Edward Conard

Top Ten New York Times Bestselling Author

  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Monday, June 9, 2025

AI Summary. The case for cutting the Federal Reserve's policy interest rate is weak: the share of workers aged 25-54 with a job has been stable at a multi-decade high, underemployment measures look relatively benign, and inflation is still running faster than target with upside risks more salient than downside risks.

Matthew Klein The Overshoot
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“The latest data available on the job market, inflation, and business sentiment all suggest that the current constellation of interest rates is broadly consistent with underlying economic conditions,” concludes @M_C_Klein.

Does the economy justify cutting interest rates now?

Core argument: The employment rate for U.S. workers aged 25–54 has held at a multi-decade high since the end of 2022, with only minor fluctuations visible on close inspection.

While Federal Reserve officials may eventually feel compelled to lower their policy interest rate band, the case for doing so now is weak. Despite the current administration’s best efforts to discourage business investment and hiring, the U.S. economy is still humming along remarkably well. Moreover, the best and timeliest indicators of business sentiment have improved relative to March and April, implying that we may have (temporarily?) found a cyclical bottom. At the same time, inflation is still trending faster than target, with the upside risks larger and more salient than the downside risks. All of which is to say that there are no obvious reasons to think that interest rates are too high relative to economic and financial conditions. The share of workers aged 25-54 with a job has been stable at a multi-decade high since the end of 2022. While there have been some wiggles in the past 30 months, they are only visible if you zoom in incredibly closely. Measures of underemployment also look relatively benign, even if they are not quite as good as they were in early 2023. Importantly, most of the (mild) worsening in conditions happened over a year ago, with little change in the past 12 months.

Takeaways by Macro Roundup® AI

  1. The employment rate for U.S. workers aged 25–54 has held at a multi-decade high since the end of 2022, with only minor fluctuations visible on close inspection.
  2. The case for cutting the Federal Reserve's policy rate band now is weak, since inflation is still trending faster than target with upside risks larger and more salient than downside risks.
  3. Timely indicators of U.S. business sentiment have improved relative to March and April, implying a possibly temporary cyclical bottom, while underemployment measures remain relatively benign, with most of the mild worsening occurring more than a year ago.

Related Articles:

  • The Fed Should Not Cut Interest Rates Yet — Labor demand continues to outpace labor supply, with job openings 17% above pre-pandemic levels and average wages up 3.9% year on year. The author argues current conditions do not warrant interest rate cuts, as the risk of inflation getting stuck above 2.5% is too great.
  • The U.S. Economy is Roaring. Why Should Rates Come Down? — Traders and Federal Reserve officials expect short-term interest rates to fall sharply on the assumption the economy resembles its pre-pandemic state, but the data suggest a period of structurally faster growth more like the late 1990s, with inflation-adjusted U.S. output up more than 3% in 2023 versus 0.7% the prior year.

AI Summary. Roughly half of all fixed income issuance coming to market over the past year has been US Treasuries, meaning investors must allocate a growing share of dollars to financing the government. The argument is that lower government debt would free up more funds for consumer borrowing and business investment.

Torsten Sløk Apollo
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Sløk notes that the stock of US Treasuries outstanding rose by $1.7T from 2023:Q4 through the end of 2024, exceeding the rise in corporates+mortgages, which finance private expenditure on cars, homes, and business investment.

Is rising Treasury issuance crowding out lending to consumers and businesses?

Core argument: Roughly half of all fixed income product brought to market over the past 12 months has been Treasuries, a share the author argues is unhealthy because half of credit issued in an economy should not go to the government.

Over the past 12 months, roughly half of all fixed income product coming to the market has been Treasuries. This is not healthy. Half of [the] credit issued in the economy should not be going to the government. The consequence is that investors need to allocate more and more dollars to finance the government rather than financing growth in the economy through loans to firms and consumers. The bottom line is that if the level of government debt were significantly lower, more dollars would be available for consumers to buy new cars and new houses, and for companies to build new factories.

Takeaways by Macro Roundup® AI

  1. Roughly half of all fixed income product brought to market over the past 12 months has been Treasuries, a share the author argues is unhealthy because half of credit issued in an economy should not go to the government.
  2. Treasury supply growth requires investors to allocate more dollars to financing the government rather than lending to firms and consumers that finance growth in the economy.
  3. The author contends that significantly lower government debt would leave more dollars available for consumers to buy new cars and houses and for companies to build new factories.

