Edward Conard

Top Ten New York Times Bestselling Author

  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “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
  • “…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
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Wednesday, June 4, 2025

AI Summary. U.S. Treasury issuance running at least $2tn a year poses a challenge to the financial system and places persistent upward pressure on yields, with no clear investor class positioned to absorb the supply. With the Federal Reserve a net seller and foreign investors cautious on dollar assets, most issuance is likely to be absorbed by hedge funds and banks.

Joseph Wang Fed Guy Blog
Date Posted:

The $2T+ in annual Treasury issues in coming years will stress the bond market as the Fed reduces its holdings and foreigners shy away from $ assets. @FedGuy suggests hedge funds and banks are best positioned to step in and increase their holdings.

Who will absorb rising Treasury issuance as yields face upward pressure?

Core argument: Treasury issuance running at least $2 trillion a year will challenge the financial system and place persistent upward pressure on yields, with no clear investor class identified as most capable of absorbing the supply.

The significant amount of issuance in the coming years will be a challenge to the financial system and place persistent upward pressure on yields. The pace of issuance will be at least $2T a year, and it is not clear which investor class will be most capable of absorbing the supply. The Fed and foreigners have been the two largest investors in coupon Treasuries in recent years. The first burst of coupon issuance during the pandemic was entirely absorbed by the Fed. The Fed continued its purchases through 2021 but [has been a net seller of Treasuries since]. Similarly, reports suggest that foreign investors are cautious on dollar assets due to the recent shifts in economic policy. The bulk of issuance going forward is likely going to be absorbed by hedge funds and banks. This can be seen in Treasury repo volumes steadily rising and can continue as long as the basis remains attractive and repo financing is readily available. Banks are also a good candidate for future Treasury purchases as they can elastically expand their balance sheet by creating credit.

Takeaways by Macro Roundup® AI

  1. Treasury issuance running at least $2 trillion a year will challenge the financial system and place persistent upward pressure on yields, with no clear investor class identified as most capable of absorbing the supply.
  2. The Fed and foreign investors have been the two largest buyers of coupon Treasuries in recent years, but the Fed has been a net seller since its purchases ended after 2021, and reports suggest foreign investors are cautious on dollar assets following shifts in economic policy.
  3. Hedge funds and banks are likely to absorb the bulk of future Treasury issuance, reflected in steadily rising Treasury repo volumes that can continue while the basis remains attractive and repo financing is readily available, with banks able to expand their balance sheets by creating credit.

Related Articles:

  • One Weird Trick — A larger share of Treasury financing done through short-term bills rather than longer-dated coupon securities would likely ease upward pressure on long-term yields, though the effect may be modest. With the deficit estimated near $1.5t, shifting toward bills would let the Treasury hold coupon sizes steady or trim them, reducing near-term supply.
  • 10 Facts About the US Treasury Market: Monitoring Demand For US Government Debt — US government debt is projected to rise from 100% to 200% of GDP, with deficits above $1tn annually over the next decade and $9tn of debt maturing within 12 months. Debt servicing costs equal 12% of total government outlays, and interest payments have doubled from about $1bn per day before the pandemic to nearly $2bn per day.

AI Summary. Markets in safe assets are not signaling imminent default or high inflation: the gap between yields on inflation-indexed and conventional US debt is around 2.3%, barely above its 2.1% average since early 2003. The gap between the cyclically adjusted earnings yield on US equities and the real interest rate was last this low in 2007.

Martin Wolf Financial Times
Date Posted:
Is Database:
Database

The 10-yr TIPS break-even, at 2.3%, is only 20 bps above its 20-year mean of 2.1%: expected inflation is anchored, but the cyclically adjusted E/P ratio minus the 10-yr TIPS yield, a measure of the equity premium, is at worryingly low June 2007 levels.

Are bond markets signaling default or high inflation ahead?

Core argument: The US break-even inflation rate, the gap between yields on index-linked and conventional debt of the same maturity, stands around 2.3%, barely above its 2.1% average since January 2003, suggesting market confidence that inflation targets will be hit over a decade.

