Edward Conard

Top Ten New York Times Bestselling Author

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

Macro Roundup


Tuesday, June 17, 2025

AI Summary. Investment funds' share of US Treasury auction purchases rose from 1.7% to 67.8% while dealers and brokers' share fell from 79% to 19.4%, yet the Federal Reserve's secondary-market operations still run exclusively through primary dealers. Widening eligibility to non-bank financial institutions could supply liquidity more directly and aid policy pass-through.

Nina Boyarchenko and Or Shachar Journal of Economic Perspectives
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Investment funds’ participation in Treasury auctions rose from 1.7% to 67.8% btw Jan. 2008 and Oct. 2023, largely replacing broker-dealers. Commensurate extension of Fed open market operations to non-bank institutions could improve market liquidity.

Should the Fed expand its market operations beyond primary dealers?

Core argument: Investment funds' share of Treasury auction participation rose from 1.7% in January 2008 to 67.8% in October 2023, while dealers' and brokers' share fell from 79% to 19.4% over the same period.

The Federal Reserve has historically relied on banks and primary dealers, [but] the landscape for fixed income ownership shifted after the 2007–2009 financial crisis, and again after the March 2020 crisis. As of the end of 2024, [non-bank financial institutions] are more than three times larger than the US banking system. Participation of investment funds—including mutual funds, money market funds, hedge funds, money managers, and investment advisors—in auctions of Treasury securities increased from 1.7% in January 2008 to 67.8% in October 2023, whereas the share attributable to dealers and brokers’ share decreased from 79% to 19.4% during the same period. The counterparties of the Fed’s open market operations in the secondary market, however, still rely exclusively on primary dealers. Expanding the eligibility criteria for the Fed’s Treasury operations to include operations similar to non-bank financial institutions’ participation in the primary market, allowing a broader mix of participants to sell Treasuries to the Fed directly, could provide liquidity to the market more directly and immediately, thereby supporting the pass-through of the Fed’s policy.

Takeaways by Macro Roundup® AI

  1. Investment funds' share of Treasury auction participation rose from 1.7% in January 2008 to 67.8% in October 2023, while dealers' and brokers' share fell from 79% to 19.4% over the same period.
  2. Non-bank financial institutions were more than three times larger than the US banking system as of the end of 2024, following shifts in fixed income ownership after the 2007–2009 financial crisis and the March 2020 crisis.
  3. The Federal Reserve's secondary-market open market operations still rely exclusively on primary dealers, and broadening eligibility to let a wider mix of participants sell Treasuries directly to the Fed could provide liquidity more directly and support policy pass-through.

Related Articles:

  • Rapidly Growing Treasury Supply Crowding Out Other Types of Credit Growth — 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.
  • 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.
  • Our Thoughts on Large US Deficits and Their Impact on Bond Yields — Total borrowing in the US is about average despite high government deficits, as high public borrowing has contributed to the need for higher interest rates that have depressed private sector borrowing. Risk premiums on long-dated debt look about average, with no market signs that economic or debt limits are currently being hit.

AI Summary. U.S. carbon dioxide emissions from fossil fuels moved closely with GDP from 1992 to about 2005, after which the two decoupled, with GDP continuing to rise while emissions fell.

Roger Pielke Jr. The Honest Broker
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Between 1992 and 2025, the US economy significantly decarbonized; the ratio of carbon dioxide emissions to GDP fell from ~ .44 to ~.19, largely being driven by the replacement of coal by natural gas.

Has U.S. economic growth decoupled from carbon dioxide emissions?

Core argument: U.S. decarbonization, measured as fossil-fuel carbon dioxide emissions divided by GDP in 2025 dollars, is charted from 1992 to 2025.

The figure shows the decarbonization of the U.S. economy from 1992 to 2025 — with decarbonization as defined as the ratio of carbon dioxide emissions (from fossil fuels) to GDP (in 2025$). From 1992 to 2005, increasing GDP was fairly tightly coupled to increasing emissions of carbon dioxide. Then, in about 2006, things changed — since then, GDP has been decoupled from emissions of carbon dioxide — GDP has continued to increase as emissions fall.

