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, July 7, 2025

AI Summary. The National Association of Realtors reports 1.1m first-time home buyers last year, 380,000 fewer than the prior year and about half the two-decade average of 2.1m a year, with the sharpest sales slowdown in homes under $500,000. Unaffordable prices and high mortgage rates have slowed the flow from renting to owning.

Carol Ryan Wall Street Journal
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Between 2004–2024, an average of 2.1mm people annually became first-time home buyers. Last year there were only 1.1mm first-time buyers, relative to 1.9mm in 2008; 46mm American households are renting, a record high.

Are unaffordable prices and high mortgage rates keeping renters from buying?

Core argument: First-time home buyers numbered 1.1 million last year, 380,000 fewer than in 2023 and nearly half the two-decade average of 2.1 million a year, according to National Association of Realtors data.

On average, 2.1 million people a year became first-time buyers over the last two decades. Many moved to homeownership straight from the rental market. Unaffordable house prices and high mortgage rates have slowed this flow since 2022. There were 1.1 million first-time buyers last year—380,000 fewer than in 2023 and almost half the historical norm, data from the National Association of Realtors shows. This year could be even worse judging by the weak spring home-selling season. Based on sales through May, the U.S. is on track to sell 4.03 million homes in 2025, fewer than last year’s tally, which was the lowest since 1995. The sharpest slowdown is happening among properties that cost less than $500,000, NAR data shows. That is the price range that usually attracts first-time buyers.

Takeaways by Macro Roundup® AI

  1. First-time home buyers numbered 1.1 million last year, 380,000 fewer than in 2023 and nearly half the two-decade average of 2.1 million a year, according to National Association of Realtors data.
  2. Based on sales through May, the U.S. is on track to sell 4.03 million homes in 2025, fewer than last year's tally, which was the lowest since 1995.
  3. The sharpest sales slowdown is occurring among homes priced below $500,000, the range that usually attracts first-time buyers, according to National Association of Realtors data.

Related Articles:

  • Inflation Adjusted House Prices 1.0% Below 2022 Peak — Inflation-adjusted US house prices are 1.0% below their 2022 peak. An affordability index built from median income, a 15% down payment, and 30-year fixed mortgage rates shows the monthly payment on the same house up 102% over four years, with prices up 34% and mortgage rates at 6.65%.
  • 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.

AI Summary. Survey data indicate US adults do not rank having children as a top life priority: among adults aged 18–34, 22% say having children is extremely or very important, versus 68% for an enjoyable job or career and 62% for close friends. Among women aged 20–44, the share reporting that work is very important rose from 31.9% to 47.4%.

Melissa Kearney and Phillip Levine National Bureau of Economic Research
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“Shifting priorities.” In a 2023 Pew study, only 22% of those 18–34 say having children is extremely or very important. For comparison, 68% say the same about having a job or career they enjoy, and 62% say this about having close friends.

Are shifting personal priorities driving low fertility in rich countries?

Core argument: In World Values Survey data for U.S. women ages 20–44, the share reporting that work is very important to them rose from 31.9% to 47.4% between the 2005 and 2009 survey periods.

Data from the World Values Survey gives some insight into the expressed priorities of women between the ages of 20 and 44 in the United States between 2005 and 2009. Between those two survey periods, the % of women who report that work is very important to them rose from 31.9% to 47.4%. Among respondents of a 2018 survey conducted for the New York Times, the desire to “have more leisure time” is offered as the leading reason for not having children among adults who said they did not want to have children or were not sure whether they did. Survey evidence from the Pew Research Center finds that adults today do not list having children as a top priority for their adult lives. Another survey conducted by the Pew Research Center survey conducted in April 2023 reveals that while a sizable majority of American adults of all ages view job satisfaction and having close friends as being very important to a fulfilling life, many fewer say the same about being married or having children. Among all adults ages 18 to 34, only 22% say having children is extremely or very important. For comparison, 68% say the same about having a job or career they enjoy, and 62% say this about having close friends.

Takeaways by Macro Roundup® AI

  1. In World Values Survey data for U.S. women ages 20–44, the share reporting that work is very important to them rose from 31.9% to 47.4% between the 2005 and 2009 survey periods.
  2. An April 2023 Pew Research Center survey found that 22% of U.S. adults ages 18–34 say having children is extremely or very important, versus 68% for a job or career they enjoy and 62% for close friends.
  3. In a 2018 survey conducted for the New York Times, the desire to have more leisure time was the leading reason for not having children among adults who did not want children or were unsure.

