Edward Conard

Top Ten New York Times Bestselling Author

  • “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
  • “…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
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…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
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Monday, June 30, 2025

AI Summary. The S&P 500's record level holds in dollars but not in other major currencies, reflecting dollar depreciation, with non-US stocks outperforming US stocks by about 10 percentage points. The rebound is not driven by the largest tech platforms, whose performance now matches the index's other 493 stocks.

John Authers Bloomberg
Date Posted:

While the S&P hit a new all-time high Friday in dollar terms, it remains 10% under its February 19th peak in Euro terms. The MSCI All-World Index net US has outperformed the S&P by ~10pp since February.

Does a weaker dollar explain the US stock market's record high?

Core argument: Non-US stocks have beaten US stocks by about 10 percentage points since Feb. 19, and the S&P 500 sits above its Feb. 19 level in dollars but not when valued in any other major currency.

The [S&P 500] is above its Feb. 19 level when denominated in dollars, but not when valued in any other major currency. This high owes much to the dollar’s depreciation. The rest of the world’s stocks have beaten the US by about 10 percentage points since then. In dollars, that means a nice gain. The new all-time high doesn’t, then, challenge the prevailing narrative that it’s best to take money out of the US and reallocate elsewhere. This rebound has little to do with the giant tech platform groups that dominate the S&P. Since the previous high, Bloomberg’s Magnificent Seven index dipped much further during the alarm over the Liberation Day tariffs, but its performance is now bang in line with an index of the other 493 largest stocks. The S&P 500 is back trading at more than three times sales, close to a record.

Takeaways by Macro Roundup® AI

  1. Non-US stocks have beaten US stocks by about 10 percentage points since Feb. 19, and the S&P 500 sits above its Feb. 19 level in dollars but not when valued in any other major currency.
  2. The S&P 500's new all-time high owes much to the dollar's depreciation, leaving intact the narrative favoring taking money out of the US and reallocating elsewhere.
  3. Bloomberg's Magnificent Seven index dipped much further during the alarm over the Liberation Day tariffs but now performs in line with an index of the other 493 largest stocks, while the S&P 500 trades at more than three times sales, close to a record.

Related Articles:

  • Are Foreigners Selling US Assets? — European and Japanese investors hold roughly 30% and 20% of their fixed income in foreign debt, versus under 10% for US investors, with US bonds making up about 15% of Eurozone and Japanese portfolios. Because foreign investors are less sticky than domestic ones, turmoil in US bond markets has greater potential to unsettle them.
  • Trump Is Driving Off Investors and Threatening the Dollar’s Reign — 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.
  • 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.

AI Summary. US Treasury auction metrics show no current weakness in demand, with stable bid-to-cover ratios and no systematic tailing, even as debt-to-GDP rises, the term premium increases, and the government must refinance $9tn over the next year. The author argues Treasury issuance will keep outgrowing the economy, likely pushing long-term interest rates higher.

Torsten Sløk, Rajvi Shah, and Shruti Galwankar Apollo
Date Posted:

Stable bid-to-cover rates and the absence of auctions “systematically tailing” indicate strong demand for Treasuries, but rising debt servicing costs and term premia suggest “gradually higher long-term rates and steepening of the yield curve.”

Will growing Treasury issuance push long-term interest rates higher?

Core argument: The US government pays a record-high $3.3 billion in interest every day, and about 20 cents of every dollar of tax revenue goes to servicing debt.

Examining Treasury auction metrics across the curve reveals no signs of weakness in demand for US Treasuries at present. Bid-to-cover ratios are stable, and there is no evidence of auctions systematically tailing. However, [this] offers little comfort when considering the rising trend in debt-to-GDP, the increasing term premium, the falling dollar, and the $9 trillion that the US government needs to refinance over the next 12 months. In particular, debt-servicing costs are rising rapidly, and the US government currently pays a record-high $3.3 billion in interest payments every day, and for every dollar the US government collects in tax revenue, about 20 cents go to paying interest on debt. With debt levels growing much faster than GDP, the bottom line is that Treasury issuance will continue to grow faster than the economy, and the most likely outcome is that investors will demand compensation in the form of higher long-term interest rates.