Takeaways by Macro Roundup® AI

  1. U.S. decarbonization, measured as fossil-fuel carbon dioxide emissions divided by GDP in 2025 dollars, is charted from 1992 to 2025.
  2. From 1992 to 2005, rising U.S. GDP was fairly tightly coupled to rising carbon dioxide emissions from fossil fuels.
  3. Beginning around 2006, U.S. GDP decoupled from carbon dioxide emissions, with GDP continuing to increase as emissions fall.

Related Articles:

  • Heliocentrism — An energy use must be electrified before green grid electricity can decarbonize it, and while US grid decarbonization continues at a steady pace, the electricity share of final US energy consumption has grown little. Transmission line growth runs well below Department of Energy targets for 2030 and 2035, and transformer delivery times have stretched from 4–6 weeks to 2–3 years.
  • Take the Under — Downward revisions to global population and GDP projections make climate change appear more tractable, the author argues, since the scenarios used to model emissions rely on socio-economic assumptions that are more extreme than real-world observations. With slower population and economic growth, even partial policy successes could bring emissions consistent with a 2C target within reach.
  • World’s Oceans Remain Near Record Temperatures as CO2 Levels Rise — Global average sea surface temperature reached 20.79C in May, the second-highest May level on record, while atmospheric carbon dioxide peaked at a global mean of 426 parts per million, up from 423 a year earlier. Scientists estimate the ocean absorbs a quarter to 30% of emitted carbon dioxide and about 90% of excess heat.

AI Summary. Prime-age male labor force participation in the US fell after 2008 and never rebounded, making the US an outlier among advanced economies. Even so, US prime-age male employment-to-population ratios compare favorably with those countries, because the odds of finding a job are high for those in the labor force.

Robin Brooks Robin Brooks Substack
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The US prime-age employment-to-population ratio and the job-finding rate for those in the labor force are ~at the European mean. But the US participation rate has fallen below 90%, on par with Italy at the bottom of the pack, driven by men ages 25–34.

Why do American prime-age men participate less but find jobs easily?

Core argument: Prime-age male labor force participation in the US fell after 2008 and never rebounded, making the US something of an outlier among key advanced economies.

The fact that there’s a rising number of men on the sidelines jars with the perception of the US labor market as vibrant and dynamic. There’s actually no contradiction. The left chart shows labor force participation rates for men in prime working-age across key advanced economies. Participation in the US fell after 2008 and never rebounded, which makes the US something of an outlier versus other advanced countries. The right chart shows prime-age employment-to-population ratios for the same set of countries. Even though participation in the US is low, employment of prime-age men compares favorably to other advanced economies, because - provided you’re in the labor force - the odds of getting a job in the US are high. The fact that the American jobs machine is vibrant makes it all the more tragic that a rising number of men have been left on the sidelines.

Takeaways by Macro Roundup® AI

  1. Prime-age male labor force participation in the US fell after 2008 and never rebounded, making the US something of an outlier among key advanced economies.
  2. US prime-age male employment-to-population ratios compare favorably with other advanced economies despite low participation, because the odds of getting a job in the US are high for those in the labor force.
  3. The rising number of US men on the sidelines coexists with a vibrant American jobs machine rather than contradicting it.

Related Articles:

  • How Did We End Up Here? — Labor force participation among prime-age men (25–54) in the US has declined since the global financial crisis, making the US an outlier among advanced economies, while participation among young women has risen. The author argues the timing points to a lack of opportunity for young men, which would help explain their drift toward populism.
  • Out of Work and On the Dole — Is Uncle Sam Contributing to Young Men’s Malaise? — The share of US men ages 25–40 not in the labor force rose from 5% in 1976 to 11% in 2024, with more than 1 in 4 not working full-time; the increase was 165% among less-educated men versus 79% among college graduates. Of those not in the labor force, 40% received cash or cash-equivalent government benefits.
  • 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.