Related Articles:

  • The Demographic Future of Humanity: Facts and Consequences — The authors estimate the world total fertility rate is around 2.17, below the global replacement rate of roughly 2.21, meaning humanity is already below replacement, with fertility and births falling faster than anticipated. They project middle-income countries' fertility may fall below that of rich countries outside East Asia, with emigration compounding population decline.
  • World Depopulation: Prospects and Implications — The US is projected to account for a growing share of the rich world's labor force, youth, and highly educated talent, with continuing population and labor force growth and only moderate aging through 2050. Its fertility, though below replacement, exceeds that of East Asian and nearly all European countries, and sustained legal immigration is essential to this demographic advantage.
  • The Age of Depopulation: Surviving a World Gone Gray — The United States remains the main outlier among developed countries resisting depopulation, with fertility of just over 1.6 births per woman — high for a rich country but below the 2.1 replacement threshold — plus steady immigration. The Census Bureau projects the U.S. population will peak around 2080 and decline continuously thereafter.

AI Summary. New data show the population of children under five in large U.S. urban counties fell 0.2%, matching the national rate of decline and ending a stretch in which big cities lost young children faster than the country as a whole. Every large urban county with under-five growth since 2020 is in Texas, North Carolina, or Florida.

Connor O'Brien Agglomerations
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The pandemic-era flight of families with young children from non-sunbelt cities ended in 2024. Sunbelt cities have seen growth over the entire period. Rural counties are now losing their aged 0–4 populations at a faster rate (-.5%) than cities (-.2%).

Have big cities stopped losing young children faster than the nation?

Core argument: The under-five population in America's large urban counties fell 0.2% between July 2023 and July 2024, matching the national rate of decline and marking the first post-pandemic year in which big cities did not lose young children faster than the country overall.

The steep and startling decline in the number of young children living in America’s major cities was a defining demographic story of the Covid-19 pandemic and its aftermath. New data suggests that this “urban family exodus” has stopped, at least for the moment. The population of children under five years old declined a modest 0.2% in the country’s large urban counties between July 2023 and July 2024, the same rate of decline as for the country as a whole. Last year was the first since the pandemic in which the under-five population did not decline faster in the county’s largest cities than it did nationwide. None of the large urban counties whose under-five populations declined the most between 2020 and 2023 are anywhere close to recovering to pre-pandemic levels. In 2024, small towns and rural counties experienced larger declines in their populations of young children than small, mid-sized, and large urban counties. Meanwhile, suburbs’ under-five population grew very slightly, as it also did in 2022 and 2023. Every large urban county that has grown its under-five population since 2020 is in Texas, North Carolina, or Florida.

Takeaways by Macro Roundup® AI

  1. The under-five population in America's large urban counties fell 0.2% between July 2023 and July 2024, matching the national rate of decline and marking the first post-pandemic year in which big cities did not lose young children faster than the country overall.
  2. None of the large urban counties with the steepest under-five declines from 2020 to 2023 are close to recovering to pre-pandemic levels, and every large urban county that has grown its under-five population since 2020 is in Texas, North Carolina, or Florida.
  3. Small towns and rural counties saw larger declines in young-child populations than small, mid-sized, and large urban counties in 2024, while suburbs' under-five population grew very slightly, as it also did in 2022 and 2023.

Related Articles:

  • Young Families Have Continued Leaving Big Cities Post-Pandemic — Large urban counties have continued to lose population of young children even as their overall population growth resumed, driven by immigration. Birth rates in large urban counties have declined twice as fast as in rural counties over the past decade, and the number of children under five fell in 58% of all US counties.
  • Cities Aren’t Back — The share of college-educated 25-34 year-olds without school-age children living in urban neighborhoods fell from 39.2% to 37.0%, a steeper decline than for the population overall, according to the American Community Survey. The urban share of top-10% income households held roughly flat at about 30%, a change from earlier steady increases.
  • Where is Standard of Living the Highest? Local Prices and the Geography of Consumption — The authors estimate that geographical differences in cost of living are especially large for low-income US households, and that expensive cities offer college graduates a standard of living similar to affordable cities while offering less-educated households a lower one. A high school dropout household moving from the most affordable to the most expensive commuting zone would see consumption fall 18.5%.

