Edward Conard

Top Ten New York Times Bestselling Author

  • “Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
  • “…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 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 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
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…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
  • “…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
  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Friday, July 11, 2025

AI Summary. US debt is on an upward trajectory, and the author argues that extraordinary growth, default, money creation, and spending cuts are each implausible or unacceptable, leaving large tax increases. US governments collect about 28% of GDP in taxes versus 35% in the UK and 46% in France, and a value-added tax could close the roughly 4%-of-GDP fiscal gap.

Greg Mankiw Harvard University
Date Posted:

With outsized economic growth and spending cuts unlikely solutions to unsustainable US debt, and rapid money creation and default highly undesirable ones, Mankiw suspects the most likely solution is the US will levy a “broadly shared” VAT = 4% of GDP.

Are large tax increases the only way to stop rising debt?

Core argument: US governments at all levels collect about 28% of GDP in tax revenue, according to 2022 OECD data, compared with 35% in the United Kingdom, 41% in Sweden, 43% in Italy, and 46% in France.

There is no end in sight to increasing US indebtedness. There are five ways to stop this upward trajectory: (1) extraordinary economic growth, (2) government default, (3) large-scale money creation, (4) substantial cuts in government spending, and (5) large tax increases. Each of the first four ways out of this problem seems either implausible or unacceptable. The US is now a low-tax country compared with its peers. According to OECD data (for 2022), governments at all levels in the US collect only about 28% of GDP in tax revenue, compared with 35% in the United Kingdom, 41% in Sweden, 43% in Italy, and 46% in France. To close a fiscal gap of roughly 4% of GDP with only increased tax revenue, the US would need to raise overall tax revenue by about 14%. If a sizable tax increase is inevitable, we must look beyond the top 1% of the income distribution…closing the fiscal gap will require broadly shared sacrifice. Most nations have value-added taxes, and these taxes have shown themselves to be remarkably efficient. [Across advanced countries], VAT revenues average about 7% of GDP, which is more than enough to close the US fiscal gap.

Takeaways by Macro Roundup® AI

  1. US governments at all levels collect about 28% of GDP in tax revenue, according to 2022 OECD data, compared with 35% in the United Kingdom, 41% in Sweden, 43% in Italy, and 46% in France.
  2. Closing a US fiscal gap of roughly 4% of GDP through tax revenue alone would require raising overall tax revenue by about 14%, which the author argues demands broadly shared sacrifice beyond the top 1% of the income distribution.
  3. Value-added taxes raise an average of about 7% of GDP across advanced countries, more than enough to close the US fiscal gap, while extraordinary growth, default, large-scale money creation, and substantial spending cuts appear implausible or unacceptable.

Related Articles:

  • Treasury Issuance Growing — 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.
  • 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.
  • 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. Chinese workers across industries, age groups, and income brackets report fear of layoffs, shrinking wages, and few alternative job options. China's urban unemployment rate was 5%, below the government's 5.5% official target, while joblessness among those aged 16 to 24 excluding students was 14.9%, up from 14.2% a year earlier.

Luna Sun and He Huifeng South China Morning Post
Date Posted:

China’s urban jobless rate was 5% in May. Among 16 to 24–year olds, excluding students, it was 14.9%, up from 14.2%, in May of last year.

Are Chinese workers across industries and incomes worried about losing jobs?

Core argument: China's youth unemployment rate for those aged 16–24, excluding enrolled students, was 14.9% in May, an improvement on April but above the 14.2% recorded in the same month a year earlier.

Anxiety is gripping China’s workforce, with few exceptions among industries, age groups and income brackets. From factory floors to corporate offices, the fear of lay-offs, shrinking wages, and a dearth of alternatives is becoming universal. While the country’s urban jobless rate was 5% in May – under the government’s official target of 5.5% for the year – the rate among those aged 16 to 24 was 14.9% excluding enrolled students. This was an improvement on April’s reading, but significantly higher than the 14.2% reported for the same month last year.

Takeaways by Macro Roundup® AI

  1. China's youth unemployment rate for those aged 16–24, excluding enrolled students, was 14.9% in May, an improvement on April but above the 14.2% recorded in the same month a year earlier.
  2. China's urban jobless rate stood at 5% in May, below the government's official 5.5% target for the year.
  3. Fear of lay-offs, shrinking wages and a dearth of alternative jobs spans China's workforce across industries, age groups and income brackets, from factory floors to corporate offices.

