Edward Conard

Top Ten New York Times Bestselling Author

  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Friday, October 24, 2025

AI Summary. Bloomberg Economics projects the largest participants could pour as much as $4tn into artificial intelligence infrastructure by the end of the decade, with capital spending by hyperscalers such as Alphabet, Amazon, Meta, and Microsoft rising from almost $400bn to as much as $600bn. It expects AI's contribution to GDP growth could reach as much as 1.5 percentage points.

Shawn Donnan, Brooke Sutherland, Mark Niquette, and Alexandre Tanzi Bloomberg
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As AI-related real private fixed investment has surged, non-AI-related investment’s contribution to US real private fixed investment has turned negative.

How much will AI infrastructure spending add to economic growth?

Core argument: Bloomberg Economics expects the largest participants to pour as much as $4 trillion into AI infrastructure through 2030, with hyperscaler spending rising from almost $400 billion this year to as much as $600 billion.

The AI investment surge invites comparisons to other historical buildouts (and bubbles), such as the construction of the railways in the 1870s and the late 1990s flood of capital into fiber-optic and wireless networks. Altogether, the largest participants are expected to pour as much as $4 trillion into AI infrastructure through 2030, according to Bloomberg Economics. Bloomberg Economics expects AI’s contribution to GDP growth could rise to as much as 1.5 percentage points next year as the so-called hyperscalers—Alphabet, Amazon.com, Meta Platforms, Microsoft and others—dial up their investments from almost $400 billion this year to as much as $600 billion. “If it weren’t for AI, we’d probably be looking at significantly slower growth or even a modest recession,” says Rebecca Patterson, former chief investment strategist at hedge fund Bridgewater Associates.

Takeaways by Macro Roundup® AI

  1. Bloomberg Economics expects the largest participants to pour as much as $4 trillion into AI infrastructure through 2030, with hyperscaler spending rising from almost $400 billion this year to as much as $600 billion.
  2. Bloomberg Economics expects AI's contribution to GDP growth could rise to as much as 1.5 percentage points next year as hyperscalers including Alphabet, Amazon.com, Meta Platforms and Microsoft increase their investments.
  3. Rebecca Patterson, former chief investment strategist at Bridgewater Associates, says that without AI, growth would probably be significantly slower or in a modest recession.

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.
  • 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%.
  • How America’s AI Boom Is Squeezing The Rest Of The Economy — About a sixth of America's 2% real GDP growth over the past year came from investment in computer and communications equipment and data centres, and one estimate puts the artificial intelligence boom's total contribution to growth at 40%. Average electricity bills rose 7%, attributed in part to data-centre demand, while housebuilding and non-AI business investment slumped and real consumption flatlined.

AI Summary. An analysis estimating immigrants' effects on output, capital, tax revenue, and descendants finds admitting one 30-year-old without a high school diploma costs the federal government $20,000 over 10 years and over $130,000 over 30 years, while a college-educated 30-year-old yields over $200,000 and $1.6m respectively.

Daniel Di Martino Manhattan Institute
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A 30-year-old immigrant without a high school degree yields net revenue losses of $20k to the federal government over 10 years and >$130k over 30 years, while his college-educated peer yields fiscal gains of $200k over 10 years and $1.6mm over 30 years.

How does an immigrant's education level change the fiscal impact?

Core argument: Admitting one college-educated 30-year-old immigrant yields a net federal gain of over $200,000 in the 10-year budget window and $1.6 million over 30 years, accounting for descendants, according to the analysis.

This updated analysis accounts for the economic impact of immigrants on Gross Domestic Product, the capital stock, and the resulting additional tax revenue. It also accounts for the fiscal and economic impact of the children and grandchildren of immigrants. [It does not account for inflation. All numbers from 2026 on are in nominal terms, mimicking CBO scoring]. Accounting for descendants, the total fiscal impact of admitting one immigrant who is 30 years old without a high school diploma is a loss of $20,000 to the federal government in the 10-year budget window and a loss of over $130,000 over the 30-year budget window. On the other hand, admitting one college-educated 30-year-old immigrant results in a net gain of over $200,000 in the 10-year window and a gain of $1.6 million in the 30-year budget window. Shifting visas toward high-skilled categories, wage-ranking H-1B visas, and recapturing unused employment-based green cards from previous years can reduce deficits while boosting GDP.

