Edward Conard

Top Ten New York Times Bestselling Author

  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “Unintended Consequences 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 comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “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
  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “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
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Tuesday, October 7, 2025

AI Summary. French 10-year government bond yields rose more than other euro-zone yields and now trade at a slightly wider spread than Italy's, the first time since the euro's 1999 launch. Broader markets remain calm on the assumption that France is too big to be allowed to fail and that the European Central Bank would support it.

John Authers Bloomberg
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French 10-Year OATS now trade at a higher spread than Italy’s equivalent BTPs. John Authers warns that the relative calm is only due to investors’ belief that France is too big to fail and the ECB will intervene, implying “a long and steady debasement.”

Are markets staying calm even as French yields exceed Italy's?

Core argument: French government bond yields rose far more than other euro-zone yields, leaving French debt trading at a slightly higher spread than equivalent Italian BTPs for the first time since the euro launched in 1999.

The yield on French OATS rose far more than other euro-zone bond yields. Confidence in French debt is so shaken that they now trade at a slightly higher spread than Italy’s equivalent BTPs. That hasn’t happened since the euro launched in 1999. While this is very concerning for France, the conditions are nothing like the crisis that afflicted the euro zone’s sovereign debt from 2010 to 2012. The currency weakened only very slightly Monday, while 10-year German bund yields, at 2.72%, remain below the 2.9% they hit when Berlin rolled out a fiscal expansion plan in March. The relative calm is ultimately because the market assumes that France is far too big to be allowed to fail, and that the European Central Bank will tide it through one way or another. Even though most of the biggest French companies are multinationals with little exposure to their domestic economy, the CAC 40 index has lagged the rest of Europe by some 14% since the beginning of last year.

Takeaways by Macro Roundup® AI

  1. French government bond yields rose far more than other euro-zone yields, leaving French debt trading at a slightly higher spread than equivalent Italian BTPs for the first time since the euro launched in 1999.
  2. Conditions differ from the 2010–2012 euro-zone sovereign debt crisis, with the euro weakening only very slightly and 10-year German bund yields at 2.72%, below the 2.9% reached when Berlin unveiled its fiscal expansion plan in March.
  3. The CAC 40 index has lagged the rest of Europe by some 14% since the beginning of last year, even though most of the largest French companies are multinationals with little exposure to the domestic economy.

Related Articles:

  • French Companies’ Borrowing Costs Fall Below Government’s As Debt Fears Intensify — Bond yields for French companies including L'Oréal, Airbus and Axa have fallen below those on French government debt of similar maturity, with 10 French firms trading at a negative spread to the sovereign — the most in data going back to 2006, according to Goldman Sachs. Sovereign yields typically set a baseline for corporate bonds.
  • Europe’s Right-Wing Populists Swerve Left on the Economy — Right-wing populist parties across Europe, including the Sweden Democrats, Austria's Freedom Party, Germany's Alternative for Germany and France's National Rally, have shifted from small-government, low-tax, free-trade platforms toward calls for higher welfare benefits, subsidies and protectionism, often alongside pro-market positions.
  • ECB Yield Caps and TARGET2 Balances — Unlike International Monetary Fund programs, whose conditionality and stigma push borrowing countries to reform quickly, the euro system's internal cross-border payment imbalances carry neither and have persisted far longer. The author argues their persistence is evidence that the European Central Bank's de facto yield caps keep high-debt countries' borrowing costs artificially low.

AI Summary. Market pricing for Japan's 10-year government bond yield 20 years from now stands at 4.52%, far above its current 10-year yield of 1.69%, while France's equivalent forward yield is 5.03% versus a 3.57% 10-year yield. The author argues these large risk premiums, alongside a falling Yen, signal mounting fiscal stress.

Robin Brooks Robin Brooks Substack
Date Posted:
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Long Japanese yields spiked, and the Yen fell in response to the likely new prime minister’s “reputation as a fiscal dove.” Robin Brooks describes the divergence btw 10y20y fwd and simple 10-year yields as “scary.”

