Edward Conard

Top Ten New York Times Bestselling Author

  • “…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 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
  • “…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
  • “…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
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…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
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Tuesday, August 12, 2025

AI Summary. Proprietary flow tracking shows foreign bond flows into US assets, an outlier low in one month, have substantially normalized, suggesting an allocation shift away from dollar assets may have peaked. The authors argue traditional fundamentals, such as the US business cycle and Federal Reserve policy, will matter more for any further dollar weakness.

Jens Nordvig Money: Inside and Out
Date Posted:

The shift out of dollar assets has likely peaked, but inflows are unlikely to return to the 2017–2024 mean of 43% of cross-border equity flows. Relative bond flows based on proxy flows from mutual funds and ETFs have “substantially normalized.”

Have foreigners stopped shifting their allocations away from dollar assets?

Core argument: US bond flows were a complete outlier in April, but proprietary tracking of mutual fund and ETF proxy flows shows relative bond flows substantially normalized over May–July.

US bond flows looked very bad and were a complete outlier in April. But as our proprietary tracking shows, the relative bond flows are substantially normalized in May-July, based on proxy flows from mutual funds and ETFs. All told, 2025 has seen an important USD asset allocation shift, and serious question marks around the USD bull trend that has been in place for most of the past 10-11 years have appeared. But precise and holistic flow analysis also indicates that the allocation shift may have peaked and that the force from this factor will be less dominant in H2 compared to H1 2025. This does not mean that the USD is necessarily set for recovery. But it does mean that traditional fundamentals, such as the cyclical state of the US economy (and relatedly Fed policy) will play a bigger role in facilitating potential further USD weakness.

Takeaways by Macro Roundup® AI

  1. US bond flows were a complete outlier in April, but proprietary tracking of mutual fund and ETF proxy flows shows relative bond flows substantially normalized over May–July.
  2. The authors argue 2025 has brought an important USD asset allocation shift that raises serious question marks around the USD bull trend in place for most of the past 10–11 years.
  3. Flow analysis indicates the USD allocation shift may have peaked and will be less dominant in H2 than in H1 2025, leaving traditional fundamentals such as the cyclical state of the US economy and Fed policy a bigger role in any further USD weakness.

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.
  • 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.
  • 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.

AI Summary. Wage growth for the bottom quarter of US earners was 3.7%, around the lowest since 2017, versus 4.7% for the top quarter, according to the Federal Reserve Bank of Atlanta. Bank of America customer data show after-tax pay up 1.6% year-over-year for the bottom third of households versus 2.9% for the top third.

Justin Lahart Wall Street Journal
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Wage growth of the bottom quartile of American workers slowed to a 3.7% annual rate in June, below that of the top quartile, whose wages grew 4.7%. Since 2015, wage growth for the bottom quartile has generally outpaced that of their higher-earning peers.

Are low-paid workers now seeing slower wage growth than high earners?

Core argument: Wage growth for the bottom quarter of earners was 3.7% as of July, around the lowest since 2017, versus 4.7% for the top quarter, according to the Atlanta Fed.

As of July, wage growth at the bottom quarter was 3.7% according to the Atlanta Fed, around the lowest since 2017. For the top quarter, it was 4.7%. A Bank of America Institute analysis of BofA customer data tells a similar story. It shows that after-tax wages and salaries for households at the bottom third by income were up 1.6% this June from a year earlier, versus 2.9% for households in the top third. As recently as December, the BofA data showed wage growth for lower-income households was outpacing high-income wage growth.

Takeaways by Macro Roundup® AI

  1. Wage growth for the bottom quarter of earners was 3.7% as of July, around the lowest since 2017, versus 4.7% for the top quarter, according to the Atlanta Fed.
  2. Bank of America Institute data show after-tax wages and salaries for households in the bottom third by income rose 1.6% in June from a year earlier, compared with 2.9% for the top third.
  3. The Bank of America data showed wage growth for lower-income households outpacing that of high-income households as recently as December.

Related Articles:

  • The Unexpected Compression: Competition at Work in the Low Wage Labor Market — Labor market tightness produced an unexpected compression in the US wage distribution, with disproportionate wage growth at the bottom reducing the college wage premium and reversing nearly 40% of the rise in 90-10 wage inequality since 1980. The authors attribute this in part to increased competition for low-wage workers.
  • AI and Jobs: The Final Word (Until the Next One) — Unemployment has risen by 0.30 percentage points for the fifth of workers most exposed to artificial intelligence, compared with 0.94 percentage points for the least exposed fifth, leaving no visible AI effect on jobs. The share of workers leaving the labor force within a year is lowest among the most AI-exposed workers and roughly flat.
  • 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.

