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
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “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
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a 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
  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Friday, September 5, 2025

AI Summary. The authors argue that research crediting neighborhoods with causing better child outcomes confuses causation with parental self-sorting, since more affluent, better-educated, and more stable families tend to move to good neighborhoods before their children are born. Their analysis of Danish population data found the same sorting pattern as in the United States.

James Heckman and Sadegh Eshaghnia Wall Street Journal
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Heckman argues that contrary to Chetty’s research, local geography has little causal effect on children’s adult outcomes in the US. Studies that find otherwise reflect parental self-selection.

Do neighborhoods cause better child outcomes, or do families sort themselves?

Core argument: The authors argue that neighborhood-effects research falsely attributes disparities in outcomes across locations to the causal effect of neighborhoods, when the differences stem from the parents who self-sort into those neighborhoods.

Advocates of [relocating struggling families to residential areas with better conditions] ignore serious flaws in the research. The methods used in this literature falsely link the disparity of outcomes across locations to the causal effect of neighborhoods. In reality, the difference is due to the parents who self-sort into neighborhoods. Those who move to better neighborhoods early on tend to be more affluent, more educated and more likely to have intact families. They move to better neighborhoods with people similar to themselves, just as later movers, who are less affluent and less educated, move to less affluent neighborhoods. Focusing on the family rather than the neighborhood changes the conversation around intergenerational mobility. In our 2022 study on lessons for America from Denmark, we analyzed data collected by Denmark’s government statistics agencies for the entire population, similar to census data in the U.S. As with Americans, more-affluent and better-educated Danish are more likely to move to good neighborhoods before children are born. Less-educated and less-affluent families that relocate later in their children’s lives tend to be less stable than early movers, who are less likely to experience divorce or a change in household composition.

Takeaways by Macro Roundup® AI

  1. The authors argue that neighborhood-effects research falsely attributes disparities in outcomes across locations to the causal effect of neighborhoods, when the differences stem from the parents who self-sort into those neighborhoods.
  2. Families who move to better neighborhoods early tend to be more affluent, more educated and more likely to have intact families than those who relocate later in their children's lives.
  3. A 2022 study of Danish government statistics covering the entire population found that, as in the U.S., more-affluent and better-educated Danes are likelier to move to good neighborhoods before children are born, while later movers are less stable.

Related Articles:

  • Changing Opportunity: Sociological Mechanisms Underlying Growing Class Gaps and Shrinking Race Gaps in Economic Mobility* — The authors find that children's economic mobility improves across birth cohorts in communities where parental employment rates increase, with larger effects for children who move to such communities at younger ages. The relationship is strongest for the parental employment rates of peers in a child's own birth cohort, suggesting it is mediated by social interaction.
  • Lessons from Denmark about Inequality and Social Mobility — Denmark's intergenerational educational mobility resembles that of the U.S. despite its extensive welfare and equalizing social policies, with cognitive test scores of Danish children correlating similarly with parental income across cohorts born in 1958 and 1988. The evidence suggests family background and neighborhood effects shape educational outcomes in ways universal service provision does not offset.
  • Transmission of Family Influence — The authors estimate substantially higher intergenerational persistence using expected lifetime resource measures than using traditional income measures. They estimate that, measured at ages 30–35, almost 80% of male children have higher disposable income than their fathers did, about 70% have higher consumption, and around 60% have greater expected lifetime resources.

AI Summary. The US foreign-born population reached 51m, or 15.4% of the total, exceeding the previous high set in 1910. Estimated lifetime fiscal impact varies by education: an immigrant arriving at 25 without a high school degree imposes a $246,000 cost, while one with a graduate degree contributes $795,000.

Pia Orrenius, Alan Viard, and Madeline Zavodny American Enterprise Institute
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An AEI analysis finds immigrants with a high school degree or less have a negative net fiscal impact. These immigrants are less of a burden than their native peers as they don’t qualify for as much public assistance.

Does an immigrant's education level determine their lifetime fiscal impact?

Core argument: An immigrant without a high school diploma arriving at age 25 imposes an estimated lifetime fiscal cost of $246,000, while the average immigrant with a graduate degree makes an estimated lifetime fiscal contribution of $795,000.