Markets in safe assets are not screaming “default is nigh”. Nor, for that matter, are they screaming “hyperinflation (even high inflation) is nigh”. The simple way of looking at the latter is in terms of “break-even” inflation rates, which are the gaps between yields on index-linked and conventional debt of the same maturity. In the US, this spread is around 2.3%, which is barely above the average of 2.1% since January 2003. Markets seem strikingly confident that inflation targets will be hit over a 10-year period. Even a normalisation of interest rates after such a long period of ultra-low rates might prove too much for [equity valuations to absorb]. One obvious point here concerns the “equity risk premium”. A way of measuring this is by the gap between the cyclically-adjusted earning yield on US equities (the inverse of the “cyclically adjusted price/earnings ratio”) and the real interest rate. The last time the gap (which indicates expected excess long-term return on equities over Tips) was as low as it is right now was in June 2007. That is hardly a comforting thought.

Takeaways by Macro Roundup® AI

  1. The US break-even inflation rate, the gap between yields on index-linked and conventional debt of the same maturity, stands around 2.3%, barely above its 2.1% average since January 2003, suggesting market confidence that inflation targets will be hit over a decade.
  2. The gap between the cyclically adjusted earnings yield on US equities and the real interest rate, a measure of the equity risk premium, was last as low as it is now in June 2007.
  3. Markets in safe assets signal neither imminent default nor imminent high inflation, though a normalisation of interest rates after a long period of ultra-low rates might prove too much for equity valuations to absorb.

Related Articles:

  • Data Update 4 for 2025: Interest Rates, Inflation and Central Banks! — Interest rates are ultimately driven by macroeconomic fundamentals, with an "intrinsic risk-free rate" defined as the sum of the inflation rate and real GDP growth tracking the observed 10-year Treasury bond yield closely. On this view, central banks' influence comes from preferential access to data on those fundamentals, their capacity to alter them, and their credibility.
  • US Fiscal Sustainability Once More — 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.
  • 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 dollar has fallen while the trade-weighted interest rate differential between the US and the rest of the G10 has remained stable, which the author attributes to equity flows as investors reverse bets on US "exceptionalism." The author argues this weakness is likely temporary and that the dollar remains in a multi-decade strengthening cycle.

Robin Brooks Robin Brooks Substack
Date Posted:

The Dollar has fallen sharply since April 9, but trade-weighted, the US-G10 interest differential is stable. Brook argues the dollar depreciation is driven by equity outflows with bonds a “side-show,” and that dollar weakness is likely to be temporary.

Are equity flows driving the dollar's decline rather than interest rate differentials?

Core argument: The dollar has fallen sharply since the April 9 announcement of a 90-day pause on reciprocal tariffs, while the US trade-weighted interest rate differential versus the rest of the G10 has remained stable, a decoupling robust to alternative measures of the differential.

The Dollar (black line) has fallen sharply, especially since the 90-day pause of reciprocal tariffs was announced on April 9, while the trade-weighted rate differential of the US vis-à-vis the rest of the G10 has been stable (blue). Rate differentials are stable while the Dollar is falling [and this is] robust to different versions of this differential. The most benign interpretation for this decoupling is that equity flows are the principal driver of Dollar weakness. Markets had bought into US “exceptionalism” and are now reversing themselves on that theme. This may see many foreign buyers cut their allocation to US equities. This is a cyclical re-assessment of the US growth picture, expressed via equities, which would explain why bond markets and thus rate differentials are a side show. At this point, I am almost sure the decoupling is the former. Current Dollar weakness is therefore likely temporary. In my view, the Dollar is in a multi-decade strengthening cycle, which is far from over. More Dollar strength is coming.

Takeaways by Macro Roundup® AI

  1. The dollar has fallen sharply since the April 9 announcement of a 90-day pause on reciprocal tariffs, while the US trade-weighted interest rate differential versus the rest of the G10 has remained stable, a decoupling robust to alternative measures of the differential.
  2. The author attributes dollar weakness principally to equity flows, arguing markets that had bought into US "exceptionalism" are reversing, which may lead many foreign buyers to cut their allocations to US equities.
  3. The author reads the move as a cyclical re-assessment of US growth expressed through equities, with bond markets and rate differentials a side show, and judges current dollar weakness likely temporary within a multi-decade strengthening cycle.