Related Articles:

  • 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.
  • Rapid Increase in T-Bill Supply Is a Growing Risk — The supply of short-term US Treasury bills has risen by $2tn over 12 months, and bills have grown as a share of total debt outstanding. Absorbing this supply requires continued demand from banks, money market funds, and households, and falling appetite could push short-term rates higher and raise the risk of funding-market strains.

AI Summary. The Congressional Budget Office estimates the House Republican bill would reduce spending by $1.3tn over a decade, predominantly from entitlements, while cutting revenues by $3.7tn through extending tax cuts enacted in 2017 and adding more. The bill adds to deficits because of the revenue reductions rather than spending increases.

Greg Ip Wall Street Journal
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“If Musk is upset about this bill adding to the national debt, it’s the tax cuts, not the spending, he should be attacking,” comments @greg_ip. The bill would reduce spending over the coming decade by $1.3T, while cutting revenues by $3.7T.

Does the House bill add to deficits through spending or tax cuts?

Core argument: The House Republican bill would cut spending by $1.3 trillion over the coming decade relative to current law, predominantly from entitlements, according to the Congressional Budget Office, contrary to Musk's claim of "crazy spending increases.".

Entitlements are infamously difficult to cut. Yet that’s what House Republicans propose. Far from being full of “crazy spending increases,” as Musk claims, the bill would reduce spending over the coming decade by $1.3 trillion, relative to current law, and that would be predominantly from entitlements, according to the Congressional Budget Office. So why does the bill add to deficits? Because it reduces revenues even more, by $3.7 trillion, by extending tax cuts enacted in 2017, then adding a bunch more. If Musk is upset about this bill adding to the national debt, it’s the tax cuts, not the spending, he should be attacking. There’s lots for budget hawks to hate about the Republican bill. It leaves debt on track to hit records. It doesn’t touch the big drivers of spending—Social Security and Medicare. It shifts costs, such as for food stamps, to the states. It lards the tax code with breaks that reward Trump’s base rather than help economic growth, and sunsets them in 2028 to artificially reduce the cost. It front loads the tax cuts and back loads the spending cuts.

Takeaways by Macro Roundup® AI

  1. The House Republican bill would cut spending by $1.3 trillion over the coming decade relative to current law, predominantly from entitlements, according to the Congressional Budget Office, contrary to Musk's claim of "crazy spending increases.".
  2. The bill adds to deficits because it reduces revenues by $3.7 trillion, more than its $1.3 trillion in spending cuts, by extending the tax cuts enacted in 2017 and adding more.
  3. Budget hawks' objections to the Republican bill include leaving debt on track to hit records, not touching Social Security and Medicare, shifting costs such as food stamps to the states, sunsetting tax breaks in 2028 to artificially reduce their cost, and front-loading tax cuts while back-loading spending cuts.

Related Articles:

  • CBO Estimates $3 Trillion of Debt from House-Passed OBBBA — 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.
  • 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.

AI Summary. Automakers and suppliers are considering shifting some auto-parts manufacturing to China to avoid production shutdowns caused by China's export controls on rare-earth magnets, which have slowed license approvals. Shipping unfinished parts to China for magnet installation adds cost, time, and potential tariff exposure, but executives view shutdowns as worse.

Sean McLain and Ryan Felton Wall Street Journal
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Facing strict Chinese export controls on magnets, US & EU auto makers may consider shifting some parts production to China, a “remarkable outcome from a trade war initiated by President Trump with the intention of bringing manufacturing back to the U.S.”

How are automakers responding to export controls on rare-earth magnets?

Core argument: Four major automakers fear China's controls on rare-earth magnet exports could force them to shut down some car production within weeks.