Do far-above-current forward bond yields signal mounting fiscal stress?

Core argument: Japan's 10y20y forward yield, backed out from 20- and 30-year government bond yields, jumped to 4.52% from 4.26% on Friday, alongside a sharp fall in the Yen, which the author calls tell-tale signs of mounting fiscal stress.

Each chart shows the 10-year government bond yield in blue and the 10y20y forward yield in red. The latter is what markets price for the 10-year yield 20 years from now, which I back out from 20- and 30-year government bond yields. Japan’s 10y20y yield yesterday jumped to 4.52%, up from 4.26% on Friday. That’s a massive move for longer-term yields, which was accompanied by a sharp fall in the Yen. Rising yields with a falling currency are tell-tale signs of mounting fiscal stress. For perspective, Japan’s simple 10-year yield was 1.69% yesterday. The risk premium for Japan’s longer-term trajectory is scary. France’s 10y20y forward yield yesterday jumped to 5.03%, up from 4.96% on Friday. Its simple 10-year yield is 3.57%. A massive risk premium is building, the result of a deeply divided electorate and a President who’s trying to hang on to keep the extreme right out of power.

Takeaways by Macro Roundup® AI

  1. Japan's 10y20y forward yield, backed out from 20- and 30-year government bond yields, jumped to 4.52% from 4.26% on Friday, alongside a sharp fall in the Yen, which the author calls tell-tale signs of mounting fiscal stress.
  2. Japan's simple 10-year government bond yield stood at 1.69%, far below the 4.52% that markets price for the 10-year yield 20 years from now, a risk premium the author describes as scary.
  3. France's 10y20y forward yield rose to 5.03% from 4.96% on Friday against a simple 10-year yield of 3.57%, a risk premium the author attributes to a deeply divided electorate and a President trying to keep the extreme right out of power.

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.
  • Fiscal Risk from Rising Bond Yields — US interest rates fell for roughly 40 years before the pandemic, allowing maturing high-coupon debt to be refinanced at lower rates and keeping federal interest expense manageable even as debt rose. Because Congressional Budget Office projections assume the 10-year Treasury yield drifts down to 3.8% from about 4.1%, the author argues its debt-service projections face upside risk.
  • Our Thoughts on Large US Deficits and Their Impact on Bond Yields — Total borrowing in the US is about average despite high government deficits, as high public borrowing has contributed to the need for higher interest rates that have depressed private sector borrowing. Risk premiums on long-dated debt look about average, with no market signs that economic or debt limits are currently being hit.

AI Summary. Gold topped $4,000 a troy ounce for the first time, with futures rising more than 50% in a year — a bigger run-up than during the pandemic or the 2007-09 recession, and the largest since the inflationary shock of 1979. Central-bank buying has helped gold surpass the euro as the world's second-largest reserve asset.

David Uberti Wall Street Journal
Date Posted:

Gold’s spot price has risen 50% since the start of the year. Since Powell’s Jackson speech, gold has risen 18% while the dollar has remained stable against G10 currencies in a broad debasement of advanced economies’ currencies relative to gold.

Is central-bank buying driving gold to record highs?

Core argument: Gold topped $4,000 a troy ounce for the first time, with futures up more than 50% in 2025, outpacing rallies during the pandemic and the 2007-09 recession and rising more in a year than at any time since the 1979 inflationary shock.

Gold soared to $4,000 a troy ounce for the first time. The price of the precious metal has surged this year more than it did during some of America’s biggest crises. Rising more than 50%, futures’ run-up in 2025 has outpaced rallies during the pandemic and 2007-09 recession. Not since the inflationary shock of 1979 has gold catapulted so much higher in a year. Central banks around the world have gobbled up gold for more than a decade, helping the precious metal surpass the euro as the world’s second-largest reserve asset this year. Central banks bought 415 tons of gold in the first half, according to the World Gold Council, and many analysts expect continued central-bank purchases next year to support prices.