Related Articles:

  • What Ails the US Dollar? — 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.
  • 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.
  • 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. The historical pattern in which higher U.S. interest rates coincided with a stronger dollar has broken down, with interest rates and the dollar moving in opposite directions. The author argues this pattern resembles emerging-market crises of confidence, in which international investors pull money out, causing both a falling currency and rising interest rates.

Paul Krugman Paul Krugman Substack
Date Posted:

The US is experiencing rising interest rates and a falling dollar, “the kind of thing one sees in emerging markets, where big market moves often reflect crises of confidence” that lead to capital flight.

Does a falling dollar alongside rising interest rates signal lost investor confidence?

Core argument: The historical U.S. pattern in which rising interest rates lifted the dollar by attracting foreign capital has broken down since Donald Trump returned to power, with rates rising while the dollar falls.

It used to be true that when U.S. interest rates rose, so did the dollar, because higher yields pulled in foreign capital. But since Donald Trump returned to power, that relationship has broken down. Instead, we’ve seen a combination of rising interest rates and a falling dollar: what we’ve been seeing in recent months, with interest rates and the dollar moving in opposite directions, doesn’t look like what we normally see in the United States, or for that matter advanced nations, in general. Instead, it’s the kind of thing one sees in emerging markets, where big market moves often reflect crises of confidence: international investors lose faith, pulling their money out, and capital flight causes both a falling currency and rising interest rates.

Takeaways by Macro Roundup® AI

  1. The historical U.S. pattern in which rising interest rates lifted the dollar by attracting foreign capital has broken down since Donald Trump returned to power, with rates rising while the dollar falls.
  2. Simultaneously rising interest rates and a falling currency resemble emerging-market episodes rather than typical U.S. or advanced-economy behavior, according to the author.
  3. In emerging markets, such moves often reflect crises of confidence in which international investors pull money out, and the resulting capital flight drives both a falling currency and rising interest rates.

Related Articles:

  • It’s Over — 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.
  • What Ails the US Dollar? — 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.
  • 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. The authors estimate the world total fertility rate is around 2.17, below the global replacement rate of roughly 2.21, meaning humanity is already below replacement, with fertility and births falling faster than anticipated. They project middle-income countries' fertility may fall below that of rich countries outside East Asia, with emigration compounding population decline.

Jesús Fernández-Villaverde University of Pennsylvania
Date Posted:

The world’s 2024 total fertility rate (TFR) was likely ~2.17, below the replacement rate of 2.21, notes Jesús Fernández-Villaverde, intensifying demographic challenges posed by the “welfare state.”

Is global fertility already below the replacement rate?

Core argument: Correcting for excess births, the world total fertility rate in 2024 is estimated at around 2.17 against a replacement rate of about 2.21, placing humanity already below replacement.

Correcting for excess births, the world TFR in 2024 is likely to be around 2.17 instead of 2.25. The world replacement rate is around 2.21. So, we estimate that humanity is already below the replacement rate. We are entering a whole new world: fertility and births are falling much faster than anyone anticipated. There is a good chance that the TFR of middle-income countries (e.g., Colombia, Chile, Thailand, Turkey) will fall below the TFR of rich countries (at least outside East Asia). Migration will exacerbate the situation: Colombia’s population is already declining due to high migration to the U.S. and Spain. This creates a whole range of challenges. Middle-income countries may not have the margins of maneuver that Japan has. Once you start thinking about these issues, it is hard to think about anything else: demography is destiny. The number of immigrants that the advanced would need to bring is phenomenal, causing multiple strains in society. We live in a welfare state, and this is unlikely to change anytime soon.

Takeaways by Macro Roundup® AI

  1. Correcting for excess births, the world total fertility rate in 2024 is estimated at around 2.17 against a replacement rate of about 2.21, placing humanity already below replacement.
  2. There is a good chance that the total fertility rate of middle-income countries such as Colombia, Chile, Thailand, and Turkey falls below that of rich countries outside East Asia.
  3. Migration compounds the decline, with Colombia's population already falling due to high migration to the U.S. and Spain, while middle-income countries may lack the margins of maneuver Japan has.