Four major automakers are racing to find workarounds to China’s stranglehold on rare-earth magnets, which they fear could force them to shut down some car production within weeks. Several traditional and electric-vehicle makers—and their suppliers—are considering shifting some auto-parts manufacturing to China to avoid looming factory shutdowns, people familiar with the situation said. Shipping an unfinished part halfway across the world to have a chiclet-sized magnet installed adds to the cost and time it takes to manufacture, but the companies see it as perhaps the only alternative to shutting down some production lines altogether. The move could expose carmakers to additional tariffs, but auto executives believe the alternative would be even worse. China was supposed to have eased export controls on rare-earth magnets as part of a 90-day tariff truce agreement with the White House, but the country has slow-walked license approvals for magnets. China has pushed back at the notion that it was to blame, alleging “discriminatory and restrictive measures” by Washington, including restricting exports of AI chips and revoking visas for Chinese students.

Takeaways by Macro Roundup® AI

  1. Four major automakers fear China's controls on rare-earth magnet exports could force them to shut down some car production within weeks.
  2. Traditional and electric-vehicle makers and their suppliers are considering shifting some auto-parts manufacturing to China so chiclet-sized magnets can be installed there, adding cost and time but averting production-line shutdowns and risking additional tariffs.
  3. China was supposed to ease rare-earth magnet export controls under a 90-day tariff truce with the White House but has slow-walked license approvals, alleging "discriminatory and restrictive measures" by Washington, including AI chip export limits and revoked Chinese student visas.

Related Articles:

  • China Weighs Export Ban For Rare-Earth Magnet Tech — China is weighing rules that would ban or restrict exports of technology used to process and refine rare-earth elements and to make high-performance rare-earth magnet alloys. China accounts for roughly 70% of global rare-earth production, down from about 90% a decade earlier, and retains a tight hold on refining.
  • Can the World Make an Electric Car Battery Without China? — China dominates electric-vehicle battery supply chains, controlling 41% of global cobalt mining and the most lithium mining, and is projected to produce more than twice as many batteries as all other countries combined by 2030. It can build battery factories at nearly half the cost of North America or Europe.

AI Summary. China has agreed to fast-track rare earth export licence approvals for some European companies after its export controls on the critical minerals disrupted global supply chains and slowed deliveries for manufacturers of goods from cars to washing machines. China's commerce minister urged the European Union to facilitate trade in high-tech products to China.

Edward White and Andy Bounds Financial Times
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Beijing agreed to fast-track approvals of rare earth export licenses to the EU, avoiding factory stoppages. “Resolving this issue is of strategic importance for the EU due to the alarming situation for EU industry.”

Is China easing rare earth export controls for European manufacturers?

Core argument: Beijing agreed to fast-track rare earth export licence approvals for some European companies after China's controls on the critical minerals rocked global supply chains and slowed deliveries for manufacturers of goods from cars to washing machines.

Beijing has agreed to fast-track approvals for rare earth export licenses for some European companies after China’s strict controls on shipments of the critical minerals rocked global supply chains. Beijing has become increasingly concerned that Europe has followed US-led restrictions on sales of semiconductors and chipmaking equipment to China. China’s commerce minister urged the EU to “take effective measures to facilitate, safeguard and promote compliant trade of high-tech products to China”. Beijing has sought to improve ties with Brussels since Trump returned to office but EU officials said that, despite warm words, there had been little compromise on issues of concern until now. The EU commissioner for trade and economic security said he had pressed his Chinese counterpart over the rare earth delays, which were slowing deliveries for manufacturers of a wide range of items from cars to washing machines. On Friday the European Chamber warned that progress had “not been sufficient” to prevent severe supply chain disruptions for many companies.

Takeaways by Macro Roundup® AI

  1. Beijing agreed to fast-track rare earth export licence approvals for some European companies after China's controls on the critical minerals rocked global supply chains and slowed deliveries for manufacturers of goods from cars to washing machines.
  2. China's commerce minister urged the EU to "take effective measures to facilitate, safeguard and promote compliant trade of high-tech products to China," amid Beijing's concern that Europe has followed US-led restrictions on semiconductors and chipmaking equipment.
  3. The European Chamber warned that progress had "not been sufficient" to prevent severe supply chain disruptions for many companies, and EU officials said Beijing had offered little compromise on issues of concern despite warm words.