AI Summary. Slowing wage growth suggests labor market weakness reflects weaker labor demand rather than a shortage of workers, since reduced immigration would push wages up even as job growth slowed. Real consumer spending has plateaued, and tariffs now taking effect are expected to further reduce corporate profits and consumer incomes.

Joseph Wang Fed Guy Blog
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Deceleration in wage growth suggests recent labor market weakness is being driven “primarily” by lower labor demand; this and reductions in corporate profits and consumer incomes due to tariffs could shift the FOMC’s base case from 2 to 3 cuts this year.

Does slowing wage growth signal weaker labor demand rather than worker shortages?

Core argument: Decelerating wage growth suggests labor market weakness stems primarily from lower labor demand rather than a labor shortage, since reduced illegal immigration would push wages up even as job growth slowed.

The deceleration in wage growth suggests labor market weakness is driven primarily by lower labor demand. If there were a labor shortage from lower illegal immigration, then wages would increase even as growth in jobs numbers slows. Real consumer spending plateaued since the beginning of the year, even before changes in tariff and immigration policy. A new dovish member A new dovish member on the FOMC could shift the base case from two cuts this year to three cuts, but there has already been a notable loss in economic momentum. A new dovish member on the FOMC could shift the base case from two cuts this year to three cuts, but there has already been a notable loss in economic momentum. The full tariffs are just coming into effect this month and will further reduce corporate profits and consumer incomes. Future weakness in economic data could end up being more persuasive than any number of Fed doves.

Takeaways by Macro Roundup® AI

  1. Decelerating wage growth suggests labor market weakness stems primarily from lower labor demand rather than a labor shortage, since reduced illegal immigration would push wages up even as job growth slowed.
  2. Real consumer spending has plateaued since the start of the year, before changes in tariff and immigration policy took effect.
  3. Full tariffs coming into effect this month will further reduce corporate profits and consumer incomes, while a new dovish FOMC member could shift the base case from two cuts this year to three.

Related Articles:

  • The Job Market Is Strong, Inflation Is Too Fast, and the Government Is Bananas — The inflation measure preferred by Federal Reserve officials has risen faster in 2025 than in 2024 or 2023, with no progress since late 2022. A "supercore" measure stripping out volatile components is running nearly 2 percentage points above its pre-pandemic average, driven by accelerating goods prices excluding energy, groceries, and vehicles.
  • Goods Inflation And The Tariffs — Tariff pass-through to consumer goods prices has varied widely by category, with household appliances and household supplies passing on nearly all or more than the estimated tariff cost while clothing, new cars, and telephone equipment show minimal or negative price effects. Across 19 products the authors estimate about 50% pass-through to consumption goods prices.
  • The Tariff Shock to US Inflation Is Massive — Tariff-driven inflation is now showing up in furnishings and recreational goods—two heavily China-imported categories making up 25% of "core" goods in US inflation baskets—with monthly inflation running 100–120 basis points above seasonal norms. The author argues this impulse is large enough that the Federal Reserve may not cut rates at all.

AI Summary. Using US Census Bureau micro-data on manufacturing, the authors estimate that both the output elasticity of research and development and its marginal returns have risen, alongside rising technological rivalry and obsolescence. They conclude ideas are not getting harder to find, but innovations are more transient, so rising R&D need not raise aggregate productivity growth.

Yoshiki Ando, James Bessen and Xiupeng Wang Social Science Research Network
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Low productivity growth in the US manufacturing sector btw 1976 and 2018 was due to “rising technological rivalry” that “render[ed] rivals’ technologies obsolete and innovations more transient.”

Are ideas getting harder to find, or just more transient?

Core argument: Using US Census Bureau micro-data on manufacturing from 1976 to 2018, the authors find that both the elasticity of total factor productivity with respect to R&D and the marginal returns to R&D have risen sharply.