Takeaways by Macro Roundup® AI

  1. The US government pays a record-high $3.3 billion in interest every day, and about 20 cents of every dollar of tax revenue goes to servicing debt.
  2. Treasury auction metrics across the curve show no current weakness in demand, with stable bid-to-cover ratios and no evidence of auctions systematically tailing.
  3. With debt growing much faster than GDP and $9 trillion to refinance over the next 12 months, Treasury issuance is set to outpace the economy, with investors most likely demanding higher long-term interest rates.

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.
  • The Long-Term Budget Outlook Under Alternative Scenarios for the Economy and the Budget — The Congressional Budget Office projects that if private investment were more sensitive to federal deficits, debt held by the public would exceed 250% of GDP and real national income per person would be 18% ($21,300) lower than its baseline, with the average interest rate on federal debt 2pp higher.
  • Larry Summers and Bob Rubin Join Our CIOs to Discuss the Surprising Economic Cycle — Adopting the Simpson-Bowles fiscal consolidation when interest rates were at zero would have risked excessive disinflation, since long rates had no room to fall to provide an offsetting expansionary impulse. After the large run-up in debt and rise in real interest rates, the developing fiscal situation risks inflationary pressure, Treasury market disruption, or crowding out of private investment.

AI Summary. The Congressional Budget Office's score of the Senate reconciliation bill implies it would add over $3.9tn to the national debt against a current-law baseline including interest, with roughly $4.45tn of net tax cuts and nearly $300bn of gross spending increases partially offset by nearly $1.5tn of spending cuts.

Marc Goldwein Committee for a Responsible Federal Budget
Date Posted:

Using CBO scoring, the Committee for a Responsible Federal Budget calculates the Senate’s version of the reconciliation bill would add over $3.9 trillion to the national debt by 2034 including ~ $690B in cumulative interest costs.

How much would the Senate reconciliation bill add to the debt?

Core argument: Measured against a current law baseline and including interest, the Senate reconciliation bill would add over $3.9 trillion to the national debt, based on CBO's "current policy" score.

The Congressional Budget Office (CBO) published their "current policy" score of the Senate reconciliation bill, showing the bill would add about $500 billion less to the deficit than extending all the expiring 2017 tax cuts. Against a more appropriate current law baseline, and including interest, these numbers suggest the bill would add over $3.9 trillion to the national debt. Specifically, the bill includes roughly $4.45 trillion of net tax cuts and nearly $300 billion of gross spending increase, partially offset by nearly $1.5 trillion of gross spending cuts. We estimate the bill would increase interest costs by nearly $700 billion.

Takeaways by Macro Roundup® AI

  1. Measured against a current law baseline and including interest, the Senate reconciliation bill would add over $3.9 trillion to the national debt, based on CBO's "current policy" score.
  2. The Senate bill contains roughly $4.45 trillion of net tax cuts and nearly $300 billion of gross spending increases, partially offset by nearly $1.5 trillion of gross spending cuts.
  3. CBO's "current policy" score shows the Senate bill adding about $500 billion less to the deficit than extending all the expiring 2017 tax cuts, and the bill is estimated to raise interest costs by nearly $700 billion.

Related Articles:

AI Summary. A Federal Reserve chair could not persuade the rate-setting committee to cut to 1%, but could emphasize the employment mandate over the inflation mandate, while the Treasury lowers longer-dated yields by shifting issuance toward short-term bills. The next crisis is likely to stem from a large dollar depreciation triggering foreign investor flight.

Joseph Wang Fed Guy Blog
Date Posted:

Joseph Wang @FedGuy12 warns a dovish chair and shortened maturity profile of Treasuries risks dollar depreciation and capital flight that could more than offset the boon to risk assets from lower interest rates.

How can a Fed chair and Treasury lower long-term interest rates?