Related Articles:

  • World Depopulation: Prospects and Implications — The US is projected to account for a growing share of the rich world's labor force, youth, and highly educated talent, with continuing population and labor force growth and only moderate aging through 2050. Its fertility, though below replacement, exceeds that of East Asian and nearly all European countries, and sustained legal immigration is essential to this demographic advantage.
  • Rapid Fertility Decline Is an Existential Crisis — Moravec's Paradox holds that computers handle tasks humans find difficult, like advanced math, more easily than tasks humans find trivial, like making a bed — the very skills needed for elder care as populations fall. Tax breaks for fertility appear ineffective, while more and earlier marriage appears significant.
  • 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.

Thursday, June 5, 2025

AI Summary. The Congressional Budget Office estimates the House-passed tax and spending bill would add more than $2.4tn to primary deficits over 10 years, or nearly $3tn including interest costs, and about $5tn if temporary provisions are made permanent. It projects debt would rise from 100% of GDP to 124% by 2034, with the deficit reaching 7% of GDP by 2026.

Marc Goldwein Committee for a Responsible Federal Budget
Date Posted:
Is Database:
Database

The CBO released an updated cost estimate for the OBBBA projecting that the bill would add over $2.4T to primary deficits over 10 years and increase debt from 100% of GDP to 124% by 2034, 133% if interest rates remain high.

How much debt would the House-passed tax and spending bill add?

Core argument: CBO estimates the House-passed OBBBA would add more than $2.4 trillion to primary deficits over 10 years and, including interest, nearly $3.0 trillion to debt through 2034, or roughly $5.0 trillion if temporary provisions are made permanent.

CBO released an updated cost estimate for the House-passed OBBBA, projecting the bill would add over $2.4T to primary deficits over 10 years. Review the bill's specific cost estimates here. After interest costs on the new debt, CBO estimates that by FY2034 the bill would: increase debt by nearly $3T, or roughly $5T if made permanent; increase the deficit to 7% of GDP by 2026; double interest costs between 2024 and 2034 to $1.8T (4.2% of GDP); increase debt from 100% of GDP today to 124% of GDP by 2034, 129% of GDP if made permanent, and 133% if interest rates remain high. With interest, the bill would add nearly $3.0T to the debt through 2034 – or $5.0 trillion if various temporary provisions are made permanent. If rates remain at current levels (10-year Treasuries at 4.5%) then interest costs would climb further to $2.1T (5.1% of GDP) in 2034. OBBBA would increase the deficit to 7.0% of GDP by 2026, compared to a current law projected level of 5.5%.

Takeaways by Macro Roundup® AI

  1. CBO estimates the House-passed OBBBA would add more than $2.4 trillion to primary deficits over 10 years and, including interest, nearly $3.0 trillion to debt through 2034, or roughly $5.0 trillion if temporary provisions are made permanent.
  2. CBO projects OBBBA would raise debt from 100% of GDP today to 124% of GDP by 2034, 129% if made permanent, and 133% if interest rates remain high.
  3. CBO estimates OBBBA would push the deficit to 7.0% of GDP by 2026, against a current-law projection of 5.5%, and double interest costs between 2024 and 2034 to $1.8 trillion (4.2% of GDP), or $2.1 trillion (5.1% of GDP) if 10-year Treasuries stay at 4.5%.

Related Articles:

  • Chicken Hawks — 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.
  • This is What Normalization Looks Like (Mostly) — 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.
  • US Fiscal Sustainability Once More — 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.

AI Summary. An analysis of the House-passed reconciliation bill estimates that accounting for behavioral responses raises its costs relative to conventional scoring before 2033: some households reduce hours worked to retain Medicaid eligibility, and lower-wage workers increase hours while higher-income households work less, leaving total wage bills flat or lower.

Kent Smetters et al Penn-Wharton Budget Model
Date Posted:

Conventionally scored, the House-passed reconciliation bill raises the deficit by $2.8T over 2025–2035. Dynamic effects, incl. recipients’ re-acquiring Medicaid by working less and reduced hours of high income households, raise the delta to $3.2T.

Do behavioral responses raise the budget cost of the reconciliation bill?