R&D investment has grown robustly, yet aggregate productivity growth has stagnated. Is this because “ideas are getting harder to find”? This paper uses micro-data from the US Census Bureau to explore the relationship between R&D and productivity in the manufacturing sector from 1976 to 2018. We find that both the elasticity of output (TFP) with respect to R&D and the marginal returns to R&D have risen sharply. Exploring factors affecting returns, we conclude that R&D obsolescence rates must have risen. Using a novel estimation approach, we find consistent evidence of sharply rising technological rivalry and obsolescence. These findings suggest that R&D has become more effective at finding productivity-enhancing ideas, but these ideas may also render rivals’ technologies obsolete, making innovations more transient. Because of obsolescence, rising R&D does not necessarily mean rising aggregate productivity growth. [Flagged by Tyler Cowen].

Takeaways by Macro Roundup® AI

  1. Using US Census Bureau micro-data on manufacturing from 1976 to 2018, the authors find that both the elasticity of total factor productivity with respect to R&D and the marginal returns to R&D have risen sharply.
  2. The authors conclude that R&D obsolescence rates must have risen, and using a novel estimation approach find consistent evidence of sharply rising technological rivalry and obsolescence.
  3. The authors argue that R&D has become more effective at finding productivity-enhancing ideas, but that such ideas may render rivals' technologies obsolete, so rising R&D does not necessarily mean rising aggregate productivity growth.

Related Articles:

  • 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.
  • Are Ideas Getting Harder to Find? — The authors estimate U.S. research productivity has fallen by a factor of 41 since the 1930s, averaging declines above 5% per year across sectors. Sustaining constant growth in output per person requires doubling research effort every 13 years, challenging growth models that assume constant research productivity.
  • Something Is Getting Harder But It’s Not Finding Ideas — The number of researchers in the US economy has grown to 23x its 1930 level while the economy's growth rate has been constant or declining, contradicting the assumption that constant research input yields a constant growth rate. Bloom et al. explain this divergence by assuming ideas get harder to find as more are discovered.

AI Summary. Chinese authorities have sent notices discouraging domestic firms from using Nvidia's less-advanced H20 processors, with especially strong guidance against their use in government or national security work, though the letters stop short of an outright ban. The guidance complicates Nvidia's efforts to recover billions in lost China revenue after the US reversed an effective ban on such sales.

Mackenzie Hawkins and Ian King Bloomberg
Date Posted:

On the heels of the Trump administration’s reversal of the US export controls on H20 chip exports, Beijing is urging domestic firms to avoid purchases of Nvidia H20 chips.

Is China discouraging domestic firms from buying US AI chips?

Core argument: Chinese authorities have sent notices to a range of local firms discouraging use of Nvidia's H20 processors, complicating Nvidia's attempt to recoup billions in lost China revenue after the Trump administration reversed an effective US ban on such sales.

Beijing has urged local companies to avoid using processors, particularly for government-related purposes, complicating the chipmaker’s attempts to recoup billions in lost China revenue after the Trump administration reversed an effective US ban on such sales. Over the past few weeks, Chinese authorities have sent notices to a range of firms discouraging use of the less-advanced semiconductors, people familiar with the matter said, asking not to be named discussing sensitive information. The guidance was particularly strong against the use of H20s for any government or national security-related work by state enterprises or private companies, the people said. The letters did not, however, constitute an outright ban on H20 use, according to the people. Industry analysts broadly agree that Chinese companies still covet those chips, which perform quite well in certain crucial AI applications.

Takeaways by Macro Roundup® AI

  1. Chinese authorities have sent notices to a range of local firms discouraging use of Nvidia's H20 processors, complicating Nvidia's attempt to recoup billions in lost China revenue after the Trump administration reversed an effective US ban on such sales.
  2. Beijing's guidance was particularly strong against using H20 chips for government or national security-related work by state enterprises or private companies, though the letters did not constitute an outright ban, according to people familiar with the matter.
  3. Industry analysts broadly agree that Chinese companies still covet the less-advanced H20 chips, which perform quite well in certain crucial AI applications.