Related Articles:

  • 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.
  • China Already Had a Graduate Jobs Crisis. The Trade War is Making it Worse — China's graduate job market faces multiple simultaneous pressures, including a real estate slump, tighter financial-sector regulation with pay cuts and layoffs, and cautious private-sector hiring. Major state banks have cut graduate recruitment sharply, with Agricultural Bank of China planning 4,530 hires, down 68.9%, and Industrial and Commercial Bank of China down 47%.
  • ‘No Marriage, No Children’ Is China’s Ticking Timebomb — China registered about 6.1m marriages in its most recent year, the lowest since public records began in 1986 and less than half the 2013 peak, with roughly 30% of 30-year-olds unmarried versus 15% a decade earlier. Births of 9.54m were the second-lowest since the People's Republic of China was founded in 1949.

AI Summary. New asylum applications in OECD countries reached 2.7m, above the nearly 1.7m a year lodged during the Syrian refugee crisis, while the share of claims succeeding in the European Union fell from 57% to 42%. Nearly half of applicants come from countries with success rates below 20%.

Economist Staff The Economist
Date Posted:

In 2023 there were 2.7mm asylum claims made in OECD countries, far more than the 1.7mm at the height of the Syrian Civil War. The claimants are largely migrating for economic reasons.

Are rising asylum applications in rich countries increasingly unsuccessful?

Core argument: OECD countries received 2.7m new asylum applications in 2023, exceeding the nearly 1.7m a year lodged during the Syrian refugee crisis of 2015 and 2016.

Claims for asylum in the rich world shot up. In 2023, 2.7m new applications were lodged in OECD countries, more than the nearly 1.7m a year during the Syrian refugee crisis of 2015 and 2016. Many claims are dubious. In the EU, the proportion that succeed has fallen from 57% in 2016 to 42% in 2024. Nearly half of applicants come from countries that have a success rate of below 20%. Twice as many asylum recipients in Britain said they were 17 when they applied as said they were 19, presumably because they think the system is kinder to children.

Takeaways by Macro Roundup® AI

  1. OECD countries received 2.7m new asylum applications in 2023, exceeding the nearly 1.7m a year lodged during the Syrian refugee crisis of 2015 and 2016.
  2. The share of EU asylum claims that succeed fell from 57% in 2016 to 42% in 2024, and nearly half of applicants come from countries with success rates below 20%.
  3. Twice as many asylum recipients in Britain reported being 17 when they applied as reported being 19, presumably because they believe the system treats children more kindly.

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.
  • Germany Opened Its Doors to Migrants. Now It’s Struggling to Cope — Germany recorded 6.43m more arrivals than departures over a decade, the largest inflow of any country outside the US, with migrants at 18.8% of the population versus 15.3% in the US. Noncitizens, 15% of the population, accounted for 41% of crimes, up from 28.7%, according to police statistics.
  • Changing Sub-Saharan Africa’s Growth Trajectory — Sub-Saharan Africa's working-age population is growing nearly 3% a year, versus close to zero in much of the world, and is projected to exceed China's within about a decade and reach a quarter of the global total. With modest productivity growth near 2%, the region is likely among the world's fastest-growing.

AI Summary. European cities face more intense, frequent, and longer heat, with hot nights rising fastest, yet air conditioning remains far less common than in the US: London is seeing as many days requiring cooling as Portland, Oregon, where 79% of households have air conditioning. Extreme heat killed an average 83,000 western Europeans annually versus 20,000 North Americans.

John Burn-Murdoch Financial Times
Date Posted:

Between 2000–2019, an average of 83,000 western Europeans lost their lives every year as a result of extreme heat, compared with 20,000 North Americans. Yet due to climate concerns, air conditioning is frowned upon and restricted in the UK and Europe.

Should Europe expand air conditioning as heat deaths outpace North America's?

Core argument: Extreme heat killed an average of 83,000 western Europeans a year between 2000 and 2019, compared with 20,000 North Americans, a disparity the author links to the wide US-Europe gap in air conditioning use.

European cities are enduring more intense heat, more frequently, and for longer periods than just a decade or two ago. Hot nights — where the risks to health are highest, and air conditioning adds the most value — are rising fastest of all. This year London is experiencing as much heat as Portland, Oregon, (18 days and counting of temperatures requiring active cooling), but without Portland’s cooling infrastructure (79% of households there have air conditioning). The results will not be pretty. The wide US-Europe disparity in air conditioning use is becoming reflected in a startlingly wide disparity in heat-related deaths. Between 2000 and 2019, an average of 83,000 western Europeans lost their lives every year as a result of extreme heat, compared with 20,000 North Americans.

