Edward Conard

Top Ten New York Times Bestselling Author

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

Macro Roundup


Tuesday, November 18, 2025

AI Summary. Using US data since 1869, the authors estimate that a permanent tariff increase lowers inflation and raises unemployment, with results consistent across pre-World War II and post-World War II samples. In the pre-World War II period, a roughly 4ppt permanent tariff rise is estimated to cut inflation by 2ppt on impact and raise unemployment by about 1ppt.

Regis Barnichon and Aayush Singh Federal Reserve Board of San Francisco
Date Posted:

Contrary to the usual presumption that increases in tariffs are stagflationary, US evidence going back to 1870 suggests that tariffs raise unemployment but lower inflation, consistent with the view that tariffs are contractionary aggregate demand shocks.

How do permanent tariff increases affect inflation and unemployment?

Core argument: Using a yearly VAR with 2 lags on tariff changes, unemployment, and CPI inflation, the authors estimate that over 1869–1939 a roughly 4 percentage point permanent tariff increase lowered inflation by 2 points on impact and raised unemployment by about 1 point.

To estimate the dynamic causal effects of tariffs, we use a yearly VAR (vector autoregression) with 2 lags and (at least) 3 variables: tariff changes, unemployment, and CPI inflation. A careful review of the major changes in US tariff policy since 1870 shows no systematic relation between the state of the cycle and the direction of the tariff changes, as partisan differences on the effects and desirability of tariffs led to opposite policy responses to similar economic conditions. [Thus] Figure 5 plots the “OLS estimates”, i.e., treating innovations to the average tariff rate as independent of the business cycle. The results are remarkably consistent across sample periods; whether we use the full historical dataset (1869-2020), only pre-World War II data (1869-1939), or only post-World War II data (1946-2020). We find that a permanent tariff increase has a large effect on inflation and unemployment. Over the pre-WWII sample, a roughly 4ppt permanent increase in tariff rate lowers inflation by 2ppt on impact and raises unemployment by about 1ppt. The estimates are economically large and strongly statistically significant. Over the post-WWII sample period, the estimates are more uncertain given the much more limited variation in tariff rate over that period, but show the same conclusions: higher tariffs lower inflation and raise unemployment.

Takeaways by Macro Roundup® AI

  1. Using a yearly VAR with 2 lags on tariff changes, unemployment, and CPI inflation, the authors estimate that over 1869–1939 a roughly 4 percentage point permanent tariff increase lowered inflation by 2 points on impact and raised unemployment by about 1 point.
  2. The estimated effects of tariff increases — lower inflation and higher unemployment — are consistent across the full 1869–2020 sample, the pre-WWII 1869–1939 sample, and the post-WWII 1946–2020 sample, though post-WWII estimates are more uncertain given limited tariff variation.
  3. A review of major US tariff policy changes since 1870 shows no systematic relation between the state of the business cycle and the direction of tariff changes, as partisan differences produced opposite policy responses to similar economic conditions.

Related Articles:

  • Help for the Heartland? The Employment and Electoral Effects of the Trump Tariffs in the United States — The authors find that the combined effect of U.S.-China trade war import tariffs, retaliatory tariffs, and farm subsidies on employment in exposed U.S. locations was at best a wash and possibly mildly negative, while residents of tariff-protected areas became less likely to identify as Democrats and more likely to vote Republican.
  • Did Tariffs Make American Manufacturing Great? New Evidence from the Gilded Age — Using digitized industry-level US tariff data from 1870–1900 matched to state-level manufacturing census data for over 80 industries, the authors estimate that tariffs reduced labor productivity. They argue the results are consistent with weaker international competition allowing less efficient firms to survive, reduced incentives to innovate, and lobbying for protection misallocating resources.

AI Summary. Stronger Chinese growth driven by export-oriented manufacturing may not produce net positive spillovers: for every 1pp export-driven boost to China's GDP, other economies may see a 0.1–0.3pp drag, with high-tech producers such as Europe and Japan facing greater pressure. Cheaper Chinese goods continue to exert a disinflationary impulse.

Andrew Tilton, Hui Shan, Lisheng Wang, Xinquan Chen, et al. Goldman Sachs
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GS estimates that for every 1pp export-driven increase in Chinese GDP, advanced economies experience a 0.1–0.3pp drag. “China Shock 2.0 is likely to crowd out tech-intensive, high-value-added manufacturing activity in the rest of the world.”

