Edward Conard

Top Ten New York Times Bestselling Author

  • “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 comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…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 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
  • “…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
  • “…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
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Tuesday, September 16, 2025

AI Summary. Excluding pharmaceuticals and gold — categories where trade is distorted by tax treatment and stockpiling ahead of tariffs — U.S. trade flows look largely normal despite tariff increases. Imports from China fell sharply, but imports from Taiwan and Southeast Asia rose, with electronics imports up on data center investment, leaving total Asian imports little changed.

Brad Setser Council On Foreign Relations
Date Posted:
Is Database:
Database

Apart from initial volatility in gold and pharma imports, US tariffs have yet to impact net trade flows. Soaring imports from Taiwan and SE Asia led to growth in total imports from Asia to the US in spite of reduced trade with China.

Have tariffs disrupted US trade flows?

Core argument: The annualized monthly U.S. trade deficit peaked at $2 trillion in March, fell to $1 trillion, and rebounded to $1.2 trillion in July, roughly where it started, with most of the volatility coming from pharmaceuticals and gold.

The annualized monthly trade deficit rose to a peak of $2 trillion in March before dipping to $1 trillion and then rebounding to $1.2 trillion in July (which is where it started, more or less). But most of the volatility has come from two categories: pharmaceuticals (where trade is heavily distorted by tax and companies can easily front-run tariffs by stockpiling active ingredients) and gold. Take out pharmaceuticals and gold and U.S. trade looks, well, rather normal. To be sure, imports from China (where hefty tariffs were expected) tanked. But imports from Taiwan and Southeast Asia (which were only subject to a 10% tariff before Trump started delivering letters setting out his “deal” terms) soared. Imports of electronics are up substantially (imports from Taiwan are up over 50% YTD) on the back of booming investment in data centers for advanced statistical analysis to backstop large language models (“AI”). Total imports from Asia aren’t yet down in any significant way. So global trade has actually held up rather well. Let’s see what the data for the fall shows - there should be more of an impact than is now apparent.

Takeaways by Macro Roundup® AI

  1. The annualized monthly U.S. trade deficit peaked at $2 trillion in March, fell to $1 trillion, and rebounded to $1.2 trillion in July, roughly where it started, with most of the volatility coming from pharmaceuticals and gold.
  2. Excluding pharmaceuticals and gold, U.S. trade looks rather normal: imports from China tanked, while imports from Taiwan and Southeast Asia, subject to only a 10% tariff before Trump's "deal" letters, soared.
  3. U.S. imports from Taiwan are up over 50% year-to-date on booming data center investment tied to large language models, and total imports from Asia are not yet down in any significant way.

Related Articles:

  • Global Imbalances In A Shifting World — Current accounts of major economies diverged, with the US deficit widening by $228bn to $1.13tn (1% of world GDP) while China's surplus rose by $161bn to $424bn and the euro area's by $198bn to $461bn. Changes in investment rates drove the widening saving-investment gaps, with private saving offsetting only 10–50% of the investment change.
  • China Emerges From Trade Chaos With Record Exports, Surplus — 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%.
  • 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. Germany has lost its safe-haven status, with its far-forward 10-year government bond yield rising sharply during a period of elevated global uncertainty that would previously have pushed German yields down, while Switzerland's yields fall across the curve. The author argues that fewer places to hide may explain gold's large rally.

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

A comparison of German and Swiss bond yields suggests the dramatic extent to which Germany has suffered a loss of both its safe haven status and its prestige, as its ability to confront its fiscal deterioration and that of its neighbors has declined.

Is the shrinking pool of safe havens driving gold's rally?

Core argument: Germany's 10y20y forward yield — the market-implied 10-year yield in 20 years' time, backed out from 20- and 30-year bond yields — has risen sharply this year, at a time of elevated global uncertainty that in the past would have pushed German yields down.