Takeaways by Macro Roundup® AI

  1. Admitting one college-educated 30-year-old immigrant yields a net federal gain of over $200,000 in the 10-year budget window and $1.6 million over 30 years, accounting for descendants, according to the analysis.
  2. Admitting one 30-year-old immigrant without a high school diploma costs the federal government $20,000 over the 10-year window and over $130,000 over 30 years, including the fiscal impact of children and grandchildren.
  3. The analysis finds that shifting visas toward high-skilled categories, wage-ranking H-1B visas, and recapturing unused employment-based green cards from prior years can reduce deficits while boosting GDP.

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.
  • America’s — 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.
  • 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.
  • Did The Political Establishment Pave The Way For Trump and Farage? — An analysis finds that voters and mainstream politicians have long been broadly aligned on economic issues such as tax and spending, but diverge widely on sociocultural issues like immigration and criminal justice, with publics favoring more order and cultural integration while politicians lean toward more inclusive, permissive approaches.

AI Summary. Young men and people out of work in English-speaking countries report markedly higher social isolation, which is associated with greater risk of self-destructive behavior. Because enduring involuntary joblessness rather than financial distress appears to drive the harm, large-scale AI-driven unemployment might not be offset even by a substantial universal basic income.

John Burn-Murdoch Financial Times
Date Posted:

Young men and the unemployed report higher feelings of isolation in the Anglosphere relative to non-English-speaking countries. AI could amplify these trends if it drives “the lasting destruction of professions and careers” and long-term joblessness.

Can universal basic income offset the harm from widespread job loss?

Core argument: Young men and people out of work in English-speaking countries report significantly higher social isolation, which markedly increases the risk of self-destructive behaviour.

Both young men and people out of work report being significantly more socially isolated in English-speaking countries, markedly increasing the risk of self-destructive behaviour. Several factors in non-anglophone countries may be playing a protective role here, from levels of religious belief and social solidarity to more concrete factors such as close-knit multigenerational family units. These may allow other populations to weather storms that damage anglophone societies. This dangerous combination of economic dislocation and social isolation brings us to AI. If future iterations of today’s large language models do, one day, bring about joblessness at scale, it will not be a passing spike. Rather it will mean the lasting destruction of professions and careers, permanently scarring the generation affected. Because enduring involuntary unemployment (much more than financial distress) is what causes the harm, even a substantial universal basic income might not be sufficient to replace the loss of purpose, camaraderie and social contact that work can provide.

Takeaways by Macro Roundup® AI

  1. Young men and people out of work in English-speaking countries report significantly higher social isolation, which markedly increases the risk of self-destructive behaviour.
  2. Religious belief, social solidarity, and close-knit multigenerational family units may act as protective factors in non-anglophone countries, allowing those populations to weather storms that damage anglophone societies.
  3. Should future large language models bring about joblessness at scale, the resulting destruction of professions and careers would be lasting, and because enduring involuntary unemployment rather than financial distress causes the harm, even a substantial universal basic income might not suffice.

Related Articles:

  • Declining Life Satisfaction and Happiness Among Young Adults in Six English-speaking Countries — Eleven studies find declines in life satisfaction and happiness among young adults in the US, Australia, Canada, Ireland, New Zealand, and the UK. In these countries life satisfaction now rises with age across the lifespan, as young people's life satisfaction dropped sharply while that of people 45 and over stayed flat.
  • Disconnected: The Growing Class Divide in American Civic Life — 17% of Americans report having no close friends, and survey data show a wide educational gap: 24% of those with a high school education or less have no close friends versus 10% of college graduates. Three decades ago, Americans with less formal education reported social circles at least as large.
  • Teens Used To Be Happier. What Changed? — The share of US high school seniors describing themselves as "very happy" peaked at 24.8% and remained around 24.4% before falling to 11.4% at its low, recovering only to 12.7%, well below the 17.9% recorded before the pandemic. The decline coincided with smartphones and social media becoming pervasive.