Takeaways by Macro Roundup® AI

  1. Extreme heat killed an average of 83,000 western Europeans a year between 2000 and 2019, compared with 20,000 North Americans, a disparity the author links to the wide US-Europe gap in air conditioning use.
  2. London has recorded 18 days and counting of temperatures requiring active cooling this year, as much heat as Portland, Oregon, where 79% of households have air conditioning.
  3. European cities are facing more intense, more frequent, and longer-lasting heat than a decade or two ago, with hot nights — when health risks are highest and air conditioning adds the most value — rising fastest.

Related Articles:

  • Air Conditioning To Be Major Driver Of Electricity Demand, Says IEA — The International Energy Agency projects home air conditioning will require an extra 697 terawatt hours of electricity by 2030 — more than 3x the added demand from computer data centres — with electric vehicles needing an extra 854 terawatt hours. The agency attributes the rise to higher incomes in the developing world and higher temperatures from climate change.
  • The Future of Cooling — Over half of the world's 1.6bn air conditioners are in just two countries, China with 570m units and the United States with 375m, and nearly 70% of all units globally are in residential buildings. Household ownership ranges from about 4% in India and under 10% in Europe to over 90% in the United States and Japan.
  • 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.

AI Summary. Australia, Japan, and the United States signed an agreement to boost logistical interoperability among their forces, letting their navies refuel, reload missile systems, repair ships, and share maintenance data, including flexible refueling at sea. Indo-Pacific militaries depend on sea and air transport for supplies, while fixed seaports and airports can be difficult to defend from attack.

Rurika Imahashi Nikkei Asia
Date Posted:

Australia, Japan, and the US agreed to increase “logistical interoperability” among their naval forces, including reloading missile systems, refueling at sea, repairing ships, and sharing data on maintenance.

Can shared naval logistics strengthen allied military resilience in the Indo-Pacific?

Core argument: Australia, Japan and the U.S. signed an agreement to boost logistical interoperability among their defense forces, allowing their navies to refuel, reload equipment, repair ships more smoothly and share maintenance data.

The defense forces of Australia, Japan and the U.S. signed an agreement on Friday to boost logistical interoperability between their forces, allowing their navies to refuel, reload equipment, repair ships more smoothly, and to share data on maintenance. The agreement entails cooperation in reloading missile systems as well as flexible refueling, including at sea. These forms of cooperation present logistical benefits as nations in the Indo-Pacific region depend on transportation by sea or air for their military supplies, although fixed seaports and airports can be difficult to defend from potential attack.

Takeaways by Macro Roundup® AI

  1. Australia, Japan and the U.S. signed an agreement to boost logistical interoperability among their defense forces, allowing their navies to refuel, reload equipment, repair ships more smoothly and share maintenance data.
  2. The Australia-Japan-U.S. agreement covers cooperation in reloading missile systems and flexible refueling, including at sea.
  3. Indo-Pacific nations depend on sea or air transportation for military supplies, while fixed seaports and airports can be difficult to defend from potential attack.

Related Articles:

  • Ship Wars — Shipyards tied to China's defense industrial base account for 15% of the country's active shipyards but 40% of commercial output by tonnage, with over 75% of their production built for firms outside China and Hong Kong. The authors argue these commercial revenues offset fixed costs and effectively subsidize China's naval expansion.
  • U.S. Seeks To ‘Integrate’ Japan Into Defense Industrial Base — The U.S. and Japan are formalizing arrangements for U.S. Navy warships to undergo maintenance, repair, and overhaul at Japanese private shipyards, initially limited to the roughly two dozen ships forward-deployed to Japan. Expanding the work to U.S.-based ships, which could ease American maintenance bottlenecks, may require congressional action.
  • How South Korea’s Shipyards Could Save the US Navy — US shipyards had just five commercial ships under construction compared with 1,749 in China, and China's naval fleet is projected to grow from 370 to 475 vessels in a decade versus 297 to between 305 and 317 for the US Navy, whose major shipbuilding programs are behind schedule.

Monday, July 14, 2025

AI Summary. Manufacturing productivity growth fell behind other sectors after computer and semiconductor manufacturing productivity, which had grown at roughly 15% and 11% a year, decelerated substantially. The authors also present suggestive evidence that quality improvements are missed in price measures, estimating manufacturing productivity growth is understated by 0.8 percentage points, including 1.7 points for durable goods.