The universe of safe havens is shrinking, with Germany losing that status this year. The two charts above illustrate what’s going on. The left chart shows the 10-year government bond yield for Germany (blue line) and the 10y20y forward yield (red line) that I’ve backed out from 20- and 30-year bond yields. This 10y20y forward yield is what markets price for the 10-year yield in 20 years’ time. The right chart shows the same for Switzerland. The difference between the two is striking. A true safe haven like Switzerland is seeing yields fall sharply across the yield curve, even at the very long end. That’s no longer true for Germany, where the 10y20y forward yield is up very sharply this year, at a time of elevated global uncertainty that - in the past - would have seen German yields fall. The loss of safe haven status for Germany has a negative externality for the world. It means there’s one less place to hide when global uncertainty rises, which may explain why gold has seen such a massive rally this year. After all, there’s only so much hiding you can do in tiny Switzerland.

Takeaways by Macro Roundup® AI

  1. Germany's 10y20y forward yield — the market-implied 10-year yield in 20 years' time, backed out from 20- and 30-year bond yields — has risen sharply this year, at a time of elevated global uncertainty that in the past would have pushed German yields down.
  2. Switzerland remains a safe haven, with yields falling sharply across the yield curve including the very long end, in contrast to Germany's rising long-forward yields.
  3. Germany's loss of safe haven status leaves one less place to hide when global uncertainty rises, which may explain gold's rally this year, given how little capacity Switzerland offers.

Related Articles:

  • How A Global Debt Crisis Starts — Far-forward government bond yields — what markets price for the 10-year yield 10 and 20 years ahead — have risen in Japan, the UK, France and Germany, with Japan's 10-year yield 20 years forward at 4.5%. The US 10y20y forward yield has fallen slightly, which the author attributes to safe-haven inflows.
  • 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.
  • Gold Surpasses Inflation-Adjusted Record High Set in 1980 — Gold's spot price reached an all-time high of $3,674.27 an ounce, surpassing the inflation-adjusted peak set when gold topped out at $850 in January 1980. That earlier peak came amid a collapsing US currency, an inflation spike, and a recession.

AI Summary. Markets are pricing interest-rate cuts about 70bps deeper than Federal Reserve officials' own projections, an outcome the author argues is unlikely with core inflation stabilized near 3%, wage growth at 4% versus 3% before the pandemic, and unemployment at a historically low 4.3%.

Joseph Wang Fed Guy Blog
Date Posted:

Joseph Wang argues the market is likely overestimating the pace of rate cuts, given that “core inflation appears to have stabilized at around 3%” and “the employment picture has not deteriorated enough for it to abandon its inflation concerns.”

Are markets pricing deeper rate cuts than inflation and employment justify?

Core argument: Markets are pricing Fed rate cuts 70bps below the 2026 dot-plot, a scenario the author deems very unlikely given core inflation stabilized near 3% and a labor market that has not yet broken.

The market is pricing a series of deep cuts that is 70bps lower than the dot-plot in 2026. That scenario is very unlikely as inflation looks to be stuck around 3% for the foreseeable future, the labor market has not yet broken, and Chair Powell still perceives policy to only be modestly restrictive. Core inflation appears to have stabilized at around 3%. Wage growth has stabilized at 4%, compared to 3% pre-pandemic. Market pricing also indicates that inflation will remain elevated in the coming months, Fed officials have attributed the lower job growth numbers to changes in immigration policy impacting both the supply and demand for labor, and pointed to the 4.3% unemployment rate, which remains historically low and also lower than the June dot-plot projection of 4.5% for the end of 2025. The labor market is clearly deteriorating, but it is still evolving according to forecast. Even Governor Waller, who dissented last meeting, is only calling for a 25bps cut and measured data dependency. The risk to both mandates is high.