Core argument: The analysis of the House-passed reconciliation bill finds that before 2033 dynamic costs exceed conventional costs partly because some households that would otherwise lose Medicaid re-acquire access by reducing their hours worked.

Before 2033, two primary factors increase the dynamic costs relative to the conventional: first, some households that would otherwise have lost Medicaid without dynamics re-acquire access with dynamics by reducing their hours worked. Second, despite increasing the number of hours worked in response to the legislation, firm-level total wage bills are often flat or negative due to compositional effects. Specifically, lower-wage workers increase their hours worked, especially due to a reduction in the social safety net spending programs. However, higher-income households reduce their hours worked, as income effects slightly dominate substitution effects after reductions in marginal tax rates. While total productivity-weighted hours increase, lower-income households pay taxes at a lower marginal tax rate than higher-income households.

Takeaways by Macro Roundup® AI

  1. The analysis of the House-passed reconciliation bill finds that before 2033 dynamic costs exceed conventional costs partly because some households that would otherwise lose Medicaid re-acquire access by reducing their hours worked.
  2. Firm-level total wage bills are often flat or negative under the bill despite an increase in hours worked, as lower-wage workers raise hours in response to reduced social safety net spending while higher-income households cut hours.
  3. Total productivity-weighted hours increase under the legislation, though lower-income households pay taxes at lower marginal rates than higher-income households, whose reduced hours reflect income effects slightly dominating substitution effects after cuts in marginal tax rates.

Related Articles:

  • Taking a Closer Look at the House Budget’s Reconciliation Instructions — A House budget resolution allows $3.3tn of net deficit increases—$4.8tn of increases offset by $1.5tn of required savings—which with interest the authors estimate would permit nearly $4tn of additional debt. The authors estimate debt would reach 126% of GDP in the budget's final year versus 117% under current law.
  • Principles-Based Illustrative Reforms of Federal Tax and Spending Programs — The authors model 13 illustrative federal tax and spending reforms based on standard public economics design principles and project that, over 30 years relative to current law, they would cut budget deficits by 38%, raise the capital stock 31%, GDP 21%, and wages nearly 7%, while lowering health premiums 27%.

AI Summary. The authors estimate that faster-rising labor market returns to college for women account for about 50% of the increase in women's college graduation rate, with parental background explaining about a quarter and improved chances of marriage offers at older ages about a fifth. Women with college-educated mothers show greater tastes for or ability at college than sons do.

Zvi Eckstein, Michael Keane and Osnat Lifshitz National Bureau of Economic Research
Date Posted:

White women’s graduation rate rose 10pp more than white men’s btw the 1960 and 1980 cohorts. Returns to college, which rose twice as fast for women as men, account for 50%, and the “knock-on effect” of mothers’ rising education accounts for another 25%.

What drives women's rising college graduation rates relative to men's?

Core argument: Parental background accounts for about one quarter of the rise in women's college graduation rate, as children with college-educated mothers have greater tastes for or ability at college, with the effect stronger for daughters than sons.

In recent cohorts, women graduate at much higher rates than men. Our first main result is that changes in parental background are a key factor driving the growing gender education gap: children with college educated mothers have greater tastes for (or ability at) college, and this effect is stronger for daughters than sons. Thus, the increase in women’s education over time has the knock-on effect of increasing daughter’s education relative to sons in the next generation. The marriage market also contributed: women’s chance of getting marriage offers at older ages has improved, making it easier to defer marriage until after college. In contrast, we find that assortative mating did not increase much across the cohorts we study, so this is not an important factor driving the increase in women’s college graduation rate. Labor market returns to college increased in the ’60 to ’80 cohorts, but they increased twice as fast for women as for men. This factor accounts for about 50% of the increase in their graduation rate. Parental background accounts for about 1/4 and marriage offers 1/5.

Takeaways by Macro Roundup® AI

  1. Parental background accounts for about one quarter of the rise in women's college graduation rate, as children with college-educated mothers have greater tastes for or ability at college, with the effect stronger for daughters than sons.
  2. Improved chances of receiving marriage offers at older ages account for about one fifth of the increase in women's college graduation, while assortative mating changed little across the cohorts studied and is not an important factor.