Related Articles:

  • China’s Curb On Metal Exports Reverberates Across Chip Sector — China announced export curbs on gallium and germanium, metals used in chipmaking that the US government classifies among dozens of minerals critical to economic and national security.
  • China Weighs Export Ban For Rare-Earth Magnet Tech — China is weighing rules that would ban or restrict exports of technology used to process and refine rare-earth elements and to make high-performance rare-earth magnet alloys. China accounts for roughly 70% of global rare-earth production, down from about 90% a decade earlier, and retains a tight hold on refining.

AI Summary. The historical preference for sons has almost disappeared globally, with sex ratios at birth falling toward natural levels in South Korea, China, and India, while surveys in Japan and other rich countries show a growing share of couples preferring a daughter. The Economist calculates roughly 50m fewer girls have been born since 1980 than would naturally be expected.

Economist Staff The Economist
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Globally, there are ~105 male births for every 100 female births. The bias in favor of boys is shrinking in developing countries even as a preference for girls is emerging in the rich world.

Are parents worldwide shifting from preferring sons to preferring daughters?

Core argument: The Economist calculates that roughly 50m fewer girls have been born worldwide since 1980 than the natural ratio of about 105 male births per 100 female births would imply, after ultrasound gave parents a way to choose gender.

Parents around the world used to have a pronounced preference for sons. But…that preference for boys has diminished dramatically in developing countries—and signs of a bias in favour of girls are emerging in the rich world. In the natural course of things, there are roughly 105 male births for every 100 female ones. As parents in much of the world began having fewer children…ultrasound gave parents a way to choose [gender]. Roughly 50m fewer girls have been born since 1980 than you would naturally expect, according to The Economist’s calculations. The global preference for sons has almost disappeared. In South Korea almost 116 boys were born for every 100 girls in 1990. Yet today South Korea has a near-even distribution between the sexes. In China it has fallen from a peak of 117 for most of the 2000s to 111 in 2023. In India the rate was 107 that year, down from 109 in 2010. The Japanese National Fertility Survey, a poll conducted every five years, shows that in 1982, 48.5% of married couples wanting only one child said they would prefer a daughter. By 2002, 75% did. Other rich countries follow a similar pattern.

Takeaways by Macro Roundup® AI

  1. The Economist calculates that roughly 50m fewer girls have been born worldwide since 1980 than the natural ratio of about 105 male births per 100 female births would imply, after ultrasound gave parents a way to choose gender.
  2. South Korea's sex ratio at birth has fallen from almost 116 boys per 100 girls in 1990 to a near-even distribution, while China's dropped from a peak of 117 for most of the 2000s to 111 in 2023 and India's from 109 in 2010 to 107.
  3. The Japanese National Fertility Survey shows the share of married couples wanting only one child who would prefer a daughter rose from 48.5% in 1982 to 75% in 2002, with other rich countries following a similar pattern.

Related Articles:

  • China’s Alarming Sex Imbalance — An analysis of UN population projections and China's 2020 census projects the ratio of men to women at prime marriage ages will peak at 119 men per 100 women by 2027, implying 22.5m more men than women in those cohorts, and remain high for decades. The share of unmarried men aged 25-39 rose from 13% to 30%.
  • Suddenly There Aren’t Enough Babies. The Whole World Is Alarmed — The global fertility rate fell to 2.3 by 2021, near the roughly 2.2 rate demographers consider necessary to keep world population stable, and faster than United Nations projections anticipated. National birth registries are reporting births 10% to 20% below United Nations projections, according to an economist's estimate covering about half the world's population.
  • East Asia’s Coming Population Collapse

AI Summary. China's graduate job market faces multiple simultaneous pressures, including a real estate slump, tighter financial-sector regulation with pay cuts and layoffs, and cautious private-sector hiring. Major state banks have cut graduate recruitment sharply, with Agricultural Bank of China planning 4,530 hires, down 68.9%, and Industrial and Commercial Bank of China down 47%.

Luna Sun South China Morning Post
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Tens of millions of highly educated young Chinese men face unprecedented barriers to launching their careers, as both domestic and global economic headwinds lead Chinese employers to slash hiring for entry-level roles.

How severe are the pressures facing China's graduate job market?

Core argument: Agricultural Bank of China plans to hire just 4,530 graduates, down 68.9% from 14,557 last year, while ICBC's intake falls 47% to 4,506 and China Construction Bank's drops 34.8% to 3,567.