Enghin Atalay, Ali Hortacsu, Nicole Kimmel and Chad Syverson Working Paper
Date Posted:
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Almost all measured productivity growth in US manufacturing since 1987 was in Computer and Electronic Products, but true TFP growth may be underestimated by 1.7pp in durables overall (and by 0.4pp in nondurables) due to quality improvements.

Why has manufacturing productivity growth fallen behind other sectors?

Core argument: Computer manufacturing total factor productivity grew about 15% per year and semiconductor manufacturing TFP more than 11% per year between 1987 and 2009, with both decelerating substantially by the early 2010s, which the authors link to manufacturing's lagging productivity growth.

In the late 2000s, manufacturing productivity growth started to fall behind productivity growth elsewhere. The first half of the article documents that these trends can be explained by the resolution of the ICT revolution. Between 1987 and 2009, Computer manufacturing TFP grew by an astronomical 15% per year. Semiconductor manufacturing TFP grew by more than 11% per year. By the early 2010s, productivity growth in these industries had decelerated substantially. We then marshal suggestive evidence that quality improvements and, by implication, productivity growth may be substantially underestimated [not only in computers and electronics, but] in durable goods manufacturing [overall]. Annual price changes of durable goods are 2.6 percentage points greater when using gross output deflators and import price indices than when using PCE price indices in computers and other electronic goods. Using BEA Input-Output matrices, we find that manufacturing TFP growth (from 1997 to 2023) is understated by 0.8 percentage points: 1.7 percentage points for durable goods industries and 0.4 percentage points for nondurable goods manufacturing industries.

Takeaways by Macro Roundup® AI

  1. Computer manufacturing total factor productivity grew about 15% per year and semiconductor manufacturing TFP more than 11% per year between 1987 and 2009, with both decelerating substantially by the early 2010s, which the authors link to manufacturing's lagging productivity growth.
  2. Using BEA Input-Output matrices, the authors estimate manufacturing TFP growth from 1997 to 2023 is understated by 0.8 percentage points, comprising 1.7 points for durable goods industries and 0.4 points for nondurable goods manufacturing.
  3. Annual price changes for computers and other electronic goods are 2.6 percentage points greater under gross output deflators and import price indices than under PCE price indices, which the authors offer as suggestive evidence that quality improvements are underestimated.

Related Articles:

  • 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.
  • The R&D Puzzle in U.S. Manufacturing Productivity Growth — Research and development spending in U.S. manufacturing has been rising relative to output and hours worked while productivity has been flat, which suggests the ability of research and development to boost productivity growth has been declining.
  • The Mysterious Slowdown in U.S. Manufacturing Productivity — US manufacturing labor productivity growth slowed broadly after the Great Recession, with the four largest firms in each industry averaging –0.5% growth from 2010 to 2022 versus 3.7% from 1987 to 2007, and smaller follower firms showing an identical 4.2 percentage-point decline. The authors find the slowdown spans all industries and firm sizes.

AI Summary. China posted a record half-year trade surplus of about $586bn, with exports up 5.8% year-over-year to $325bn and imports up 1.1%. Shipments to the US fell 16.1% from a year earlier, while exports to the 10 Southeast Asian nations in the Asean group rose 17%.

Bloomberg Staff Bloomberg
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Chinese exports hit $1.8T through 2Q2025, driving a record surplus of $586B. Bloomberg notes: “The pickup in China’s export growth in June was led by a rebound in shipments to the US after a temporary thaw in the trade war. The blip may not last long.”

Has China offset falling US shipments with record exports elsewhere?

Core argument: China posted a record first-half trade surplus of about $586 billion, with June exports up 5.8% from a year earlier to $325 billion, exceeding the median estimate in a Bloomberg survey of analysts.