Core argument: Trump has expressed a preference for 1% interest rates and looks to nominate a Fed Chair early to influence policy expectations, though that Chair will not persuade the committee to cut to 1% and could instead emphasize the employment mandate over the inflation mandate.

Trump has expressed a preference for 1% interest rates and looks to nominate a Fed Chair early in order to influence policy expectations. Trump’s Chair will not be able to persuade the committee to drop rates to 1%, but he could emphasize the employment mandate over the inflation mandate. The Treasury can significantly lower longer dated rates by adjusting coupon supply in conjunction with a dovish Fed. Trump’s proclamation of ending issuance of debt maturing more than 9 months is an exaggeration, but increasing the bill share of Treasuries can easily be done. The next crisis is likely to emerge from the impacts of a significant dollar depreciation, which could lead to a foreign investor exodus that is commonly seen in emerging markets. Easier domestic financial conditions make risk assets more attractive to domestic investors, but that has to be balanced with the potential for capital flight.

Takeaways by Macro Roundup® AI

  1. Trump has expressed a preference for 1% interest rates and looks to nominate a Fed Chair early to influence policy expectations, though that Chair will not persuade the committee to cut to 1% and could instead emphasize the employment mandate over the inflation mandate.
  2. The Treasury can significantly lower longer-dated rates by adjusting coupon supply alongside a dovish Fed, and while Trump's proclamation of ending issuance of debt maturing beyond 9 months is an exaggeration, increasing the bill share of Treasuries can easily be done.
  3. The next crisis is likely to emerge from the impacts of a significant dollar depreciation, which could prompt a foreign investor exodus of the kind commonly seen in emerging markets, while easier domestic financial conditions make risk assets more attractive to domestic investors.

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.
  • Bond Traders Boost Bets US 10-Year Yield Will Dive Toward 4% — Bond traders have paid at least $38m in premiums for options positions that pay off if the 10-year US Treasury yield falls to 4% from roughly 4.3%. Interest-rate swaps price about 60 basis points of Federal Reserve easing across the year's remaining meetings, up from 45 basis points a week earlier.
  • 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. Canada scrapped its digital services tax, a 3% levy on revenue of the largest technology companies including Meta, Netflix and Amazon, to smooth trade negotiations with the US. Canadian and US leaders agreed to resume trade talks.

Ilya Gridneff Financial Times
Date Posted:

Canada scrapped a digital services tax hours before it was to go into effect. After scrapping the tax, “Carney and Trump have agreed that they will resume negotiations.”

Will scrapping a digital services tax restart stalled trade negotiations?

Core argument: Canada scrapped its 3% digital services tax on the revenue of the largest technology companies hours before it was due to take effect on June 30, in an effort to smooth trade negotiations with the United States.

Canada has scrapped a digital services tax that targeted US technology companies, in an effort to smooth trade negotiations with its neighbour after President Donald Trump described the levy as a “direct and blatant” attack. The tax, first announced in 2020, targeted companies such as Meta, Netflix and Amazon as well as local businesses. Those affected had to file a return by the end of June or face a fine. The decision to abandon the tax, a 3% levy on revenue for the biggest technology companies, came hours before it was due to come into effect on June 30. Carney and Trump have agreed that they will resume negotiations.

Takeaways by Macro Roundup® AI

  1. Canada scrapped its 3% digital services tax on the revenue of the largest technology companies hours before it was due to take effect on June 30, in an effort to smooth trade negotiations with the United States.
  2. The Canadian levy, first announced in 2020, targeted US firms including Meta, Netflix and Amazon as well as local businesses, with affected companies required to file a return by the end of June or face a fine.
  3. President Donald Trump described Canada's digital services tax as a "direct and blatant" attack, and Carney and Trump have agreed to resume trade negotiations.

Related Articles:

  • Treasury Deal Kills ‘Revenge Tax’ That Spooked Wall Street — The US Treasury Department announced an agreement with G-7 allies to exempt US companies from certain international minimum taxes under the OECD global tax framework. In exchange, the Treasury asked Congress to drop the proposed Section 899 retaliatory tax measure from the pending tax bill.

