.
  2. Roughly a quarter of Italy's 59mn people are over 65 while just 12% are children aged 14 and under, and the working-age population is forecast to drop by another 5mn by 2040.
  3. Istat reports that half of Italian emigrants in 2023 held at least a college degree, up from one in three in 2014, with a net loss of about 97,000 young graduates over the decade.

Related Articles:

  • Germany Opened Its Doors to Migrants. Now It’s Struggling to Cope — Germany recorded 6.43m more arrivals than departures over a decade, the largest inflow of any country outside the US, with migrants at 18.8% of the population versus 15.3% in the US. Noncitizens, 15% of the population, accounted for 41% of crimes, up from 28.7%, according to police statistics.
  • Changing Sub-Saharan Africa’s Growth Trajectory — Sub-Saharan Africa's working-age population is growing nearly 3% a year, versus close to zero in much of the world, and is projected to exceed China's within about a decade and reach a quarter of the global total. With modest productivity growth near 2%, the region is likely among the world's fastest-growing.
  • Germany Joins EU’s ‘Ultra-Low’ Fertility Club — Germany's fertility rate fell to 1.35 children per woman, below the United Nations' "ultra-low" threshold of 1.4, a level at which falling birth rates become difficult to reverse. Estonia and Austria also dropped below 1.4, joining nine European Union countries including Spain, Greece, and Italy, while France's rate fell to a record-low 1.67 and Finland's to 1.26.

AI Summary. Denmark's state pension age is tied to life expectancy under a parliamentary agreement that sets adjustments every five years with 15 years' notice and caps increases at one year at a time. Under this system the pension age is set to rise from 67 to 70, keeping public finances healthy long term.

Jesper Rangvid Rangvid’s Blog
Date Posted:

The Danish Welfare Reform of 2006 linked the eligibility age for the state pension to life expectancy. Recent changes increase the statutory age of eligibility, from 67 today to age 70 by 2040, a reform that may secure the system’s fiscal sustainability.

Does linking the retirement age to life expectancy keep public finances healthy?

Core argument: Denmark's decision of 22 May raises the state pension age to 70 in 2040, up from 67 currently and already-decided increases to 68 in 2030 and 69 in 2035.

[The Danish raising the retirement age to 70] was highly anticipated because it stems from a 20-year-old political agreement—known as the ‘Welfare Reform’, passed by the Danish Parliament in 2006—that links the state pension age to life expectancy. The state pension age can be raised by a maximum of one year at a time (i.e. there is a cap on increases). Adjustments to the state pension age are decided every five years in the Folketing (Danish Parliament), with 15 years’ notice. Currently, the state pension age in Denmark is 67. It had already been decided that it will rise to 68 in 2030 and to 69 in 2035. The decision made on 22 May raises it to 70 with 15 years’ notice, meaning it will come into effect in 2040. If Denmark continues to raise the retirement age as planned, the country’s public finances will remain healthy in the long term. Failure to adjust the retirement age would place a significant burden on public finances. High levels of private pension savings among Danes, and taxation upon withdrawals, contribute substantially to the health of the system.

Takeaways by Macro Roundup® AI

  1. Denmark's decision of 22 May raises the state pension age to 70 in 2040, up from 67 currently and already-decided increases to 68 in 2030 and 69 in 2035.
  2. Denmark's 2006 'Welfare Reform' links the state pension age to life expectancy, with adjustments decided every five years in the Folketing, capped at one year per increase and requiring 15 years' notice.
  3. Continuing to raise Denmark's retirement age as planned would keep public finances healthy in the long term, while failure to adjust would place a significant burden on them; high private pension savings and taxation on withdrawals also support the system.

Related Articles:

  • Analysis of the 2024 Social Security Trustees’ Report — The Social Security Trustees project the retirement trust fund will deplete its reserves by 2033, triggering a 21% across-the-board benefit cut, with the combined retirement and disability funds insolvent by 2035 and a 17% cut. Restoring 75-year solvency would require the equivalent of a 27% payroll tax increase or a 21% benefit reduction.
  • China’s First Retirement Age Hike Since 1978 Triggers Discontent — China will raise its retirement age for the first time since 1978, phasing in over 15 years a shift for men from 60 to 63 and for women from 50 to 55 for ordinary workers and 55 to 58 for managers. People 65 and older are projected to reach 30% of the population by around 2035, from 14.2%.
  • Macron’s Pensions Law Clears Constitutional Hurdle After Protests — France's constitutional council validated most of a law raising the minimum retirement age from 62 to 64, ruling it valid under the constitution and legally enacted. Turnout for labour-led marches and strikes against the reform has shrunk.