Related Articles:

  • Bachelors Without Bachelor’s: Gender Gaps in Education and Declining Marriage Rates — Marriage rates for college-educated women have remained stable over the past fifty years even as the relative supply of college-educated men declined, with the overall decline in marriage driven almost entirely by fewer marriages between non-college women and non-college men. The education gap in women's marriage rates is larger in areas where non-college men face the highest joblessness and incarceration.
  • Post-Pandemic Recovery for America’s Prime Age Labor Force: A Tale of Two Sexes — Prime-age women's labor force participation climbed about 5 points above its pre-pandemic level over a decade, while prime-age men's rose barely a point, only just regaining pre-pandemic levels. Despite economic expansion and labor shortages, work rates for prime-age American men are barely as high as at the trough of the severe Reagan-era recession.
  • American Women Are Giving Up on Marriage — An analysis of census data by the Aspen Economic Strategy Group finds 51.4% of US women ages 18 to 40 were single—neither married nor cohabitating—up from 41.8% in 2000. Research estimates marriage rates by age 45 for women without a college degree fell from 79% to 52% across those born between 1930 and 1980.

AI Summary. Survey measures of output prices show inflationary pressure in the US, at about two standard deviations above normal, while China's reading of -1.6 standard deviations indicates deflationary pressure, with Chinese consumer prices down 0.1% year-over-year. The author attributes China's persistent deflationary pressure to excess manufacturing capacity and argues letting the yuan depreciate against the dollar is the best remedy.

Robin Brooks Robin Brooks Substack
Date Posted:

Robin Brooks argues that US tariffs are stoking rising input and output prices and delivery lags at home while exacerbating existing deflationary pressures in China, to which the best response would be a depreciation of the yuan against the dollar.

Is excess manufacturing capacity driving China into deflation?

Core argument: China's output price Z-score stands at -1.6, indicating deflationary rather than inflationary pressure, and China's headline CPI inflation was -0.1 percent year-over-year in April 2025.

The left chart shows supplier delivery times (black), input prices (red) and output prices (blue) for the US. Delivery times measure disruption to supply chains, input prices are what firms pay suppliers and output prices are what they charge customers. The Z-score transformation means you can think of a reading of 1.9, which is where US output prices now are, as two standard deviations above “normal,” a sign inflation pressure is building. The right chart shows the same three series for China. You can see the spikes in delivery times during various COVID lockdowns. The Z-score for output prices is currently -1.6, which means there’s deflationary, not inflationary, pressure. To be sure, deflationary pressure has existed for some time as China grapples with excess capacity in its manufacturing sector. But it’s notable that this deflationary pressure shows no sign of abating. China’s headline CPI inflation was -0.1 percent year-over-year in April 2025. The deflationary impulse from US tariffs is therefore pushing on an open door. The best way for China to combat deflation risk is to allow the Yuan to fall against the Dollar.

Takeaways by Macro Roundup® AI

  1. China's output price Z-score stands at -1.6, indicating deflationary rather than inflationary pressure, and China's headline CPI inflation was -0.1 percent year-over-year in April 2025.
  2. US output prices sit at a Z-score of 1.9, about two standard deviations above "normal," a sign inflation pressure is building, in contrast to China's deflationary reading.
  3. China's deflationary pressure, which has persisted as the country grapples with excess capacity in manufacturing, shows no sign of abating, and the author argues the best remedy is to let the Yuan fall against the Dollar.

Related Articles:

  • Global Economies, Converging on Equilibrium, Confront a Geopolitical Regime Shift — Global economies are converging on a reasonable equilibrium, with developed-world central banks gradually cutting rates toward what they view as neutral, China prioritizing domestic demand after a deflationary stretch, and artificial intelligence showing potential to enhance productivity. Markets are discounting that stability, with US equity indexes pricing an even more exceptional decade than the last.
  • Prices Won’t Stop Falling in China, and Beijing Is Grasping for Solutions — Prices for goods leaving Chinese factories have fallen year-over-year for 26 consecutive months, and China's gross domestic product deflator, a broad gauge of economy-wide prices, has been negative for six straight quarters, the longest stretch since the late 1990s. As falling prices sap profitability, companies could delay investment or cut jobs, and buyers could postpone purchases expecting further declines.
  • China FX Diversification and the Dollar — 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.