AI Summary. China's headline consumer price inflation has fallen below zero and core inflation is little better, and the author argues US tariffs will hasten this deflationary dynamic. Because easing monetary policy would weaken the Yuan against the Dollar, China is accepting deflation instead, which the author argues means rising real interest rates.

Robin Brooks Robin Brooks Substack
Date Posted:

CPI readings suggest that deflation is taking hold in China. Reduced demand for Chinese goods due to US tariffs, Brooks argues, requires looser Chinese monetary policy and devaluation of the yuan; China’s refusal is an implicit acceptance of deflation.

Is China accepting deflation to keep its currency stable?

Core argument: China's headline CPI inflation fell below zero toward the end of 2024, before US tariffs hit, and core inflation looks little better.

China was on the verge of deflation before US tariffs hit. The left chart above shows headline CPI inflation in the US (blue) and China (black). Headline inflation in China fell below zero towards the end of 2024. The right chart shows that core inflation looks little better. US tariffs will only hasten this deflationary dynamic. The way to counter this deflationary dynamic would be to ease monetary policy, but an inevitable byproduct of such easing is a fall in the Yuan against the Dollar. China doesn’t want that, so it’s - instead - making a choice to accept deflation, which in turn means that real interest rates in China will rise. The de facto peg of the Yuan against the Dollar means China is bumping up against the “impossible trinity,” whereby it’s impossible to have independent monetary policy amid an exchange rate peg and capital mobility (China of course has capital controls, but capital flight periodically rears its head). The decision not to devalue against the Dollar therefore has very real, adverse consequences: it makes a fall into deflation much more likely.

Takeaways by Macro Roundup® AI

  1. China's headline CPI inflation fell below zero toward the end of 2024, before US tariffs hit, and core inflation looks little better.
  2. Easing monetary policy to counter China's deflationary dynamic would bring a fall in the Yuan against the Dollar, which China does not want, so it is accepting deflation and rising real interest rates instead.
  3. The de facto peg of the Yuan against the Dollar puts China against the "impossible trinity" of independent monetary policy, an exchange rate peg, and capital mobility, and the decision not to devalue makes a fall into deflation much more likely.

Related Articles:

  • China is Falling into Deflation — 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.
  • Trade With China Is Becoming a One-Way Street — China's import volumes have shown no growth since the end of 2022 while its export volumes rose 33%, according to data from the Netherlands Bureau of Economic Policy Analysis. In dollar terms, Chinese imports fell 11% from the US, 17% from Japan, and 18% from Germany, as Chinese companies replace overseas suppliers with domestic ones.
  • 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.

AI Summary. About 37,000 people registered to vote in the 14 days before the registration deadline for a New York City Democratic mayoral primary, compared with about 3,000 in the same period in the prior cycle, according to an analysis of the electoral map.

Emma Fitzsimmons, Alex Lemonides and Irineo Cabreros New York Times
Date Posted:

A New York Times analysis of the NYC democratic primary electorate found a significant shift in voters’ age profile. While < 50,000 people 18–24 voted in 2021, the participation of that cohort tripled this year.

Can a mayoral campaign sharply increase new voter registrations?

Core argument: About 37,000 people registered to vote in the 14 days before the Democratic primary registration deadline, compared with roughly 3,000 in the same period in 2021, according to a New York Times analysis.

Mr. Mamdani changed the electoral map. In the 14 days leading up to the registration deadline for the Democratic primary, about 37,000 people registered to vote, compared with about 3,000 people in the same period in 2021, according to an analysis by The New York Times.

Takeaways by Macro Roundup® AI

  1. About 37,000 people registered to vote in the 14 days before the Democratic primary registration deadline, compared with roughly 3,000 in the same period in 2021, according to a New York Times analysis.