The US foreign-born population hit 51 million [in 2024], and its share of the total population reached 15.4%, exceeding the previous high set in 1910. The estimated fiscal impact of natives and immigrants varied considerably by education. An immigrant who had not completed high school and arrived in the US at age 25 imposed a lifetime fiscal cost of $246,000, while the average immigrant who had a graduate degree made a lifetime fiscal contribution of $795,000. Most of the variation in long-run fiscal impacts by education comes from the immigrants themselves, not from their descendants, because the children and later descendants of immigrants tend to converge to the US average.

Takeaways by Macro Roundup® AI

  1. An immigrant without a high school diploma arriving at age 25 imposes an estimated lifetime fiscal cost of $246,000, while the average immigrant with a graduate degree makes an estimated lifetime fiscal contribution of $795,000.
  2. The US foreign-born population reached 51 million in 2024 and 15.4% of the total population, exceeding the previous high set in 1910.
  3. Most of the variation in long-run fiscal impacts by education comes from immigrants themselves rather than their descendants, since children and later descendants of immigrants tend to converge to the US average.

Related Articles:

  • Two New Estimates of the Fiscal Impact of Immigration — Estimates of immigrants' fiscal impact depend heavily on the assumptions used: the lifetime fiscal impact of a 22-year-old high school dropout shifts from negative $315,000 under one set of assumptions to a small negative number under another. The author argues the accounting approach common in this literature understates immigrants' contribution to fiscal sustainability.
  • Immigration Policy and Its Macroeconomic Effects in the Second Trump Administration — The authors project net migration for the year to range from about −525,000 to 115,000, with zero or negative net migration more likely, reducing GDP growth by 0.3–0.4 percentage points. They project immigration policy will become more restrictive the following year before net migration rebounds in subsequent years.
  • 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.

AI Summary. Foreign capital flowed out of U.S. markets during the global financial crisis rather than in; the dollar's rally instead reflected U.S. money market funds and banks pulling back dollar loans to foreign banks and carry traders. The yen's simultaneous rally points to a carry-trade unwind rather than reserve-currency demand.

Brad Setser Council on Foreign Relations
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The dollar rally observed in 2008 was driven by repatriation of US money overseas, partly from unwinding carry trades, not inflows from foreign investors, Setser argues. “Investors should not assume that the dollar will rally in future instability.”

Why did the dollar rally while foreign capital flowed out?

Core argument: Foreign capital flowed out of U.S. markets in late 2008, contradicting the assumption that the dollar's rally during the global financial crisis reflected foreign investors moving funds into the United States.

Because the dollar (somewhat surprisingly) rallied during the crisis [i.e. the GFC], there is an assumption that foreign investors moved funds into the U.S. That isn’t quite true. Capital from abroad flowed out of the U.S. market in late 2008. The disaggregated chart tells a clear story of reduced foreign demand for U.S. assets amid the crisis. [This is what ] produced the bid for dollar assets. U.S. money market mutual funds that had lent to foreign (mostly European) banks wanted their money back, [as did] American banks that had lent out dollars to carry traders betting on the continued decline of the dollar relative to emerging economies. Put differently, the dollar was one of the funding currencies for a host of carry trades prior to the global financial crisis, as the dollar had been in a sustained slump and U.S. rates were relatively low. The dollar, as well as the yen. It is not a coincidence that the yen also rallied during the global financial crisis. That to me is a critical clue. Most attribute the ‘08 yen rally to a carry unwind, rather than a bid for the yen as a “reserve” currency. That could be said for the dollar as well. Investors should not assume that the dollar will rally in future instability.

Takeaways by Macro Roundup® AI

  1. Foreign capital flowed out of U.S. markets in late 2008, contradicting the assumption that the dollar's rally during the global financial crisis reflected foreign investors moving funds into the United States.
  2. The dollar's crisis bid came from U.S. money market mutual funds recalling loans to foreign, mostly European, banks and U.S. banks pulling back dollars lent to carry traders betting against the dollar.
  3. The yen also rallied during the global financial crisis, a move most attribute to a carry unwind rather than demand for the yen as a reserve currency, suggesting investors should not assume the dollar will rally in future instability.