Does export-driven Chinese growth drag down other economies?

Core argument: Every 1pp export-driven boost to Chinese GDP may impose a 0.1–0.3pp drag on other economies, with high-tech producers such as Europe and Japan facing greater pressures.

Stronger Chinese GDP growth propelled by supply-driven, export-oriented activity may not generate net positive growth spillovers. For every 1pp export-driven boost to Chinese GDP, other economies may experience a 0.1-0.3pp drag, with high-tech producers like Europe and Japan facing greater pressures. In other words, if "China Shock 1.0" crowded out labor-intensive, low-value-added manufacturing activity in other countries, the ongoing "China Shock 2.0" is likely to crowd out tech-intensive, high-value-added manufacturing activity in the rest of the world. The common thread will be a continued disinflationary impulse from cheaper Chinese products, although these products will shift from toys and shoes to cars and semiconductors.

Takeaways by Macro Roundup® AI

  1. Every 1pp export-driven boost to Chinese GDP may impose a 0.1–0.3pp drag on other economies, with high-tech producers such as Europe and Japan facing greater pressures.
  2. "China Shock 2.0" is likely to crowd out tech-intensive, high-value-added manufacturing in the rest of the world, whereas "China Shock 1.0" crowded out labor-intensive, low-value-added manufacturing.
  3. Cheaper Chinese products are expected to sustain a disinflationary impulse, with their composition shifting from toys and shoes to cars and semiconductors.

Related Articles:

  • China’s Massive Surplus Is Everywhere (Yet The IMF Still Has Trouble Seeing It Clearly) — China's manufactured goods surplus exceeds $2tn in its own customs data, about 10.5% of Chinese GDP and over 2% of world GDP, far exceeding the combined peak surpluses of Germany and Japan. The author argues the International Monetary Fund understates this by relying solely on reported current account balances, which have not similarly jumped.
  • We Warned About the First China Shock. The Next One Will Be Worse — The authors argue China is moving from follower to leader by aggressively contesting innovative sectors long dominated by the United States, including aviation, artificial intelligence, telecommunications, microprocessors, robotics, and nuclear and fusion power. They note the world's largest and most innovative makers of electric vehicles, EV batteries, drones, and solar wafers are all Chinese firms under 30 years old.
  • The U.S. Trade Deficit: Myths and Realities — Taxing capital inflows would weaken the dollar but could raise domestic interest rates and depress investment, harming long-term growth, while an interest rate cut absent recession would be inflationary and erode any real depreciation needed to durably improve the trade balance. Fiscal restraint could weaken the dollar and reduce the trade deficit.

AI Summary. The article proposes a new global customs union open to countries that agree to keep their current account balances with the union within a narrow band, with variable tariffs or capital-flow taxes applied to nonmembers. It argues gains from trade are largest when trade flows are reciprocal and sustainable.

Michael Pettis Foreign Affairs
Date Posted:
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To counter Chinese style “persistent, policy-engineered surpluses—designed, e.g., to boost a country’s manufacturing share by suppressing wage growth,” Pettis proposes a “global customs union open to all countries that commit to balanced trade.”

Can a customs union requiring balanced trade fix free trade?

Core argument: The proposal calls for Washington and its allies to create a global customs union open to any country that agrees to keep its current account with the union within a narrow band, allowing cyclical variation while preventing policy-driven imbalances.

Washington and its allies should organize a new global customs union open to all countries that commit to balanced trade. States would be able to join the union by agreeing to keep their current accounts with the union within a narrow band. This band would allow normal cyclical variations while preventing the externalization of policy-driven imbalances. The customs union would then balance trade with nonmembers by adopting variable trade barriers—either in the form of tariffs or taxes on capital flows—that prevent the imbalances of nonmembers from being imported into the customs union. This would not be a political sanction, but rather a rules-based measure among trade partners. To join the union, countries would have to agree to these restrictions. The principle behind such a union is that the gains from trade are largest when trade flows are reciprocal and sustainable. That is because persistent, policy-engineered surpluses—designed, for example, to boost a country’s manufacturing share by suppressing wage growth—do not maximize global output. They instead reflect income distribution choices and credit policies that reduce global demand while pushing the cost of that reduced demand onto trade partners in the form of higher unemployment or higher debt.

