Edward Conard

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  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Monday, December 29, 2025

AI Summary. Mexican government data show manufacturing exports to the U.S. rose almost 9% over an 11-month period versus a year earlier, as a nearly 6% drop in auto-industry exports was offset by a 17% surge in other manufactured goods. U.S.–Mexico goods trade is on track to reach a record near $900bn.

Santiago Pérez and Anthony Harrup Wall Street Journal
Date Posted:
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~85% of Mexico’s exports remain tariff-free under the USMCA, allowing Mexican firms to capture ~25% of the drop in the US-China trade deficit, according to USTR. In the first 11 months of 2025, Mexican manufacturers’ exports to the US rose almost 9% y/y.

Are higher U.S. tariffs increasing Mexican manufacturing exports to America?

Core argument: Mexican manufacturing exports to the U.S. rose almost 9% from January to November versus the first 11 months of 2024, according to Mexican government data, despite steep U.S. tariffs on autos, steel and aluminum.

Even with steep tariffs on autos, steel and aluminum bound for America, Mexican manufacturing exports to the U.S. rose almost 9% from January to November, compared with the first 11 months of 2024, according to Mexican government data. Auto-industry exports to the U.S. fell close to 6% during the period, but exports of other manufactured goods surged 17%. Trade in goods between the U.S. and Mexico is on track to reach a record of nearly $900 billion this year. U.S. Trade Representative Jamieson Greer said Mexico has managed to capture about 25% of the reduction in the U.S. trade deficit with China. The shift demonstrates “the important role that Mexico plays in U.S. supply-chain resilience efforts,” Greer told U.S. lawmakers in mid-December.

Takeaways by Macro Roundup® AI

  1. Mexican manufacturing exports to the U.S. rose almost 9% from January to November versus the first 11 months of 2024, according to Mexican government data, despite steep U.S. tariffs on autos, steel and aluminum.
  2. Mexico's auto-industry exports to the U.S. fell close to 6% over the period while exports of other manufactured goods rose 17%, with U.S.-Mexico goods trade on track for a record of nearly $900 billion this year.
  3. U.S. Trade Representative Jamieson Greer told U.S. lawmakers that Mexico has captured about 25% of the reduction in the U.S. trade deficit with China, showing "the important role that Mexico plays in U.S. supply-chain resilience efforts.".

Related Articles:

  • Mexico Imposes Tariffs Of Up To 50% On Chinese Goods — Mexico has approved tariffs of up to 50% on Chinese cars and other goods, from footwear to microwaves, more than double the previous 15%–20% rate and the highest allowed under World Trade Organization rules. Chinese imports account for a fifth of Mexican imports, and China's commerce ministry opposed the increase.
  • An Anatomy of the Great Reallocation in US Supply Chain Trade — China's share of US direct imports fell from a peak of about 22% in 2017 to roughly 16% in 2022, 13% in 2024, and about 9% by mid-2025 — matching its share when it joined the World Trade Organization. Vietnam, Mexico, and more recently Taiwan have been the main gainers.
  • Mexico Is Not Just the Top Supplier to the U.S. Now It Is the Top Buyer — Mexico is now both the largest buyer of U.S. exports and the largest source of U.S. imports, with U.S. goods exports to Mexico at $226.4bn versus $225.6bn to Canada and imports from Mexico totaling $354.9bn. Mexico's growth, including its middle class, has increased demand for U.S. goods among its more than 130 million people.

AI Summary. Mexico's growth has fallen to near zero as an investment boom from recent years faded into a drag on growth and private consumption returned to the weakness seen in the five years before the pandemic. Despite strong exports to the US, the gains from trade are not reaching enough of the population, making the stagnation a structural problem.

Robin Brooks Robin Brooks Substack
Date Posted:
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The temporary increase in GDP growth due to investment driven by the nearshoring boom has receded, while exports to the US rose. Private consumption in Mexico has completely stagnated, driving GDP growth close to zero.

Why has Mexico's growth stalled despite booming exports to the US?

Core argument: Mexico's GDP growth has fallen to near zero as the investment boom that lifted growth between 2022 and 2024 faded and turned into a drag on growth.

The chart shows what’s going on in terms of the different components of GDP. You can clearly see the investment boom (red bars), which lifted growth in the years between 2022 - 2024. But that investment boom has faded - it was never sustainable - and has turned into a drag on growth. The key reason why growth has fallen back to near zero is private consumption (blue bars), which is back to being as weak as it was in the five year period before the pandemic. The reasons for Mexico’s stagnation are complex, but what’s clear is that the lack of growth should at this point be regarded as a structural problem. For some reason, the gains from globalization - Mexico’s exports to the US are doing extremely well - are not benefitting the broader population, which is why private consumption stagnates. This is the basic problem. The gains from trade aren’t benefitting enough people.