Related Articles:

  • Trump Opens Door To Nvidia Selling Advanced AI Chips to China For A Fee — The US government negotiated an arrangement taking 15% of Nvidia's Chinese sales of its H20 artificial intelligence processor, a chip with performance restricted relative to versions sold to US customers. The administration said it would consider allowing Nvidia to sell China more advanced chips based on its newer Blackwell platform.
  • China Wants US To Relax Export Controls On Chips As Part Of Trade Deal — China is seeking relief from US semiconductor export controls as part of a trade deal, and people familiar with the matter say Beijing is more concerned about restrictions on high-bandwidth memory chips than about the H20 chip Nvidia designed for the Chinese market. Those memory controls constrain Chinese companies' ability to develop their own AI chips.
  • 2025 AI Diffusion Export Controls – Microsoft Regulatory Capture, Oracle Tears, Impacts Quantified, Model Restrictions — The US Framework for Artificial Intelligence Diffusion imposes export restrictions aimed at preventing China from accessing the computing power needed to build frontier AI models. It sorts the world into three tiers — the US and 18 allies, 23 arms-embargoed nations plus Macau, and all other countries — with differing access to AI chips and caps on graphics processor purchases.

AI Summary. China's leaders cite security concerns, including suspicion of hidden back doors in US-designed chips, as a rationale for their drive toward chip self-sufficiency. The dilemma extends beyond chips: US intelligence reportedly found extra modems on Chinese-made port cranes, and the US has banned Chinese components from connected auto systems.

Chris Miller Financial Times
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Chinese concerns over Nvidia’s H20 chips are not new. Chris Miller notes, “Beijing no doubt has always suspected that US-designed chips have deliberate back doors,” which had long motivated their drive for chip self-sufficiency.

Do security fears about foreign chips drive both countries toward self-sufficiency?

Core argument: Beijing suspects US-designed chips contain deliberate back doors, and while no public evidence supports this, past chips have been found to have apparently accidental design flaws that unmasked encryption.

Beijing no doubt has always suspected that US-designed chips have deliberate back doors, though there is no public evidence for this. We do, however, know plenty from the public domain about apparently accidental design flaws in past chips that were discovered to have unmasked encryption. China’s leaders cite security as a key rationale for their decade-long drive for chip self-sufficiency. Yet this dilemma is not unique to China or even to chips: it is the result of increasing connectivity in all sorts of complex machines. Washington had a kill-switch crisis of its own last year, when US intelligence reportedly found extra modems on the Chinese-made cranes that move containers from ship to shore in US ports. If every ship crane could be shut down from Beijing, the US logistics system would grind to a halt. Similar fears have led the US to ban Chinese components from connected auto systems.

Takeaways by Macro Roundup® AI

  1. Beijing suspects US-designed chips contain deliberate back doors, and while no public evidence supports this, past chips have been found to have apparently accidental design flaws that unmasked encryption.
  2. China's leaders cite security as a key rationale for their decade-long drive for chip self-sufficiency, a dilemma that stems from increasing connectivity in all sorts of complex machines rather than chips alone.
  3. US intelligence reportedly found extra modems on Chinese-made ship-to-shore container cranes in US ports, raising the prospect that Beijing could halt US logistics, and similar fears prompted a US ban on Chinese components in connected auto systems.

Related Articles:

  • China Intensifies Push to ‘Delete America’ From Its Technology — A Chinese government directive requires state-owned companies in finance, energy, and other sectors to replace foreign software in their information technology systems by 2027, part of a broader push to remove U.S. technology. Hardware makers were targeted first, with Dell, IBM, and Cisco equipment gradually replaced by Chinese products.
  • The Year-End Wake-Up: The ‘Chinese Sputnik’ That Demands Our Attention — Chinese AI company DeepSeek trained its Version 3 large language model for roughly $5.6m, about 100x cheaper than Meta's Llama 3, with performance comparable to Claude 3.5 Sonnet and interface access costing 12x less than Anthropic's. The author argues US chip export controls backfired by spurring leaner engineering, and that the gap between open-source and closed-source models is narrowing rapidly.
  • Huawei Readies New Chip to Challenge Nvidia, Surmounting U.S. — Huawei is close to introducing a new artificial intelligence chip, the Ascend 910C, which Chinese internet companies and telecommunications operators have been testing and which Huawei tells potential clients is comparable to Nvidia's H100, a chip not directly available in China. Aided by state support, Huawei has developed Chinese alternatives to U.S. products despite American sanctions.

Wednesday, August 13, 2025

AI Summary. New U.S. tariffs are estimated to generate $1.3tn in net new revenue through the end of the current presidential term and $2.8tn through 2034 before economic effects, about $600bn more than previously enacted tariffs. If a court ruling striking down some tariffs is upheld, the remainder could raise as little as $800bn through 2034.