Related Articles:

  • The Anatomy of Mamdani’s Political Earthquake — An analysis of New York City's mayoral vote finds that Mamdani's coalition centered on working-, middle-, and upper-middle-class renters across white, Hispanic and Asian neighborhoods and on the youngest voters, while Cuomo's support came from both the wealthy and the poor and from middle-class Black voters in an older Black electorate.
  • Behind Trump’s 2024 Victory, a More Racially and Ethnically Diverse Voter Coalition — Republican support in the 2024 presidential election rose among Hispanic voters (48%, up from 36% in 2020), Black voters (15% from 8%), Asian voters (40% from 30%), and naturalized citizens (47% from 38%). Men backed Trump by 12 points (55%-43%) after splitting closely in 2020, with gains concentrated among men under 50.
  • New Yorkers Make Their Housing Shortage Worse — Housing units rose 17% in the Austin metropolitan area between 2020 and 2024 versus 3% in New York City, and New York housing prices and rents have risen more than Austin's despite far weaker job growth. Rent regulation covering roughly half of New York's units discourages tenants from moving and landlords from upgrading.

Tuesday, July 1, 2025

AI Summary. The authors' model of automation predicts that occupations with rising expertise requirements see higher wages but falling employment, while those with declining requirements see lower wages alongside rising employment. Analyzing employment and earnings data by occupation across four decades, they find changes in occupational expertise strongly predict changes in occupational wages.

David Autor and Neil Thompson National Bureau of Economic Research
Date Posted:

Autor finds automation of a given routine task can “replace experts in some occupations and augment expertise in others.” Data from 1980–2014 show that occupations in which automation increased expertise requirements saw falling employment but rising wages.

How do changing expertise requirements shape occupational wages and employment?

Core argument: The authors' conceptual model shows that automation of a given task can simultaneously replace experts in some occupations and augment expertise in others, with countervailing effects on wages and employment.

Automation of any given task can simultaneously replace experts in some occupations and augment expertise in others. Our conceptual model shows how automation simultaneously replaces experts and augments expertise, and it predicts that changing expertise requirements have countervailing effects on wages and employment: automation that decreases expertise requirements reduces wages but permits the entry of less expert workers; automation that raises requirements raises wages but reduces the set of qualified workers. Analyzing data on employment and earnings by occupation over four decades, we show that changes in occupational expertise, stemming from both the removal and addition of occupational tasks, strongly predict changes in occupational wages. Our model makes the counterintuitive prediction that occupations with increasing expertise requirements see falling employment (alongside rising wages), while occupations with declining expertise requirements see rising employment alongside falling wages. The data robustly confirm this prediction.

Takeaways by Macro Roundup® AI

  1. The authors' conceptual model shows that automation of a given task can simultaneously replace experts in some occupations and augment expertise in others, with countervailing effects on wages and employment.
  2. Analyzing employment and earnings by occupation across four decades, the authors find that changes in occupational expertise, stemming from both the removal and addition of occupational tasks, strongly predict changes in occupational wages.
  3. The authors' model predicts, and their data confirm, that occupations with rising expertise requirements see falling employment alongside rising wages, while occupations with declining requirements see rising employment alongside falling wages.

Related Articles:

  • Applying AI To Rebuild Middle-Class Jobs — Computerization concentrated decision-making power and resources among elite experts with college and graduate degrees, while the 60% of U.S. adults without a bachelor's degree were relegated to low-paid service jobs. Because artificial intelligence can combine information and rules with acquired experience, it could enable more workers to perform higher-stakes decision-making tasks.
  • Technological Disruption in the Labor Market — The authors measure US labor market structure since 1880 and find 1990–2017 less disruptive than any earlier period, because past changes from general-purpose technologies like steam and electricity were so profound. They identify four recent signs of accelerating change, including a 50%+ rise in science and technology employment share since 2010.
  • Skills and Human Capital in the Labor Market — Labor market earnings are strongly associated with measures of personality traits and preferences, and over the last two decades returns to cognitive skills have been flat or declined in the US, Sweden, and Finland while returns to "soft" skills such as conscientiousness, extraversion, emotional stability, and social skills have grown rapidly.