Takeaways by Macro Roundup® AI

  1. Gold topped $4,000 a troy ounce for the first time, with futures up more than 50% in 2025, outpacing rallies during the pandemic and the 2007-09 recession and rising more in a year than at any time since the 1979 inflationary shock.
  2. Central banks bought 415 tons of gold in the first half of the year, according to the World Gold Council, extending more than a decade of accumulation.
  3. Gold surpassed the euro this year as the world's second-largest reserve asset, and many analysts expect continued central-bank purchases next year to support prices.

Related Articles:

  • Dollar Dominance and Dollar Depreciation — Moving On Different Tracks — The dollar is projected to depreciate as less exceptional US economic and market performance makes it harder to attract unhedged capital flows to fund a large current account and fiscal deficit, leaving a high currency valuation to correct further. A softening US labor market supports that view.
  • State of Chinese Gold Demand — Gold broke above its $3,200–$3,400 range to a record high above $3,600, with the near-term catalyst identified as threats to Federal Reserve independence driving US investor demand. Chinese total gold demand bottomed near $9bn and nearly doubled to $16bn before moderating to about $13bn as private-sector buying partially normalized.
  • De-Dollarization? Diversification? Exploring Central Bank Gold Purchases and the Dollar’s Role in International Reserves — Central banks' gold accumulation is generally not associated with reducing the dollar's share of international reserves at the country level, apart from a few prominent cases, and is more consistent with modest overall diversification. Gold's role as an official-sector store of value has grown, but its use as a unit of account and medium of exchange remains limited.

AI Summary. Energy companies are investing nearly $50bn over five years in 8,800 miles of new and planned US natural gas pipelines to serve record liquefied natural gas exports and data centre demand, according to energy consulting firm Wood Mackenzie. US natural gas consumption is expected to rise 1% this year to an all-time high of 91.4bn cubic feet per day.

Kristina Shevory Financial Times
Date Posted:

8,800 miles of natural gas pipeline are planned or under construction in the US; over the next five years, ~$50B will be spent on pipeline construction.

Are energy companies expanding US gas pipelines to meet record demand?

Core argument: Energy companies are investing almost $50bn over the next five years in new and planned US pipelines to capitalize on a boom in natural gas demand and regulatory changes under President Donald Trump.

Energy companies are ploughing almost $50bn into new and planned pipelines over the next five years to cash in on a boom in natural gas demand and regulatory changes under US President Donald Trump. Midstream companies are building or planning 8,800 miles of pipelines across the country to meet record liquefied natural gas exports and data centre demand, according to Wood Mackenzie, an energy consulting firm. American natural gas consumption is expected to climb 1% this year to an all-time high of 91.4bn cubic feet per day, according to the US Energy Information Administration. Exports of LNG from the US, the world’s biggest exporter, hit a record in September of 9.4mn metric tonnes.

Takeaways by Macro Roundup® AI

  1. Energy companies are investing almost $50bn over the next five years in new and planned US pipelines to capitalize on a boom in natural gas demand and regulatory changes under President Donald Trump.
  2. Midstream companies are building or planning 8,800 miles of US pipelines to serve record liquefied natural gas exports and data centre demand, according to Wood Mackenzie.
  3. US natural gas consumption is expected to rise 1% this year to an all-time high of 91.4bn cubic feet per day, according to the US Energy Information Administration, while September LNG exports hit a record 9.4mn metric tonnes.

Related Articles:

  • 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.
  • 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.
  • Heliocentrism — An energy use must be electrified before green grid electricity can decarbonize it, and while US grid decarbonization continues at a steady pace, the electricity share of final US energy consumption has grown little. Transmission line growth runs well below Department of Energy targets for 2030 and 2035, and transformer delivery times have stretched from 4–6 weeks to 2–3 years.