AI Summary. Federal spending has averaged 21.1% of gross domestic product over the past 50 years but has remained above that average since rising during the Covid-19 pandemic, and with tax increases politically off the table the result is larger deficits. Medicare and Medicaid now cost just over 5% of gross domestic product, up from 1.2% in 1975.

Steven Rattner New York Times
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Over the past 50 years, federal spending has averaged 21.1% of GDP, rising to 24.4% post-pandemic. Revenues, at 18.3% of GDP, remain above the 17.3% 50-year average, but not enough to cover interest costs and “relentlessly” rising Medicare and Medicaid.

Is elevated federal spending driving larger deficits?

Core argument: Federal spending averaged 21.1% of GDP over the past 50 years but has remained above that average since ballooning during the Covid-19 pandemic, which, with tax increases politically off the table, means larger deficits.

Over the past 50 years, federal spending as a percentage of gross domestic product averaged 21.1%. But since ballooning during the Covid-19 pandemic, spending has remained stubbornly above this average. With tax increases politically off the table, this means larger deficits. The [reconciliation bill] is just the latest, and worst, example of a policy followed by both Republicans and Democrats in recent years: take the easy way out and let deficits climb. The costs of Medicare and Medicaid are rising relentlessly and are now just over 5% of G.D.P., compared with 1.2% in 1975. Social Security’s outlays have also grown. And now, because of increasing debt and higher interest rates, the cost of servicing the national debt has begun to soar. Allowing the 2017 tax cuts to expire, which effectively would have raised taxes on 62% of Americans, could have been highly unpopular. But it was also necessary.

Takeaways by Macro Roundup® AI

  1. Federal spending averaged 21.1% of GDP over the past 50 years but has remained above that average since ballooning during the Covid-19 pandemic, which, with tax increases politically off the table, means larger deficits.
  2. Medicare and Medicaid costs now stand just over 5% of GDP, compared with 1.2% in 1975, while Social Security outlays have also grown and debt-servicing costs have begun to soar amid rising debt and higher interest rates.
  3. Letting the 2017 tax cuts expire would effectively have raised taxes on 62% of Americans, a step the author argues was necessary though potentially highly unpopular.

Related Articles:

  • The Budget and Economic Outlook: 2025 to 2035 — The Congressional Budget Office projects the federal deficit will grow from $1.9tn (6.2% of GDP) to $2.7tn by 2035, well above the 3.8% of GDP average of the past 50 years. Outlays are projected to rise to 24.4% of GDP, driven by growth in Social Security and Medicare spending and rising net interest costs, while revenues reach 18.3%.
  • 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.
  • US Fiscal Sustainability Once More — US federal interest payments were projected to rise from 18% of tax revenues to about 22% by 2034 under the Congressional Budget Office's prior baseline. The author estimates that if the yield curve stays at current levels and policy is unchanged, that ratio would exceed 25% by 2032 and approach 30% by 2035.

AI Summary. US tariff revenues rose almost fourfold from a year earlier to a record $24.2bn in a month, equal to about 14.5% of the typical $166bn monthly federal budget shortfall. The Yale Budget Lab projects current tariff policy would raise $2.2tn over 2025–2034, or $1.8tn net of lost revenue elsewhere.

Alan Smith and Jonathan Vincent Financial Times
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In May, the first full month of the 10% universal tariff, revenue hit a record $24.2B, 14.5% of the mean monthly deficit over the last year. Tariff revenue is projected at $1.8T over the next decade, offsetting ~½ of the $3.4T deficit hike in the OBBBA.

How much of the federal deficit do rising tariff revenues cover?

Core argument: US tariff revenues rose almost fourfold from a year earlier to a record $24.2bn in May, the first full month of President Donald Trump's 10% global tariff, up more than 25% from April while total goods imports were broadly unchanged.

US tariff revenues surged almost fourfold from a year earlier to a record $24.2bn in May, the first full month in which President Donald Trump’s 10% global tariff was in effect. The figure represented a rise of more than 25% from the month earlier, while the total value of US goods imports remained broadly unchanged from April. Despite the rise in sums collected, the receipts represented only about 7.7% of May’s federal deficit of $316bn. The deficit figure oscillates from month to month, however. The sum raised in May was equivalent to about 14.5% of the typical $166bn shortfall between federal spending and revenues over the past year. Analysis by Yale Budget Lab suggests that if the rates in place as of June 16 were to remain, with no further increase on July 9, the effective tariff rate would settle at about 15 per cent. The think-tank projected that the current tariff policy would raise $2.2tn between 2025 and 2034, but thanks to reductions in tax revenue streams elsewhere, would result in net revenues of $1.8tn during those years - large, but significantly less than the $3.4tn forecast to be added to US federal debt over the same period by implementing Trump’s tax bill, according to estimates from the Congressional Budget Office