Marc Goldwein Committee For A Responsible Federal Budget
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The current tariff regime will raise ~$2.8T net new revenue through 2034, conventionally scored, according to a CRFB estimate. “Those who wish to reduce or reverse the tariffs should put forward alternative sources of deficit reduction to replace them.”

How much new revenue do the new tariffs generate?

Core argument: Tariffs introduced by the Trump Administration are estimated to generate $1.3 trillion of net new revenue through the end of his term and $2.8 trillion through 2034 before economic effects, about $600 billion more than the tariffs in effect as of May.

The new tariffs introduced by the current Trump Administration will generate an estimated $1.3 trillion of net new revenue through the end of his term and $2.8 trillion through 2034, before accounting for economic effects – about $600 billion more than the tariffs in effect as of May. The U.S. Trade Court has ruled some of these tariffs illegal, pending appeal. If the ruling is upheld, the remaining tariffs could raise as little as $800 billion through 2034. Depending on the legal outcome, recent tariff increases will generate 0.2 to 0.8 percent of GDP of net new revenue through 2034 under conventional scoring.

Takeaways by Macro Roundup® AI

  1. Tariffs introduced by the Trump Administration are estimated to generate $1.3 trillion of net new revenue through the end of his term and $2.8 trillion through 2034 before economic effects, about $600 billion more than the tariffs in effect as of May.
  2. The U.S. Trade Court has ruled some of these tariffs illegal, pending appeal, and if the ruling is upheld the remaining tariffs could raise as little as $800 billion through 2034.
  3. Depending on the legal outcome, the recent tariff increases will generate 0.2 to 0.8 percent of GDP in net new revenue through 2034 under conventional scoring.

Related Articles:

  • State of U.S. Tariffs: August 7, 2025 — The Budget Lab estimates U.S. consumers face an overall average effective tariff rate of 18.6%, the highest since 1933, falling to 17.7% after consumption shifts away from tariffed goods. The 2025 tariffs are projected to raise $2.7tn over 2026-35, or $2.2tn after $475bn in negative dynamic revenue effects.
  • Trump’s Tariffs Are Making Money. That May Make Them Hard to Quit — Tariff revenue may make future administrations of either party reluctant to roll back tariffs, since repeal would add to the federal debt and replacing the revenue with other taxes would require a politically risky vote in Congress. Democrats may also be tempted to use tariff revenue to fund new social programs.
  • 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. Capital has flowed at the margin away from US markets and toward Europe, with the euro posting its longest stretch of monthly gains against the dollar in eight years and Germany's DAX index up 33% in dollar terms, more than four times the S&P 500's gain. US outflows remain modest, as Treasury auctions continue to find steady demand.

John Cortese, Rob Bittencourt, Akila Grewal, Shobhit Gupta, et al. Apollo
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Btw the start of the year and the end of July, Germany’s DAX has experienced a 33% total return in dollar terms – 4x the S&P 500’s gains. Still, Apollo notes, “capital outflows from the US so far have been modest.”

Is capital shifting away from US markets toward Europe?

Core argument: Germany's DAX index has gained 33% year-to-date in dollar terms, more than four times the S&P 500's gains, as capital has flowed at the margin away from the US and toward European markets.

One of the clearest themes to emerge has been the shift in capital flows—where at least on the margin, money has flowed away from the US and toward European markets. These capital flow shifts are being reinforced by stronger relative performance in European assets. The euro posted its longest stretch of monthly gains against the dollar in eight years, rallying over the first six months of the year. The Bloomberg Dollar Spot Index hit its lowest level in more than three years in early July. Germany’s DAX benchmark Index is up 33% so far this year in dollar terms, more than four times the gains of the S&P 500 Index. Still, the capital outflows from the US so far have been modest. Treasury auctions, while volatile, continue to find buyers. Recent 30-year bond sales illustrate this resilience: April’s 2.4 bid-to-cover ratio came in slightly above the average for the past six reopenings, May’s 2.3 was modestly below the average for new issues, and June’s 2.4 matched the recent reopening average—highlighting steady demand even amid elevated uncertainty.