AI Summary. Japan plans to raise defense-related spending to 2% of gross domestic product in the fiscal year ending March 2026, two years ahead of the existing target date of March 2028. The government also set economic goals it says require no tax increases and prioritized domestic energy sources including nuclear power and Japanese-developed perovskite solar cells.

Mitsuru Obe and Yuichi Shiga Nikkei Asia
Date Posted:

Japan’s new Prime Minister Sanae Takaichi has unveiled a plan to raise defense spending to 2% of GDP by this spring. If this goal is met, the plan would achieve Tokyo’s 2% defense spending target two years ahead of the current trajectory of March 2028.

Is Japan accelerating its defense spending target to 2% of GDP?

Core argument: Japanese Prime Minister Sanae Takaichi pledged to raise Japan's defense-related spending to a level equivalent to 2% of GDP in the fiscal year ending March 2026, two years ahead of the existing plan to reach that target by March 2028.

Japanese Prime Minister Sanae Takaichi, in her first policy address to parliament on Friday, unveiled a plan to lift Japan's defense-related spending to a level equivalent to 2% of gross domestic product in the current fiscal year ending March 2026, while also outlining a list of economic goals that she said can be achieved without raising taxes. If met, the increase in defense outlays would come two years ahead of the current plan for achieving the 2% target by the end of a five-year buildup through March 2028. Developing domestic energy sources will also be a key focus under the new administration, according to the policy address, in which Takaichi referred to nuclear power, newer and safer reactors, nuclear fusion technology and Japanese-developed perovskite solar cells, a thin, flexible technology that was developed in Japan and can be installed on walls and roofs.

Takeaways by Macro Roundup® AI

  1. Japanese Prime Minister Sanae Takaichi pledged to raise Japan's defense-related spending to a level equivalent to 2% of GDP in the fiscal year ending March 2026, two years ahead of the existing plan to reach that target by March 2028.
  2. Takaichi outlined economic goals in her first policy address to parliament that she said can be achieved without raising taxes.
  3. Takaichi named developing domestic energy sources as a key focus, citing nuclear power, newer and safer reactors, nuclear fusion technology, and Japanese-developed perovskite solar cells that can be installed on walls and roofs.

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.
  • Japan, U.S. Form Working Group For Joint Missile Production — Japan and the United States agreed to create working groups on joint missile production, ship and aircraft repair, and supply chain resiliency as part of a defense industry cooperation forum. U.S. officials say Japan's engineering, industrial, and manufacturing capacity is a significant addition for the U.S. defense industrial base.
  • Japan Raises Military Spending To Counter China With More Missiles and Ships — Japan's defense budget rises 13% over the prior fiscal year's planned spending, part of a five-year, ¥43tn plan to lift military spending to roughly 2% of gross domestic product, versus the roughly 1% cap maintained since the 1960s. Purchases include Aegis-equipped destroyers and Tomahawk cruise missiles, with the largest share directed at the Self-Defense Forces' sustainability and resilience.

AI Summary. A tally by Bloomberg News found only 168 of the 205 members of China's Communist Party Central Committee attended the party's fourth plenum, the lowest attendance rate since the Cultural Revolution, with 42 officials including alternate members absent without explanation. The tally suggests the anti-corruption purges are wider than publicly known.

Bloomberg Staff Bloomberg
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At the CCP’s recent plenum, only 168 of the 205 Central Committee members attended; 26 of the absences lacked explanation, suggesting Xi’s anti-corruption purges are wider than publicly known.

Are China's party purges wider than officially disclosed?

Core argument: Only 168 of 205 Chinese Communist Party Central Committee members attended the fourth plenum in Beijing, the lowest attendance rate for such a session since the Cultural Revolution, according to a Bloomberg News tally.

Only 168 of the 205 Central Committee members turned up at the Communist Party’s fourth plenum this week, the lowest attendance rate for such a session since the chaotic years of the Cultural Revolution, according to a tally by Bloomberg News. After accounting for one fatality and 10 cadres already kicked out of the party, there were still 26 officials who skipped the four-day huddle in Beijing without explanation. Separately, another 16 alternate members were unaccounted for, bringing the total number of officials absent without explanation to 42. Taken together, the mysterious absences suggest President Xi Jinping’s anti-corruption purges are wider than publicly known.