Takeaways by Macro Roundup® AI

  1. US tariff revenues rose almost fourfold from a year earlier to a record $24.2bn in May, the first full month of President Donald Trump's 10% global tariff, up more than 25% from April while total goods imports were broadly unchanged.
  2. May's $24.2bn in tariff receipts covered about 7.7% of that month's $316bn federal deficit and equalled roughly 14.5% of the typical $166bn monthly shortfall between federal spending and revenues over the past year.
  3. Yale Budget Lab projects that if tariff rates in place as of June 16 remain, the effective rate would settle at about 15% and raise $2.2tn between 2025 and 2034, or $1.8tn net, against the $3.4tn the Congressional Budget Office estimates Trump's tax bill would add to federal debt.

Related Articles:

  • Has Trump Outsmarted Everyone on Tariffs? — A possible US trade strategy would hold tariffs at 30% on China and 10% on all other countries while giving trading partners 12 months to lower non-tariff barriers. The author argues this would immediately reduce uncertainty, aiding business planning, employment, and markets, while generating $400bn in annual revenue.
  • 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.
  • Help for the Heartland? The Employment and Electoral Effects of the Trump Tariffs in the United States — The authors find that the combined effect of U.S.-China trade war import tariffs, retaliatory tariffs, and farm subsidies on employment in exposed U.S. locations was at best a wash and possibly mildly negative, while residents of tariff-protected areas became less likely to identify as Democrats and more likely to vote Republican.

Tuesday, July 8, 2025

AI Summary. Companies funding AI data centers through jointly owned special purpose vehicles keep the borrowing off their own balance sheets while retaining shared control and use of the facilities. AI data center spending already exceeds telecom spending during the dot-com bubble, and weak returns would quickly wipe out the thin equity cushion above the vehicles' debtholders.

Paul Kedrosky Applied Complexity
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The AI buildout is being funded by special purpose vehicles (SPVs). Paul Kedrosky warns “if the returns aren’t there quickly, the thin equity cushion above datacenter SPV debt holders will be speedily wiped out.”

Are off-balance-sheet vehicles hiding the risk of AI data center debt?

Core argument: A rough estimate puts current AI data center spending above telecom capital spending during the dot-com bubble, driven by the same sort of hyperbolic projections of future usage and spending.

The capital needed for these buildouts is so large that doing it with orthodox balance sheet debt, or by issuing sufficient equity, let alone spending your cash, would make a mess of your balance sheet. By structuring it this way, via special purpose vehicles (SPVs) in which they have joint ownership, companies like Meta don't have to show the debt as their debt. It is the debt of those guys over there, that SPV. Not us. Granted, they retain shared control, and they get to use the AI data center, and nothing there happens without their say-so, but still. It's not ours. [Here] is a rough estimate of AI data center now vs telecom spending then during the dot-com bubble. We are already spending more now than then, driven by the same sort of hyperbolic projections of future usage and spending. They may turn out to be correct, but if the returns aren't there quickly, the thin equity cushion above datacenter SPV debtholders will be speedily wiped out.

Takeaways by Macro Roundup® AI

  1. A rough estimate puts current AI data center spending above telecom capital spending during the dot-com bubble, driven by the same sort of hyperbolic projections of future usage and spending.
  2. Companies such as Meta finance AI data centers through jointly owned special purpose vehicles, keeping the debt off their own balance sheets while retaining shared control and use of the facilities.
  3. The equity cushion above AI data center SPV debtholders is thin and would be speedily wiped out if returns on the buildouts do not arrive quickly.