Takeaways by Macro Roundup® AI

  1. The proposal calls for Washington and its allies to create a global customs union open to any country that agrees to keep its current account with the union within a narrow band, allowing cyclical variation while preventing policy-driven imbalances.
  2. Under the plan, the customs union would balance trade with nonmembers through variable tariffs or taxes on capital flows, presented as a rules-based measure among trade partners rather than a political sanction.
  3. The argument holds that gains from trade are largest when flows are reciprocal and sustainable, because persistent policy-engineered surpluses reflect income distribution and credit choices that reduce global demand and push its cost onto trade partners as higher unemployment or debt.

Related Articles:

  • China’s “Anti-Involution” Campaign: Global Implications — China's economy has slowed as domestic investment stagnates and consumer spending stays weak, with the shortfall partly offset by rising net exports. The author argues these internal problems are being passed to the rest of the world, since export values are rising about 6% a year while import values are down 2.2%.
  • The True Cost of China’s Falling Prices — Prices fell for 51 of 67 consumer items tracked over a two-year period in China, while the broader GDP deflator, which includes upstream sectors, declined for 10 straight quarters, indicating deflation is more entrenched in industry. The share of "zombie" firms whose profits cannot cover debt interest rose from 19% to 34% over five years.
  • China’s Massive Surplus Is Everywhere (Yet The IMF Still Has Trouble Seeing It Clearly) — China's manufactured goods surplus exceeds $2tn in its own customs data, about 10.5% of Chinese GDP and over 2% of world GDP, far exceeding the combined peak surpluses of Germany and Japan. The author argues the International Monetary Fund understates this by relying solely on reported current account balances, which have not similarly jumped.

AI Summary. The cyclically adjusted price-earnings ratio stands at 40, below its all-time high of 44.2 but above the level reached at the onset of the Great Depression. Using only the prior year's earnings gives a less extreme reading, yet the standard price-earnings ratio still sits near the 95th percentile of its historical distribution.

Jesper Rangvid Rangvid's Blog
Date Posted:

While CAPE is at 40, higher than its 1929 level, adjusting equity values for last year’s profitability suggests the market’s value is less “overstretched” than it was then. Still, it remains ~ at the 95th percentile of its historical distribution.

How stretched are stock market valuations by historical measures?

Core argument: The CAPE ratio stands at 40, below the all-time high of 44.2 reached in December 1999 just before the dot-com bubble burst, but above the peak observed at the start of the Great Depression in 1929.

The CAPE ratio stands at 40. The all-time high was 44.2, reached in December 1999, right before the dot-com bubble burst. Today’s level is even higher than the peak observed at the start of the Great Depression in 1929. The only period with a higher stock-market valuation than today was from January 1999 to September 2000, after which the dot-com bubble burst. It’s often pointed out that a key difference between today’s market and the dot-com bubble of the late 1990s is that the tech companies driving the current surge actually earn substantial profits—unlike many tech firms back then. That’s true. So, when we divide today’s rapidly rising stock prices by slowly changing long-term earnings (rather than by more responsive, current earnings), we risk misrepresenting the situation. Fair enough. Let’s then use just last year’s earnings instead. That gives us a standard price-earnings ratio rather than the Shiller “cyclically adjusted” one. This adjustment helps somewhat. The earnings of today’s fast-growing companies have also been rising rapidly. The market therefore appears less extreme using this measure. Still, while not as overstretched as when measured via CAPE, the market remains highly valued: the current price-earnings ratio sits around the 95th percentile of its historical distribution.

Takeaways by Macro Roundup® AI

  1. The CAPE ratio stands at 40, below the all-time high of 44.2 reached in December 1999 just before the dot-com bubble burst, but above the peak observed at the start of the Great Depression in 1929.
  2. The only period with a higher stock-market valuation than today ran from January 1999 to September 2000, after which the dot-com bubble burst.
  3. Substituting last year's earnings for slowly changing long-term earnings yields a standard price-earnings ratio that makes the market appear less extreme, yet it still sits around the 95th percentile of its historical distribution.