Takeaways by Macro Roundup® AI

  1. Only 168 of 205 Chinese Communist Party Central Committee members attended the fourth plenum in Beijing, the lowest attendance rate for such a session since the Cultural Revolution, according to a Bloomberg News tally.
  2. After accounting for one death and 10 cadres already expelled from the party, 26 Central Committee members skipped the four-day plenum without explanation, along with 16 unaccounted-for alternate members, totaling 42 unexplained absences.
  3. The unexplained absences from the fourth plenum suggest President Xi Jinping's anti-corruption purges are wider than publicly known.

Related Articles:

Monday, October 27, 2025

AI Summary. Chinese banks' external fixed-income assets more than doubled over the past decade to over $1.5tn, with the renminbi-denominated share reaching almost $484bn, including $360bn of renminbi loans and deposits, up from $110bn. The renminbi's share of global trade finance quadrupled over three years to 7.6%, second only to the US dollar.

William Sandlund and Haohsiang Ko Financial Times
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External renminbi loans, deposits, and bond investments have quadrupled over the past five years to $484B, approaching a third of China’s $1.5T of overseas fixed-income assets. Much of the expansion is in the form of trade finance.

Is renminbi lending abroad growing as China promotes its currency?

Core argument: External fixed-income assets of Chinese banks more than doubled over the past decade to more than $1.5tn, with the renminbi-denominated share reaching almost $484bn at the end of June, according to China's State Administration of Foreign Exchange.

Recent data from China’s State Administration of Foreign Exchange shows the external fixed-income assets of Chinese banks more than doubling over the past decade to more than $1.5tn, with the share denominated in renminbi expanding rapidly to almost $484bn at the end of June. This includes $360bn of renminbi loans and deposits, up from $110bn in 2020. A big part of the expansion in renminbi lending has been in trade finance. Data from cross-border payments system provider Swift shows that the renminbi’s share of global trade finance quadrupled over the past three years to 7.6% in September, making it the second most-used currency in trade finance after the US dollar.

Takeaways by Macro Roundup® AI

  1. External fixed-income assets of Chinese banks more than doubled over the past decade to more than $1.5tn, with the renminbi-denominated share reaching almost $484bn at the end of June, according to China's State Administration of Foreign Exchange.
  2. Renminbi loans and deposits included in those external assets rose to $360bn from $110bn in 2020, with much of the expansion in renminbi lending occurring in trade finance.
  3. The renminbi's share of global trade finance quadrupled over the past three years to 7.6% in September, making it the second most-used trade finance currency after the US dollar, according to Swift data.

Related Articles:

  • A New Driver of China’s De-Dollarization — Chinese banks have shifted their trade financing toward the renminbi, which now accounts for 72% of the roughly $250bn of Chinese trade credit extended since 2017, up from 17% of about $150bn during 2017-2021. The dollar share of Chinese trade credit is falling, and dollar trade credit provision may be negative.
  • China FX Diversification and the Dollar — The dollar's share of China's cross-border transfers has fallen from 80-85% to 40-45% over roughly 15 years, with the decline driven mainly by higher renminbi flows, and the renminbi's share of global trade financing has risen from about 2% to over 7%. China's foreign exchange reserve composition and onshore trading remain dollar-dominated.
  • 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%.

AI Summary. Headline inflation rose to 3%, the top of the Federal Reserve's target range, but shelter prices dipped far more than expected as the gap narrowed between official rental measures and private indexes based on recently signed leases. The direction of core goods and food prices, most exposed to tariffs, remains troubling.

John Authers Bloomberg
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John Authers notes it is almost “certain” the Federal Reserve will cut the FFR this week, though September headline and core CPI inflation both came in at a 3% annual rate. Rental inflation continues to fall, but further pressure from tariffs looms.

Does falling shelter inflation justify a rate cut despite 3% headline inflation?

Core argument: Headline inflation rose to 3% in the delayed September report, the very top of the Federal Reserve's target range, yet the universal conclusion from the data was that the Fed will cut the fed funds rate this week.