AI Summary. Ukraine used drones smuggled into Russia aboard trucks and released remotely from mobile wooden structures to strike strategic airfields as distant as eastern Siberia. An official in Ukraine's Security Service said more than 40 Russian aircraft, including Tu-95 and Tu-22 M3 long-range bombers and A-50 surveillance planes, were damaged, with losses assessed at at least $2bn.

Bloomberg Staff Bloomberg
Date Posted:

Drones released from trucks destroyed or damaged 40 Russian aircraft, including long-range bombers. Kiev claimed the Russian losses were over $2B.

Can smuggled drones destroy strategic bombers thousands of miles inside enemy territory?

Core argument: More than 40 Russian aircraft, including Tu-95 and Tu-22 M3 long-range bombers capable of delivering conventional and nuclear weapons and the A-50, were reported damaged in Ukraine's Sunday strikes, an official in Ukraine's Security Service said.

Ukraine staged a dramatic series of strikes across Russia, deploying drones hidden in trucks deep inside the country to hit strategic airfields as far away as eastern Siberia. More than 40 Russian aircraft, including the Tu-95 and Tu-22 M3 long-range bombers capable of deploying conventional and nuclear weapons as well as the A-50, are reported to have been damaged in the operation on Sunday, an official in Ukraine’s Security Service said on condition of anonymity as the details are not public. Ukraine’s Security Service chief Vasyl Malyuk led the operation and losses are assessed to be at least $2 billion, the person said. Drones were released remotely from wooden mobile houses that were transported on trucks inside Russian territory, according to the official.

Takeaways by Macro Roundup® AI

  1. More than 40 Russian aircraft, including Tu-95 and Tu-22 M3 long-range bombers capable of delivering conventional and nuclear weapons and the A-50, were reported damaged in Ukraine's Sunday strikes, an official in Ukraine's Security Service said.
  2. Russian losses from the operation are assessed at at least $2 billion, according to the Ukrainian Security Service official, who spoke anonymously because the details are not public.
  3. Drones were released remotely from wooden mobile houses transported on trucks inside Russian territory to hit strategic airfields as far away as eastern Siberia, in an operation led by Ukraine's Security Service chief Vasyl Malyuk, the official said.

Related Articles:

  • A US Drone Maker Tries to Take Back the Country’s Skies — US drone maker Skydio has produced 45,000 drones in total, while Chinese rival DJI likely makes that many every few weeks — a scale gap that matters because production costs fall predictably with cumulative output. The Pentagon's Defense Innovation Unit says that at attrition rates observed in Ukraine, the US military would exhaust its entire drone supply in five days.
  • A Thousand Snipers in the Sky: The New War in Ukraine — Ukraine reported making over one million first-person-view drones in a year while Russia claims output of 4,000 daily, with both aiming for three to four million annually. Drones now hunt other drones, act as motherships for swarms, and explosive-laden naval vessels target ships hundreds of miles away.
  • Defence Groups Bet Big On Drone-Destroying Laser Weapons — Major defense contractors including RTX, MBDA, and QinetiQ are investing heavily in high-energy laser weapons to destroy drones, a technology long regarded as science fiction. Britain's Ministry of Defence says its DragonFire laser will be deployed on Royal Navy ships five years ahead of schedule, firing at roughly £10 a shot.

Tuesday, June 3, 2025

AI Summary. A provision in US legislation would let the Treasury impose a 5% tax surcharge, rising in stages to 20%, on the US investments of countries it identifies as levying "extraterritorial and discriminatory" taxes on American companies, such as the European Union's digital services tax. The chief financial effects would be a weaker dollar and foreign markets outperforming the US.

John Authers Bloomberg
Date Posted:

Noting section 899 is “really likely to happen,” John Authers speculates the dollar will weaken. Bloomberg’s dollar index, relative to both developed and emerging currencies, is at a two-year low.