AI Summary. Amazon employs about 1.56m people overall and is approaching having more robots than human workers in its warehouses, with robots supplanting some employees and helping slow hiring. A Wall Street Journal analysis estimates its average employees per facility fell to roughly 670, a 16-year low, while packages shipped per employee rose from about 175 in 2015 to about 3,870.

Sebastian Herrera Wall Street Journal
Date Posted:

Amazon has deployed more than one million robots in its facilities, which are at their lowest employee headcount since 2015. Since 2015, Amazon’s productivity has improved from 175 packages shipped per employee annually to 3,870.

Are warehouse robots replacing workers and raising productivity per employee?

Core argument: Amazon's average employees per facility fell to roughly 670 last year, the lowest in 16 years, according to a Wall Street Journal analysis comparing the company's reported workforce with estimates of its facility count.

Robots are also supplanting some employees, helping the company to slow hiring. Amazon employs about 1.56 million people overall, with the majority working in warehouses. The average number of employees Amazon had per facility last year, roughly 670, was the lowest recorded in the past 16 years, according to a Wall Street Journal analysis, which compared the company’s reported workforce with estimates of its facility count. The number of packages that Amazon ships itself per employee each year has also steadily increased since at least 2015 to about 3,870 from about 175, the analysis found, an indication of the company’s productivity gains.

Takeaways by Macro Roundup® AI

  1. Amazon's average employees per facility fell to roughly 670 last year, the lowest in 16 years, according to a Wall Street Journal analysis comparing the company's reported workforce with estimates of its facility count.
  2. The number of packages Amazon ships itself per employee each year rose to about 3,870 from about 175 since at least 2015, which the Wall Street Journal analysis calls an indication of productivity gains.
  3. Amazon is approaching the point of using more robots than humans in its warehouses, with robots supplanting some employees and helping the company slow hiring across a workforce of about 1.56 million.

Related Articles:

  • How AI & Robots are Smashing Economics, and Why It Matters — As artificial intelligence and robots make wages less responsive to employment conditions, the link between tight labor markets and inflation weakens, undermining central banks' inflation-targeting frameworks. The author argues central banks would then need far larger interest-rate moves to achieve the same effect, producing more volatile and less predictable outcomes.
  • America Is Missing The New Labor Economy – Robotics Part 1 — Building an identical robotic arm in the US costs about 2.2x more than in China, and US-labeled components still depend heavily on Chinese parts and materials with no scalable alternative. The author argues China is the only country positioned to capture full-scale intelligent robotic automation, which would let it outcompete the US across production.
  • What Progress Has There Been In Industrial Robots? — Industrial robot repeatability improved little between 1972 and 1984, with a typical 1-meter reach, 10kg payload arm accurate to about 1 mm in both years, but a comparable 2023 robot achieves roughly 0.01–0.02 mm, 50 to 100x more precise. Such a robot cost 2 to 3x more in the 1980s than today, before accounting for cheap Chinese robot arms.

AI Summary. Movements in the trade-weighted US dollar against other major currencies map almost entirely onto changes in forward interest-rate differentials, with the same positive relationship holding across periods despite noisier data. The author argues this leaves no discernible evidence of a separate political risk premium in the dollar.

Robin Brooks Robin Brooks Substack
Date Posted:
Is Database:
Database

The dollar is down 11% since the start of the year. Robin Brooks argues that the decline is not a function of an increased risk premium but “maps almost entirely into interest differentials.”

Do interest-rate differentials explain dollar moves without a political risk premium?

Core argument: The fall in the trade-weighted Dollar against the G10 maps almost entirely into interest differentials, measured by the 2y2y forward trade-weighted rate differential of the US against the same set of countries.