AI Summary. The US government is taking a 10% stake in Canadian miner Trilogy Metals for $35.6mn and has approved Alaska's Ambler Road project, which would open remote areas to mining companies, as part of an effort to reduce US dependence on China for critical resources. The agreement also allows the federal government to acquire a further 7.5% of Trilogy.

Jamie Smyth, Camilla Hodgson and Lauren Fedor Financial Times
Date Posted:

The US is taking a 10% stake in Canada’s Trilogy Metals in an effort to increase Alaskan and Canadian production of copper, cobalt, gallium and germanium.

Is the US taking equity in miners to reduce dependence on China?

Core argument: The Trump administration announced a $35.6mn investment for a 10% stake in Canadian miner Trilogy Metals, with the agreement enabling the federal government to acquire a further 7.5%, according to the White House.

The Trump administration has said it will take a 10% stake in a Canadian mining company and allow a controversial infrastructure project in Alaska as it aims to break US dependency on China for critical resources. The $35.6mn investment in Trilogy Metals was announced on Monday as the White House approved the Ambler Road project, which the Biden administration had blocked based on its environmental impact. The road would open remote areas to mining companies including Trilogy. The agreement also enabled the federal government to acquire a further 7.5% of Trilogy, said the White House in a statement.

Takeaways by Macro Roundup® AI

  1. The Trump administration announced a $35.6mn investment for a 10% stake in Canadian miner Trilogy Metals, with the agreement enabling the federal government to acquire a further 7.5%, according to the White House.
  2. The White House approved Alaska's Ambler Road project, which the Biden administration had blocked based on its environmental impact, and the road would open remote areas to mining companies including Trilogy.
  3. The Trump administration said the Trilogy stake and Ambler Road approval aim to break US dependency on China for critical resources.

Related Articles:

  • US Government In Talks To Take Stake In Lithium Americas — The US government has held talks with the developer of the Thacker Pass lithium mine in Nevada that may lead to it taking an equity stake, sending the company's shares more than 90% higher. The negotiations, which also involve General Motors, centre on a $2.3bn government loan approved to develop the project.
  • Pentagon to Take Stake in Rare-Earth Company, Challenging China’s Control — Under a deal with the largest U.S. rare earths miner, the Defense Department will take a 15% stake, commit billions of dollars to investment and output purchases, and guarantee a price floor for rare earth minerals and magnets. The agreement calls for a new magnet factory, expected online in 2028, at a scale far exceeding current U.S. magnet production.
  • Why Every Country Needs To Master The Electric Tech Stack — Drones are the foundation of hard power in the early 21st century, so a country unable to produce them domestically is at a disadvantage. As electric motors overtake combustion engines as the core technology that makes machines move, the same supply chains and production processes used for electronics can also produce cars, drones, robots, and appliances.

Wednesday, October 8, 2025

AI Summary. Oracle generated about $900m from renting servers powered by Nvidia chips over a three-month period and recorded $125m in gross profit, a 14% gross margin that is below those of many nontech retail businesses. The author argues data centers are a capital-intensive business with unimpressive margins.

Paul Kedrosky Applied Complexity
Date Posted:

Oracle is currently earning 14% gross margins from renting out Nvidia’s cutting-edge Blackwell chip. Paul Kedrosky notes, “That’s worse than the gross margins of many nontech retail businesses.”

Are GPU rental margins lower than those of retail businesses?

Core argument: Oracle earned a 14% gross margin renting Nvidia-powered servers, generating roughly $900 million in revenue and $125 million in gross profit in the three months ended August, equal to 14 cents per $1 of sales.

Oracle's getting 14% gross margin from renting out Nvidia's Blackwell. In the three months that ended in August, Oracle generated around $900 million from rentals of servers powered by Nvidia chips and recorded a gross profit of $125 million. That is equal to 14 cents for every $1 of sales. That’s worse than the gross margins of many nontech retail businesses. [Data centers are a] highly capital-intensive business with unimpressive margins.