Takeaways by Macro Roundup® AI

  1. Germany's DAX index has gained 33% year-to-date in dollar terms, more than four times the S&P 500's gains, as capital has flowed at the margin away from the US and toward European markets.
  2. The euro posted its longest stretch of monthly gains against the dollar in eight years over the first six months of the year, and the Bloomberg Dollar Spot Index hit its lowest level in more than three years in early July.
  3. Capital outflows from the US have been modest, with 30-year Treasury bond sales showing steady demand: bid-to-cover ratios of 2.4 in April, 2.3 in May, and 2.4 in June, broadly in line with recent averages.

Related Articles:

  • Are Foreigners Selling US Assets (Part II) — Proprietary flow tracking shows foreign bond flows into US assets, an outlier low in one month, have substantially normalized, suggesting an allocation shift away from dollar assets may have peaked. The authors argue traditional fundamentals, such as the US business cycle and Federal Reserve policy, will matter more for any further dollar weakness.
  • 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.
  • The Great European Disentanglement From US Stocks Has Only Just Started — Federal Reserve data show European investors held about $9tn in US stocks, roughly 17% of the total value of the US market. After inflation, a dollar invested in the US at the start of 2000 was worth $3.28 by the end of 2024, versus $1.63 for the rest of the world.

AI Summary. US healthcare stocks tracked technology-sector returns from 1989 to 2019 with lower volatility (15% vs 24%), but have since stagnated as technology advanced. Major pharmaceutical firms trade at forward price-to-earnings ratios of 8x–9x, biotech carries one of the market's largest valuation discounts, and 80% of biotech initial public offerings since 2018 have collapsed.

Michael Cembalest J.P. Morgan
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Btw 1989 and 2019, US healthcare returns tracked the US tech sector’s returns, albeit with lower volatility. Since 2020, healthcare returns have stagnated as overall US healthcare spending has flatlined at ~17% of GDP since 2008.

Have healthcare stocks stopped tracking technology sector returns?

Core argument: From 1989 to 2019, US healthcare equities tracked technology sector returns with considerably lower volatility, 15% versus 24%, but healthcare has stagnated since then while technology has surged ahead.

For the 30-year period from 1989 to 2019, the US healthcare sector tracked technology returns, with considerably lower volatility (15% vs 24%). Things have changed markedly since then as tech barrels ahead while healthcare stagnates. Remaining pharma stalwarts like Merck, Pfizer and Bristol Myers trade at forward P/E ratios of just 8x-9x; biotech trades at one of the largest valuation discounts in the market, while 80% of biotech IPOs since 2018 have imploded; managed care returns have collapsed; and life sciences companies may be hurt by cuts to the NIH, NSF, CDC and other scientific research organizations, a trend which is already visible in the form of sharply reduced NIH grants through July of this year. There may not be much room for the US public or private sector to add to healthcare spending. [Overall] US healthcare spending was consistently rising as a share of GDP during the period when healthcare was tracking the returns of the technology sector, from the 1980s to 2019.

Takeaways by Macro Roundup® AI

  1. From 1989 to 2019, US healthcare equities tracked technology sector returns with considerably lower volatility, 15% versus 24%, but healthcare has stagnated since then while technology has surged ahead.
  2. Merck, Pfizer and Bristol Myers trade at forward P/E ratios of just 8x–9x, biotech carries one of the market's largest valuation discounts, and 80% of biotech IPOs since 2018 have imploded.
  3. Life sciences companies may be hurt by cuts to the NIH, NSF, CDC and other scientific research organizations, a trend already visible in sharply reduced NIH grants.

Related Articles:

  • U.S. Health Spending is Slowing Down — U.S. health spending fell to 17.1% of GDP from 17.5% a year earlier and 17.9% the year before, the smallest share since 2014 and below the pre-pandemic level. Adjusted for overall and medical inflation the share was largely unchanged, with the decline driven by higher inflation outside health and lagging medical inflation.
  • Where is Health Care The Biggest Part of the Economy? — Health spending as a share of state economic output is highest in West Virginia, at more than one-fourth, and lowest in Washington State and Washington D.C., at less than one-ninth. Poorer states such as Arkansas, Alabama, and Mississippi rank far higher by share of output than by dollars spent per person.
  • Saved by Medicaid: New Evidence on Health Insurance and Mortality from the Universe of Low-Income Adults — Using linked Census and tax records for 37m low-income adults, the authors estimate that state Medicaid expansions raised enrollment by 12 percentage points and cut mortality among low-income adults by 2.5%, implying a 21% reduction in the mortality hazard of new enrollees. They estimate direct budgetary costs of $5.4m per life saved and $179,000 per life-year saved.