Would taxing foreign investors' US holdings weaken the dollar?

Core argument: Section 899 of the One Big Beautiful Bill Act, before the Senate, would let the Treasury secretary levy a 5% surcharge on the US investments of countries applying "extraterritorial and discriminatory" taxes, rising in stages to 20%.

Three numbers are sending a spasm of concern through Wall Street: 899. That’s the clause of the One Big Beautiful Bill Act currently before the Senate that gives the Treasury secretary the power to levy retaliatory taxes on the US investments of foreign countries that have levied “unfair taxes” on US companies. [The] Treasury must tell Congress each quarter which countries apply “extraterritorial and discriminatory” taxes (the EU’s digital services tax is a prime example), and can then levy a 5% tax surcharge on their investments in the US, which could rise in stages to 20%. This matters because: Capital flows can be stopped far more easily than trade in goods; it gives the US a new weapon for negotiations (or to shoot itself in the foot); once passed by Congress, it has stronger legal grounding than tariffs; It’s really likely to happen; and future Democratic administrations might well leave it in place. Financially, the chief effects would be to weaken the dollar, a key administration aim, and to help foreign markets outperform the US.

Takeaways by Macro Roundup® AI

  1. Section 899 of the One Big Beautiful Bill Act, before the Senate, would let the Treasury secretary levy a 5% surcharge on the US investments of countries applying "extraterritorial and discriminatory" taxes, rising in stages to 20%.
  2. Under Section 899, Treasury would report to Congress each quarter which countries impose "extraterritorial and discriminatory" taxes, with the EU's digital services tax cited as a prime example.
  3. The chief financial effects of Section 899 would be a weaker dollar, a key administration aim, and foreign markets outperforming the US.

Related Articles:

  • Obscure Tax Item in Trump’s Big Bill Alarms Wall Street — A proposed US tax provision, Section 899, would raise tax rates on individuals and companies from countries whose tax policies the US deems discriminatory, including those imposing digital services taxes on large technology firms. Analysts say the measure, which could raise rates on passive income such as interest and dividends, would further drive away foreign investors.
  • 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.
  • A User’s Guide to Restructuring the Global Trading System — During the 2018–2019 U.S.–China trade war, the effective tariff rate on Chinese imports rose 17.9 percentage points while the renminbi depreciated 13.7% against the dollar, leaving after-tariff import prices in dollars up just 4.1%. The author argues this currency offset of more than three-fourths of the tariff explains why inflation pressure was negligible.

AI Summary. Estimates attribute much of the rise in US 10-year Treasury yields to higher term premia — the extra yield investors demand for holding long-term debt — which the authors find is influenced by the size and structure of the financial sector's gross balance sheet. They argue term premia now dominate bond returns and that long-term yields drive policy rates.

Michael Howell Capital Wars
Date Posted:

Michael Howell notes that most of the recent increase in 10-year Treasury yields reflects term premia, not the policy rate. He argues that “long-term yields drive short-term policy rates, not vice versa,” suggesting “deteriorating bond returns.”

Do financial sector balance sheets drive long-term Treasury yields?

Core argument: The authors attribute much of the increase in US 10-year Treasury yields to higher term premia, whose trend they describe as both upward and robust.

The chart shows US 10-year Treasury yields and our estimates of daily term premia. Much of the recent yield increase is due to higher term premia. More worryingly, the trend in term premia looks both upward and robust. Term premia relate directly to a liquidity-driven world because they are affected by the size and composition of the gross (not net) financial sector balance sheet. Evidence shows mismatches between the maturity, credit and forex components of balance sheets can affect the level of term premia. Because conventional narratives largely ignore balance sheet size and structure, focusing instead on net rather than gross flows, they naturally downplay the impact of term premia. Key conclusions of our liquidity-based research are that: (1) fluctuating term premia have become the most important driver of bond returns (dominating policy rate expectations), and (2) long-term yields drive short-term policy rates, not vice versa. It follows that the upward drift in term premia not only suggests deteriorating bond returns, but they also warn that policy rates may prove sticky.