It looks as if we can be certain that the Federal Reserve will cut the fed funds rate this week. That was the universal conclusion from the delayed inflation report for September, and it’s doubtless correct — even though the headline rose to 3%, the very top of the Fed’s target range. The big reason for optimism came from rental inflation, whose measurement is controversial as it comes with a long lag because it averages all leases signed over the previous 12 months. The disparity with the private sector indexes that are based only on the last month’s leases, such as Zillow’s, is reducing, and shelter prices dipped far more than expected. The disparity with the private sector indexes that are based only on the last month’s leases, such as Zillow’s, is reducing, and shelter prices dipped far more than expected. If the Fed was prepared to cut in September despite somewhat elevated core readings, this report offers no reason to desist from a cut this week — although it will need to be careful to avert the growing impression that its true target has now risen to 3%. If there are problems, they come, inevitably, from tariffs (of which much more is below). The direction of travel for core goods (most directly affected by levies) and food is troubling, even if both still contribute far less to overall inflation than services does.

Takeaways by Macro Roundup® AI

  1. Headline inflation rose to 3% in the delayed September report, the very top of the Federal Reserve's target range, yet the universal conclusion from the data was that the Fed will cut the fed funds rate this week.
  2. Shelter prices dipped far more than expected, and the gap between official rental inflation, which averages leases signed over the prior 12 months, and private indexes based only on the last month's leases, such as Zillow's, is narrowing.
  3. Core goods, the category most affected by tariffs, and food show a troubling direction of travel, though both contribute far less to overall inflation than services.

Related Articles:

  • Are We Heading For A New Inflation Surge? — The analysis finds post-pandemic headline and core inflation closely tracking the pattern of the early 1970s, with the spike in each case taking about three years to be brought under control and followed by roughly 18 months of relative stability. If the parallel holds, a renewed inflation flare-up would be expected.
  • Data Update 4 for 2025: Interest Rates, Inflation and Central Banks! — Interest rates are ultimately driven by macroeconomic fundamentals, with an "intrinsic risk-free rate" defined as the sum of the inflation rate and real GDP growth tracking the observed 10-year Treasury bond yield closely. On this view, central banks' influence comes from preferential access to data on those fundamentals, their capacity to alter them, and their credibility.
  • A New Era of Higher Inflation Risks — The authors argue inflation's baseline is now higher than pre-pandemic, with 2% acting more as a floor than a ceiling, noting disinflation has largely stalled and core inflation has run above target on a six-month annualized basis for five years. They expect a structurally wider range of inflation outcomes, skewed to the upside and centered higher than in the 2010s.

AI Summary. A large retailer reports that pre-tariff inventory is still being sold, so tariff costs will show up as margin hits later, and that prices must eventually rise roughly 10–15% to cover them. The retailer says its sector's tariff rate went from about 12% to about 33%, and that retailers are holding prices through the holiday season before raising them.

John Cochrane The Grumpy Economist
Date Posted:

Cochrane relays an exchange with a CEO of a large retailer. “We have to raise prices roughly 10–15% to cover tariffs. [We] will start to see the margin hits a little in Q3 and a lot in Q4. But…we are all trying to hold prices through the key holiday.”

Are retailers delaying tariff-driven price increases until after the holidays?

Core argument: A large retailer's CEO says tariff rates in his sector rose from roughly 12% to about 33%, requiring price increases of roughly 10–15% to cover the tariff cost.

I had an interesting correspondence with the CEO of a fairly large retailer, "[inflation is] coming, and it’s a tidal wave for the American consumer. All tariff pauses just ended on August 8…we all brought in as much previously (lower) tariffed goods before that, and most fall merchandise was here in the spring and early summer…so we are still selling goods that didn’t have the latest tariff burden. But we are all raising prices slowly and carefully as the tariffed inventory gets sold (remember, accounting wise, we have a cash hit paying tariffs upon receipt, but we have a P&L hit when we sell the tariffed goods). You will start to see the margin hits a little in 3Q and a lot in Q4. But…we are all trying to hold prices through the key holiday...because we all believe the American consumer is going to be smacked by raised prices everywhere. So many are holding back to try to eke out a good holiday. But we all know that come January, we have massive margin hits (our sector was already the highest tariffed at ~12%, and now sits at ~33%), and we have to raise prices roughly 10-15% to cover tariffs."