AI Summary. Trade deficits can reflect strength when a fast-growing economy imports capital to build infrastructure and expand production, as the US did for most of the 19th century. The author argues today's persistent US deficits instead raise the dollar, weaken manufacturers' competitiveness, increase debt and inequality, and make growth more dependent on asset bubbles.

Michael Pettis Financial Times
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In contrast to the 19th century, when trade deficits increased US investment, Pettis argues, in the 21st century, trade deficits “cause the debt to rise, [the share of] productive sectors like manufacturing to decline, [and] income inequality to rise.”

Do today's US trade deficits benefit American consumers?

Core argument: Trade deficits are not necessarily harmful: a fast-growing developing economy importing capital to build infrastructure or expand production can run a deficit that reflects strength, as the US did for most of the 19th Century.

Trade deficits are not necessarily harmful. A rapidly growing developing economy with strong investment opportunities might import more capital than it exports as it builds new infrastructure or expands production. In that context, a deficit can reflect strength. That is what characterised the US economy for most of the 19th Century. But that is not what happens in the US today. In fact, by pushing up the value of the dollar and making American manufacturers less globally competitive, foreign capital may actually put downward pressure on US investment. As a result, whereas persistent US deficits in the 19th Century allowed American investment to rise and American manufacturing to grow, in the 21st Century persistent American deficits cause American debt to rise, productive sectors like manufacturing to decline as a share of the American economy, income inequality to rise, and growth in the economy to become more dependent on asset bubbles. None of these benefit American consumers.

Takeaways by Macro Roundup® AI

  1. Trade deficits are not necessarily harmful: a fast-growing developing economy importing capital to build infrastructure or expand production can run a deficit that reflects strength, as the US did for most of the 19th Century.
  2. Foreign capital inflows push up the dollar's value and make American manufacturers less globally competitive, which may put downward pressure on US investment rather than raising it.
  3. Persistent 21st Century US deficits cause American debt to rise, manufacturing to decline as a share of the economy, income inequality to rise, and growth to depend more on asset bubbles, none of which benefit consumers.

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.
  • Why Global Imbalances Do Matter — From 2008 to 2023 the US household and corporate sectors ran average savings surpluses of 3.5% and 1.6% of GDP respectively, leaving the federal government as the dominant net borrower in the US economy. This suggests the benefit of persistent net capital inflows is the ability to run larger fiscal deficits and grow public debt.
  • The U.S. Trade Deficit: Myths and Realities — Taxing capital inflows would weaken the dollar but could raise domestic interest rates and depress investment, harming long-term growth, while an interest rate cut absent recession would be inflationary and erode any real depreciation needed to durably improve the trade balance. Fiscal restraint could weaken the dollar and reduce the trade deficit.

AI Summary. The United States exported about 30% of its domestic primary energy production, a share that has grown considerably in recent decades, with nearly all exports being fossil fuels sent to North America, Europe, or Asia. It exported 55% of its crude oil and natural gas plant liquids output as crude or processed petroleum products.

Mickey Francis Energy Information Administration
Date Posted:

In 2024, the United States exported about 30% of its domestic primary energy production. Nearly all of the exports were fossil fuels destined for other countries in North America, Europe, or Asia.

How much of US energy production is exported?

Core argument: The United States exported about 30% of its domestic primary energy production in 2024, a share that has grown considerably in recent decades, with nearly all exports being fossil fuels bound for North America, Europe, or Asia.

In 2024, the United States exported about 30% of its domestic primary energy production. This percentage has grown considerably in recent decades. Nearly all of the exports were fossil fuels destined for other countries in North America, Europe, or Asia. In 2024, the United States exported 55% of its domestic crude oil and natural gas plant liquids (NGPL) production either directly as crude oil or as processed petroleum products such as propane, distillate fuel oil, and motor gasoline. During the past decade, U.S. crude oil and NGPL production as well as crude oil and petroleum products exports grew rapidly, outpacing modest domestic petroleum demand growth and declining U.S. imports.

Takeaways by Macro Roundup® AI

  1. The United States exported about 30% of its domestic primary energy production in 2024, a share that has grown considerably in recent decades, with nearly all exports being fossil fuels bound for North America, Europe, or Asia.
  2. The United States exported 55% of its 2024 crude oil and natural gas plant liquids production, either directly as crude oil or as processed products such as propane, distillate fuel oil, and motor gasoline.
  3. U.S. crude oil and natural gas plant liquids production and crude oil and petroleum product exports grew rapidly over the past decade, outpacing modest domestic petroleum demand growth as U.S. imports declined.