Takeaways by Macro Roundup® AI

  1. Markets are pricing Fed rate cuts 70bps below the 2026 dot-plot, a scenario the author deems very unlikely given core inflation stabilized near 3% and a labor market that has not yet broken.
  2. Wage growth has stabilized at 4%, above the 3% pre-pandemic pace, while market pricing indicates inflation will remain elevated in the coming months.
  3. Unemployment at 4.3% remains historically low and below the June dot-plot's 4.5% projection for end-2025, with Fed officials attributing weaker job growth to immigration policy changes affecting both labor supply and demand.

Related Articles:

  • A Big, Not-So-Beautiful Inflation Picture — Wage growth for the lowest-paid quartile of US workers has slowed to just above the headline inflation rate, consistent with the view that companies are holding onto staff while showing little interest in bidding up pay for lower-skilled workers. With inflation not tamed and tariffs yet to feed through to employment and production decisions, the risk ahead is stagflation.
  • Mid-Year Outlook: At the Crossroads of Stagflation—What’s Next? — Foreign investors hold roughly $18.5tn in US equities (about 20% of the market), $7tn in Treasuries and $5tn in credit (about 30% of each), and foreign participation in 30-year Treasury auctions has trended down in recent months. Combined with US fiscal challenges, the authors argue this reliance on foreign demand is a vulnerability.
  • The Rising Tide of Government Interest Costs — A model of forward interest rate curves, projected deficits, and debt maturity structures estimates that government interest spending on marketable debt will rise across G10 economies by an average of 0.5 percentage points of GDP by 2029, with France, Japan, and the United States facing the largest increases.

AI Summary. The authors estimate that resuming required student loan payments cut household spending by $630 a year for every $10,000 in student debt, implying annualized cutbacks of $1,590 for the median borrower and $2,980 for the mean. With about $1.25tn of eligible student debt, they estimate an aggregate spending reduction of $20bn, roughly 0.3% of GDP.

Aditya Aladangady, Edmund Crawley, William Gamber, Patrick Moran, et al. Board of Governors of the Federal Reserve
Date Posted:

Resumption of student loan payments resulted in an estimated annualized cutback in spending of $2,980 for the mean borrower, reducing consumer spending in the first quarter of 2024 by $20 billion, roughly 0.3% of GDP.

How much does resuming student loan payments reduce household spending?

Core argument: The authors estimate the resumption of student loan payments cut spending by an annualized $630 for every $10,000 in student loan balances, implying $1,590 for the median borrower and $2,980 for the mean.

Following the announcement in June 2023 that student loan payments would resume in October 2023, we find that households began to significantly curtail spending in areas with higher exposure to student debt relative to those with lower exposure. The cutback in spending grows further following the actual resumption of required payments. Our estimate of the effect of resumption of student loan payments is an annualized reduction in spending of $630 per year for every $10,000 in student loan balances. These numbers imply an annualized cutback in spending of $1,590 for the median student loan borrower and $2,980 for the mean. Given that we find about $1.25 trillion of eligible student debt at the time the policy ended, our estimates imply that the resumption of student loan payments reduced consumer spending [by $20 billion], roughly 0.3% of GDP or 0.4% of personal consumption expenditures (PCE) in the first quarter of 2024. This finding indicates that the payment pause had supported consumption in those areas.

Takeaways by Macro Roundup® AI

  1. The authors estimate the resumption of student loan payments cut spending by an annualized $630 for every $10,000 in student loan balances, implying $1,590 for the median borrower and $2,980 for the mean.
  2. With about $1.25 trillion of eligible student debt outstanding when the pause ended, the authors estimate the payment restart reduced consumer spending by $20 billion, roughly 0.3% of GDP or 0.4% of personal consumption expenditures in the first quarter of 2024.
  3. Households in areas with higher student debt exposure curtailed spending relative to lower-exposure areas after the June 2023 announcement, with the cutback growing further once required payments resumed in October 2023.