Related Articles:

  • Why We Are Not In A Bubble….Yet — 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.
  • Surviving the AI Capex Boom — Capital spending by the largest US technology companies has risen from 4% to 15% of revenue since 2012, approaching the capital intensity of utilities, with Meta, Microsoft, and Alphabet each set to spend 21–35% of revenue. The authors argue this shift toward asset-heavy models is associated with inferior returns.
  • Minsky Moments and AI CapEx — Capital-spending forecasts for the four largest cloud providers rose nearly 50% over the year, and AI data centers are increasingly funded through leveraged and off-balance-sheet structures, including $3.2bn in senior secured notes and a roughly $30bn asset-backed financing. The author argues this marks a speculative-finance phase where borrowers must roll over principal.

AI Summary. The share of U.S. 12th graders who say they will likely get married someday fell to 67% in 2023 from 80% in 1993, a decline the Pew Research Center attributes to shifting views among girls. Boys are now more likely than girls to say they want to marry (74% vs. 61%), reversing the 1993 pattern.

Dana Braga Pew Research Center
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Btw 1993 and 2023, the share of American female high school seniors who reported wanting to get married “someday” fell from 83% to 61%. Their male counterparts saw just a 2pp decline to 74%.

Are high school girls now less likely than boys to want marriage?

Core argument: 67% of U.S. 12th graders said in 2023 that they will likely choose to get married someday, down from 80% in 1993, according to a Pew Research Center analysis of University of Michigan survey data.

U.S. high schoolers are less likely now than in the past to say they want to get married someday. And a smaller share today say that they’re very likely to have children if they do get married, according to a Pew Research Center analysis of survey data from the University of Michigan. As of 2023, 67% of the nation’s 12th graders say they’ll likely choose to get married someday, down from 80% in 1993. The drop in the share of 12th graders who say they want to get married reflects shifting views among girls. Boys are more likely than girls to say they want to get married someday (74% vs. 61%), but this wasn’t always the case. In 1993, a larger share of girls (83%) than boys (76%) said they wanted to get married.

Takeaways by Macro Roundup® AI

  1. 67% of U.S. 12th graders said in 2023 that they will likely choose to get married someday, down from 80% in 1993, according to a Pew Research Center analysis of University of Michigan survey data.
  2. Boys in 12th grade are more likely than girls to say they want to marry someday (74% vs. 61%), a reversal from 1993, when 83% of girls and 76% of boys said so.
  3. Pew finds that the decline in 12th graders' stated desire to marry reflects shifting views among girls, and that a smaller share today say they are very likely to have children if they do marry.

Related Articles:

  • All Over The Rich World, Fewer People Are Hooking Up And Shacking Up — In the US, 41% of women and 50% of men aged 25-34 were single, double the share of five decades earlier, and the share of people living alone rose in 26 of 30 mostly rich OECD countries. One estimate puts the global increase in single people at over 100m in a decade.
  • Changes in Milestones of Adulthood — Among US young adults aged 25–34, the share completing a high school or college degree rose 9 percentage points to 83%, while the share ever married fell 18 points to 44% and the share living with a child fell 16 points to 39%. Economic milestones became more common as family formation milestones became less common.
  • Bachelors Without Bachelor’s: Gender Gaps in Education and Declining Marriage Rates — Marriage rates for college-educated women have remained stable over the past fifty years even as the relative supply of college-educated men declined, with the overall decline in marriage driven almost entirely by fewer marriages between non-college women and non-college men. The education gap in women's marriage rates is larger in areas where non-college men face the highest joblessness and incarceration.

Wednesday, November 19, 2025

AI Summary. Yields on Japan's 10-year government bonds reached their highest level since 2008 and 30-year yields hit a record intraday high of 3.35%. Traders attribute the sell-off to signs the Japanese government is preparing a supplementary budget of at least ¥25tn ($161bn) to boost the economy and shield households from rising prices.

Leo Lewis and Ian Smith Financial Times
Date Posted:

Yields on the 10-year JGB hit 1.78%, the highest level since June 2008, as investors anticipate further fiscal expansion in Japan.

Are expectations of a large stimulus package pushing Japanese bond yields higher?

Core argument: Japan's 10-year government bond yield rose as much as 0.04 percentage points to 1.78%, its highest since June 2008, before easing back to 1.76%.

Yields on the benchmark 10-year bonds, which move inversely to price, climbed as much as 0.04 percentage points to 1.78% on Wednesday — the highest level since June 2008 in the global financial crisis — before falling back to 1.76%. The sell-off extended to longer-dated notes. Yields on 30-year JGBs rose to a record intraday high of 3.35%. Driving the rise in JGB yields, said traders, were signs that the government of Prime Minister Sanae Takaichi was preparing a huge supplementary budget of at least ¥25tn ($161bn) as she seeks to make good on pledges to boost the economy and protect households from rising prices.