AI Summary. The article argues that China's decades of fertility-control policies left it with relatively few children, who are the biggest drivers of household spending, contributing to weak consumer demand. Household income has fallen from 62% of GDP to 44%, and household consumption from 53% to 39% of GDP, versus nearly 70% in the US.

Yi Fuxian Project Syndicate
Date Posted:
Is Database:
Database

China’s household consumption plummeted from 53% of GDP in 1983 to 39% today (compared to ~70% for the US), driven by a sharp decline in household sizes and incomes as “decades of fertility-control policies have left China with relatively few children.”

Do fewer children explain China's weak consumer demand?

Core argument: China's household consumption has fallen from 53% of GDP in 1983 to 39% today, compared with nearly 70% in the US, following decades of fertility-control policies that left the country with relatively few children.

Children are “super consumers”: the more children a household contains, the more it spends. But decades of fertility-control policies have left China with relatively few children. In 1982, three years after the one-child policy was introduced, the country’s total population-to-worker ratio stood at 2.2, reflecting a relatively large number of dependents for each worker (aged 20-59). By 2010, the ratio had plummeted to 1.6, well below the international average of 1.8. (While this ratio is now rising again in China, it is being driven primarily by an increase in the number of elderly, not children.) As households shrank, so did their incomes – from 62% of GDP in 1983 to 44% of GDP today. The result has been low and falling consumer demand: since 1983, household consumption has fallen from 53% of GDP to just 39% of GDP, compared to nearly 70% in the US.

Takeaways by Macro Roundup® AI

  1. China's household consumption has fallen from 53% of GDP in 1983 to 39% today, compared with nearly 70% in the US, following decades of fertility-control policies that left the country with relatively few children.
  2. China's total population-to-worker ratio fell from 2.2 in 1982, three years after the one-child policy began, to 1.6 by 2010, below the international average of 1.8, with the subsequent rise driven primarily by more elderly rather than more children.
  3. Chinese household income declined from 62% of GDP in 1983 to 44% today as households shrank, and children count as "super consumers," since the more children a household contains, the more it spends.

Related Articles:

  • ‘No Marriage, No Children’ Is China’s Ticking Timebomb — China registered about 6.1m marriages in its most recent year, the lowest since public records began in 1986 and less than half the 2013 peak, with roughly 30% of 30-year-olds unmarried versus 15% a decade earlier. Births of 9.54m were the second-lowest since the People's Republic of China was founded in 1949.
  • The Power of Demography and the Fate of East Asia — East Asia's total population has peaked and is projected to decline for at least a generation, with the pace of decline likely accelerating each decade, while US population is projected to keep growing for decades. The author argues such sustained divergence can shift the global balance of power.
  • China Steps Up Campaign For Single People to Date, Marry and Give Birth — Local officials in China are calling married women in their 20s and early 30s to ask about family plans, urge prenatal check-ups, and offer subsidies for additional children, with one resident reporting an Rmb100,000 ($14,000) offer for a second child. State-run outlets have promoted claims that childbirth benefits maternal health.

AI Summary. Italy is debating whether to give long-term legal migrant workers and their children a faster path to citizenship, a question with implications for an ageing society where nearly a quarter of the population is over 65 and 12% is under 14. Easing the rules could let up to 2.5mn long-term legal residents apply immediately.

Amy Kazmin Financial Times
Date Posted:

An upcoming vote might provide an easier path to Italian citizenship for 5.4mm legal foreign residents, addressing the demographic challenge of a population where 25% is over 65. 13.5% of new births in Italy last year were to foreign parents.

Should an ageing country give long-term migrant workers faster citizenship?

Core argument: Italy's referendum could allow up to 2.5mn long-term legal residents — many from eastern Europe, Asia, Africa and the Middle East — to apply immediately for citizenship, though the process would still take years.