Related Articles:

  • Significant Headwinds to Consumer Spending — With the pause on reporting delinquent federal student loans ended, up to 10% of US households may face a steep drop in their credit scores, leaving them unable to borrow for cars, homes, or furniture. Together with tariffs and high uncertainty, this is a significant headwind to consumer spending.
  • What Went Wrong with Federal Student Loans? — Weakened regulations on institutions enrolling aid-dependent students led to rising enrollment of disadvantaged students, but primarily at low-value institutions where loan performance deteriorated. Institutions in the lowest loan-repayment quintile had a 23% completion rate, $27,760 average post-enrollment earnings, and 20% default rates, versus 73%, $48,375, and 3% at the highest.
  • Course Correction: Rebuilding the Federal Student Loan System After Biden’s Mismanagement — Of 35m borrowers with federally managed student loans who were not in school, only 12m (35%) were in repayment, while 7.4m were delinquent and another 10m were in forbearance. Because default follows 270 days of nonpayment, the author warns that as many as 12m borrowers—one-third of those not in school—could end up in default.

AI Summary. China's leadership has warned against "involution" — extreme price competition arising from industrial overcapacity — questioning whether every province needs electric-vehicle factories, and BYD's executive vice-president says the crackdown on aggressive discounting could push out as many as 100 of China's more than 120 carmakers.

Edward White, Gloria Li, and Kana Inagaki Financial Times
Date Posted:
Is Database:
Database

Price wars left 8 Chinese carmakers profitable in the first half of the year. A senior executive at BYD expects 80% of China’s 120 carmakers to be “pushed out” of the market as the government’s “involution” campaign takes hold.

Can government pressure curb extreme price competition among electric vehicle makers?

Core argument: BYD executive vice-president Stella Li said Beijing's crackdown on aggressive discounting could push out as many as 100 of China's more than 120 carmakers.

Chinese President Xi Jinping in July gave his clearest warning yet against “involution” — extreme price competition stemming from industrial overcapacity — when he pointed to reckless investment plans and questioned whether every province needed EV factories. Stella Li, the executive vice-president of BYD, China’s dominant EV maker, last week said Beijing’s crackdown on aggressive discounting could see as many as 100 carmakers out of more than 120 being “pushed out”. She was speaking on the sidelines of the Munich motor show. In recent months, carmakers have responded to the government’s so-called anti-involution campaign by accelerating payments to suppliers and moderating some of their most extreme retail discounts. But there are few signs of a deeper U-turn under way as the companies, which see themselves as pioneers of an energy transition, fear falling behind on scale and technology and are willing to sacrifice short-term profitability.

Takeaways by Macro Roundup® AI

  1. BYD executive vice-president Stella Li said Beijing's crackdown on aggressive discounting could push out as many as 100 of China's more than 120 carmakers.
  2. Xi Jinping warned against "involution" — extreme price competition stemming from industrial overcapacity — citing reckless investment plans and questioning whether every Chinese province needed EV factories.
  3. Chinese carmakers have responded to the anti-involution campaign by accelerating payments to suppliers and moderating some of their most extreme retail discounts, with few signs of a deeper reversal as firms fear falling behind on scale and technology.

Related Articles:

  • China Steps In To Tame Animal Spirits As Solar Sector Racks Up Billions In Losses — China has ordered its solar industry to curb overcapacity and price-cutting as six of its largest cell and panel makers reported combined first-half losses that doubled from a year earlier to Rmb20.2bn ($2.8bn), following record profits earlier. China controls about 90% of global solar cell manufacturing capacity, and its output exceeds combined domestic and overseas demand.
  • China Struggles To Break Its Addiction To Manufacturing — China's manufacturing investment continues to rise, up 7.5% this year after a 9.5% increase the prior year, and one Chinese academic estimates the country's share of global manufacturing value-added could climb to 40% from about 27%. Chinese leadership has publicly questioned whether every province needs to develop artificial intelligence, computing power, and electric vehicles, criticizing excessive price competition.
  • 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.

AI Summary. China's cyber security regulator says the US spin-off of TikTok, to be sold to American investors, will license parent company ByteDance's Chinese algorithm and other intellectual property, with ByteDance entrusting the operation of TikTok's US user data and content security. The US Treasury says the app will be controlled by American investors while preserving some "Chinese characteristics".