Takeaways by Macro Roundup® AI

  1. The authors attribute much of the increase in US 10-year Treasury yields to higher term premia, whose trend they describe as both upward and robust.
  2. The authors' liquidity-based research concludes that fluctuating term premia have become the most important driver of bond returns, dominating policy rate expectations, and that long-term yields drive short-term policy rates rather than the reverse.
  3. Term premia are affected by the size and composition of the gross financial sector balance sheet, with evidence that maturity, credit and forex mismatches can affect their level, factors that conventional narratives focused on net flows downplay.

Related Articles:

  • How To Tell If The US Treasury Is Having Trouble Borrowing In The Bond Market — Market depth—the quantity of US Treasury securities participants will buy or sell at given prices—is a widely cited gauge of Treasury market health. One bank's depth measure plunged and, despite rising over the past couple of years, remains well below pre-pandemic levels amid policy uncertainty and regulatory constraints on intermediaries.
  • How Has Treasury Market Liquidity Evolved in 2023? — Treasury market liquidity has tracked its historical relationship with interest rate volatility, indicating liquidity has not been unusually poor given the level of rate volatility, though the two-year note shows somewhat higher-than-expected price impact. The market's capacity to smoothly handle large trading flows remains a concern for policymakers and market participants.
  • Resilience Redux in the US Treasury Market

AI Summary. The dollar's share of China's cross-border transfers has fallen from 80-85% to 40-45% over roughly 15 years, with the decline driven mainly by higher renminbi flows, and the renminbi's share of global trade financing has risen from about 2% to over 7%. China's foreign exchange reserve composition and onshore trading remain dollar-dominated.

Martin Lynge Rasmussen Money Inside and Out
Date Posted:

China has reduced its reliance on the dollar with the CNY’s share of global trade finance transactions increasing from 1.9% btw 2018–2021, to 6.4% in November of last year, and 7.4% in March.

Is China reducing its dollar reliance in cross-border payments?

Core argument: The dollar's share of China's cross-border transfers has fallen structurally from 80–85% in 2010 to 40–45% now, with the vast majority of that decline driven by higher renminbi flows.

China has managed to reduce its reliance on the dollar by increasing the role of the renminbi. The dollar’s share of Chinese cross-border transfers has declined structurally in the last 15 years, from 80-85% in 2010 to 40-45% now, and the vast majority of the decline has been driven by higher renminbi flows. Relatedly, the CNH's share of global trade financing has increased from around 2% in 2021 to over 7% now (and picked up further since November), and has come at the expense of the dollar's market share. One explanation for the increasing linkage between renminbi cross-border transfers and its global market share is that the RMB is increasingly being used for 'real' economic transactions with foreigners rather than simply for cross-border transfers between Chinese entities. Against this, FX diversification has not made much progress. The dollar share of China's FX reserves, for example, seems to have remained constant in recent years. And onshore FX trading remains extremely dominated by USDCNY, with very little trading in other pairs.

Takeaways by Macro Roundup® AI

  1. The dollar's share of China's cross-border transfers has fallen structurally from 80–85% in 2010 to 40–45% now, with the vast majority of that decline driven by higher renminbi flows.
  2. The offshore renminbi's share of global trade financing rose from around 2% in 2021 to over 7% now, picking up further since November, at the expense of the dollar's market share.
  3. China's FX diversification has made little progress, with the dollar share of its FX reserves appearing constant in recent years and onshore FX trading still dominated by USDCNY.

Related Articles:

  • Asia’s $7.5 Trillion Bet on US Assets Is Suddenly Unravelling — 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.
  • 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.
  • Top Dollar — Foreign holdings of U.S. financial assets exceed American holdings abroad, making the United States a net debtor whose liabilities are denominated in dollars while its foreign assets are largely in other currencies. U.S. foreign liabilities grew from $30tn to over $51tn while U.S. foreign assets grew from $24tn to $33tn, tripling the net debtor position from $6tn.

AI Summary. Japan's 30-year government bond yield has risen from 2.3% to just under 3.0%, matching Germany's despite Japanese government debt of 240% of GDP versus Germany's 64%. The author argues the Bank of Japan's continued bond purchases hold yields artificially low, and that market-set yields could reach 6–7%.

Robin Brooks Robin Brooks Substack
Date Posted:

Yielding 3%, Japan’s 30-year yields are “still way too low” given a debt level of 240% of GDP. The low yields are likely driven by ongoing BoJ intervention which suppressed yield; Robin Brooks argues a market-set yield would be 6 or 7%.