Takeaways by Macro Roundup® AI

  1. Oracle earned a 14% gross margin renting Nvidia-powered servers, generating roughly $900 million in revenue and $125 million in gross profit in the three months ended August, equal to 14 cents per $1 of sales.
  2. Oracle's 14% gross margin on rentals of Nvidia-powered servers is worse than the gross margins of many nontech retail businesses.
  3. Data centers are a highly capital-intensive business with unimpressive margins.

Related Articles:

  • 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.
  • The Blob: Capital, China, Chips, Chicago and Chilliwack — Data center construction spending has eclipsed office construction, and the specialized power rates most data centers pay fall short of covering the cost of a new natural gas plant, leaving other customers to bear part of the bill. In the PJM grid region, data center demand accounted for 70% of the increase in electricity costs over the past year.
  • Fair Shakes — Technology-sector capital spending has accounted for 35%–45% of US GDP growth over three quarters, implying that without it growth would be near 1% given weak consumption. Among S&P 500 companies, capital spending rose 24% and research and development 10%, but the median stock grew both by only 3%–4%.

AI Summary. The 5 largest US technology companies are worth about 16% of the global public equity market, and the top 10 US stocks nearly 25%, almost $25tn. The author argues valuations are high but not bubble-level, with the "Magnificent 7" median forward price-to-earnings ratio at 27x, roughly half that of the late-1990s leaders.

Peter Oppenheimer, Sharon Bell, Guillaume Jaisson and Giovanni Ferrannini Goldman Sachs
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Citing a median 24m fwd P/E ratio across the Mag7 of 27x (26x net Tesla) relative to their comps 52x during the Tech Bubble, Oppenheimer argues valuations are “not at levels that are as high as are typically seen at the height of a financial bubble.”

Are Today's Dominant Tech Valuations High Enough To Constitute A Bubble?

Core argument: The 5 largest US technology companies are worth about 16% of the entire global public equity market, exceeding the combined value of the Eurostoxx 50, the UK, India, Japan, and Canada.

The biggest 5 technology companies in the US now have a collective value that exceeds the combined size of the Eurostoxx 50, the UK, India, Japan, and Canada. Put another way, these 5 companies are worth around 16% of the entire global public equity market. The biggest 10 US stocks (8 of which are technology-related) account for nearly 25% of the global equity market, and are worth almost $25 trillion. While stock prices have appreciated strongly, up until now, these have been reflected by powerful and sustained profit growth rather than excessive speculation about the future. [The] the median 24m forward P/E ratio across the ‘Magnificent 7’ is 27x, or 26x if we exclude Tesla (which has a much higher multiple than the other companies). This is roughly half the equivalent valuation of the biggest 7 companies in the late 1990s, while the dominant companies in Japan (mostly banks) traded at higher valuations still; the current EV to sales ratios are also much lower than those of the dominant companies in the late 1990s. So it is true that valuations are high but, in our view, generally not at levels that are as high as are typically seen at the height of a financial bubble.

Takeaways by Macro Roundup® AI

  1. The 5 largest US technology companies are worth about 16% of the entire global public equity market, exceeding the combined value of the Eurostoxx 50, the UK, India, Japan, and Canada.
  2. The 10 biggest US stocks, 8 of them technology-related, are worth almost $25 trillion and account for nearly 25% of the global equity market.
  3. The median 24-month forward P/E for the "Magnificent 7" is 27x, or 26x excluding Tesla, roughly half the equivalent valuation of the biggest 7 companies in the late 1990s, whose EV/sales ratios were also higher.