Ryan McMorrow, Hannah Murphy, Zijing Wu, and Demetri Sevastopulo Financial Times
Date Posted:

The Chinese government said the US spin-off of TikTok will still use ByteDance’s algorithm. It remains unclear if ByteDance would retain control of the algorithm in the US under the proposed licensing agreement.

Will the US version of TikTok still license China's algorithm?

Core argument: China's cyberspace regulator says the US spin-off of TikTok, to be sold to American investors in a deal orchestrated by President Donald Trump, will use ByteDance's Chinese algorithm under a licensing arrangement.

Beijing has said the US spin-off of TikTok to be sold to American investors in a deal orchestrated by President Donald Trump will use parent company ByteDance’s Chinese algorithm. Wang Jingtao, deputy head of China’s powerful cyber security regulator, told reporters on Monday night that US and Chinese officials had agreed to a framework that included “licensing the algorithm and other intellectual property rights”. He said ByteDance would “entrust the operation of TikTok’s US user data and content security”, without elaborating. US Treasury secretary Scott Bessent separately told reporters that the spun-off app would be controlled by American investors but preserve some “Chinese characteristics”, according to Reuters.

Takeaways by Macro Roundup® AI

  1. China's cyberspace regulator says the US spin-off of TikTok, to be sold to American investors in a deal orchestrated by President Donald Trump, will use ByteDance's Chinese algorithm under a licensing arrangement.
  2. Wang Jingtao, deputy head of China's cyber security regulator, said US and Chinese officials agreed to a framework covering "licensing the algorithm and other intellectual property rights," with ByteDance entrusting the operation of TikTok's US user data and content security.
  3. US Treasury secretary Scott Bessent said the spun-off TikTok app would be controlled by American investors while preserving some "Chinese characteristics," according to Reuters.

Related Articles:

  • Teens, Social Media and Technology 2023 — About nine-in-ten U.S. teens ages 13 to 17 say they use YouTube, making it the most widely used platform in Pew Research Center's survey, followed by TikTok (63%), Snapchat (60%), and Instagram (59%). Facebook use among teens fell from 71% in 2014-2015 to 33%, and Twitter's teen user base also shrank over the past decade.
  • Why the TikTok Era Spells Trouble For The Establishment — Video-first platforms like TikTok and Instagram reward charisma, energy and delivery over being first with news, a shift that favors political outsiders and upstart media outlets less tied to establishment politicians and freer to publish what mainstream outlets would not. Research finds the newest class of news influencers lean slightly right, and even those with other politics are anti-establishment.
  • China Orders Apple to Remove Popular Messaging Apps — Chinese authorities ordered Apple to remove WhatsApp, Threads, Signal and Telegram from its App Store in China, citing national security concerns. The apps, which together have roughly 3bn users globally, were already accessible in China only through virtual private networks but remained commonly used.

Wednesday, September 17, 2025

AI Summary. An analysis of Federal Reserve data found the top 10% of US earners accounted for 49.2% of total consumer spending, up from 48.5% the prior quarter and the highest share in data going back to 1989. Spending by the bottom 80%, those making under roughly $175,000, has merely kept pace with inflation.

Jonnelle Marte Bloomberg
Date Posted:
Is Database:
Database

Mark Zandi finds Americans in the top 10% of the income distribution accounted for 49.2% of consumer spending in Q2, the highest level since 1989.

Are top earners accounting for a record share of consumer spending?

Core argument: The top 10% of US earners accounted for 49.2% of total consumer spending in the second quarter, up from 48.5% in the first quarter and the highest share in data going back to 1989, according to Mark Zandi's analysis of Federal Reserve data.

Consumers in the top 10% of the income distribution accounted for 49.2% of total spending in the second quarter, up from 48.5% in the first quarter, reaching the highest level in data going back to 1989, according to an analysis of Federal Reserve data by Mark Zandi, chief economist for Moody’s Analytics. In contrast, the bottom 80% of the income distribution, or consumers making less than roughly $175,000 a year, have seen their spending merely keep pace with inflation since the pandemic.