China’s job market is being buffeted by several different economic headwinds all at once – with the US trade war just one of the issues affecting employers. The real estate sector – once a pillar of the country’s economy – has plunged into a deep slump. The finance industry has seen its glossy image tarnished following a wave of strict new regulations, sharp pay cuts, and widespread lay-offs. Agricultural Bank of China plans to hire just 4,530 people – a steep 68.9% drop from last year’s 14,557 graduate hires. Industrial and Commercial Bank of China (ICBC) plans to recruit 4,506, down 47% from last year, while China Construction Bank has slashed its intake 34.8% to 3,567. “Most graduates in finance, IT and even engineering are either jobless or preparing for postgraduate exams or the civil service. There’s barely a third option.” The private sector at large, which provides most urban jobs, has also grown cautious: freezing headcounts, scaling back hiring plans, and in some cases cutting staff as old growth drivers like construction and labour-intensive manufacturing become increasingly ineffective.

Takeaways by Macro Roundup® AI

  1. Agricultural Bank of China plans to hire just 4,530 graduates, down 68.9% from 14,557 last year, while ICBC's intake falls 47% to 4,506 and China Construction Bank's drops 34.8% to 3,567.
  2. China's job market faces multiple simultaneous headwinds, including the US trade war, a deep slump in real estate, and a finance industry hit by strict new regulations, sharp pay cuts, and widespread lay-offs.
  3. China's private sector, which provides most urban jobs, is freezing headcounts, scaling back hiring plans, and in some cases cutting staff as old growth drivers like construction and labour-intensive manufacturing become increasingly ineffective.

Related Articles:

Tuesday, June 10, 2025

AI Summary. Quality-adjusted real house prices are historically high in many major US markets, especially in the Sunbelt, while homebuilding has fallen sharply, particularly in higher-price, lower-density areas. The authors find high suburban prices in Sunbelt metros no longer stimulate much new construction, possibly because residents have made new projects difficult to permit.

Edward Glaeser and Joseph Gyourko National Bureau of Economic Research
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Supply curves in four key sunbelt areas have become less elastic. “High prices in the suburban parts of these areas no longer stimulate much new building, possibly because the residents of these areas have made it difficult to permit new projects”.

Why have high suburban house prices stopped spurring new homebuilding?

Core argument: Real, constant-quality house prices sit at historically high levels in many major U.S. markets, most notably sunbelt areas, while homebuilding has declined sharply, especially in higher-price, lower-density places.

Real, constant-quality prices are at historically high levels in many major markets, most notably in sunbelt areas. Building levels have declined dramatically, especially in higher price, lower density areas. Figure 10 plots the shifting empirical supply curves [with price on the x axis and change in density on the y axis] over time for the four sunbelt metros. The empirical supply curve among suburban tracts in the 1970s (thick solid line) is always steeper than the supply curve for more central tracts (thick dotted line). Except for Dallas, the suburban line always is above the city line throughout our domain. In addition, the 1970s lines always are above those for the 1990s and 2010s. By the end of our data in the 2010s, the schedules have shifted down and flattened considerably, which is compatible with the decline in homebuilding discussed above. The lines for the 1990s show that this change began before the 2010s. High prices in the suburban parts of these metro areas no longer stimulate much new building, possibly because the residents of these areas have made it difficult to permit new projects.

Takeaways by Macro Roundup® AI

  1. Real, constant-quality house prices sit at historically high levels in many major U.S. markets, most notably sunbelt areas, while homebuilding has declined sharply, especially in higher-price, lower-density places.
  2. Empirical supply curves for four sunbelt metros shifted down and flattened considerably by the 2010s relative to the 1970s, with the change already visible in the 1990s.
  3. In the 1970s, suburban tracts in these sunbelt metros had steeper supply curves than more central tracts, and high suburban prices no longer stimulate much new building, possibly because residents have made new projects difficult to permit.