Related Articles:

  • The International Role of the U.S. Dollar – 2025 Edition — The US dollar accounted for 58% of disclosed global official foreign reserves, versus 20% for the euro and 2% for China's renminbi, and roughly 50% of international payments made through the SWIFT messaging system. About 55% of international claims and 60% of liabilities are denominated in dollars, a share relatively stable since 2000.
  • Dollar Downgrade — The author argues that rising 10- and 30-year US Treasury yields do not show up in long-term inflation expectations, judging by the spread between inflation-indexed and non-indexed Treasury bonds. The author attributes the increase instead to a shift in demand away from long-dated US debt, reinforcing higher long-term real interest rates.
  • 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.

AI Summary. The Federal Reserve's Beige Book survey of regional business conditions reported a surge of data center construction, a rare bright spot in commercial real estate, alongside related increases in energy demand. Data centers are profitable and predictable electricity customers but add load in step increases to a system that cannot smoothly add new power sources.

Paul Kedrosky Applied Complexity
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Citing reports from the Atlanta and Kansas City Feds of data center construction “causing a step increase in regional electricity loads.” Kedrosky suggests that power is the biggest constraint on continued datacenter capex at the current rate.

Is data center construction lifting commercial real estate while straining power supply?

Core argument: The Beige Book noted a "surge of data center construction" as a rare bright spot in commercial real estate, in particular in the Philadelphia, Cleveland, and Chicago Districts.

Nationally, the report noted a “surge of data center construction”, a rare bright spot in commercial real estate, in particular in the Philadelphia, Cleveland, and Chicago Districts. And, not surprisingly, it cited sharp related increases in energy demand, in particular in Atlanta and Kansas City, due to data centers significantly causing a step increase in regional electricity loads. To put this in a kind of context, here is a graph of data center mentions organized by Beige Book edition over the last two years. I have added a helpful up-and-to-the-right arrow to the figure. Data centers are profitable and predictable [electrical] customers, but they also represent step function load increases in a system that can't smoothly add new sources of power.

Takeaways by Macro Roundup® AI

  1. The Beige Book noted a "surge of data center construction" as a rare bright spot in commercial real estate, in particular in the Philadelphia, Cleveland, and Chicago Districts.
  2. The Beige Book cited sharp increases in energy demand tied to data centers, in particular in the Atlanta and Kansas City Districts, where data centers contributed to step increases in regional electricity loads.
  3. Data centers are profitable and predictable electricity customers but represent step-function load increases in a system that cannot smoothly add new sources of power.

Related Articles:

  • Back to Our Regularly Scheduled Programming — The four largest US hyperscalers spent $440bn on capital expenditure and research in 2024, with $596bn projected for 2025, a 35% increase, leaving large gaps between AI spending and AI revenues. These firms account for more than half of all capital expenditure growth in the US equity market.
  • Power Check: Watt’s Going On With The Grid? — Bank of America Global Research estimates US electricity demand will grow at a 2.5% compound annual rate through 2035, up from 0.5% annually over the prior decade, driven by building electrification, data centers, industrial demand, and electric vehicles. Meeting it requires greater utility investment in grid capacity.
  • How A Power Shortage Could Short-Circuit Nvidia’s Rise — Analysts estimate Nvidia will sell roughly 6m Blackwell and 5.5m GB chips over a two-year span, and that if half are installed and run at capacity in America they would add 25GW to power demand. Bernstein projects a US shortfall of 17–62GW by 2030 depending on chip efficiency; Morgan Stanley puts the gap at 45GW by 2028.

AI Summary. Social media has expanded who produces and broadcasts political information, and an analysis of the ideological positions of those sharing political content finds extreme views on both left and right are heavily over-represented relative to traditional media, where moderate positions were well-represented. The author argues this has eroded norms that kept radicals on the fringe.

John Burn-Murdoch Financial Times
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John Burn-Murdoch hypothesizes that rising populism reflects “an unveiling of the electorate’s unfiltered inclinations,” with extreme views, both left and right, better reflected in social, as opposed to traditional, media.

Has social media over-represented extreme views relative to traditional media?

Core argument: An analysis of the ideological positions of people sharing political content on social media finds extreme views of both left and right heavily over-represented, whereas traditional media catered to a range of views with moderate positions well-represented.