Takeaways by Macro Roundup® AI

  1. A large retailer's CEO says tariff rates in his sector rose from roughly 12% to about 33%, requiring price increases of roughly 10–15% to cover the tariff cost.

Related Articles:

  • Tariffs as Fiscal Policy — US tariff revenue has reached about $30bn per month, roughly $23bn of it new, and could raise about $2tn over a ten-year budget window if broad tariffs survive legal challenges. The authors argue this shift from income taxation to tariffs is hard to defend, estimating efficiency losses equal to about a third of tariff revenue.
  • The U.S. Is Not “Winning the Trade War” — The U.S. is the world's largest single source of demand for manufactured goods but remains far smaller than the rest of the world combined, implying foreign producers will mostly avoid bearing the direct cost of tariffs. Consistent with this, the dollar has fallen about 7% against trading partners' currencies while pre-tariff import prices rose about 1%.
  • The U.S. Is Tiptoeing Away From Many of Trump’s Signature Tariffs — The US has exempted dozens of products from its reciprocal tariffs and offered to carve out hundreds more, from farm products to airplane parts, for countries that strike trade deals. The administration is simultaneously expanding tariffs grounded in Section 232 of the Trade Expansion Act, covering metals, autos, heavy trucks, pharmaceuticals and furniture.

AI Summary. Microsoft, Alphabet, Amazon and Meta are projected to spend a combined $360bn on capital expenditures in their current fiscal years, much of it AI-related, rising to nearly $420bn the following year. The Magnificent Seven group of large technology companies is projected to deliver 14% profit growth, versus 8% for the broader S&P 500.

Jeran Wittenstein and Ryan Vlastelica Bloomberg
Date Posted:

Bloomberg estimates Microsoft, Alphabet, Amazon and Meta will spend $420B on capex next fiscal year; up from $360B this year.

Are big tech firms still outgrowing the market despite soaring AI spending?

Core argument: Microsoft, Alphabet, Amazon and Meta are projected to post a combined $360 billion in capital expenditures in their current fiscal years, much of it tied to AI, rising to nearly $420 billion next year, according to analyst estimates compiled by Bloomberg.

Microsoft, Alphabet, Amazon and Meta are projected to post a combined $360 billion in capital expenditures in their current fiscal years, much of it related to AI. That spending is expected to jump to nearly $420 billion next year, according to analyst estimates compiled by Bloomberg. The Magnificent Seven is projected to deliver profit growth of 14% in the third quarter, down from 27% in the second quarter, according to data compiled by Bloomberg Intelligence. That’s nearly twice the 8% expected profit growth for the broader S&P 500, but it also would be the slowest pace for the group since the first quarter of 2023.

Takeaways by Macro Roundup® AI

  1. Microsoft, Alphabet, Amazon and Meta are projected to post a combined $360 billion in capital expenditures in their current fiscal years, much of it tied to AI, rising to nearly $420 billion next year, according to analyst estimates compiled by Bloomberg.
  2. The Magnificent Seven is projected to deliver third-quarter profit growth of 14%, down from 27% in the second quarter and the slowest pace since the first quarter of 2023, according to data compiled by Bloomberg Intelligence.
  3. The Magnificent Seven's projected 14% third-quarter profit growth is nearly twice the 8% expected for the broader S&P 500, according to data compiled by Bloomberg Intelligence.

Related Articles:

  • AI Data Center Boom Threatens Trump’s Manufacturing Revival — Bloomberg Economics projects the largest participants could pour as much as $4tn into artificial intelligence infrastructure by the end of the decade, with capital spending by hyperscalers such as Alphabet, Amazon, Meta, and Microsoft rising from almost $400bn to as much as $600bn. It expects AI's contribution to GDP growth could reach as much as 1.5 percentage points.
  • 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. Industrial policy justified on national security grounds requires weighing how much economic inefficiency is worth tolerating, since costs incurred today make a country poorer and therefore less able to project power later. The calculation is difficult because security gains are probabilistic and long-term economic costs are speculative.

Chris Miller Chris Miller's Newsletter
Date Posted:

Chris Miller asks, “How much inefficiency should we swallow in exchange for the security of self-sufficiency?” He argues it’s “a tricky calculation” as “security gains are probabilistic” and “long-term economic costs are highly speculative.”