Takeaways by Macro Roundup® AI

  1. The top 10% of US earners accounted for 49.2% of total consumer spending in the second quarter, up from 48.5% in the first quarter and the highest share in data going back to 1989, according to Mark Zandi's analysis of Federal Reserve data.
  2. Consumers in the bottom 80% of the income distribution, making less than roughly $175,000 a year, have seen their spending merely keep pace with inflation since the pandemic, according to Moody's Analytics chief economist Mark Zandi.

Related Articles:

  • The U.S. Economy Depends More Than Ever on Rich People — Moody's Analytics estimates the top 10% of earners account for 49.7% of all U.S. consumer spending, a record in data going back to 1989, up from about 36% three decades ago, with their spending alone equal to almost one-third of gross domestic product.
  • To Understand America Today, Study the Zero-Sum Mindset — Younger generations in the United States and other rich countries hold more zero-sum views than older ones, a pattern researchers link to growing up amid slower economic growth and lower mobility. People who have surpassed their parents, or whose families rose over generations, are less likely to think in zero-sum terms.
  • 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.

AI Summary. Bank of America data show wage and salary growth for the bottom third of U.S. earners slowed to 0.9% year over year, the smallest gain since 2016, while the top third grew 3.6%, the most since November 2021. Spending growth diverged similarly, at 0.3% for low-income and 2.2% for higher-income households.

Jeanne Whalen Wall Street Journal
Date Posted:

Bank of America data show that while the bottom 1/3 of American households’ after-tax income grew faster than that of the top 2/3rds in 2023–2024, the top 1/3 has outpaced lower-income earners since the start of this year.

Are wage and spending gains diverging between low- and high-income Americans?

Core argument: Annual wage and salary growth for the bottom third of U.S. earners fell to 0.9% in August, the smallest gain since 2016, while the top third grew 3.6%, the most since November 2021, per Bank of America data.

For much of the past few years, wages for the bottom third of U.S. earners grew at a faster rate than for the top third, Bank of America data show. But since the start of the year, top earners have pulled far ahead. In August, annual wage and salary growth fell to 0.9% for the bottom third, the smallest gain since 2016, the Bank of America data show. The top third saw growth of 3.6% year over year, the most since November 2021. That divergence was echoed in year-over-year spending growth in August, with household spending rising just 0.3% for the low-income group and 2.2% for higher-income households.

Takeaways by Macro Roundup® AI

  1. Annual wage and salary growth for the bottom third of U.S. earners fell to 0.9% in August, the smallest gain since 2016, while the top third grew 3.6%, the most since November 2021, per Bank of America data.
  2. Bank of America data show wages for the bottom third of U.S. earners grew faster than for the top third for much of the past few years, but top earners have pulled far ahead since the start of the year.
  3. Year-over-year household spending growth in August was 0.3% for low-income households versus 2.2% for higher-income households, according to Bank of America data.

Related Articles:

  • Income in the United States: 2024 — U.S. median household income was $83,730, not statistically different from the prior year's $82,690, according to Census Bureau estimates. Across most demographic subgroups, median household income was higher or not statistically different from the prior year, with the exception of Black households, which saw a decline.
  • The Era of Big Raises for Low-Paid Workers Is Over — 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.
  • 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 Summary. Using the Panel Study of Income Dynamics, the authors estimate that parental income during middle childhood and adolescence has a significantly stronger influence on a child's future income than parental income in early childhood. The income advantage of being raised in a two-parent household is modest in early childhood but pronounced in middle childhood and adolescence, peaking around age 17.

Yoosoon Chang, Steven Durlauf, Bo Hu, and Joon Park National Bureau of Economic Research
Date Posted:
Is Database:
Database

Chang et al find that in the PSID, higher parental income and living in an intact family during middle childhood and adolescence are more predictive of favorable child outcomes than income and family structure during early childhood.