Social media has dramatically expanded the pool of people producing and broadcasting information, and in doing so the range of views and narratives people are exposed to. My analysis of the ideological positions of those who share political content on social media shows that exactly this has happened. Whereas traditional media catered to a range of views, with moderate positions well-represented, extreme views — of both left and right — are heavily over-represented on social media. This proliferation of views and narratives formerly considered beyond the pale, spread via individuals and platforms outside the control of erstwhile political and media powers, has shattered norms that previously kept radicals on the fringe.

Takeaways by Macro Roundup® AI

  1. An analysis of the ideological positions of people sharing political content on social media finds extreme views of both left and right heavily over-represented, whereas traditional media catered to a range of views with moderate positions well-represented.
  2. Social media has expanded the pool of people producing and broadcasting information, widening the range of views and narratives to which audiences are exposed.
  3. The spread of views formerly considered beyond the pale, via individuals and platforms outside the control of established political and media powers, has shattered norms that previously kept radicals on the fringe.

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

AI Summary. Satellite images and other open-source material examined by The Wall Street Journal show China building air and naval facilities along its eastern coast, including a large base for amphibious warships and a multibillion-dollar airport about 3 miles from front-line Taiwanese islands. Analysts say the sites would strengthen China's position in an invasion of Taiwan.

Niharika Mandhana and Camille Bressange Wall Street Journal
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China is undertaking a large-scale infrastructure build on its eastern coast, including new naval bases for amphibious vessels with hardened fuel tanks. Michael Dahm, a retired U.S. Navy intelligence officer, argues “they expect this to be bombed.”

How would new coastal air and naval sites aid invading Taiwan?

Core argument: Satellite images and other open-source material examined by The Wall Street Journal show China building air and naval sites along its eastern coast, including a multibillion-dollar airport roughly 3 miles from front-line Taiwanese islands.

China is undertaking a large-scale build-out of infrastructure along its eastern coast, including air and naval sites that show its growing readiness for a potential conflict over Taiwan. Satellite images and other open-source material examined by The Wall Street Journal illustrate how these facilities would strengthen China’s hand if it launched an invasion of the island democracy. Beijing claims Taiwan as its territory and has pledged to take it, by force if necessary. The sites range from a large new base for amphibious warships to a multibillion-dollar airport that sits around 3 miles from front-line Taiwanese islands. “All of it goes to supporting China’s one military planning scenario, which is a Taiwan scenario,” said Michael Dahm, a retired U.S. Navy intelligence officer and senior resident fellow at the Mitchell Institute for Aerospace Studies who closely tracks these projects.

Takeaways by Macro Roundup® AI

  1. Satellite images and other open-source material examined by The Wall Street Journal show China building air and naval sites along its eastern coast, including a multibillion-dollar airport roughly 3 miles from front-line Taiwanese islands.
  2. China's coastal build-out includes a large new base for amphibious warships, and The Wall Street Journal's review indicates such facilities would strengthen Beijing's hand if it launched an invasion of Taiwan.
  3. Michael Dahm, a retired U.S. Navy intelligence officer and senior resident fellow at the Mitchell Institute for Aerospace Studies, said all of the construction supports China's one military planning scenario, a Taiwan scenario.

Related Articles:

  • Australia, Japan and US Sign ‘Historic’ Agreement on Naval Logistics — 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.
  • The West Badly Needs More Missiles—But The Wait To Buy Them Is Years Long — Each Nasams air-defense system, made by Norway's Kongsberg, takes two years to build and new buyers face a multiyear backlog, prompting the plant to run 24-hour, seven-day shifts. The defense industry faces a prolonged labor crunch, struggling to find workers with niche skills willing to undergo lengthy security checks.
  • World’s Top Hedge Fund Bridgewater Dumps All China Stocks In Retreat From Market — Hedge fund Bridgewater exited positions in 16 Chinese stocks worth a combined $1.41bn and closed its indirect exposure through China-focused exchange-traded funds, according to its US regulatory filing. The firm shifted toward US mega-cap technology stocks, raising its stakes in Nvidia by 154%, Microsoft by 112%, Meta Platforms by 90% and Alphabet by 84%.