AI Summary. Goldman Sachs estimates, using census data, that immigrants living in the U.S. illegally make up about 4.4% of the U.S. workforce overall but far more in some industries: 19% of landscaping services, 17% of crop production, 16% of animal slaughtering and processing, and 13% of construction.

Arian Campo-Flores, Rebecca Picciotto, Patrick Thomas and Tarini Parti Wall Street Journal
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Illegal immigrants constitute ~ 4.4% of the overall American workforce according to a GS analysis, but make up 13% of construction workers, 16% of animal slaughtering and processing workers, and 17% of farm workers.

How concentrated are unauthorized immigrant workers in specific US industries?

Core argument: Immigrants living in the U.S. illegally make up about 4.4% of the U.S. workforce overall but far more in specific industries: 19% in landscaping services, 17% in crop production, 16% in animal slaughtering and processing and 13% in construction, according to a Goldman Sachs analysis of 2023 census data.

Immigrants living in the U.S. illegally account for about 4.4% of the U.S. workforce, according to a Goldman Sachs analysis of 2023 census data. But their share of the workforce in some industries is much higher, the analysis found: 19% in landscaping services, 17% in crop production, 16% in animal slaughtering and processing and 13% in construction. Roughly 12 million people immigrated to the U.S. from 2021 to 2024, according to the Congressional Budget Office, many of them either illegally or through an emergency process set up by the Biden administration. Many now have some kind of temporary permission to stay in the country and work, though they could ultimately face removal. Others sneaked into the country or overstayed visas. Immigration helped cool a job market that was in danger of overheating by “rebalancing the tightest parts of the labor market, where wage and price pressures were most extreme,” Goldman Sachs economists wrote in a note last year.

Takeaways by Macro Roundup® AI

  1. Immigrants living in the U.S. illegally make up about 4.4% of the U.S. workforce overall but far more in specific industries: 19% in landscaping services, 17% in crop production, 16% in animal slaughtering and processing and 13% in construction, according to a Goldman Sachs analysis of 2023 census data.
  2. Roughly 12 million people immigrated to the U.S. from 2021 to 2024, according to the Congressional Budget Office, many illegally or through an emergency process set up by the Biden administration, with many now holding temporary permission to stay and work.
  3. Goldman Sachs economists wrote that immigration helped cool a job market in danger of overheating by rebalancing the tightest parts of the labor market, where wage and price pressures were most extreme.

Related Articles:

  • America’s Immigration Mess: An Illustrated Guide — Current Population Survey estimates indicate America's foreign-born population surpassed 50m for the first time and exceeded 15% of the national population, above the prior peak of 14.8% recorded in 1890. Mass immigration during that earlier wave was associated in contemporary opinion with widening income and wealth gaps and depressed wages for less-skilled native-born men, and sweeping national restrictions followed.
  • Deporting Undocumented Workers Will Make Housing More Expensive — Undocumented workers make up a substantial share of homebuilding occupations, with construction laborers the most affected by mass deportation, according to estimates from the Center for American Progress. The author argues that any wage gains for some American workers would be outweighed by higher housing costs, reduced housing supply, and construction delays.

AI Summary. U.S. consumer price inflation has run at a 2.3% annualized rate, close to the pre-pandemic average of 2.1%, but personal consumption price and hourly pay data suggest underlying inflation is stuck 1–1.5 percentage points above its pre-pandemic pace. Producer price data for manufactured goods point to upside inflation risk from higher input costs.

Matt Klein The Overshoot
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Underlying inflation is running ~ 1–1.5pp above its pre-pandemic rate. @M_C_Klein notes, “With underlying inflation holding steady and the potential for tariffs to push things further, price risks seem to be skewed towards the upside.”

Is underlying inflation still running above its pre-pandemic pace?