Related Articles:

  • The Blob: Capital, China, Chips, Chicago and Chilliwack — Data center construction spending has eclipsed office construction, and the specialized power rates most data centers pay fall short of covering the cost of a new natural gas plant, leaving other customers to bear part of the bill. In the PJM grid region, data center demand accounted for 70% of the increase in electricity costs over the past year.
  • Honey, AI Capex is Eating the Economy — Capital spending on AI data centers is around 20% of railroads' peak spending as a share of GDP and is rising quickly, having already surpassed the dot-com era peak in telecom investment. Unlike long-lived rail infrastructure, data centers are short-lived assets requiring frequent hardware replacement, and the capital is being reallocated from other sectors.
  • Data Centers: More Money, Fewer Buyers — Data center developers can earn 12–15% returns on new construction while stabilized hyperscale campuses trade at 4–5% capitalization rates, drawing capital into development. Because long, flat leases to Amazon, Microsoft and Google make finished assets behave like annuities, few buyers exist, so developers turn to securitization instead of selling.

AI Summary. More than $400bn of planned gas-fired power plants slated through the end of the decade risk delay or cancellation because turbine manufacturing capacity cannot meet expected orders, according to Bloomberg News calculations. Only three major suppliers, operating a handful of factories from Germany to Japan, build the largest power-plant turbines.

Stephen Stapczynski, Akshat Rathi, and Josh Saul Bloomberg
Date Posted:
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A new combined cycle-gas plant cost ~$800 a kilowatt in 2021, but is ~$2,600–2,800 today due to supply constraints. Siemens, GE Vernova and Mitsubishi Heavy account for 70% of global gas turbine production capacity and are struggling to increase capacity.

Do turbine manufacturing limits threaten $400 billion of planned gas power plants?

Core argument: More than $400 billion of planned gas-fired power plants through the end of the decade risk delay or cancellation because turbine manufacturing capacity cannot meet future orders, according to Bloomberg News calculations.

More than $400 billion worth of planned gas-fired power plants through the end of the decade are in jeopardy of delay or cancellation because of the lack of capacity to meet future turbine orders, according to Bloomberg News calculations. The crux of the bottleneck is that there are only three major suppliers for the largest turbines used in power plants across a handful of factories from Germany to Japan. GE Vernova is already in talks with customers about fulfilling turbine orders as far out as 2030. Mitsubishi Heavy plans to quickly double its gas turbine capacity, but has most slots booked for 2027 and 2028. Siemens Energy declined to give specific timelines on its orderbook, but said turbines are only one of many things needed to build a gas power plant.

Takeaways by Macro Roundup® AI

  1. More than $400 billion of planned gas-fired power plants through the end of the decade risk delay or cancellation because turbine manufacturing capacity cannot meet future orders, according to Bloomberg News calculations.
  2. Only three major suppliers produce the largest power-plant turbines, across a handful of factories spanning Germany to Japan, forming the crux of the bottleneck.
  3. GE Vernova is discussing turbine orders with customers as far out as 2030, while Mitsubishi Heavy plans to double gas turbine capacity but has most 2027 and 2028 slots booked.

Related Articles:

  • World’s Largest Transformer Maker Warns of Supply Crunch — Hitachi Energy, the world's largest transformer maker, says the industry is overwhelmed and cannot keep pace with demand for grid equipment, with utilities that have not pre-reserved units now facing waits of three to four years versus six to eight months previously. Demand has been strained partly by data centres running generative artificial intelligence.
  • What’s Happening to Wholesale Electricity Prices? — Average US retail electricity prices have risen about 35% since 2020, while average wholesale electricity costs have nearly doubled, with wholesale prices far more volatile. Wholesale location marginal prices consist of energy generation costs (typically 80–90% of the total), transmission congestion, and transmission losses, with a price spike partly driven by a large rise in natural gas prices.
  • Heliocentrism — An energy use must be electrified before green grid electricity can decarbonize it, and while US grid decarbonization continues at a steady pace, the electricity share of final US energy consumption has grown little. Transmission line growth runs well below Department of Energy targets for 2030 and 2035, and transformer delivery times have stretched from 4–6 weeks to 2–3 years.