Monday, September 8, 2025

AI Summary. The Congressional Budget Office estimates that the top 10% of U.S. families held 60% of all wealth in 2022, up from 56% in 1989, with the top 1% holding 27%, up from 23%. The rest of the top half saw its share fall from 37% to 33%, while the bottom half held 6% in both years.

Nadia Karamcheva, Xiaotong Niu, and Julie Topoleski Congressional Budget Office
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In 2022, the present value of Social Security was ~50% of the wealth of American families at the median of the wealth distribution, ~34% at the 75th percentile, and 20% at the 90th. The wealth shares of the top 1% and top 5% both rose by 4pp since 1989.

Has the share of wealth held by the richest families risen?

Core argument: CBO reports that families in the top 10% of the wealth distribution held 60% of all wealth in 2022, up from 56% in 1989, while families in the top 1% held 27%, up from 23%.

In 2016, CBO published a report that defined family wealth as marketable wealth—that is, its easily tradable assets minus its debts—and in 2022, CBO published a report that defined family wealth as the sum of a family’s marketable wealth and its promised income from defined benefit pension plans. This report updates those prior analyses with more recent data and expands the measure of wealth to account for future streams of income from Social Security benefits. In 2022, families in the top 10% of the distribution held 60% of all wealth, up from 56% in 1989, and families in the top 1% of the distribution held 27%, up from 23% in 1989. The share of wealth held by the rest of the families in the top half of the distribution shrank from 37% to 33% over the same period. Families in the bottom half of the distribution held 6% of all wealth in both 1989 and 2022.

Takeaways by Macro Roundup® AI

  1. CBO reports that families in the top 10% of the wealth distribution held 60% of all wealth in 2022, up from 56% in 1989, while families in the top 1% held 27%, up from 23%.
  2. The share of wealth held by families in the top half of the distribution outside the top 10% fell from 37% in 1989 to 33% in 2022, according to CBO.
  3. Families in the bottom half of the wealth distribution held 6% of all wealth in both 1989 and 2022, under a CBO measure that expands marketable wealth to include promised defined benefit pension income and future Social Security benefits.

Related Articles:

  • Social Security and Trends in Wealth Inequality — The authors estimate that including Social Security in household wealth leaves top wealth shares little changed over three decades, with the top 10% and top 1% shares rising 1.1 and 1.6 percentage points versus roughly 9 and 6 points for marketable wealth alone. Social Security wealth grew from $7tn to $39tn.
  • The Gilded Age and Beyond: The Persistence of Elite Wealth in American History — The authors find that most extremely wealthy Americans fall out of the top tail within their lifetimes, and that grandparental wealth is associated with reaching the top 1% in a non-linear way. Still, over 90% of grandchildren of top 1% grandfathers did not reach that level.
  • Inequality Hasn’t Risen. Here’s Why It Feels Like It Has — In both the US and UK, the lowest earners have seen the fastest wage growth and aggregate inequality has not increased, as low-skilled workers gained and middle-skilled workers lost from the hollowing out of the middle of the jobs distribution. The author argues middle earners face both resentment and precarity.

AI Summary. The top 10 stocks in the S&P 500 by market capitalization accounted for 54% of the index's increase in market capitalization since the start of 2021, reflecting concentration in market cap, returns, earnings, and capital spending tied to artificial intelligence.

Torsten Slok, Rajvi Shah, and Shruti Galwankar Apollo
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Since the beginning of 2021, the top 10 stocks in the S&P 500 by market cap accounted for 54% of the index’s increase in market capitalization.

How concentrated is the S&P 500 in AI-linked stocks?

Core argument: The top 10 stocks in the S&P 500 by market cap accounted for 54% of the index's increase in market capitalization since the beginning of 2021.

[Torsten Sløk's] chart book documents the extreme AI concentration within the S&P 500’s market cap, returns, earnings and capex.

Takeaways by Macro Roundup® AI

  1. The top 10 stocks in the S&P 500 by market cap accounted for 54% of the index's increase in market capitalization since the beginning of 2021.
  2. Torsten Sløk's chart book documents AI concentration within the S&P 500 across market cap, returns, earnings, and capital expenditure.