Does parental income matter more in adolescence than early childhood?

Core argument: Parental income during middle childhood and adolescence exerts a significantly stronger influence on a child's latent permanent income in the Panel Study of Income Dynamics than parental income during early childhood, contrasting with the early childhood development literature.

[The two panels] capture the age-specific effects of parental income and family structure, respectively, on a child’s latent permanent income in the Panel Study of Income Dynamics [PSID]. Parental income during middle childhood and adolescence exerts a significantly stronger influence on a child’s future income than parental income during early childhood, a finding [that] contrasts with the early childhood development literature. The sensitivity of adult outcomes to adolescent incomes suggests that the uses of this income have distinct effects from early childhood investment. One reason why this finding is credible is that incomes in later childhood and adolescence influence the schools and neighborhoods, determinants that are not operational for younger years. Children raised in two-parent households tend to achieve higher adult income status than those raised in single-parent households. While this advantage is relatively modest during early childhood, it becomes pronounced in middle childhood and adolescence, peaking during the late high school years at around age 17. [Editor’s note: This may reflect the likelihood that a family that is still intact when the child is 17 was more functional throughout].

Takeaways by Macro Roundup® AI

  1. Parental income during middle childhood and adolescence exerts a significantly stronger influence on a child's latent permanent income in the Panel Study of Income Dynamics than parental income during early childhood, contrasting with the early childhood development literature.
  2. Children raised in two-parent households tend to reach higher adult income status than those raised in single-parent households, an advantage that is modest in early childhood but pronounced in middle childhood and adolescence, peaking around age 17.
  3. The sensitivity of adult outcomes to adolescent parental income suggests that this income has uses distinct from early childhood investment, since later-childhood income influences schools and neighborhoods, determinants not operational in younger years.

Related Articles:

  • Changing Opportunity: Sociological Mechanisms Underlying Growing Class Gaps and Shrinking Race Gaps in Economic Mobility — Across the 1978 to 1992 birth cohorts, adult household incomes fell for white children raised in low-income families and rose for those raised in high-income families, increasing the intergenerational persistence of income ranks among white children by 28%. Over the same cohorts, adult incomes rose for Black children at all parental income levels.
  • Intergenerational Mobility in American History: Accounting for Race and Measurement Error — Accounting for Black families, who historical studies routinely drop, and for measurement error in fathers' economic status can double estimates of intergenerational persistence in linked United States census data from 1850 to 1940. The author argues historical mobility was lower than previously estimated, implying greater equality of opportunity today than in the past.
  • The Inheritance Of Social Status: England, 1600 to 2022 — Using a genealogical database of 422,374 English people with rarer surnames, the authors find social status persists strongly even among distant relatives, with status correlations declining by a constant factor of 0.79 per step in the lineage across all status measures and eras studied. The authors argue this constancy suggests social interventions have modest effects.

AI Summary. Hedged investments into US bonds and equities are outstripping unhedged holdings for the first time in four years, according to Deutsche Bank analysis, with about 80% of roughly $7bn flowing into foreign-domiciled US equity exchange traded funds over three months done on a hedged basis, up from about 20%. Falling US interest rates have made such currency hedges cheaper.

Ian Smith and Emily Herbert Financial Times
Date Posted:

Hedged investment into US bonds and equities overtook unhedged holdings according to a Deutsche Bank analysis, as international investors seek to manage potential further depreciation of the dollar.

Are foreign investors increasingly hedging their US asset holdings against dollar swings?

Core argument: About 80% of the roughly $7bn that flowed into foreign-domiciled US equity ETFs over the past three months was on a hedged basis, up from about 20% at the start of the year, according to Deutsche Bank analysis.