AI Summary. The International Monetary Fund's data on official foreign exchange reserves show the dollar's share falling from 58% to 56% in one quarter, a 2.5 standard deviation drop, with the euro rising from 20% to 21%. An updated analysis attributes the decline to dollar depreciation rather than reserve managers exiting dollars.

Robin Brooks Robin Brooks Substack
Date Posted:

Q2 and “Liberation Day” saw the dollar’s share of official foreign exchange reserves drop from 58% to 56% with the Euro’s share rising from 20% to 21%. The decline in the dollar’s share of Central Bank reserves in Q2 was due to dollar depreciation rather than reserve managers pulling out of the dollar around “Liberation Day.”

Does dollar depreciation explain the falling dollar share of reserves?

Core argument: The euro was the main beneficiary of the Q2 shift in the IMF's COFER data, with its reserve allocation rising from 20% to 21%, a 1.5 standard deviation increase.

NOTE Robin Brooks updated this analysis to reflect that the decline in the dollar’s share of Central Bank reserves in Q2 was due to dollar depreciation rather than reserve managers pulling out of the dollar around “Liberation Day.” See: FX-Valuation Adjusted COFER Shares
The IMF just published its latest COFER survey, which tracks how official foreign exchange reserves are allocated across currencies. The last data point in this survey is is now Q2 2025 [which covers the reaction of reserve managers to “Liberation Day”]. Q2 shows an unusually large drop in allocations to the Dollar by the standards of these data. The Dollar share went from 58% at the end of Q1 to 56% at the end of Q2 (black line). That may not sound like much, but it’s massive by the standards of these data, amounting to a 2.5 standard deviation drop. The main beneficiary was the Euro (blue line), which saw its allocation rise from 20 to 21%, a 1.5 standard deviation rise. By the standards of these data, these changes are earthquakes and as close as COFER data will ever get to showing a Dollar exodus. My best guess is that Q3 data will show stabilization in the Dollar share, though the scale of the Q2 drop should certainly give everyone in the Trump administration pause.

Takeaways by Macro Roundup® AI

  1. The euro was the main beneficiary of the Q2 shift in the IMF's COFER data, with its reserve allocation rising from 20% to 21%, a 1.5 standard deviation increase.
  2. Robin Brooks updated his analysis to attribute the Q2 decline in the dollar's reserve share, from 58% to 56%, to dollar depreciation rather than reserve managers pulling out of the dollar around "Liberation Day," and expects Q3 data to show stabilization.

Related Articles:

  • Dollar Dominance and Dollar Depreciation — Moving On Different Tracks — The dollar is projected to depreciate as less exceptional US economic and market performance makes it harder to attract unhedged capital flows to fund a large current account and fiscal deficit, leaving a high currency valuation to correct further. A softening US labor market supports that view.
  • 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.
  • De-Dollarization? Diversification? Exploring Central Bank Gold Purchases and the Dollar’s Role in International Reserves — Central banks' gold accumulation is generally not associated with reducing the dollar's share of international reserves at the country level, apart from a few prominent cases, and is more consistent with modest overall diversification. Gold's role as an official-sector store of value has grown, but its use as a unit of account and medium of exchange remains limited.

AI Summary. UK 10-year government bond yields are the highest in the G7 and gross public debt stands at 101% of GDP, high by historical standards outside major wars. The authors estimate the UK needs a primary budget surplus of about 1% of GDP — a consolidation of roughly 3% — to stabilise debt.

Sven Jari Stehn and Fausto Martin Goldman Sachs
Date Posted:
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10-year gilt yields are the highest across the G7. Goldman estimates the UK needs a fiscal consolidation of ~ 3% of GDP to attain a primary balance of ~1% to stabilize debt.

How much fiscal consolidation does the UK need to stabilise debt?