Related Articles:

  • American Unexceptionalism — The S&P 500 has outperformed other developed-market equities by a cumulative 150% over the past fifteen years, but the authors attribute about 80% of that gap to a strengthening dollar and expanding relative valuations rather than fundamentals such as dividends, buybacks, and organic growth. U.S. valuations sit around the 90th percentile on price-to-earnings measures.
  • Long-Term Shareholder Returns: Evidence From 64,000 Global Stocks — A study of about 64,000 global stocks estimates net global stock market wealth creation of $75.7tn, with returns highly concentrated: the top 159 firms (0.25%) account for half of net wealth creation and the top 1,526 (2.39%) account for all of it. Fewer than half of stocks beat one-month US Treasury bills, 42.6% of non-US and 44.8% of US stocks.
  • Summer Mailbag — The share of total US market capitalization held by young unprofitable companies has fallen from its 2021–2022 peak, while over 40% of small-cap companies have negative earnings and the negative-earnings share among large caps is falling. The 10 largest stocks hold about 35% of market cap, a high since 1990, but their share of market earnings has roughly kept pace.

AI Summary. Total annual revenue from AI at the West's leading AI firms is estimated at $50bn, less than 2% of the $2.9tn in global data-centre investment Morgan Stanley forecasts over a four-year period, excluding energy costs. The average American tech firm's assets are estimated to last nine years, versus 15 for 1990s telecoms assets.

Mike Bird and Callum Williams The Economist
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Americans’ exposure to the stock market, at 30% of household net worth, exceeds the dotcom era’s 26%. The Economist’s Bird and Williams warn, “Should Digital God fail to arrive, the fall will be brutal.”

Does AI revenue justify the scale of data-centre investment?

Core argument: The West's leading AI firms take in about $50bn a year in total revenue from the technology, less than 2% of the $2.9trn in global new data-centre investment Morgan Stanley forecasts for 2025-2028, a figure that excludes energy costs.

By our reckoning, the total revenue from the tech accruing to the West’s leading AI firms is currently $50B a year. Although such revenues are growing fast, they are still less than 2% of the $2.9T investment in new data centres globally that Morgan Stanley forecasts between 2025 and 2028—a figure which excludes energy costs. An unusually large share of capital investment is being devoted to assets that depreciate quickly. Nvidia’s cutting-edge chips will look clunky in a few years’ time. We estimate that the average American tech firm’s assets have a shelf-life of just nine years, compared with 15 for telecoms assets in the 1990s.

Takeaways by Macro Roundup® AI

  1. The West's leading AI firms take in about $50bn a year in total revenue from the technology, less than 2% of the $2.9trn in global new data-centre investment Morgan Stanley forecasts for 2025-2028, a figure that excludes energy costs.
  2. The average American tech firm's assets have an estimated shelf-life of just nine years, compared with 15 years for telecoms assets in the 1990s.
  3. An unusually large share of capital investment is going into fast-depreciating assets, with Nvidia's cutting-edge chips likely to look clunky within a few years.

Related Articles:

  • The AI Boom’s Hidden Risk to the Economy — Net income at Alphabet, Amazon, Meta and Microsoft rose 73% to $91bn in a quarter two years on, while their combined free cash flow fell 30% to $40bn, as heavy AI investment absorbs cash these firms once recycled into financial markets. That spare cash previously helped hold down long-term interest rates despite large federal deficits.
  • The Kanye/Data Center Crossover — Data center capital spending differs from fiber and railroad investment because most of the cost sits in processors that are replaced every 3-4 years rather than in long-lived shells, power, and cooling connections. That short replacement cycle requires returns high enough to exceed a risk-adjusted cost of capital of 12-14% before the hardware must be replaced.
  • Back to Our Regularly Scheduled Programming — The four largest US hyperscalers spent $440bn on capital expenditure and research in 2024, with $596bn projected for 2025, a 35% increase, leaving large gaps between AI spending and AI revenues. These firms account for more than half of all capital expenditure growth in the US equity market.

AI Summary. The Netherlands' $2tn pension system, the European Union's largest, is shifting from defined-benefit to defined-contribution plans, reducing its need to hold long-dated government bonds as a hedge against promised future payouts. The expected drop in demand for long-duration bonds is putting upward pressure on yields.