China ended the first half of the year with a record trade surplus of about $586 billion after exports to the US began to stabilize, with factories riding out the tariff rollercoaster that upended global commerce. Exports rose 5.8% in June from a year earlier to $325 billion, exceeding the median estimate in a Bloomberg survey of analysts. Imports rose 1.1% to grow for the first time since February, according to data from the General Administration of Customs on Monday. Shipments to the US fell 16.1% from a year earlier after slumping by over 34% in May. Chinese firms were able to increase their sales in other markets to compensate for the drop to the US, with exports to the 10 Southeast Asian nations in the Asean group soaring 17% from a year earlier. Eric Zhu of Bloomberg notes "The pickup in China’s export growth in June was led by a rebound in shipments to the US after a temporary thaw in the trade war that brought down tariffs. The blip may not last long"

Takeaways by Macro Roundup® AI

  1. China posted a record first-half trade surplus of about $586 billion, with June exports up 5.8% from a year earlier to $325 billion, exceeding the median estimate in a Bloomberg survey of analysts.
  2. China's shipments to the US fell 16.1% in June from a year earlier after slumping more than 34% in May, while exports to the 10 Asean nations rose 17%, offsetting the US decline.
  3. Eric Zhu of Bloomberg attributes the June pickup in China's export growth to a rebound in shipments to the US after a temporary thaw in the trade war brought down tariffs, adding the blip may not last long.

Related Articles:

  • The US Trade Deficit and Foreign Borrowing — The authors argue US trade deficits persist because foreign investors find US financial assets attractive, but the current deficit level is not sustainable. They estimate that stabilizing the US net foreign liability position requires improving the trade balance by about 2% of GDP, or over 3% if low-cost borrowing privileges are lost.
  • 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.
  • China’s Stealth Trade Surplus — China's trade surplus has soared over the past five years, including a shift from a deficit to a large surplus in autos, with net vehicle exports exceeding 6m units, and dominance in renewables manufacturing. Its export volume growth has consistently exceeded global trade growth, consistent with economies leaning on exports after a real estate crisis weakens domestic demand.

AI Summary. The authors argue China is moving from follower to leader by aggressively contesting innovative sectors long dominated by the United States, including aviation, artificial intelligence, telecommunications, microprocessors, robotics, and nuclear and fusion power. They note the world's largest and most innovative makers of electric vehicles, EV batteries, drones, and solar wafers are all Chinese firms under 30 years old.

David Autor and Gordon Hanson New York Times
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Autor and Hanson warn the US faces a second “China Shock” that tariffs are ill-equipped to counter. According to an Australian analysis, btw 2003 and 2007, the US led China in 60 of 64 cutting-edge sectors; by 2023, China led the US in 57 of the 64.

Is China moving from follower to leader in innovative industries?

Core argument: The authors argue China Shock 2.0 will see China shift from underdog to favorite as it contests innovative sectors long led by the United States, including aviation, AI, telecommunications, microprocessors, robotics, and nuclear and fusion power.

China Shock 2.0, the one that’s fast approaching, is where China goes from underdog to favorite. Today, it is aggressively contesting the innovative sectors where the United States has long been the unquestioned leader: aviation, A.I., telecommunications, microprocessors, robotics, nuclear and fusion power. The world’s largest and most innovative producers of EVs (BYD), EV batteries (CATL), drones (DJI) and solar wafers (LONGi) are all Chinese start-ups, none more than 30 years old. They attained commanding technological and price leadership not because President Xi Jinping decreed it, but because they emerged triumphant from the economic Darwinism that is Chinese industrial policy. The rest of the world is ill prepared to compete with these apex predators. When U.S. policymakers deride China’s industrial policy, they are imagining something akin to the lumbering takeoff of Airbus or the lights going out on Solyndra. They should instead be gazing up at the nimble swarms of DJI drones buzzing over Ukraine.

Takeaways by Macro Roundup® AI

  1. The authors argue China Shock 2.0 will see China shift from underdog to favorite as it contests innovative sectors long led by the United States, including aviation, AI, telecommunications, microprocessors, robotics, and nuclear and fusion power.
  2. The world's largest and most innovative producers of EVs (BYD), EV batteries (CATL), drones (DJI) and solar wafers (LONGi) are all Chinese start-ups no more than 30 years old, according to the authors.
  3. The authors attribute these firms' technological and price leadership not to decrees from Xi Jinping but to the economic Darwinism of Chinese industrial policy, which U.S. policymakers imagine as lumbering Airbus-style takeoffs or Solyndra-style failures.