Takeaways by Macro Roundup® AI

  1. Mexico's GDP growth has fallen to near zero as the investment boom that lifted growth between 2022 and 2024 faded and turned into a drag on growth.
  2. Private consumption in Mexico is as weak as it was in the five years before the pandemic, the key reason growth has fallen back to near zero.
  3. Mexico's exports to the United States are doing extremely well, yet the gains from trade are not benefiting enough people, and the lack of growth should be regarded as a structural problem.

Related Articles:

  • Mexico Is Not Just the Top Supplier to the U.S. Now It Is the Top Buyer — Mexico is now both the largest buyer of U.S. exports and the largest source of U.S. imports, with U.S. goods exports to Mexico at $226.4bn versus $225.6bn to Canada and imports from Mexico totaling $354.9bn. Mexico's growth, including its middle class, has increased demand for U.S. goods among its more than 130 million people.
  • China Launches Sweeping Probe Into Mexican Tariffs As Trade War Widens — China has opened an investigation into Mexico's tariffs and trade restrictions on Chinese exports, including a proposed 50% tariff on Chinese cars and levies on about 1,400 products from countries lacking a trade deal with Mexico. China's commerce ministry says the measures would seriously damage Chinese companies' trade and investment interests.
  • China Delays Approval of BYD’s Mexico Plant Amid Fears Tech Could Leak to US — China's commerce ministry has withheld the approval that domestic automakers need to manufacture abroad, holding up BYD's planned Mexican car plant, which the company said would create 10,000 jobs and build 150,000 vehicles a year. Officials are concerned that Mexico's proximity to the US could give Mexico, and possibly the US, access to BYD's advanced technology and knowhow.

AI Summary. China's very high investment rates, combined with a shrinking workforce and slowing productivity, produce sharply diminishing returns, making its decades-old high-savings, high-investment growth model unsustainable. The author argues China's leaders resist a pivot toward consumption because of ideology and geopolitical ambition, with the leadership rejecting welfare spending as breeding dependency.

Paul Krugman Krugman Wonks Out
Date Posted:

With China’s high level of investment still not enough to absorb its massive annual saving, Krugram argues, China’s trade surplus “functions as a sort of safety valve, allowing China to escape the full consequences of its inadequate consumer demand.”

Why won't China's leaders shift growth toward consumption?

Core argument: China's high-savings, high-investment growth model of more than three decades is no longer sustainable, as very high investment rates colliding with a shrinking workforce and a productivity slowdown produce sharply diminishing returns on investment.

When very high rates of investment collide with a shrinking workforce and a productivity slowdown, the result is sharply diminishing returns on investment. Basically, Chinese businesses can’t profitably invest all the money Chinese consumers want to save. So the extremely-high-savings, extremely-high-investment model that has driven China’s economic strategy for more than three decades is no longer sustainable. A policy pivot [to boost consumption] that aimed to make economic growth sustainable while making families more financially secure would be a no-brainer — it would be popular as well as sensible. So why won’t China’s leaders do it? Much of the answer involves a combination of ideology and geopolitical ambition. Many people have quoted from a 2021 speech by Premier Xi Jinping, in which he declared, "To promote common prosperity, we must not engage in “welfare”. Some Latin American countries in the past have engaged in populism, and welfare in these countries has raised a group of “lazy people” with unearned incomes. As a result, the countries’ financial systems were overwhelmed and fell into the “middle-income trap”, that they were unable to extricate themselves from for a long time."

Takeaways by Macro Roundup® AI

  1. China's high-savings, high-investment growth model of more than three decades is no longer sustainable, as very high investment rates colliding with a shrinking workforce and a productivity slowdown produce sharply diminishing returns on investment.
  2. Chinese businesses cannot profitably invest all the money Chinese consumers want to save, and a policy pivot toward boosting consumption would make growth sustainable while making families more financially secure.
  3. Much of the explanation for China's leaders declining to pivot toward consumption involves ideology and geopolitical ambition, with Xi Jinping declaring in a 2021 speech that promoting common prosperity "must not engage in 'welfare,'" which he said raised "lazy people" in Latin America.

Related Articles:

  • China’s Economy: Rightsizing 2025, Looking Ahead to 2026 — The authors argue China's official growth figures are inconsistent with ten consecutive quarters of deflation, estimating that real GDP is around 11% below official levels, with most of the adjustment in investment. That would imply a drop of roughly 9 percentage points in China's share of global investment, helping explain its export surge.
  • 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.
  • Can China Continue to Export its Way Out of its Property Slump? — The International Monetary Fund estimates Chinese public sector debt near 125% of GDP and a combined on- and off-balance-sheet fiscal deficit possibly above 12% of GDP. Since the property bubble burst, net exports have added over a percentage point to annual growth on average, with the goods surplus approaching $1.2tn, or 6% of GDP.