Joseph Wang Fed Guy Blog
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The key drivers of elevated European long yields are higher inflation and chronic fiscal deficits, but another catalyst may be lower demand for long-dated debt, as the $2T Dutch pension system transitions from a defined benefit to a defined contribution system.

Does a pension shift to defined contribution push long-term yields higher?

Core argument: The $2tn Dutch pension system, the largest in the EU, is expected to reduce its demand for long-dated bonds significantly, putting upward pressure on yields.

The Dutch pension fund system has been a large investor in long dated bonds, but its appetite for duration will be significantly lower going forward. The system is transitioning from a defined benefit system to a defined contribution system where beneficiaries will simply receive their contributions plus investment returns at retirement. Previously, beneficiaries were promised a certain payout regardless of market performance. This prompted the fund to invest heavily in safe long duration assets like government bonds to hedge their future liabilities. That is no longer a concern under the new system. The $2T Dutch pension fund system is the largest in the E.U., so the expected reduction in bond demand is putting upward pressure on yields.

Takeaways by Macro Roundup® AI

  1. The $2tn Dutch pension system, the largest in the EU, is expected to reduce its demand for long-dated bonds significantly, putting upward pressure on yields.
  2. The Dutch pension system's shift from defined benefit to defined contribution removes the need to hedge promised payouts with long-duration government bonds, since beneficiaries will receive contributions plus investment returns at retirement.
  3. Under the prior defined benefit arrangement, Dutch beneficiaries were promised a set payout regardless of market performance, prompting heavy investment in safe long-duration assets such as government bonds to hedge future liabilities.

Related Articles:

  • 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.
  • Why Denmark is Raising its Retirement Age to 70, Europe’s Highest — Denmark's state pension age is tied to life expectancy under a parliamentary agreement that sets adjustments every five years with 15 years' notice and caps increases at one year at a time. Under this system the pension age is set to rise from 67 to 70, keeping public finances healthy long term.
  • European Views: Back to School with Confidence — A French government confidence vote is expected to be lost, with the likely outcome a newly appointed government, though fresh elections remain possible. The authors project slower fiscal adjustment, with the deficit easing from 5.4% to 5.2% in 2026, adding to debt and raising the risk of credit rating changes.

AI Summary. The employment rate for Americans aged 25–54 has held essentially unchanged at a multi-decade high of 80.7%, just below its recent peak of 80.9%, alongside robust growth in hours worked. Because overall unemployment has risen while prime-age employment stayed stable, job market weakness is concentrated among Americans under 25.

Matt Klein The Overshoot
Date Posted:
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Labor demand and employment remain strong; 80.7% of US residents aged 25–54 have a job – near the recent peak. Hiring, however, has slowed; unemployment for those <25 has risen enough to affect the aggregate unemployment rate.

Is job market weakness concentrated among the youngest workers?

Core argument: The U.S. prime age employment rate stands at 80.7%, just below its recent peak of 80.9% and essentially unchanged over the past 2.5 years at a multi-decade high.

The “prime age employment rate” remains essentially unchanged over the past 2.5 years at a multi-decade high. The current reading of 80.7% is only just below the recent peak of 80.9%. For perspective, this indicator had dropped by 1.6 percentage points between January 2000 and August 2001. The stability of the prime age employment rate and the robust growth in hours worked stands in contrast to the overall unemployment rate, which seems to be breaking out of the range it had been sitting in since last summer. By definition, if prime age employment has been stable at the same time that [the overall unemployment rate] has been rising and at the same time that workers have been dropping out of the labor force, job market weakness must be concentrated elsewhere. Specifically, Americans under 25. While jobless rates for the 16-24 age cohort [are normally] higher and more volatile, that does not explain the relentless surge since the beginning of 2025, and the magnitude of [that] unemployment rate increase has been big enough to affect the aggregate numbers.

Takeaways by Macro Roundup® AI

  1. The U.S. prime age employment rate stands at 80.7%, just below its recent peak of 80.9% and essentially unchanged over the past 2.5 years at a multi-decade high.
  2. The prime age employment rate dropped 1.6 percentage points between January 2000 and August 2001, in contrast to its current stability and robust growth in hours worked, even as the overall unemployment rate appears to break out of the range it held since last summer.
  3. With prime age employment stable while overall unemployment rises and workers drop out of the labor force, job market weakness is concentrated among Americans under 25, whose unemployment rate has surged since the beginning of 2025 by enough to affect the aggregate numbers.