Related Articles:

  • Was Made in China 2025 Successful? — Chinese firms have narrowed the gap with foreign competitors across targeted industries, with China's share of global patents rising by more than 4 percentage points in electric vehicles, new materials, electronics, and robotics. Gaps remain in areas such as advanced semiconductors, where Chinese firms still lag the global frontier.
  • Will China Take Over the Global Auto Industry? — The global auto market has historically been regional, with most cars sold in a region also built there. Overcapacity in China's internal combustion sector, expanding electric-vehicle capacity, ample state bank credit, and a weaker yuan could concentrate global auto production in China absent restrictions such as the US 100% tariff on Chinese electric vehicles.
  • How Do U.S. Firms Withstand Foreign Industrial Policies? — U.S. firms in industries targeted for encouragement by China's Five-Year Plans show significant declines in employment, investment, and output beginning a year after a plan's release, with plant closures following a year later. The authors find firms with existing operations upstream or downstream of encouraged industries, or able to offshore into them, fare better.

AI Summary. The dollar is having its worst year since 1973, and the author argues that persistent large fiscal deficits and challenges to Federal Reserve independence imply significant further downside for a currency still trading above historical averages. Foreign investors hold very large dollar asset exposure, so a shift from currency hedging to outright selling could spur a self-reinforcing cycle of declines.

Joseph Wang Fed Guy Blog
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Investors are still very long dollar assets, even though some are starting to hedge or modestly reduce their exposure. Joseph Wang argues the dollar may have “much more to fall” if fiscal deficits are not reduced and a dovish Fed chair is appointed.

Does the dollar have significant further downside ahead?

Core argument: The dollar is having its worst year since 1973, yet still trades above historical averages, which the analysis argues leaves significant further downside.

The dollar is experiencing its worst year since 1973, but the policy trajectory and investor positioning suggest that there is much more to fall. The large and persistent fiscal deficit looks to continue, and the intensifying challenge to Fed independence will ultimately be resolved by the appointment of a Chair committed to low rates. These two factors alone imply significant downside to a dollar that is ultimately still just trading above historical averages. Foreign investors have so far tended to reach for FX hedges rather than outright repatriation, but that could change. The renewed tariff threats could spur further desire to diversify dollar exposure and contribute to an economic slowdown that dents the performance of U.S. assets. Foreign investors have very large exposure to dollar assets, so their selling has the potential to spur a cycle of dollar declines that prompt further sales of dollar assets.

Takeaways by Macro Roundup® AI

  1. The dollar is having its worst year since 1973, yet still trades above historical averages, which the analysis argues leaves significant further downside.
  2. A large and persistent U.S. fiscal deficit and the challenge to Fed independence, expected to be resolved by the appointment of a Chair committed to low rates, alone imply substantial dollar downside.
  3. Foreign investors have so far reached for FX hedges rather than outright repatriation, but their very large dollar asset exposure means their selling could spur a cycle of dollar declines that prompts further sales.

Related Articles:

  • The US Trade Deficit and Foreign Borrowing — The authors argue US trade deficits persist because foreign investors find US financial assets attractive, but the current deficit level is not sustainable. They estimate that stabilizing the US net foreign liability position requires improving the trade balance by about 2% of GDP, or over 3% if low-cost borrowing privileges are lost.
  • A Trump Risk Premium in the Dollar — 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.
  • Treasury Issuance Growing — 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.

AI Summary. Long-term government bond yields rose in Japan, Germany, the UK and France as concern over widening fiscal deficits dented demand, with 30-year German yields near their highest levels in 14 years. Fiscal worries — including heavy government debt, spending, bond supply and sticky inflation — are displacing central-bank interest-rate policy as the main driver for these markets.

Alice Gledhill Bloomberg
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Japanese long bond yields rose, with the 20- and 30-year hitting 2.6% and 3.2%, respectively. Globally, long yields are rising. The US 30-year Treasury is approaching a 5% yield.

Are fiscal deficits replacing central banks as the driver of long-bond yields?

Core argument: Japan's 30-year yield jumped the most in two months, leading a global long-bond selloff, while 30-year German bund yields flirted with their highest levels in 14 years and US 30-year yields touched a one-month high.

Yields for long-term debt from Japan and Germany to the UK and France rose on Monday as growing concern over widening fiscal deficits dented demand. The yield on Japan’s 30-year notes jumped the most in two months and those on similar-maturity German bunds flirted with their loftiest levels in 14 years. For these countries fiscal concerns are usurping central-bank interest-rate policies as the main factor to watch. While the selloff is less pronounced in the US, 30-year yields there still touched the highest in a month. Japanese election largesse and Donald Trump’s weekend tariff announcements were the immediate cause of the latest nudge higher. They tapped into deeper concerns about excessive government debt, fire-hose spending, too many bonds coming to market, and inflation that’s still much too sticky in developed markets around the world.