Core argument: Annualized headline U.S. CPI inflation so far in 2025 is 2.3%, barely faster than the pre-pandemic average of 2.1% a year, with rent increases now fully decelerated to their pre-pandemic pace.

Traders responded to the latest batch of U.S. inflation releases as if the news were benign. One reason is that tariffs do not seem to have had much of an impact (yet). This is likely temporary and attributable to the massive stockpiles of imported inventories accumulated before any tariffs kicked in.) At the same time, the pace of rent increases has now fully decelerated to the pre-pandemic pace. The annualized headline CPI inflation rate so far in 2025 is just 2.3%, barely faster than the pre-pandemic average rate of 2.1% a year. [Yet] a closer look suggests that there is less to this improvement than meets the eye. The PCE index, as well as the monthly data on hourly pay, [suggest that] underlying inflation seems stuck around 1-1.5pp faster at a yearly rate than before the pandemic, [and the] latest Producer Price Index (PPI) data on what businesses in America are charging customers for manufactured goods suggests that there is considerable upside risk to inflation coming from higher input costs.

Takeaways by Macro Roundup® AI

  1. Annualized headline U.S. CPI inflation so far in 2025 is 2.3%, barely faster than the pre-pandemic average of 2.1% a year, with rent increases now fully decelerated to their pre-pandemic pace.
  2. The PCE index and monthly hourly pay data suggest underlying U.S. inflation is stuck around 1–1.5pp faster at a yearly rate than before the pandemic.
  3. Tariffs have not yet had much impact on U.S. prices, likely a temporary result of imported inventories stockpiled before tariffs took effect, while Producer Price Index data on manufactured goods suggest considerable upside inflation risk from higher input costs.

Related Articles:

  • Are Businesses Absorbing the Tariffs or Passing them on to Their Customers? — About three-quarters of manufacturing and service firms facing tariff-driven cost increases reported passing at least some of those costs to customers through higher prices, while roughly a quarter of each said they absorbed the full increase without raising prices. Nearly a third of manufacturers and about 45% of service firms reported full pass-through.
  • State of U.S. Tariffs: May 29, 2025 — The authors estimate that if tariffs issued under emergency economic powers are invalidated, leaving only steel, aluminum, auto, and auto parts tariffs, consumers would face an average effective tariff rate of 6.9%, the highest since 1969. They project a 0.6% short-run price increase, equal to an average household loss of $950, and US real GDP growth 0.2pp lower.

Wednesday, June 18, 2025

AI Summary. The United States averaged annual GDP growth above 3% for decades, but 2% or less is now more likely. Over ten years, the author estimates that gap amounts to a $3.36tn larger economy, $3.7tn more tax revenue, and 6m more jobs, shifting public psychology from abundance toward scarcity.

Paul Kedrosky Applied Complexity
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Paul Kedrosky argues the American economy is undergoing a fundamental shift from > 3% mean annual real GDP growth to “life under two,” or below 2% annually. If maintained, this shift from “abundance” to “scarcity” will change American life.

How much does slower growth cost the economy over a decade?

Core argument: The author argues that 3% annual U.S. GDP growth rather than 2% would, over ten years, yield an economy $3.36 trillion larger, $3.7 trillion more in tax revenue, 6 million more jobs, and significantly higher real incomes.

The American economy is facing a quiet crackup that's behind much of the frustration and anger among its citizens. For decades, the United States averaged GDP growth rates above 3% annually. Today, 2% growth—or less—is more likely, now and in the near future. The difference between 3% and 2% annual growth is stark. At the higher rate, over ten years, you have: $3.36 trillion larger economy. $3.7 trillion more in tax revenue. 6 million more jobs. Significantly higher real incomes. The gap directly affects opportunities, wage growth, tax revenue, social services, health care, solvency, and optimism about the future. Growing quickly and being awash in income makes people optimistic about the future; the opposite does…the opposite. Americans built their self-image and expectations around decades of strong growth, trusting each generation would surpass the previous one. Sub-2% growth erodes this assurance, shifting psychology from abundance toward scarcity, and even zero-sum thinking. When people don't see abundance they stop sharing. And Americans have stopped sharing.