Related Articles:

  • Why Has Construction Productivity Stagnated? The Role of Land-Use Regulation — Homes built per construction worker boomed after World War II and fell after 1970, a decline the authors link to local land-use regulation that limits project size and keeps construction firms small and less productive. They estimate US residential builders would be roughly 60% more productive if their size distribution matched manufacturing.
  • America’s Housing Affordability Crisis and the Decline of Housing Supply — Housing production intensity has fallen substantially, especially in fast-growing Sunbelt markets once known for building, converging toward the low rates long seen on the coasts and in declining industrial centers. The authors argue incumbent-controlled regulation explains the weakening link between high prices, high demand areas, and new construction.
  • This Is How to Fix the Housing Crisis — US homebuilding falls short of demand, particularly in high-demand coastal markets, with per-person permitting running at less than half the level of two and five decades ago. The author argues Washington could unlock construction by conditioning federal highway funds on state housing reform, the same lever used to push states to set the drinking age at 21.

AI Summary. Faster loan growth at lightly regulated smaller banks, credit unions, and private credit compared with large banks suggests post-2008 rules that raised capital and liquid-asset requirements with bank size have constrained large-bank lending. With loan growth currently limited more by demand than supply, easing large-bank requirements may mainly shift existing loans toward large banks.

Joseph Wang Fed Guy Blog
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The surge in alternative lending sources suggests that the financial system “rewired itself” around the regulatory constraints imposed on large institutions. Less regulation may restore large bank lending at the expense of small banks and private credit.

Would easing large-bank capital rules boost lending or just shift it?

Core argument: Faster loan growth at more lightly regulated small banks and credit unions than at large banks during the pandemic boom, alongside rapid private credit expansion, suggests post-2008 regulations have been a significant constraint on large-bank lending.

The strong relative growth in lending by smaller banks and private credit suggest that regulations have been a significant constraint on bank lending. Post-2008 banking regulations sought in part to end “To Big to Fail” by imposing regulatory burdens that increased with the size of a bank. Large banks had to significantly increase capital and were also forced to hold a lot of low yielding liquid assets. This framework put large banks at a structural disadvantage relative to more lightly regulated small banks and credit unions. The impact can be seen in the rapid loan growth in more lightly regulated banks compared to large banks during the pandemic economic boom and in the rapid growth in private credit. Bowman, the Fed’s new Vice Chair of Supervision, is signaling upcoming changes that would lower regulatory costs on large banks. The current environment suggests that loan growth is more constrained by demand rather than supply. [Thus] lower capital requirements and the removal of WFC’s asset cap may simply redistribute the outstanding loans from small banks and private credit towards the large banks.

Takeaways by Macro Roundup® AI

  1. Faster loan growth at more lightly regulated small banks and credit unions than at large banks during the pandemic boom, alongside rapid private credit expansion, suggests post-2008 regulations have been a significant constraint on large-bank lending.
  2. Post-2008 rules aimed at ending "Too Big to Fail" imposed regulatory burdens that rose with bank size, requiring large banks to significantly increase capital and hold large amounts of low-yielding liquid assets.
  3. With loan growth more constrained by demand than supply, lower capital requirements and removal of Wells Fargo's asset cap may simply redistribute outstanding loans from small banks and private credit toward large banks.

Related Articles:

  • The Secular Decline of Bank Balance Sheet Lending — Traditional bank balance sheet lending has declined as a share of credit intermediation, with credit increasingly channeled through arms-length transactions such as securitization. A structural model attributes falling lending shares to lower securitization costs, savers' behavior driving bank balance sheet size, and implicit bank costs and subsidies shaping balance sheet composition.
  • Private Credit Growth and Monetary Policy Transmission — Private credit — direct lending to businesses by nonbank institutions — accounts for about 15% of private companies' outstanding debt, with volumes comparable to leveraged loans and high-yield corporate bonds. The authors find monetary policy transmission through private credit may be muted relative to bank lending and public bond markets, given resilient credit supply.
  • How the Banking System Changed Post-SVB — American banks have tightened lending standards and reduced credit availability for both business and household loans, amid a weaker macroeconomic environment, limited liquidity, and elevated financial risks. The degree of tightening matches levels previously seen only during the 2008 recession and the onset of the COVID-19 pandemic.

AI Summary. Balance-of-payments data from major creditor economies and the US indicate that recent inflows into dollar assets have come largely from private investors seeking yield rather than official reserve accumulation. In East Asia reserve flows tracked current account surpluses closely until 2014 and have since fallen well short, while Europe's outflows have long come from institutional investors and banks.