Takeaways by Macro Roundup® AI

  1. Japan's 30-year yield jumped the most in two months, leading a global long-bond selloff, while 30-year German bund yields flirted with their highest levels in 14 years and US 30-year yields touched a one-month high.
  2. Fiscal concerns are usurping central-bank interest-rate policy as the main factor to watch for Japan, Germany, the UK and France, with widening deficits denting demand for long-term debt.
  3. Japanese election largesse and Donald Trump's weekend tariff announcements were the immediate cause of the yield rise, tapping into deeper concerns over excessive government debt, heavy bond supply and sticky inflation across developed markets.

Related Articles:

  • Japan’s Debt Trap — Japan's 30-year government bond yield has risen from 2.3% to just under 3.0%, matching Germany's despite Japanese government debt of 240% of GDP versus Germany's 64%. The author argues the Bank of Japan's continued bond purchases hold yields artificially low, and that market-set yields could reach 6–7%.
  • 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.
  • Foreign Treasuries Holdings Held Near a Record in April Turmoil — Foreign holdings of US Treasuries totaled $9.01tn, the second-highest on record and down $36bn from the prior month, with the decline mainly reflecting net sales of US notes and bonds by foreign private investors while official entities were net buyers of longer-term Treasuries. Japan remained the largest foreign holder at $1.13tn.

AI Summary. China's DJI accounts for about 70% of commercial drones sold globally, and industry experts estimate its output far exceeds that of any other manufacturer, with capacity in the millions of drones a year. About 500 US companies manufacture drones, producing fewer than 100,000 annually, according to an industry association.

Farah Stockman New York Times
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China’s DJI can manufacture millions of drones a year; about 500 American drone manufacturers are collectively building fewer than 100,000 drones annually.

Does China outproduce the US in drone manufacturing?

Core argument: DJI accounts for about 70% of all commercial drones sold globally for hobby and industrial uses such as aerial photography, package delivery and weather research, with industry experts estimating its output far exceeds that of any other drone manufacturer.

DJI accounts for about 70% of all commercial drones sold globally for hobby and industrial use, such as aerial photography, package delivery and weather research. The company declined to share market data, but industry experts estimate that DJI’s output far exceeds that of any other drone manufacturer. “No one even comes close,” said Bobby Sakaki, chief executive of UAS NEXUS, a drone industry consultant. “DJI can make millions of drones per year. That is a hundred times more than anybody in the United States can make.” About 500 companies manufacture drones in the United States, producing fewer than 100,000 a year, according to Ryan Carver, communications manager for the Association for Uncrewed Vehicle Systems International, a nonprofit organization of industry professionals.

Takeaways by Macro Roundup® AI

  1. DJI accounts for about 70% of all commercial drones sold globally for hobby and industrial uses such as aerial photography, package delivery and weather research, with industry experts estimating its output far exceeds that of any other drone manufacturer.
  2. About 500 U.S. companies manufacture drones and together produce fewer than 100,000 a year, according to Ryan Carver of the Association for Uncrewed Vehicle Systems International.
  3. Bobby Sakaki, chief executive of drone industry consultant UAS NEXUS, says DJI can make millions of drones per year, a hundred times more than any manufacturer in the United States can make.

Related Articles:

  • China Made Millions of Drones. Now It Has to Find Uses For Them — China accounts for 70-80% of global commercial drone supply and 79% of approved drone patents globally, according to industry analysts and a patent study. The Civil Aviation Administration of China projects the low-altitude economy, which includes flying cars, will grow fivefold to $490bn by 2035.
  • Ukraine Drone Strikes Hit Nuclear Bombers Deep Inside Russia — Ukraine used drones smuggled into Russia aboard trucks and released remotely from mobile wooden structures to strike strategic airfields as distant as eastern Siberia. An official in Ukraine's Security Service said more than 40 Russian aircraft, including Tu-95 and Tu-22 M3 long-range bombers and A-50 surveillance planes, were damaged, with losses assessed at at least $2bn.
  • A US Drone Maker Tries to Take Back the Country’s Skies — US drone maker Skydio has produced 45,000 drones in total, while Chinese rival DJI likely makes that many every few weeks — a scale gap that matters because production costs fall predictably with cumulative output. The Pentagon's Defense Innovation Unit says that at attrition rates observed in Ukraine, the US military would exhaust its entire drone supply in five days.