The fall in the Dollar maps almost entirely into interest differentials. The left chart shows the trade-weighted Dollar against the G10 and the 2y2y forward trade-weighted rate differential of the US against the same set of countries. It’s tempting to think that a Trump risk premium is building, because the Dollar is down more than the rate differential. But looking at “levels” is misleading in this regard, because it compounds a bunch of moves that have nothing to do with the Dollar. The right chart uses the same data, but looks at daily changes in the rate differential (horizontal axis) and the Dollar (vertical axis). I differentiate between pre- (black dots) and post-inauguration (blue dots) data points and highlight the last observation (Jun. 30, 2025) just like I do in the left chart. As expected, there’s a positive link between the rate differential and the Dollar. There is no discernible difference between pre- and post-inauguration data. Things have gotten noisier - no question there - but the positive link is basically the same.

Takeaways by Macro Roundup® AI

  1. The fall in the trade-weighted Dollar against the G10 maps almost entirely into interest differentials, measured by the 2y2y forward trade-weighted rate differential of the US against the same set of countries.
  2. Daily changes in the rate differential and the Dollar show a positive link with no discernible difference between pre- and post-inauguration observations, though the relationship has gotten noisier.
  3. Comparing levels of the Dollar and the rate differential is misleading because it compounds moves that have nothing to do with the Dollar.

Related Articles:

  • With a Weakening Dollar, It’s America Second — The S&P 500's record level holds in dollars but not in other major currencies, reflecting dollar depreciation, with non-US stocks outperforming US stocks by about 10 percentage points. The rebound is not driven by the largest tech platforms, whose performance now matches the index's other 493 stocks.
  • The Dollar’s Global Role and the Financing of the US External Deficit — 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.
  • 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. The Taiwan dollar surged more than 2% amid large foreign inflows and heavy US dollar selling by local exporters, testing the central bank's tolerance for currency strength. Further gains could produce paper losses for Taiwanese life insurers, which have scaled back hedges on foreign assets held largely in US dollars.

Betty Hou and Matthew Burgess Bloomberg
Date Posted:

Taiwan’s dollar surged more than 2% as its large life insurance and export sectors moved to hedge US dollar weakness. Taiwan’s currency has gained 12% this year, driven by foreign inflows and significant US dollar selling by local exporters.

Does a surging Taiwan dollar threaten local life insurers' unhedged holdings?

Core argument: The Taiwan dollar surged more than 2% as local exporters' selling of the US dollar, alongside large foreign inflows, tested the central bank's tolerance for local currency strength, according to two traders.

The Taiwan dollar surged more than 2% in another day of volatility for the currency, as exporters’ sales of the greenback tested the central bank’s tolerance for local currency strength. Large foreign inflows and significant US dollar selling by local exporters were seen in Tuesday’s morning session, according to two traders, who asked not to be identified as they weren’t authorized to speak publicly. Concerns over a stronger Taiwan dollar have been building since early May, when the currency posted its biggest one-day jump since the 1980s. If left unchecked, the gains could result in paper losses for life insurers after they scaled back hedges on their foreign asset holdings, the bulk of which are denominated in the greenback.

Takeaways by Macro Roundup® AI

  1. The Taiwan dollar surged more than 2% as local exporters' selling of the US dollar, alongside large foreign inflows, tested the central bank's tolerance for local currency strength, according to two traders.
  2. Concerns over a stronger Taiwan dollar have been building since early May, when the currency posted its biggest one-day jump since the 1980s.
  3. Unchecked Taiwan dollar gains could result in paper losses for life insurers, which scaled back hedges on foreign asset holdings that are mostly denominated in US dollars.

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  • The Coming Asian FX ‘Avalanche’ — Investment firm Eurizon SLJ argues that Asian exporters have hoarded much of their trade surpluses in dollar deposits rather than repatriating them, creating an overhang the firm roughly estimates at $2.5tn in China plus more from Taiwan, Malaysia, and Korea, growing about $500bn a year. It predicts this raises the risk of a non-linear dollar sell-off.
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AI Summary. Germany's budget raises defence spending to €152.8bn by 2029, more than doubling it to 3.5% of GDP. Using International Monetary Fund growth projections and today's yield curve, the author estimates German gross debt rises from 64% of GDP to 76% by 2029, with net debt supply for private investors approaching €250bn a year.