Related Articles:

  • Microsoft’s Datacenter Freeze – 1.5GW Self-Build Slowdown & Lease Cancellation Misconceptions — Reported cancellations of about 2GW of Microsoft datacenter capacity cover only non-binding letters of intent, while the company holds roughly 5GW of pre-leased capacity under binding contracts slated to begin operating between 2025 and 2028. The authors estimate Microsoft accounted for more than 60% of all newly leased turnkey datacenter capacity over a recent six-quarter stretch.
  • The Alchemists — NVIDIA's share of all US capital spending is projected to approach two 20th-century peaks by 2026, and large cloud providers would need $400–500bn in new revenue to earn their traditional 50% gross margin on roughly $250bn of annual data center spending. After the dot-com collapse, Corning's fiber optic revenues did not surpass 2000 levels until 2018 in nominal terms.
  • A Severe Case of COVIDIA: Prognosis For An AI-Driven US Equity Market — Computing cycles move from infrastructure to platforms to applications, and NVIDIA data center revenues as a share of market-wide capital spending are projected to reach levels last seen at the 1969 mainframe peak and the dot-com boom. Large cloud providers spend more than twice as much training foundational models as running them for customers.

AI Summary. The authors estimate US tariffs leave consumers facing an average effective tariff rate of 17.6%, the highest since 1934, or 16.5% after consumption shifts to cheaper goods. They project the tariffs reduce US real GDP growth by 0.7pp, leave the economy persistently 0.4% smaller (about $110bn annually), and raise $2.2tn over a decade after dynamic effects.

Ernie Tedeschi Yale University
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As of July 7, the US has an effective tariff rate of 17.6%, now reflecting a 20% tariff on Vietnam and 25% tariffs on Japan and South Korea. Dynamically scored, this regime will likely raise $2.2T over 2026–2035.

How much do new tariffs cost consumers, growth, and revenue?

Core argument: US consumers face an overall average effective tariff rate of 17.6%, the highest since 1934, falling to 16.5% after consumption shifts, the highest since 1936.

Consumers face an overall average effective tariff rate of 17.6%, the highest since 1934. After consumption shifts, the average tariff rate will be 16.5%, the highest since 1936. US real GDP growth over 2025 is -0.7pp lower from all 2025 tariffs. In the long-run, the US economy is persistently -0.4% smaller, the equivalent of $110 billion annually in 2024$. All tariffs to date in 2025 raise $2.6 trillion over 2026-35, with $408 billion in negative dynamic revenue effects, bringing dynamic revenues to $2.2 trillion.

Takeaways by Macro Roundup® AI

  1. US consumers face an overall average effective tariff rate of 17.6%, the highest since 1934, falling to 16.5% after consumption shifts, the highest since 1936.
  2. All 2025 tariffs lower US real GDP growth over 2025 by 0.7pp and leave the economy persistently 0.4% smaller in the long run, equivalent to $110 billion annually in 2024 dollars.
  3. Tariffs imposed in 2025 raise $2.6 trillion over 2026–35, with $408 billion in negative dynamic revenue effects, bringing dynamic revenues to $2.2 trillion.

Related Articles:

  • US Tariff Receipts Surge in Donald Trump’s Trade War — US tariff revenues rose almost fourfold from a year earlier to a record $24.2bn in a month, equal to about 14.5% of the typical $166bn monthly federal budget shortfall. The Yale Budget Lab projects current tariff policy would raise $2.2tn over 2025–2034, or $1.8tn net of lost revenue elsewhere.
  • 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.
  • Help for the Heartland? The Employment and Electoral Effects of the Trump Tariffs in the United States — The authors find that the combined effect of U.S.-China trade war import tariffs, retaliatory tariffs, and farm subsidies on employment in exposed U.S. locations was at best a wash and possibly mildly negative, while residents of tariff-protected areas became less likely to identify as Democrats and more likely to vote Republican.

AI Summary. Chinese producer prices have been in deflationary territory since September 2022, and Chinese leaders have used state and party media to criticise "involution", or excessive price competition among manufacturers. The statements suggest Beijing is wary that rising industrial output alongside weak domestic consumer demand is entrenching deflation and straining relations with major trading partners.

Joe Leahy and Haohsiang Ko Financial Times
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CCP officials have attacked “neijuan” or “involution,” meaning low-priced, disorderly price competition. Overcapacity, driven by industrial investment, is fueling, and potentially entrenching, deflation.

Is China's price competition among manufacturers entrenching deflation?

Core argument: Chinese producer prices have remained in deflationary territory since September 2022.

Chinese producer prices have been mired in deflationary territory since September 2022. In articles across state and party media, Chinese President Xi Jinping and other leading officials have attacked what they call neijuan, or “involution”, meaning excessive price competition. The statements suggest Beijing is growing increasingly wary that surging industrial output, coupled with weak consumer demand at home, is fuelling a race to the bottom in prices that is entrenching deflation and fuelling tensions with the country’s biggest trading partners.