Brad Setser Council on Foreign Relations
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East Asian “reserves tracked the current account surplus almost perfectly until 2014,” but in the past 10 years outflows were driven by private investors seeking yield, “not state investors who are forced to hold safe assets.” @Brad_Setser

Are private investors, not official reserves, financing the US deficit?

Core argument: Data from both major creditor countries and the U.S. show that flows into dollar assets in recent years came largely from private investors seeking yield rather than state investors compelled to hold safe assets.

The actual data—from both the main creditor countries and the U.S.—is quite consistent here: it shows that the flow into dollar assets in the last few years has largely come from private investors seeking yield, not state investors who are compelled to hold safe assets. That’s true of Asia. Look at a chart of cumulative reserve flows from the balance of payments against the cumulative current account surplus of the largest East Asian surplus economies, setting aside the city-state financial centers. Reserves tracked the current account surplus almost perfectly until 2014, but have subsequently fallen well-short. If the analysis is extended to Europe, the same conclusion holds: reserve-related outflows never were the main counterpart to the euro area’s external surplus. The main outflow has long come from European institutional investors and banks looking for yield in fixed income markets abroad.

Takeaways by Macro Roundup® AI

  1. Data from both major creditor countries and the U.S. show that flows into dollar assets in recent years came largely from private investors seeking yield rather than state investors compelled to hold safe assets.
  2. Cumulative reserve flows of the largest East Asian surplus economies, excluding city-state financial centers, tracked their cumulative current account surplus almost perfectly until 2014 but have since fallen well short.
  3. Reserve-related outflows were never the main counterpart to the euro area's external surplus, which has long been matched instead by European institutional investors and banks seeking yield in foreign fixed income markets.

Related Articles:

  • How China is Quietly Diversifying From US Treasuries — US Treasury data show China cut its official holdings of US Treasuries by more than 27% to $759bn, a faster decline than the preceding period, while raising holdings of higher-yielding agency bonds issued by government-sponsored entities such as Fannie Mae. Analysts argue China's true Treasury holdings may be higher, masked by intermediary custodians.
  • Our Thoughts on Large US Deficits and Their Impact on Bond Yields — Total borrowing in the US is about average despite high government deficits, as high public borrowing has contributed to the need for higher interest rates that have depressed private sector borrowing. Risk premiums on long-dated debt look about average, with no market signs that economic or debt limits are currently being hit.
  • Global Debt Report 2025 — About 60% of fixed-rate government debt in advanced economies maturing by 2027 — roughly $9tn — was issued before the recent interest-rate tightening, with weighted average yields below 2% versus projected 10-year rates near 3.6%, implying refinancing at nearly double the original cost. France, Spain, the UK, and the US face heightened vulnerability, with maturing debt exceeding 15% of GDP.

AI Summary. Seasonally adjusted monthly tourist arrivals to the US from Germany, Italy, Spain, and the UK show no collapse in foreign travel, with arrivals from Italy reaching an all-time high. The UK accounts for by far the largest share of arrivals among these four countries, followed by Germany and Italy.

Robin Brooks Robin Brooks Substack
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Foreign tourist arrivals in the US–especially from Europe–remain buoyant. Italy posted a new all-time high in April 2025; data provide evidence contrary to the narrative warning of a collapse in travel to the US.

Have European tourist arrivals to the US declined?

Core argument: Seasonally adjusted monthly tourist arrivals to the US from Germany, Italy, Spain and the UK show no collapse in foreign travel through April 2025, based on National Travel and Tourism Office data from January 2015 onward.

[The charts show] monthly tourist arrivals into the US from January 2015 to April 2025, the latest month for which data are available. Source for these data is the National Travel and Tourism Office (NTTO). Travel is highly seasonal, so I seasonally adjust these data. This means you can compare arrivals during the peak summer vacation season with arrivals at other times of the year. Data are for Germany (top left), Italy (top right), Spain (bottom left) and the UK (bottom right). The scale of these charts is different, with tourism from the UK by far the most important across these four countries, followed by Germany and Italy. What’s notable is that there’s no collapse in foreign travel to the US. In fact, in one case - Italy - arrivals posted a new all-time high in April 2025.