Chris Marsh Money: Inside and Out
Date Posted:

As Germany remilitarizes, @GeneralTheorist forecasts German gross debt will rise from 64% of GDP last year to 76% of GDP in 2029, increasing the available supply of Bunds by ~5% of German GDP over the next two years.

How much will higher defense spending raise German government debt?

Core argument: Germany's 2025 budget, delayed by government formation, more than doubles defence spending by 2029 to €152.8bn, equal to 3.5% of GDP.

The German 2025 budget (only announced in the past this week due to the delays in forming a government) sees defence spending more than double by 2029, rising to €152.8 billion (to reach 3.5% of GDP).Plugging these numbers into a debt sustainability framework, using the IMF’s latest WEO projections for GDP, German gross debt increases from 64% of GDP in 2024 to 76% of GDP in 2029 given today’s yield curve - a 12ppts of GDP uplift in 5 years. State and local government borrowing could add more to this—as would a higher yield curve. While net issuance will be lower than during the pandemic and energy shock, allowing for the net Eurosystem purchases shows the increase in net free float will approach EUR250bn per year—about 5% of GDP—in the next two years.

Takeaways by Macro Roundup® AI

  1. Germany's 2025 budget, delayed by government formation, more than doubles defence spending by 2029 to €152.8bn, equal to 3.5% of GDP.
  2. Applying the budget to a debt sustainability framework with IMF World Economic Outlook GDP projections and today's yield curve, German gross debt rises from 64% of GDP in 2024 to 76% in 2029, a 12-point increase.
  3. Accounting for net Eurosystem purchases, the increase in German net free float approaches €250bn per year, about 5% of GDP, over the next two years, with net issuance below pandemic and energy-shock levels.

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AI Summary. Manufacturing accounted for about €2.5tn ($2.9tn) of EU value added, or roughly 16% of the total, down from about 20% in 1995. Consultancy EY estimates that raising European NATO equipment spending to about €137bn annually would add €35.7bn to Europe's defence sector and supply chain, creating perhaps 500,000 jobs.

Economist Staff The Economist
Date Posted:

Consultancy EY estimates that increased European equipment spending on Europe’s domestic defence sector and associated supply chain will increase the EU’s overall manufacturing sector by ~1.5% and create 500,000 jobs.

Can higher defense spending slow Europe's manufacturing decline?

Core argument: EY estimates European NATO members will need to spend roughly €137bn annually on equipment, about €65bn more than current levels, of which €35.7bn would flow to Europe's own defence sector and its supply chain.

Manufacturing made up around €2.5trn ($2.9trn) of value added in 2024, or around 16% of the EU total, down from about 20% in 1995. But what proportion of that is the defence industry and its complex supply chain is hard to determine, as official statistics generally keep such data confidential. Bottom-up modelling by EY, a consultancy, gives an idea, however. If, as it estimates, the European parts of NATO, which is most of the EU plus Britain and Norway, will need to spend around €137bn annually over the coming years in equipment, that would be about €65bn more than the current figure. The resulting increase in spending on Europe’s own defence sector and its associated supply chain would be €35.7bn, about 1.5% of the EU’s overall manufacturing-sector total and would, so EY reckons, add perhaps 500,000 jobs there. Less than a third of the additional €35.7bn would be in the defence sector itself; the rest would be spent elsewhere in the supply chain. That still translates into creating around 150,000 extra jobs in the actual defence sector.

Takeaways by Macro Roundup® AI

  1. EY estimates European NATO members will need to spend roughly €137bn annually on equipment, about €65bn more than current levels, of which €35.7bn would flow to Europe's own defence sector and its supply chain.
  2. EY reckons the €35.7bn increase equals about 1.5% of the EU's manufacturing total and would add perhaps 500,000 jobs, around 150,000 of them in the defence sector itself.
  3. EU manufacturing accounted for about €2.5trn ($2.9trn) of value added in 2024, or roughly 16% of the EU total, down from about 20% in 1995.

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