Italian voters are wrestling with the contentious issue of whether the country should ease its restrictive immigration rules and give its long-term, legal migrant workers — and their children — a faster path to citizenship. It is a question with profound implications for a rapidly ageing society, where nearly a quarter of the population is over 65 and just 12% below the age of 14. Italy’s official statistical agency does not make public any details of the country’s 5.4mn legal foreign residents, their origins, birthplaces, or ages. But more than 914,000 of Italy’s 8.1mn school children — 11% of the total — are foreigners, while 13.5% of last year’s new births were to foreign parents. In total, Italy has had 1.4mn foreign births since 2002. People from within the EU can seek naturalisation in Italy after just four years, the referendum could permit up to 2.5mn long-term legal residents — many from eastern Europe, Asia, Africa and the Middle East — to apply for citizenship immediately, though the process would still take years to complete.

Takeaways by Macro Roundup® AI

  1. Italy's referendum could allow up to 2.5mn long-term legal residents — many from eastern Europe, Asia, Africa and the Middle East — to apply immediately for citizenship, though the process would still take years.
  2. Nearly a quarter of Italy's population is over 65 and just 12% is under 14, while foreigners account for more than 914,000 of 8.1mn school children (11%) and 13.5% of last year's births.
  3. Italy's official statistical agency publishes no details on the origins, birthplaces or ages of the country's 5.4mn legal foreign residents, while EU citizens can seek naturalisation in Italy after four years.

Related Articles:

  • Italy’s Exodus of Young Talent Worsens Population Squeeze — 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.
  • 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. The US cannot fill about a third of the more than 400,000 new engineering roles created each year, and the UK faces a shortfall of 1 million engineering jobs as 20% of its engineers retire. Shortages of skilled workers raise costs and lengthen timelines for building electricity grids and data centers.

Akshat Rathi, Olivia Rudgard and Josh Saul Bloomberg
Date Posted:
Is Database:
Database

Aging populations and anti-immigration rhetoric in rich countries are forcing companies building electricity infrastructure to find creative solutions to meet surging demand. The US is unable to fill a third of its 400k+ new annual engineering roles.

Are engineer shortages raising costs and delaying grid and data center construction?

Core argument: The US cannot fill about a third of the more than 400,000 new engineering roles created each year, while 20% of the UK's engineers will retire by 2030, leaving a shortfall of 1 million jobs.

How do you get more labor? “You either birth them or you import them,” says Zeke Hernandez, professor at the Wharton School of the University of Pennsylvania. “But in an environment of declining birth rates, increasing retirements and now a restrictive immigration regime, shortages become quite severe.” The US is already unable to fill about a third of its more than 400,000 new engineer roles created each year. The UK will see 20% of its engineers retire by 2030 — leaving a shortfall of 1 million jobs. Skilled worker shortages lead to higher costs and longer timelines to build much-needed infrastructure, such as electricity grids. This is a problem for the US and Europe, which are seeing a surge in demand for power thanks to electric cars, heat pumps and massive data centers. The severe shortage of skilled workers is slowing progress towards electrifying everything. Some data center builders in the US are delaying new work, while others are having to plan projects two years in advance instead of six months.

Takeaways by Macro Roundup® AI

  1. The US cannot fill about a third of the more than 400,000 new engineering roles created each year, while 20% of the UK's engineers will retire by 2030, leaving a shortfall of 1 million jobs.
  2. Wharton professor Zeke Hernandez argues labor comes only from births or immigration, and that declining birth rates, rising retirements and a restrictive immigration regime make shortages quite severe.
  3. Skilled worker shortages raise costs and lengthen timelines for infrastructure such as electricity grids, with some US data center builders delaying new work and others planning projects two years ahead instead of six months.

Related Articles:

  • Chip Industry Sees Labor Shortages Threatening US Expansion Plan — The Semiconductor Industry Association projects US chipmakers will add roughly 115,000 jobs by 2030, but estimates about 58% could go unfilled based on current degree completion rates. The group says too few Americans study science, engineering, math and technology, while many foreign-born engineering graduates leave the US.
  • Skilled Workers Are Scarce, Posing a Challenge for Bidens Infrastructure Plan — A shortage of skilled construction labor poses a challenge to large-scale U.S. infrastructure spending, with only 10% of infrastructure workers under 25 versus 13% of all U.S. workers and a median age of 53 for construction and building inspectors. The construction industry faces a projected shortfall of 2m workers, and 88% of contractors report difficulty finding skilled labor.