Takeaways by Macro Roundup® AI

  1. Seasonally adjusted monthly tourist arrivals to the US from Germany, Italy, Spain and the UK show no collapse in foreign travel through April 2025, based on National Travel and Tourism Office data from January 2015 onward.
  2. Italian arrivals to the US posted an all-time high in April 2025, the latest month for which National Travel and Tourism Office data are available.
  3. The UK is by far the largest source of US-bound tourists among Germany, Italy, Spain and the UK, followed by Germany and then Italy.

Related Articles:

  • European Travellers Cancel US Visits As Trump’s Policies Threaten Tourism — Overnight visitors from western Europe to the US fell 17% year-on-year, with declines of more than 20% from countries including Ireland, Norway and Germany, according to the International Trade Administration. Total overseas visitors dropped 12% year-on-year, the steepest decline since pandemic travel restrictions.
  • U.S. Is Top Investment Destination Despite Falling Inflows — United Nations data show the U.S. remained the top destination for foreign direct investment even as inflows fell to $285bn from $388bn, driven mainly by a drop in foreign purchases of American companies. China recorded its highest-ever inflow at $189bn, a 5% increase, much of it from European businesses.
  • European Travellers Cancel US Visits As Trump’s Policies Threaten Tourism — Overnight visitors from western Europe to the US fell 17% year-on-year, with declines of more than 20% from countries including Ireland, Norway and Germany, according to the International Trade Administration. Total overseas visitors dropped 12% year-on-year, the steepest decline since pandemic travel restrictions.

AI Summary. U.S. total energy production reached a record of more than 103 quadrillion British thermal units, a 1% increase over the prior record, with natural gas, crude oil, natural gas plant liquids, biofuels, solar, and wind each setting domestic production records. Natural gas accounted for about 38% of total production and crude oil 27%.

Mickey Francis US Energy Information Administration
Date Posted:
Is Database:
Database

In 2024, the US produced a record amount of energy, a 1% increase from the previous record set in 2023. Natural gas, crude oil, natural gas plant liquids, biofuels, solar, and wind all set domestic production records.

Has U.S. energy production reached a new record high?

Core argument: U.S. total energy production reached more than 103 quadrillion British thermal units in 2024, a record and a 1% increase over the prior record set in 2023, according to the Monthly Energy Review.

In 2024, the United States produced a record amount of energy, according to data in our Monthly Energy Review. U.S. total energy production was more than 103 quadrillion British thermal units in 2024, a 1% increase from the previous record set in 2023. Several energy sources—natural gas, crude oil, natural gas plant liquids, biofuels, solar, and wind—each set domestic production records last year. Natural gas accounted for about 38% of U.S. total energy production in 2024 and has been the largest source of U.S. domestic energy production every year since 2011. Domestic crude accounted for 27% of production; coal accounted for 10%; NGLP accounted for 9%; solar and wind production accounted for 25 and 8%, respectively. Biofuels, wind, and solar set record production in 2024, up 6% from 2023.

Takeaways by Macro Roundup® AI

  1. U.S. total energy production reached more than 103 quadrillion British thermal units in 2024, a record and a 1% increase over the prior record set in 2023, according to the Monthly Energy Review.
  2. Natural gas, crude oil, natural gas plant liquids, biofuels, solar, and wind each set U.S. domestic production records in 2024, with biofuels, wind, and solar up 6% from 2023.
  3. Natural gas supplied about 38% of U.S. total energy production in 2024 and has been the largest source of U.S. domestic energy production every year since 2011, followed by crude oil at 27%, coal at 10%, and natural gas plant liquids at 9%.

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  • How Xi Sparked China’s Electricity Revolution — Electricity has risen to 30% of China's final energy use while plateauing near 22% in Europe and the US, supported by a decades-long grid expansion and upgrade program projected to cost as much as $800bn by 2030. Chinese grid investment is forecast to grow about 5% annually through 2030, faster than projected economic growth.
  • Economic Growth Now Depends on Electricity, Not Oil — Average annual electricity load growth reached 3% and is projected to continue at that rate for five years, with utilities raising expected peak demand for 2029 by 12%, or 101 gigawatts, driven by data centers, new factories, electric vehicles, heat pumps, and hydrogen production.