Takeaways by Macro Roundup® AI

  1. Chinese producer prices have remained in deflationary territory since September 2022.
  2. Xi Jinping and other leading Chinese officials have attacked "neijuan", or "involution", meaning excessive price competition, in articles across state and party media.
  3. The official statements suggest Beijing is growing wary that surging industrial output combined with weak domestic consumer demand is fuelling a race to the bottom in prices, entrenching deflation and stoking tensions with China's biggest trading partners.

Related Articles:

  • China Chooses Deflation — 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.
  • China is Suffering its Own ‘China Shock’ — Academic analysis of 12 labour-intensive Chinese manufacturing industries estimates average employment fell about 14%, or nearly 4mn jobs, between 2011 and 2019, with textile roles down 40%; a further analysis of the same sectors found 3.4mn more jobs lost through 2023. Researchers argue industrial upgrading and automation are cutting demand for lower-skilled workers and depressing their wages.
  • 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.

AI Summary. China's export controls on rare earth materials and magnets threatened to halt production across the auto industry, the largest manufacturing sector in most advanced economies, and forced Washington to negotiate on tariffs. Despite China's well-known dominance of rare earth production, Western governments and companies have not developed alternative suppliers.

Chris Miller Financial Times
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China’s precisely targeted rare earth export controls were “probably the key factor in forcing Washington to reverse its tariff rises on the country.” The American auto industry would effectively shut down if the controls were not lifted. @crmiller1

Do rare earth export controls give China leverage in trade negotiations?

Core argument: China's export controls on rare earth materials and magnets threatened within weeks to shutter key factories across the auto industry, the largest manufacturing sector in most advanced economies.

The new controls on exporting rare earth materials and magnets are different. In just a handful of weeks they threatened to shutter key factories across the auto industry — the largest manufacturing sector in most advanced economies. They also brought the US president to heel on his signature initiative: the trade war. The White House thought it had achieved escalation dominance. Its theory was that sky-high tariffs would be so costly that Beijing would have no hope but to negotiate. In fact, China’s leaders could swallow the political cost of tariffs. But Washington couldn’t ignore the loss of rare earth materials and its impact on auto companies. The most striking aspect of China’s weaponisation of rare earths is how unprepared western governments and companies were. Even those who cannot name a single rare earth element know that China dominates their production. Nevertheless, over the decade and a half since China first cut rare earth exports to Japan in 2011, the west has failed to find new suppliers.

Takeaways by Macro Roundup® AI

  1. China's export controls on rare earth materials and magnets threatened within weeks to shutter key factories across the auto industry, the largest manufacturing sector in most advanced economies.
  2. The White House's theory of escalation dominance — that sky-high tariffs would force Beijing to negotiate — faltered because China's leaders could absorb the political cost of tariffs while Washington could not ignore the loss of rare earths.
  3. Western governments and companies remained unprepared for China's rare earth leverage, failing to find new suppliers in the decade and a half since Beijing first cut rare earth exports to Japan in 2011.

Related Articles:

  • China Found World’s Pain Point on Trade – and Will Use It Again — China's export permitting system for rare earths and other critical minerals is detailed enough that Beijing is developing a granular understanding of where every kilogram it produces ends up and why. Bottlenecks emerged as China slowed approvals for magnets containing even minuscule amounts of seven rare earths, alongside limits on sales of the raw elements.
  • Automakers Race to Find Workaround to China’s Stranglehold on Rare-Earth Magnets — 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.
  • The U.S.-China Rare Earths Battle — Most rare earth elements are relatively abundant but not always easy to extract, and China accounts for an estimated 70% of global output according to the United States Geological Survey. China also holds the world's largest reserves at 44m tonnes of rare-earth-oxide equivalent, roughly double those of Vietnam, Brazil, or Russia.

AI Summary. Analysis of nearly 75 years of RSMeans construction cost data across many metro areas finds that building costs, while a large share of new home costs, are a weak predictor of variation in house prices, especially in the highest-cost metros. The authors attribute this decoupling partly to restrictions that prevent housing supply expansion in high-demand areas.

Brian Potter and Chad Syverson National Bureau of Economic Research
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Variation in construction costs has had relatively low predictive power for variation in house prices, with increased decoupling over time suggesting “increasingly binding restrictions that prevent housing supply expansion in high-demand areas.”

Do construction costs explain differences in house prices across metro areas?