Takeaways by Macro Roundup® AI

  1. Japan's 10-year government bond yield rose as much as 0.04 percentage points to 1.78%, its highest since June 2008, before easing back to 1.76%.
  2. Yields on 30-year Japanese government bonds hit a record intraday high of 3.35% as the sell-off extended to longer-dated notes.
  3. Traders attributed the rise in Japanese government bond yields to signs that Prime Minister Sanae Takaichi's government was preparing a supplementary budget of at least ¥25tn ($161bn) to boost the economy and shield households from rising prices.

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.
  • Japan Urged to Use Gloomier Population Forecasts After Plunge in Births — Japanese births fell to a record low of 686,000 in 2024, dropping below 700,000 for the first time since 19th-century records began and reaching a level Japan's official median population forecast had not projected until 2039. Because the government bases economic and fiscal policy on that median forecast, adopting lower estimates would require revising projections for taxes and pension benefits.
  • Japan’s Debt Puzzle: Sovereign Wealth Fund from Borrowed Money — Japan's public sector operates as a highly leveraged sovereign wealth fund, funding risky assets by borrowing from banks and depositors at below-market rates, with returns sustaining its debt-to-GDP ratio above 200% without primary surpluses. The authors argue the resulting duration and currency mismatches expose Japan to mark-to-market losses that could trigger a fiscal crisis or a run on the yen.

AI Summary. International Monetary Fund data show Denmark with the largest rise in foreign ownership of government debt and Greece with the largest fall, with emerging markets also seeing very large declines. The author reads this as markets gravitating toward low-debt safe havens while foreign investor confidence in high-debt countries remains low.

Robin Brooks Robin Brooks Substack
Date Posted:

With its debt at only 30% of GDP, Denmark is attracting foreign investors, who owned ~ 25% of Danish debt in 2019, compared to almost 45% today. Overall, Brooks argues, “global investors are retrenching at home.”

Do foreign investors favor low-debt countries over high-debt ones?

Core argument: Denmark recorded the largest rise in foreign ownership of government debt between Q4 2019 and Q2 2025, which the author reads as consistent with markets gravitating to low-debt economies in their search for safe havens.

The horizontal axis in the chart shows IMF data on foreign ownership of government debt in Q2 2025 (the latest data point available). The vertical axis shows the same thing in Q4 2019, i.e. before COVID hit. Countries below and to the right of the dotted diagonal line have seen foreign ownership rise over this time frame, while countries above and to the left have seen it fall. I’ve colored the G10 in blue, the Euro zone in red and EM in black. Several points are worth noting. First, Denmark has seen the biggest rise in foreign ownership, consistent with markets gravitating to low-debt economies in their search for safe havens. Second, Greece has seen the biggest fall in foreign ownership, a reminder that foreign investor confidence in high-debt countries remains low, regardless of ECB actions. Third, EM has seen very large falls in foreign ownership.

Takeaways by Macro Roundup® AI

  1. Denmark recorded the largest rise in foreign ownership of government debt between Q4 2019 and Q2 2025, which the author reads as consistent with markets gravitating to low-debt economies in their search for safe havens.
  2. Greece recorded the largest fall in foreign ownership of government debt over the same period, which the author cites as a reminder that foreign investor confidence in high-debt countries remains low regardless of ECB actions.
  3. Emerging markets recorded very large falls in foreign ownership of government debt between Q4 2019 and Q2 2025, based on IMF data.

Related Articles:

  • Buy America — Despite multi-trillion deficits, investors show no sign of concern about US government debt, and the Treasury has supported demand by shifting issuance toward maturities with the strongest buyer interest. Short-term bills now make up 22% of marketable Treasuries, absorbed largely by money market funds whose assets have grown to $7tn.
  • The Race Between Asset Supply and Asset Demand — The authors estimate that demand for assets has outpaced supply by roughly 400% of GDP versus 100%, making rising asset demand the leading contributor to falling interest rates. They project that debt sustainability requires fiscal consolidation exceeding 10% of GDP, though debt could reach 250% of GDP without raising interest rates.
  • 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. During the earlier decline in bank reserves at the Federal Reserve, the drop came entirely from domestically chartered U.S. banks while U.S. branches of foreign banks kept adding reserves; more recently foreign banks' U.S. offices have shed roughly $400bn in reserves while domestic banks largely held theirs. That reversal returns foreign banks to their pre-pandemic pattern of mediating reserve swings.