How much economic inefficiency should national security justify?

Core argument: International economics must take geopolitical competition more seriously while also applying "willingness to pay" analysis to determine how much inefficiency is worth tolerating for geopolitical resilience.

The study of international economics clearly needs to take geopolitical competition more seriously. But scholars and practitioners of economic statecraft also need more focus on what economists call “willingness to pay.” How much inefficiency should we tolerate for the sake of geopolitical resilience? The answer isn’t infinite—costs incurred today make us poorer and therefore less capable of mustering power in the future. So how much inefficiency should we swallow in exchange for the security of self-sufficiency? It's a tricky calculation, because security gains are probabilistic (how likely is an adversary to test our reliance on products from abroad?) and because the long-term economic costs are highly speculative. I’m a believer that, like in 1933, there was a strong case for rebalancing economic and security concerns in favor of the latter. In 1933, the Western powers were far delayed in their rearmament and far too willing to transfer technology and industrial capacity to obviously adversarial powers. But that concern must be balanced against the downsides. Being the world’s richest and most productive economy is a key input to our security, too.

Takeaways by Macro Roundup® AI

  1. International economics must take geopolitical competition more seriously while also applying "willingness to pay" analysis to determine how much inefficiency is worth tolerating for geopolitical resilience.
  2. Tolerance for inefficiency in pursuit of self-sufficiency is not infinite, because costs incurred today make a country poorer and therefore less capable of mustering power in the future.
  3. The calculation is difficult because security gains from reduced foreign reliance are probabilistic, depending on whether an adversary tests that reliance, while long-term economic costs are highly speculative.

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AI Summary. Solar and wind produced 15% of world electricity in 2024, up from less than 4% a decade earlier, and accounted for 63% of the growth in global electricity production since just before the Covid pandemic.

Paul Krugman Krugman Wonks Out
Date Posted:
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Database

In 2024, solar and wind generated 15% of global electrical production and 63% of the growth of electrical output since 2019.

Are solar and wind now driving most global electricity growth?

Core argument: Solar and wind produced 15% of world electricity in 2024, up from less than 4% a decade earlier.

Many people still think of solar and wind as marginal, more woke environmentalist aspiration than serious parts of the global energy supply. This was still somewhat true a decade ago, when solar and wind produced less than 4% of the world’s electricity. But renewables have grown explosively since then. In 2024 solar and wind produced 15% of world electricity, and growth in solar and wind accounted for 63% of the growth in electricity production since the eve of Covid. All of this amounts to an enormous technological revolution. Less than 20 years ago there seemed to be no realistic alternative to powering our civilization with fossil fuels. Today we seem to be on an unstoppable path toward relying mainly on renewable energy.

Takeaways by Macro Roundup® AI

  1. Solar and wind produced 15% of world electricity in 2024, up from less than 4% a decade earlier.
  2. Growth in solar and wind accounted for 63% of the growth in global electricity production since the eve of Covid.
  3. Less than 20 years ago there seemed to be no realistic alternative to powering civilization with fossil fuels, and the world now appears set on an unstoppable path toward relying mainly on renewable energy.

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  • How Mega Batteries Are Unlocking An Energy Revolution — Global battery storage capacity is projected to rise 67% to 617GWh and grow tenfold by 2035, with the US and China accounting for about 70% of projects by power capacity. In California, batteries have supplied more than a quarter of electricity during spring and summer peaks, while gas generation fell 37% over two years.
  • Heliocentrism — An energy use must be electrified before green grid electricity can decarbonize it, and while US grid decarbonization continues at a steady pace, the electricity share of final US energy consumption has grown little. Transmission line growth runs well below Department of Energy targets for 2030 and 2035, and transformer delivery times have stretched from 4–6 weeks to 2–3 years.
  • The U.S. Is Forfeiting the Clean-Energy Race to China — China installed 277 gigawatts of wind and solar capacity in seven months, roughly four times the utility-scale additions U.S. federal analysts project for all power sources over a full year. Chinese firms' global market share in batteries and solar modules has reached 75% or higher, according to BloombergNEF.