Core argument: UK gross public debt stands at 101% of GDP per IMF data, historically high outside major wars and meaningfully exceeded in Europe only by Italy (135%) and France (115%), alongside Japan (237%) and the US (121%).

Ten-year gilt yields are the highest across the G7, with the most elevated term premium among major advanced economies. [The UK's] gross public debt (as measured by the IMF) is now at 101% of GDP, which is historically high outside of major wars and meaningfully exceeded only by Italy (135%) and France (115%) in Europe, Japan (237%) and the US (121%). The UK’s fiscal imbalances and “r-g” differential imply that a substantial consolidation is needed to stabilise the debt-to-GDP ratio. In particular, we estimate that the UK needs to attain a primary balance of about 1% of GDP to stabilise debt. The required consolidation of around 3% of GDP is large compared with history and towards the upper end across advanced economies.

Takeaways by Macro Roundup® AI

  1. UK gross public debt stands at 101% of GDP per IMF data, historically high outside major wars and meaningfully exceeded in Europe only by Italy (135%) and France (115%), alongside Japan (237%) and the US (121%).
  2. Stabilising the UK debt-to-GDP ratio requires a primary balance of about 1% of GDP, implying a consolidation of around 3% of GDP, large compared with history and towards the upper end across advanced economies.
  3. UK ten-year gilt yields are the highest across the G7, with the most elevated term premium among major advanced economies.

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  • The Global Debt Crisis — Market pricing for Japan's 10-year government bond yield 20 years from now stands at 4.52%, far above its current 10-year yield of 1.69%, while France's equivalent forward yield is 5.03% versus a 3.57% 10-year yield. The author argues these large risk premiums, alongside a falling Yen, signal mounting fiscal stress.
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AI Summary. China's liuzhi detention system operates alongside normal policing, requiring no court approval and denying detainees lawyers, with windowless cells, constant lighting and round-the-clock supervision. Stock-exchange filings show 39 executives at listed companies disappearing into the system by the end of September, exceeding the prior year's record.

Economist Staff The Economist
Date Posted:

There were 38,000 Chinese officials and businessmen in liuzhi – an extra-judicial form of detention – in 2024, almost a 50% increase from 2023. Another 200,000 individuals have been banned from “high consumption,” such as staying at posh hotels.

Are more Chinese executives vanishing into a detention system without courts?

Core argument: The Economist counted 39 cases of bosses at Chinese listed companies vanishing into the liuzhi detention system by the end of September, about one a week, already exceeding last year's record tally.

Liuzhi runs parallel to normal policing. Detentions do not require court approval. Detainees are denied the standard services of lawyers. Cells typically have no windows or clocks, lights are always on and detainees are often supervised 24 hours a day, even when using the toilet. This year bosses at listed companies have been vanishing into this grim system at a staggering rate: The Economist counted 39 such cases by the end of September, or about one a week, in stock-exchange filings. That already exceeds last year’s record tally. Total detentions, including those of both officials and business people, soared by nearly 50% in 2024, to around 38,000. The corporate side of the crackdown appears to be extensive.

Takeaways by Macro Roundup® AI

  1. The Economist counted 39 cases of bosses at Chinese listed companies vanishing into the liuzhi detention system by the end of September, about one a week, already exceeding last year's record tally.
  2. Total liuzhi detentions of officials and business people in China soared by nearly 50% in 2024, to around 38,000.
  3. China's liuzhi system runs parallel to normal policing, requiring no court approval for detentions, denying detainees standard services of lawyers, and holding them in cells that typically have no windows or clocks, with lights always on and supervision often 24 hours a day.

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  • 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.
  • Global Markets Uncouple From China — Foreign portfolio inflows into China have been flat for the past three years following large outflows, while non-China emerging markets have seen a strong rebound in non-resident portfolio inflows. After earlier global market shocks, flows into China rebounded strongly; the most recent bounce back has been far shallower.
  • 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%.