Matt Klein The Overshoot
Date Posted:

From the pandemic to April 2025, foreign banks’ reserve holdings at the FRBNY continued to rise, even as domestic banks sharply reduced their holdings. Since July, Klein infers, $400B of the $500B reduction in reserves was attributable to foreign banks.

Are foreign banks' US branches driving the recent drop in Fed reserves?

Core argument: U.S. offices of foreign banks have shed about $400 billion of reserves since April 2025, while domestically-chartered banks mostly held onto theirs.

When reserves were falling in December 2021-September 2022, the entire decline was attributable to domestically-chartered U.S. banks. Foreign banks, via their U.S. branches and agencies, did not shed any reserves, and had been steadily adding to their reserves at the Fed right up until April 2025. But this time around, U.S. offices of foreign banks have been the ones shedding reserves in droves, even as domestically-charted banks mostly held onto their reserves. From the perspective of 2008-2019, the recent behavior of foreign banks during a period of shrinking reserve balances at the Fed does not look odd. Until the pandemic, most of the growth and decline in reserves at the Fed was mediated through changes in the balance sheets of the U.S. branches and agencies of foreign banks, including their interoffice borrowing. But something was different in the past few years, such that foreign banks continued to hold reserves and maintain their overall U.S. exposure even as the total volume of bank reserves fell sharply in 2022. It seems like more than a coincidence that foreign banks suddenly switched back to their prior behavior in the beginning of April 2025. The big drop in reserves held by all banks in New York over the past few months [an absolute drop of 400B in foreign reserve holdings] tracks the reported drop in foreign-related institutions’ cash assets almost perfectly.

Takeaways by Macro Roundup® AI

  1. U.S. offices of foreign banks have shed about $400 billion of reserves since April 2025, while domestically-chartered banks mostly held onto theirs.
  2. During the December 2021–September 2022 decline in reserves, the entire drop was attributable to domestically-chartered U.S. banks, as foreign banks' U.S. branches and agencies shed none and added steadily until April 2025.
  3. From 2008 to 2019, most of the growth and decline in reserves at the Fed was mediated through the balance sheets of U.S. branches and agencies of foreign banks, including interoffice borrowing, a pattern foreign banks appear to have resumed in April 2025.

Related Articles:

  • Signs of Stress in Money Markets — Federal Reserve balance sheet reduction and heavy Treasury bill issuance are pushing money market funding spreads higher, with key overnight repo rates rising above the rate the Federal Reserve pays on bank reserves. The financial system is nearing the point where bank reserves are no longer ample, and persistent funding-rate volatility could affect credit markets.
  • 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.
  • Treasury Market Dysfunction and the Role of the Central Bank — The authors argue the Federal Reserve could relieve Treasury market strain by buying cash Treasuries while fully hedging with offsetting short positions in Treasury derivatives, taking the other side of hedge funds' unwinding of hedged positions. Because this removes no net duration from the market, it distinguishes market-functioning purchases from quantitative easing.

AI Summary. The Dutch government has stepped back from its intervention in chipmaker Nexperia, which it justified by citing "serious governance shortcomings" and which disrupted supply chains in car manufacturing and other industries. The ousted Chinese chief executive does not return and Wingtech's voting rights stay with a court-appointed administrator, which China calls the key obstacle to resolution.

Kana Inagaki, Andy Bounds and Sebastien Ash Financial Times
Date Posted:

The Dutch government is suspending its intervention in Nexperia following talks with the Chinese government. The Chinese CEO will not return to the job and the firm will be run by Europeans.

Does withdrawing a government seizure of a chipmaker resolve supply disruptions?

Core argument: The Dutch government stepped back from its intervention in Nexperia, which it had seized in October citing "serious governance shortcomings" by Zhang Xuezheng, after the seizure and the court's removal of the Chinese chief executive disrupted car manufacturing and other industries.