Related Articles:

  • Canaries in the Coal Mine? Six Facts about the Recent Employment Effects of Artificial Intelligence — Using payroll records covering millions of US workers, the authors find employment for workers aged 22–25 in occupations most exposed to artificial intelligence, such as software developers and customer service representatives, declined 6%, while employment for older workers in those occupations rose 6–9%. Employment in less-exposed occupations grew comparably across age groups.
  • Shorting the AI Jobs Apocalypse — Employment for workers aged 22-25 and 26-30 has declined relative to its pre-ChatGPT trend and relative to older workers in the same occupation, but the age groups shown are not equally sized. The authors argue that combining all age groups shows software developer jobs have continued to grow overall.
  • 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.

AI Summary. Japan's Chinese population held at roughly 700,000 from 2010 to 2021 before climbing, part of a foreign-resident population that has reached about 3.5m, just under 3% of the total. Without declaring an open-door immigration policy, Japan has used this influx to address demographic decline and worker shortages.

Leo Lewis Financial Times
Date Posted:

Japan’s non-Japanese population has surged to 3.5mm, 3% of the population. By 2026, there will be 1mm Chinese nationals living full-time in Japan, largely middle-class Chinese – a phenomenon referred to as Run-ri.

Is Japan addressing demographic decline without declaring an open-door immigration policy?

Core argument: Japan's foreign resident population has risen to about 3.5 million, just under 3% of the total, with numbers growing by an average of roughly 1,000 per day during 2024, about 10% of them Chinese.

The word Run-ri — broadly used to cover the middle-class entrepreneurs, white-collar workers, wealthier academics, retirees and intellectuals moving to Japan for aspirational reasons — combines two Chinese characters. The run primarily means liquidity or prosperity, but its similarity in sound to the English word “run” also conveys the idea of flight. The second character, ri, is the first in the Chinese word for Japan. The total size of the Chinese population residing in Japan was about 200,000 in 1995. It rose through the early 2000s, and settled at roughly 700,000 between 2010 and 2021. Since then, though, the numbers have soared. Without ever having declared any kind of open-door policy on immigration, Japan has quietly addressed both its demographic decline and worker shortage by allowing its non-Japanese population to surge to about 3.5 million, or just under 3% of the population. The number of foreign residents rose by an average of roughly 1,000 per day over the course of 2024, of which about 10% were Chinese.

Takeaways by Macro Roundup® AI

  1. Japan's foreign resident population has risen to about 3.5 million, just under 3% of the total, with numbers growing by an average of roughly 1,000 per day during 2024, about 10% of them Chinese.
  2. The Chinese population in Japan grew from about 200,000 in 1995 to roughly 700,000 between 2010 and 2021, and has soared since then.
  3. The term Run-ri covers Chinese middle-class entrepreneurs, white-collar workers, wealthier academics, retirees and intellectuals moving to Japan, combining a character meaning liquidity or prosperity that also echoes the English "run" with the first character of the Chinese word for Japan.

Related Articles:

  • China to See Biggest Millionaire Exodus in 2024 as Many Head to U.S. — China is projected to see a record 15,200 high-net-worth individuals — those with at least $1m in assets — leave the country, the world's largest such outflow, according to a Henley & Partners report. The prior year's 13,800 departures went mostly to the US, Canada, and Singapore.
  • Chinese Migrants Rush to Find Way to U.S. Border Before Doors Close — Ecuador has suspended visa-free entry for Chinese nationals, closing the most popular access route for Chinese migrants seeking to reach the U.S. border. Tens of thousands of Chinese migrants have attempted to enter the U.S. by flying into Ecuador and crossing the Darién Gap to Mexico.
  • 2023 Letter — Rising numbers of Chinese nationals are being apprehended at the US-Mexico border, with US officers encountering around 1,000 in one month early in the year and nearly 5,000 by November. Most Chinese emigrants leave through legal means, going primarily to Singapore, Japan, and Thailand.