Takeaways by Macro Roundup® AI

  1. The author argues that 3% annual U.S. GDP growth rather than 2% would, over ten years, yield an economy $3.36 trillion larger, $3.7 trillion more in tax revenue, 6 million more jobs, and significantly higher real incomes.
  2. The United States averaged GDP growth above 3% annually for decades, but the author holds that 2% growth or less is the more likely outcome now and in the near future.
  3. The author contends that sub-2% growth erodes Americans' expectation that each generation will surpass the last, shifting psychology from abundance toward scarcity and zero-sum thinking.

Related Articles:

  • Zero-Sum Thinking and the Roots of U.S. Political Divides — Zero-sum thinking — viewing gains for one group as losses for another — is associated with greater support for liberal economic policies, stronger alignment with the Democratic Party, and weaker alignment with the Republican Party. The authors also find it linked to believing the QAnon conspiracy theory holds some truth and to sympathy for the attack on the U.S. Capitol.
  • Is The Great Stagnation Actually Just a ‘So-So’ Stagnation? — Long-running U.S. tests show population average reading scores moved from 255 to 256 out of 500 and math from 266 to 271, despite educational attainment rising more than three years. The author argues that if added schooling has not raised productivity, measured total factor productivity growth has been understated, shrinking the apparent "Great Stagnation" by about a third.
  • Productivity During and Since the Pandemic — Total factor productivity growth since early 2021 has run only slightly above its 2010–19 average, suggesting the 2020 productivity surge reflected cyclical dynamics layered on a continuation of the slow pre-pandemic trend. Productivity has since grown somewhat faster than the authors' analysis predicted, but remains well below the 1995–2004 pace.

AI Summary. Monthly US border encounters rose to their highest levels on record under the Biden administration and have fallen to near zero under the second Trump administration, which leaned on Mexico, including by threatening tariffs. The author argues this shows the border is enforceable.

Robin Brooks Robin Brooks Substack
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Robin Brooks argues the “unprecedented” immigration wave under Biden “collided with a segmented labor market that was leaving more and more people on the sidelines.” He implies the marginal native male worker is worse off due to increased competition.

Is the US border enforceable?

Core argument: Monthly border encounters since 2011 show the immigration wave under President Biden was unprecedented, with the chart marking the start of each administration back to President Obama.

The chart shows monthly [border] encounters back to 2011. It marks the start of every new administration back to President Obama. The immigration wave under President Biden was unprecedented. Some of this reflects pent-up demand, since the COVID pandemic sharply reduced immigration that had been on a rising track in the first Trump administration. Immigration has gone to near zero from February 2025, which the second Trump administration has achieved by leaning on Mexico (including by threatening tariffs). No matter which side of the immigration debate you’re on, this shows that the border is enforceable. The immigration wave under President Biden collided with a segmented labor market that - while it was healthy on the surface - was leaving more and more people on the sidelines.

Takeaways by Macro Roundup® AI

  1. Monthly border encounters since 2011 show the immigration wave under President Biden was unprecedented, with the chart marking the start of each administration back to President Obama.
  2. Border encounters have fallen to near zero from February 2025, which the second Trump administration achieved by leaning on Mexico, including by threatening tariffs, indicating that the border is enforceable.
  3. Part of the Biden-era wave reflects pent-up demand, since the COVID pandemic sharply reduced immigration that had been on a rising track in the first Trump administration, and that wave collided with a segmented labor market leaving more people on the sidelines.