Are Japan's long-term bond yields held artificially low by central bank purchases?

Core argument: Japan's 30-year government bond yield has risen from 2.3% at the start of the year to just below 3.0%, which the author argues remains far too low given gross debt of 240% of GDP.

Japanese long-term yields have risen sharply, but they're still way too low. The 30-year government bond yield is up from 2.3% at the start of the year to just below 3.0% now. Japan’s debt is 240% of GDP, so long yields - even with this rise - are still way below where they should be. In comparison, Germany’s gross government debt in 2024 stood at 64%, but Japan’s 30-year government bond yield is now at exactly the same level as Germany’s. The reason for this outlier status is the continued presence of the Bank of Japan (BoJ) in Japan’s government bond market, which keeps yields artificially low. If markets were allowed to set Japan’s 30-year yield, it would presumably rise much further, perhaps to as high as 6 or 7%. Things will get worse before they get better, meaning indebtedness will rise, which only increases pressure on the BoJ to remain active in capping yields.

Takeaways by Macro Roundup® AI

  1. Japan's 30-year government bond yield has risen from 2.3% at the start of the year to just below 3.0%, which the author argues remains far too low given gross debt of 240% of GDP.
  2. Japan's 30-year yield now sits at exactly the same level as Germany's, even though Germany's gross government debt stood at 64% of GDP in 2024.
  3. The author attributes Japan's artificially low yields to the Bank of Japan's continued presence in the government bond market, and suggests market-set 30-year yields could rise as high as 6% or 7%.

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.
  • Japan’s 40-Year Bond Sale Draws Weakest Demand Since July — An auction of about $3.5bn of 40-year Japanese government bonds drew a bid-to-cover ratio of 2.2, the weakest demand in 10 months, amid what some traders describe as a "buyers' strike" among Japanese life insurers and other domestic investors.
  • 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.

AI Summary. Europe generates far fewer companies valued above $1bn than the U.S. or China, and has about a fifth of America's venture capital in dollar terms, limiting research and development spending. The average European Union worker now produces less than 80% of what an American worker produces per hour, down from 95%.

David Luhnow, Tom Fairless, and Andrew Barnett Wall Street Journal
Date Posted:

Europe produces ~85% fewer tech unicorns than the U.S. and has just 20% of its VC funding, as fragmented markets and limited R&D investment drive lagging innovation, productivity, and long-term growth.

Is Europe falling behind the US and China in technology?

Core argument: The average EU worker produced 95% of U.S. output per hour in the late 1990s but less than 80% now, while also working fewer hours amid a cultural focus on stability, job security, and quality of life.

From software to AI, Europe is falling behind in creating global technology companies, stalling economic growth. Specifically, Europe is generating far fewer unicorns—new, privately held companies that are worth more than $1 billion—than the U.S. or China. Those it creates often have trouble growing quickly enough to go public and become dominant players—partly because Europe has 30-plus countries with different laws, languages, and customs, making it harder to scale. With only a fifth of America’s venture capital in dollar terms, there is far less private capital flowing in. This limits spending on research and development that drives innovation. Lacking innovation and new technology companies, European workers are becoming slightly less productive than their American counterparts. In the late 1990s, the average EU worker produced 95% of what their American counterparts made per hour, compared to less than 80% now. They are also working fewer hours, driven by a cultural focus on stability, job security, and quality of life.

Takeaways by Macro Roundup® AI

  1. The average EU worker produced 95% of U.S. output per hour in the late 1990s but less than 80% now, while also working fewer hours amid a cultural focus on stability, job security, and quality of life.
  2. Europe attracts only a fifth of America's venture capital in dollar terms, limiting private capital inflows and spending on the research and development that drives innovation.
  3. Europe generates far fewer unicorns—new, privately held companies worth more than $1 billion—than the U.S. or China, and those it creates often struggle to grow fast enough to go public, partly because 30-plus countries have different laws, languages, and customs.