Related Articles:

  • Heliocentrism — An energy use must be electrified before green grid electricity can decarbonize it, and while US grid decarbonization continues at a steady pace, the electricity share of final US energy consumption has grown little. Transmission line growth runs well below Department of Energy targets for 2030 and 2035, and transformer delivery times have stretched from 4–6 weeks to 2–3 years.
  • The New Joule Order — Ample physical capacity keeps inflation low and stable and allows lower interest rates, but when demand catches up to capacity constraints, better returns in the physical economy pull capital back to fund expansion, making a commodity super-cycle a capital-expenditure cycle. In real terms, total energy investment is below its level 15 years ago.
  • U.S. Primary Energy Production, Consumption, and Exports Increased In 2024 — The United States produced more energy than it consumed, with primary energy production reaching a record 103.3 quadrillion British thermal units and consumption at 94.2 quadrillion, still below the 2007 peak of 99.0 quadrillion. Energy exports rose 4% to a record 30.9 quadrillion while imports held at 21.7 quadrillion, the largest net exports in records back to 1949.

AI Summary. IBM and Google each say they are on course to build an industrial-scale quantum computer by the end of the decade, with IBM publishing a blueprint filling in missing pieces from its earlier designs. The Pentagon's advanced research agency has begun studying quantum companies to identify which could reach practical size fastest.

Richard Waters Financial Times
Date Posted:

Engineering teams at IBM and Google both believe they are on track to build industrial-scale quantum computers by the end of the decade.

Is an industrial-scale quantum computer within reach this decade?

Core argument: IBM published a blueprint filling in critical missing pieces from its earlier designs, with quantum head Jay Gambetta saying the company has cracked the code and will be able to build the machine by the end of the decade.

In June, IBM became the latest to claim its path was now clear to a full-scale machine, after publishing a blueprint for a quantum computer that filled in critical missing pieces from its earlier designs. Quantum computers hold the potential to solve problems beyond today’s machines in fields such as materials science and AI. “It doesn’t feel like a dream anymore,” said Jay Gambetta, head of IBM’s quantum initiative. “I really do feel like we’ve cracked the code and we’ll be able to build this machine by the end of the decade.” That has intensified a race against Google, which cleared one of the biggest remaining hurdles late last year and says it is also on course to build an industrial-scale quantum computer by the end of the decade. In one sign of growing official interest in sorting out the winners, DARPA, the Pentagon’s advanced research agency, last year began a broad study of different quantum companies with the aim of identifying which could be expanded to reach practical size the fastest.

Takeaways by Macro Roundup® AI

  1. IBM published a blueprint filling in critical missing pieces from its earlier designs, with quantum head Jay Gambetta saying the company has cracked the code and will be able to build the machine by the end of the decade.
  2. Google cleared one of the biggest remaining hurdles late last year and says it is on course to build an industrial-scale quantum computer by the end of the decade.
  3. DARPA, the Pentagon's advanced research agency, began a broad study of quantum companies aimed at identifying which could be expanded to reach practical size the fastest.

Related Articles:

  • IBM Has a Roadmap to a ‘Fault-Tolerant’ Quantum Computer by 2029 — IBM has laid out a roadmap for building a fault-tolerant quantum computer by 2029, citing advances in reducing errors in quantum bits and a technique for identifying and correcting errors in real time using conventional computing. Amazon and Google are also pursuing quantum error correction with dedicated chips.
  • Microsoft’s Majorana 1 Chip Carves New Path for Quantum Computing — Microsoft unveiled Majorana 1, a quantum chip built on a Topological Core architecture using a new materials stack of indium arsenide and aluminum, which the company expects will enable quantum computers capable of solving industrial-scale problems within years rather than decades. The topological superconductor produces a qubit that is fast, small, stable, and digitally controlled.
  • Physicists Question Microsoft’s Quantum Claim — Physicists outside the work have responded cautiously to Microsoft's topological quantum computing claim, noting that the search for topological qubits and the "Majorana" particles underpinning them has a history of bold announcements later withdrawn. Researchers describe the technology as excruciatingly difficult to actually build.