Related Articles:

  • America’s Immigration Mess: An Illustrated Guide — Current Population Survey estimates indicate America's foreign-born population surpassed 50m for the first time and exceeded 15% of the national population, above the prior peak of 14.8% recorded in 1890. Mass immigration during that earlier wave was associated in contemporary opinion with widening income and wealth gaps and depressed wages for less-skilled native-born men, and sweeping national restrictions followed.
  • Trump Struggles to Press Deportations Without Damaging the Economy — Goldman Sachs estimates, using census data, that immigrants living in the U.S. illegally make up about 4.4% of the U.S. workforce overall but far more in some industries: 19% of landscaping services, 17% of crop production, 16% of animal slaughtering and processing, and 13% of construction.
  • Out of Work and On the Dole — Is Uncle Sam Contributing to Young Men’s Malaise? — The share of US men ages 25–40 not in the labor force rose from 5% in 1976 to 11% in 2024, with more than 1 in 4 not working full-time; the increase was 165% among less-educated men versus 79% among college graduates. Of those not in the labor force, 40% received cash or cash-equivalent government benefits.

AI Summary. The Congressional Budget Office estimates that H.R. 1, the One Big Beautiful Bill Act, would increase federal deficits by $2.8tn over 2025-2034, with economic effects reducing the primary deficit by $85bn while higher interest rates add $441bn in interest costs. Real gross domestic product is projected to rise by an average of 0.5% over the period.

Phillip Swagel, Devrim Demirel, John McClelland, Chad Chirico, et al. Congressional Budget Office
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The CBO’s dynamic analysis of the reconciliation bill forecasts an increase in the deficit of $2.8T over 2025–2034; increased borrowing raises interest rates on the 10-year by a mean of 14bps and real GDP increases by .5% over that period.

How much would the tax and spending bill raise deficits?

Core argument: CBO estimates H.R. 1 would increase deficits by $2.8 trillion over 2025–2034 relative to its January 2025 baseline, after accounting for the bill's economic and budgetary effects.

Relative to CBO’s January 2025 baseline: the economic effects of H.R. 1 would decrease the primary deficit by $85 billion over the 2025-2034 period, primarily reflecting an increase in economic output. The bill would increase interest rates, which would boost interest payments on the baseline projection of federal debt by $441 billion. Accounting for those budgetary effects, CBO’s estimate is that H.R. 1 would increase deficits by $2.8 trillion over the 2025-2034 period. Real GDP would increase by an average of 0.5% over the period. [The bill] would have small positive effects on the level of TFP. On average over the period, the bill would increase the level of TFP by less than one-tenth of one percent. The changes in TFP growth would slightly increase average annual potential GDP growth over the entire 2025-2034 period. Several factors would have small positive effects on TFP growth, including the bill’s effects on domestic oil and gas production, physical infrastructure investment, investment in research and development, permitting requirements, and spectrum auctions. Other effects of the bill would have small negative effects on TFP growth, including changes in educational attainment and a reduction in the number of individuals working in science, technology, engineering, and mathematics that stems from changes in higher education and immigration policy.

Takeaways by Macro Roundup® AI

  1. CBO estimates H.R. 1 would increase deficits by $2.8 trillion over 2025–2034 relative to its January 2025 baseline, after accounting for the bill's economic and budgetary effects.
  2. CBO estimates the bill's economic effects would reduce the primary deficit by $85 billion over 2025–2034, primarily reflecting higher economic output, while higher interest rates would add $441 billion to interest payments on baseline federal debt.

Related Articles:

  • Comparing Estimates of the House-Passed Reconciliation Bill — Four independent budget models produce broadly consistent projections for the House-passed reconciliation bill: roughly $4.0tn in tax cuts over ten years, partially offset by about $1.5tn in spending cuts. The models disagree on growth effects but agree the legislation would substantially widen future deficits even after accounting for growth.
  • 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.
  • Rapidly Growing Treasury Supply Crowding Out Other Types of Credit Growth — 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.

AI Summary. The dollar has lost more than 10% of its value against the euro, pound and Swiss franc and is down against every major currency, a decline comparable in speed to 2010. It nonetheless remains stronger against most major currencies than it was in 2021.

Carter Johnson, Saleha Mohsin, and Ruth Carson Bloomberg
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The dollar is off >10% against the euro, pound, and Swiss franc since January. Paul Tudor Jones argues American fiscal expansion will lead to another 10% $ decline over the next 12 months.