Related Articles:

  • The Tech Industry Is Huge—and Europe’s Share of It Is Very Small — Only four of the world's top 50 technology companies are European, and venture capital technology investment in Europe is a fifth of U.S. levels. Over 50 years the U.S. created 241 companies from scratch worth more than $10bn versus 14 in Europe, by one researcher's count.
  • Why the U.S. Economy Is Trouncing Europe’s — Only about 12% of Americans score at the highest levels on international academic tests versus 34% at the lowest, yet the U.S. has created nearly 250 companies worth over $10bn ($30tn in value) against Europe's 14, and median U.S. disposable household income is 25% above Germany's. The author argues expanding high-skilled immigration is the fastest way to accelerate growth.
  • The Future of European Competitiveness – A Competitiveness Strategy for Europe — A European Union competitiveness report attributes the EU's labour productivity growth gap with the US largely to weaker activity in information and communications technology and large-scale digital services; excluding main ICT sectors, EU productivity was broadly at par with the US from 2000-2019. It estimates Europe's investment share must rise about 5 percentage points of GDP.

AI Summary. The authors estimate that hours worked fall substantially more in response to large minimum wage increases than small ones, with large statutory increases associated with a differential decline of 0.73 hours on average. The declines are larger for 16–25 year-olds without a completed high school education (-0.94 hours) than for all 16–21 year-olds (-0.51 hours).

Jeff Clemens and Michael Strain American Enterprise Institute
Date Posted:

In CPS data from 2011–2019, relatively large statutory increases in the minimum wage reduced hours for workers, ages 16–25 with less than a high school education, by about an hour per week after 4 years, while small increases did not reduce hours.

Do large minimum wage increases reduce hours worked more than small ones?

Core argument: Using CPS and ACS data under a partially pre-committed analysis plan, the authors estimate that large statutory minimum wage increases are associated with a differential decline in hours worked of -0.73 hours on average across specifications and primary samples.

Analyzing CPS and ACS data with the empirical specifications from our partially pre-committed analysis plan [outlined in previous papers],we estimate that the elasticity of hours worked with respect to the minimum wage is substantially more negative for large minimum wage increases than for small increases. Large statutory minimum wage changes are, on average, associated with a differential hours worked decline of -0.73 hours across the full set of specifications we estimate, averaging across our primary analysis samples. The estimates are more negative for the sample consisting of individuals ages 16 to 25 with less than a completed high school education (-0.94 hours) than for the larger sample of all individuals ages 16 to 21 (-0.51 hours). The hours worked declines associated with legislation rise as the increases are phased in over time. Hours worked effects for 16-25 year olds with less than a completed high school education average -0.38 hours through an endline consisting solely of 2015 and average -1.16 hours estimated through an endline consisting solely of 2019. Equivalent estimates for the “young adult” population ages 16 to 21 are -0.26 and -0.66, respectively.

Takeaways by Macro Roundup® AI

  1. Using CPS and ACS data under a partially pre-committed analysis plan, the authors estimate that large statutory minimum wage increases are associated with a differential decline in hours worked of -0.73 hours on average across specifications and primary samples.
  2. The estimated hours declines are more negative for 16–25 year olds with less than a completed high school education (-0.94 hours) than for all individuals ages 16–21 (-0.51 hours).
  3. The authors estimate hours declines rise as increases phase in, with effects for less-educated 16–25 year olds averaging -0.38 hours through a 2015 endline versus -1.16 hours through a 2019 endline (-0.26 and -0.66 for ages 16–21).

Related Articles:

  • Do Minimum Wages Reduce Job Opportunities for Blacks? — The authors find evidence that higher minimum wages reduce employment among low-skill Black workers across every group examined — teens, high school dropouts, and young workers with at most a high school education — with larger effects for Black males, while such effects are not very detectable for whites.
  • Menu Adjustment in Response to the Minimum Wage: A Return to the New Jersey-Pennsylvania Border — Comparing New Jersey restaurant menu prices with those in neighboring Pennsylvania, where the minimum wage was unchanged, the authors estimate that each $1 increase in the minimum wage raised the price of an item by 7.0 cents on average. Pass-through was larger for items requiring more employee preparation steps, adding 0.3 cents per additional step.
  • “Compensate the Losers?” Economic Policy and Partisan Realignment in the US — The authors argue that partisan realignment by education reflects Democrats' declining supply of "predistribution" policies such as job guarantees, higher minimum wages, protectionism, and stronger unions, which less-educated Americans favor while more-educated Americans prefer taxes and transfers. They estimate changing views of the parties' economic policies explain roughly half the shift.