The Dutch government in October seized control of Nexperia and the Amsterdam court of appeal forced out the Chinese chief executive, sparking supply chain disruptions in car manufacturing and other industries. It said it had to act against Zhang Xuezheng, also the main shareholder of Wingtech, because of “serious governance shortcomings”. Nexperia said the latest development would not return Zhang to office and that Wingtech’s voting rights would remain under the control of a court-appointed administrator. European executives are running the company. China’s commerce ministry said it welcomed the Dutch move, calling it a “first step” following two days of consultations in Beijing. It also called on the Netherlands to fully revoke its decision and said that the Amsterdam court of appeal’s ruling stripping Wingtech of control of Nexperia remained the key obstacle to resolving any issues.

Takeaways by Macro Roundup® AI

  1. The Dutch government stepped back from its intervention in Nexperia, which it had seized in October citing "serious governance shortcomings" by Zhang Xuezheng, after the seizure and the court's removal of the Chinese chief executive disrupted car manufacturing and other industries.
  2. Nexperia said the Dutch move will not return Zhang to office and that Wingtech's voting rights remain under the control of a court-appointed administrator, with European executives running the company.
  3. China's commerce ministry welcomed the Dutch move as a "first step" after two days of consultations in Beijing, urging the Netherlands to fully revoke its decision and calling the Amsterdam court of appeal's ruling stripping Wingtech of control the key obstacle.

Related Articles:

  • Dutch Seized Nexperia After US Demanded Chinese CEO’s Exit — The Dutch government took control of chipmaker Nexperia under a Cold War-era law on access to essential products after US officials said replacing its Chinese chief executive was almost certainly required to keep the company off a US sanctions list. The CEO was suspended and replaced by its European finance chief.
  • Underestimating China — China's productive capacity is three times that of the United States and exceeds the next nine countries combined, with its share of global manufacturing quintupling to 30% while the U.S. share halved to about 15%. The authors argue Washington must convert its alliances into a platform for pooled capacity building.
  • Sticking with What Works: Raising GDP Forecast on China’s Manufacturing Push — Stronger Chinese growth driven by export-oriented manufacturing may not produce net positive spillovers: for every 1pp export-driven boost to China's GDP, other economies may see a 0.1–0.3pp drag, with high-tech producers such as Europe and Japan facing greater pressure. Cheaper Chinese goods continue to exert a disinflationary impulse.

AI Summary. Geothermal supplies less than 1% of global and U.S. energy, but Princeton University researchers project that technical innovations could allow widely available geothermal power to generate nearly 3x the current output of America's nuclear plants by 2050. Next-generation developers have demonstrated 70% year-on-year cuts in drilling times, lowering costs.

Economist Staff The Economist
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Citing Fervo’s 70% y/y reduction in drilling times, a Stanford analysis suggests “the power costs of geothermal will be competitive with rival fuels by 2027.” A Princeton analysis suggests geothermal output could triple US nuclear power by 2050.

Can technical innovation make geothermal a major power source?

Core argument: Geothermal supplies less than 1% of global and American energy today, but Princeton University researchers predict technical innovations could let widely available geothermal power produce nearly triple the output of U.S. nuclear plants by 2050.

Today, less than 1% of global (and American) energy comes from geothermal. But researchers at Princeton University predict that technical innovations mean widely available geothermal power could produce nearly triple the current output of the country’s nuclear power plants (which supply roughly 20% of America’s electricity at present) by 2050. The International Energy Agency envisions a $1trn global investment boom by 2035. A paper published in Nature Reviews Clean Technology in January by Roland Horne of Stanford University examined the rapid technical progress of the next-generation geothermal industry. Fervo has demonstrated a 70% year-on-year reduction in drilling times, which translates directly into much lower costs. Professor Horne reckoned that the power costs of geothermal will be competitive with rival fuels by 2027.

Takeaways by Macro Roundup® AI

  1. Geothermal supplies less than 1% of global and American energy today, but Princeton University researchers predict technical innovations could let widely available geothermal power produce nearly triple the output of U.S. nuclear plants by 2050.
  2. Fervo has demonstrated a 70% year-on-year reduction in drilling times, which translates into much lower costs, and Stanford University's Roland Horne reckons geothermal power costs will be competitive with rival fuels by 2027.
  3. The International Energy Agency envisions a $1trn global geothermal investment boom by 2035, and Horne's paper in Nature Reviews Clean Technology examined the next-generation industry's rapid technical progress.