Is the dollar's decline against major currencies as steep as it appears?

Core argument: The dollar has lost more than 10% of its value against the euro, pound and Swiss franc since Donald Trump took office, and is down against every major currency in the world.

Since Donald Trump took office, [the dollar] lost more than 10% of its value against the euro, pound and Swiss franc and is down against every single major currency in the world. The last time the dollar plunged this much, this fast was in 2010, when the Federal Reserve was frantically printing money to prop up the economy in the wake of the financial crisis. The dollar is still stronger today, when measured against most major currencies, than it was when Trump left office back in 2021.

Takeaways by Macro Roundup® AI

  1. The dollar has lost more than 10% of its value against the euro, pound and Swiss franc since Donald Trump took office, and is down against every major currency in the world.
  2. The last comparable rapid dollar plunge came in 2010, when the Federal Reserve was printing money to prop up the economy after the financial crisis.
  3. Measured against most major currencies, the dollar remains stronger than it was when Trump left office in 2021.

Related Articles:

  • The Dollar has Further to Fall — The author argues the dollar has considerably further to fall, noting Federal Reserve data show its real value nearly two standard deviations above its average since 1973, a level matched only twice before, each followed by depreciations of 25-30%. Financing the $1.1tn US current account deficit requires matching net capital inflows.
  • Why Is the Dollar Falling? — 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.
  • Asia’s $7.5 Trillion Bet on US Assets Is Suddenly Unravelling — Asia's 11 largest economies have accumulated $7.5tn in US stocks and bonds, but their annual capital flows into the US fell to $68bn, equal to just 11% of their trade surpluses with the US. Their major currencies, including the yen and yuan, trade on average 57% below exchange rates adjusted for living-cost differences.

AI Summary. Germany's finance agency says the scarcity of German government bonds is over, with greater availability in the secondary market driven by the end of the European Central Bank's bond-buying programmes. German bond yields have moved above interest rate swaps of the same duration, a sign of market normalisation.

Ian Smith and Sam Fleming Financial Times
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After years of near-zero yields, 10-year Bund yields are trading around 2.5% down from March’s 2.9%. The Bund market is “normalizing” with bond yields moving above interest rate swaps of the same duration.

Has the shortage of German government bonds ended?

Core argument: Tammo Diemer, the executive board member overseeing Germany's sovereign debt issuance, said the "scarcity of Bunds is definitely over," with only a number of securities still in short supply in the market.

Tammo Diemer, an executive board member at Germany’s finance agency who oversees its sovereign debt issuance, pointed to the increasing availability of German bonds in the secondary market following the end of quantitative easing. “Scarcity of Bunds is definitely over. There are only a number of securities where there is still shortness in the market.” The constitutional limit on Germany’s debt level has contributed to the country’s status as the Eurozone’s safest borrower and historically created a shortage of its debt that suppressed its borrowing costs. Bunds provide a benchmark against which other countries’ creditworthiness is viewed. The end to the European Central Bank’s bond-buying programmes, which had bought up huge amounts of Bunds and other government debt during previous crises, was a major driver of the greater availability, [Diemer] added. Underlining the normalisation in the market, Diemer pointed to German bond yields moving above interest rate swaps of the same duration, which happened for the first time last year as expectations mounted over debt brake reform.

Takeaways by Macro Roundup® AI

  1. Tammo Diemer, the executive board member overseeing Germany's sovereign debt issuance, said the "scarcity of Bunds is definitely over," with only a number of securities still in short supply in the market.
  2. Diemer identified the end of the European Central Bank's bond-buying programmes, which absorbed large amounts of Bunds and other government debt during previous crises, as a major driver of the greater availability of German bonds.
  3. Diemer pointed to German bond yields moving above interest rate swaps of the same duration, which occurred for the first time last year as expectations mounted over debt brake reform, as an indication of market normalisation.

Related Articles:

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