Core argument: Chicago's house prices are 48% below what building costs predict, while the highest price-to-cost cities are in coastal California, Colorado's Front Range, Florida, Seattle, and Boston, based on nearly 75 years of RSMeans housing cost data.

Nearly 75 years of the RSMeans housing cost data, which capture the costs and margins associated with actually constructing a building, but excludes ancillary and land acquisition costs, has allowed us to examine housing construction cost growth over a long period and across many different metro areas, [and to compare them] with various measures of housing prices. While construction costs [are] a very large fraction of the costs of [new homes], these costs aren’t a particularly strong predictor of [variation in] housing prices overall, especially in the very highest-cost metros and in more recent periods. The highest house price cities (relative to costs) are in coastal California, the Front Range of Colorado, Florida, as well as Seattle and Boston. The lowest relative price cities are various locations in the Midwest and South as well as Philadelphia. Chicago’s prices are 48% less than predicted by building costs. Patterns in both aggregate and cross section data suggest the cost-price relationship is weakening over time, particularly since post-2000. Drivers of this decoupling [include] increasingly binding restrictions that prevent housing supply expansion in high-demand areas.

Takeaways by Macro Roundup® AI

  1. Chicago's house prices are 48% below what building costs predict, while the highest price-to-cost cities are in coastal California, Colorado's Front Range, Florida, Seattle, and Boston, based on nearly 75 years of RSMeans housing cost data.
  2. Construction costs make up a very large fraction of the cost of new homes but are not a particularly strong predictor of variation in housing prices, especially in the highest-cost metros and in more recent periods.
  3. Aggregate and cross-sectional patterns suggest the cost-price relationship has weakened, particularly since 2000, with drivers of this decoupling including increasingly binding restrictions that prevent housing supply expansion in high-demand areas.

Related Articles:

  • First-Time Home Buyers Are MIA. Landlords Are the Winners — The National Association of Realtors reports 1.1m first-time home buyers last year, 380,000 fewer than the prior year and about half the two-decade average of 2.1m a year, with the sharpest sales slowdown in homes under $500,000. Unaffordable prices and high mortgage rates have slowed the flow from renting to owning.
  • The Price of Housing in the United States — Real housing price appreciation in the United States has varied widely across regions, with West Coast cities rising earlier while prices in other regions remained comparable in real terms to decades earlier. The authors find essentially no relationship between real price growth and zoning restrictiveness in the earliest period studied, and progressively steeper gradients in later periods.
  • 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.

AI Summary. Younger generations in the United States and other rich countries hold more zero-sum views than older ones, a pattern researchers link to growing up amid slower economic growth and lower mobility. People who have surpassed their parents, or whose families rose over generations, are less likely to think in zero-sum terms.

Stefanie Stantcheva The Economist
Date Posted:
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Database

Zero-sum thinking, in terms of political and policy views is strongly associated with lower levels of intergenerational upward mobility. @S_Stantcheva notes, “Younger generations today are much more zero-sum than older ones.”

Does slower growth and lower mobility breed zero-sum thinking?

Core argument: Younger Americans think in more zero-sum terms than older generations, a pattern attributed to growing up during periods of slower economic growth and lower mobility.

Younger generations today are much more zero-sum than older ones. This way of thinking doesn’t just appear out of nowhere; it stems from people’s economic environment and experiences—not only their own, but also those of their families and even earlier generations. Economic mobility and growth play a big role. People who have done better than their parents, or whose families have experienced upward mobility over time, are less likely to think in zero-sum terms. This also explains why younger generations in America are more zero-sum: they have grown up during times of slower economic growth and lower mobility. Other rich countries exhibit a similar generational pattern. In contrast, in many poorer countries where younger generations have experienced more growth than earlier ones, the pattern flips.

Takeaways by Macro Roundup® AI

  1. Younger Americans think in more zero-sum terms than older generations, a pattern attributed to growing up during periods of slower economic growth and lower mobility.
  2. People who have done better than their parents, or whose families experienced upward mobility over generations, are less likely to hold zero-sum views.
  3. Other rich countries show a similar generational pattern, while in many poorer countries whose younger generations experienced more growth than earlier ones, the pattern flips.

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.
  • Are We Destined For A Zero-Sum Future? — Survey data show average views in high-income countries have become 20% more zero-sum — the belief that people get rich only at others' expense — over the past century, with two rises in zero-sum attitudes coinciding with growth slowdowns in the 1970s and the past two decades.
  • 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.