Hedged investments into US bonds and equities are outstripping unhedged holdings for the first time in four years, according to Deutsche Bank analysis, after a sharp move since Trump’s election last November. Around 80% of the roughly $7bn of money that has flowed into foreign-domiciled US equity exchange traded funds over the past three months has been on a hedged basis, according to Deutsche’s analysis. That figure was about 20% at the start of the year. A typical way to hedge against dollar weakness is through derivatives such as currency forwards that lock in a future exchange rate. These contracts reflect differences in short-term interest rates and falling US rates have made the hedges cheaper.

Takeaways by Macro Roundup® AI

  1. About 80% of the roughly $7bn that flowed into foreign-domiciled US equity ETFs over the past three months was on a hedged basis, up from about 20% at the start of the year, according to Deutsche Bank analysis.
  2. Hedged investments into US bonds and equities are exceeding unhedged holdings for the first time in four years, according to Deutsche Bank analysis, after a sharp move since Trump's election.
  3. Falling US rates have made currency forwards, which lock in a future exchange rate and reflect differences in short-term interest rates, cheaper as a hedge against dollar weakness.

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.
  • 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.
  • Asia’s $7.5 Trillion Bet on US Assets Is Suddenly Unravelling — Asia's 11 largest economies have accumulated $7.5tn in US stocks and bonds, but their annual capital flows into the US fell to $68bn, equal to just 11% of their trade surpluses with the US. Their major currencies, including the yen and yuan, trade on average 57% below exchange rates adjusted for living-cost differences.

AI Summary. China's internet regulator has ordered the country's largest technology companies, including ByteDance and Alibaba, to halt testing and orders of Nvidia's RTX Pro 6000D artificial intelligence chip designed for the Chinese market, part of Beijing's push to build up domestic chipmaking and compete with the US.

Zijing Wu, Cheng Leng, and Tim Bradshaw Financial Times
Date Posted:

Chinese regulators have banned domestic firms from further purchases of Nvidia’s RTX Pro 6000D chip, the chip Nvidia produced expressly for China, as Beijing pressures Chinese tech companies to replace Western imports with domestic technology.

Is China barring its tech giants from buying US AI chips?

Core argument: The Cyberspace Administration of China ordered major Chinese technology companies, including ByteDance and Alibaba, to halt testing and orders of Nvidia's RTX Pro 6000D, a product Nvidia tailored for the Chinese market, according to three people with knowledge of the matter.

China’s internet regulator has banned the country’s biggest technology companies from buying Nvidia’s artificial intelligence chips, as Beijing steps up efforts to boost its domestic industry and compete with the US. The Cyberspace Administration of China (CAC) told companies, including ByteDance and Alibaba, this week to end their testing and orders of the RTX Pro 6000D, Nvidia’s tailor-made product for the country, according to three people with knowledge of the matter. Several companies had indicated they would order tens of thousands of the RTX Pro 6000D, and had started testing and verification work with Nvidia’s server suppliers, the people said. After receiving the CAC order, the companies told their suppliers to stop the work, the people added.

Takeaways by Macro Roundup® AI

  1. The Cyberspace Administration of China ordered major Chinese technology companies, including ByteDance and Alibaba, to halt testing and orders of Nvidia's RTX Pro 6000D, a product Nvidia tailored for the Chinese market, according to three people with knowledge of the matter.
  2. Several Chinese companies had indicated they would order tens of thousands of RTX Pro 6000D chips and had begun testing and verification with Nvidia's server suppliers before telling those suppliers to stop the work.
  3. China's ban on purchases of Nvidia's artificial intelligence chips accompanies Beijing's stepped-up efforts to boost its domestic industry and compete with the US.

Related Articles:

  • China Seeks To Triple Output Of AI Chips In Race With The US — China is preparing three new fabrication plants dedicated to producing Huawei's artificial intelligence processors, and people familiar with the effort say their combined capacity, once fully ramped up, could exceed current output from comparable lines at SMIC, China's leading chipmaker. Huawei denies having plans to launch its own fabrication plants.
  • China Has Its Own Concerns About Nvidia H20 Chips — 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.
  • 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.