Related Articles:

  • Energy Startup Says It Has Achieved Geothermal Tech Breakthrough — Startup Fervo Energy completed a 30-day full-scale well test of enhanced geothermal technology at its northern Nevada site that generated 3.5 megawatts of electricity, with the project set to power Google data centers and infrastructure in the state. The company projects its Utah site will deliver about 400 megawatts.
  • Power Politics: Energy Self-Sufficiency in a Modern Mercantilist World — China leads in adding power to the grid, with more than 30,000 miles of ultra-high-voltage transmission lines versus zero in the US and lead times for large transformers of 48 weeks against a US average of 143 weeks. This positions China to accommodate new demand sources such as artificial intelligence.
  • World Energy Outlook 2025 — Global electricity demand is projected to rise roughly 40–50% by 2035, even though electricity currently accounts for only 21% of total final energy consumption worldwide. Electricity use by servers optimized for artificial intelligence is projected to rise fivefold by 2030, yet data centres are projected to account for less than 10% of global electricity demand growth through 2030.

AI Summary. China's Tsinghua University collected 4,986 artificial intelligence and machine learning patents from 2005 through 2024, receiving more patents annually than MIT, Stanford, Princeton and Harvard combined, and China accounts for more than half of all active patent families in those fields. US institutions still hold the most influential AI patents and produced more notable AI models, 40 to China's 15.

Saritha Rai Bloomberg
Date Posted:
Is Database:
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Tsinghua students and faculty are creating more patents related to machine learning and AI than MIT, Stanford, Princeton and Harvard combined. However, American patents, as measured by citations, are rising in relevance compared to Tsinghua’s.

Does China lead in AI patent volume but not influence?

Core argument: Tsinghua University collected 4,986 AI and machine learning patents between 2005 and the end of 2024, including more than 900 in 2024, and receives more patents annually than MIT, Stanford, Princeton and Harvard combined, according to LexisNexis.

[Tsinghua University's] professors and students are quietly accumulating massive amounts of intellectual property. They already had more AI research papers among the 100 most cited than any other school at last count, and they receive more patents each year than MIT, Stanford, Princeton and Harvard combined. Tsinghua collected 4,986 AI and machine learning patents between 2005 and the end of 2024, including more than 900 last year, according to the data analytics service LexisNexis. Overall, China now accounts for more than half of all active patent families globally in those fields. The US still holds the most influential AI patents and the top performing models. Harvard and MIT, for example, consistently rank ahead of Tsinghua in the influence of their patents. American institutions also produce more notable AI models than China — 40 to 15 in 2024, according to Stanford’s AI Index Report — though Chinese organizations are closing the gap in certain performance benchmarks.

Takeaways by Macro Roundup® AI

  1. Tsinghua University collected 4,986 AI and machine learning patents between 2005 and the end of 2024, including more than 900 in 2024, and receives more patents annually than MIT, Stanford, Princeton and Harvard combined, according to LexisNexis.
  2. China accounts for more than half of all active patent families globally in AI and machine learning, while the US still holds the most influential AI patents, with Harvard and MIT consistently ranking ahead of Tsinghua on patent influence.
  3. American institutions produced 40 notable AI models in 2024 versus 15 from China, according to Stanford's AI Index Report, though Chinese organizations are closing the gap on certain performance benchmarks.

Related Articles:

  • Paper Tiger? Chinese Science and Home Bias in Citations — Researchers disproportionately cite work from their own country, and measured against a benchmark that distributes world citations by the size of citing and cited countries, every country studied shows some home bias. The authors estimate China is a clear outlier at 42.3%, followed by Iran and India at 23.2% each and the US at 15.9%.
  • Creating and Connecting US and China Science: Chinese Diaspora and Returnee Researchers — The authors estimate that China-born researchers working in the US contributed to 27% of US-addressed scientific papers, while China-born researchers with US experience who returned home contributed to 38% of China-addressed papers. Papers with these authors averaged more citations and appeared more often in high-impact journals than other papers.
  • The Global AI Talent Tracker 2.0 — The United States remains the leading destination for the world's most elite AI talent and hosts 60% of top AI institutions. China's share of top AI researchers working domestically rose from 29% in 2019 to 47% in 2022, and India retained one-fifth of its top AI researchers in 2022 versus nearly none in 2019.