AI Summary. Demographers estimate Japanese births will fall below 670,000 for the year, short of official projections of 749,000 that had not expected that level until 2041. Annual marriages, which in Japan are closely tied to births, have fallen below 500,000, about half the 1972 peak.

Leo Lewis Financial Times
Date Posted:

Japan’s 670,000 births in 2025, reflecting a ~3% decline y/y, are well under the government’s most pessimistic forecast. The number of annual marriages in Japan has fallen to less than 500,000, ~ half the 1972 peak.

Are Japanese births falling far faster than official projections?

Core argument: Demographics experts, using preliminary data for the first 10 months of the year, expect Japanese births in 2025 to come in below 670,000, versus the 749,000 projected by the National Institute of Population and Social Security Research.

The number of Japanese births this year is on track to fall short of even the government’s most pessimistic forecasts, deepening the challenge for Prime Minister Sanae Takaichi as she seeks to balance economic growth and limits on immigration with a rapidly shrinking population. Demographics experts, basing their calculations on preliminary data for the first 10 months of the year, expect that the total number of births of Japanese babies for 2025 is likely to come in below 670,000. Those estimates, compiled by the National Institute of Population and Social Security Research and last updated in 2023, had pointed to 749,000 Japanese babies born in 2025. The same projections had suggested the number of births would not fall below 670,000 until 2041. The number of annual marriages in Japan — where births outside of marriage is rare — has fallen to less than 500,000, about half the peak in 1972. With annual deaths also rising, the Japanese population shrank by just over 900,000 people in 2024.

Takeaways by Macro Roundup® AI

  1. Demographics experts, using preliminary data for the first 10 months of the year, expect Japanese births in 2025 to come in below 670,000, versus the 749,000 projected by the National Institute of Population and Social Security Research.
  2. The National Institute of Population and Social Security Research's projections, last updated in 2023, had suggested Japanese births would not fall below 670,000 until 2041.
  3. Annual marriages in Japan, where births outside marriage are rare, have fallen below 500,000, about half the 1972 peak, and with deaths rising the population shrank by just over 900,000 in 2024.

Related Articles:

  • Japan’s Labor Market Under Demographic Decline: Evolving Dynamics and Macroeconomic Implications — Japan's fertility rate stood at 1.15 in 2024 and its working-age population peaked in 1995, with the total population peaking in 2008. Rising labor force participation among women and people 65 and over has more than offset the shrinking working-age population, but further gains are limited since both rates already rank among the highest internationally.
  • East Asia’s Coming Population Collapse — United Nations projections show China's population falling 8%, Japan's 18%, South Korea's 12%, and Taiwan's 8% between 2020 and 2050, while the US population rises 12%. Working-age people per person over 65 are projected to drop to about 1.8 in China and 1.2 in Japan and South Korea.
  • Why Is The Japanese Yen Falling? — The author argues that Bank of Japan bond buying holds Japanese long-term government bond yields artificially below levels justified by the country's gross government debt, pushing risk premia into the currency instead and driving the yen lower. On this view, yen depreciation will continue until yields are allowed to rise far more, forcing fiscal consolidation.

AI Summary. A proposed California ballot measure would impose a one-time tax equivalent to 5% of assets on state residents worth more than $1bn, applying retroactively to anyone living in California on a set date, with five years to pay. Billionaires including tech investors and a Google co-founder are considering cutting their ties to the state as a result.

Ryan Mac, Theodore Schleifer and Heather Knight New York Times
Date Posted:

In response to a union-sponsored proposal for a wealth tax that would levy a 5% tax on individuals worth more than $1B, several high-profile businessmen are preparing to leave California. California Governor Gavin Newsom is opposed to the measure.

Does a proposed state wealth tax prompt billionaires to leave?

Core argument: A proposed California ballot measure from Service Employees International Union-United Healthcare Workers West would tax residents worth more than $1 billion the equivalent of 5% of their assets.

Billionaires including Peter Thiel, the tech venture capitalist, and Larry Page, a co-founder of Google, are considering cutting or reducing their ties to California by the end of the year because of a proposed ballot measure that could tax the state’s wealthiest residents. The moves are being driven by a potential California ballot measure from the health care union, Service Employees International Union-United Healthcare Workers West, the people said. The proposal calls for California residents worth more than $1 billion to be taxed the equivalent of 5% of their assets. If the measure gains enough signatures to reach the state ballot in November and wins approval, it will retroactively apply to anyone who lived in California as of Jan. 1, 2026. Those with $20 billion in assets who resided in the state on that date would face a one-time tax of $1 billion and have five years to pay it, according to the terms of the measure.

Takeaways by Macro Roundup® AI

  1. A proposed California ballot measure from Service Employees International Union-United Healthcare Workers West would tax residents worth more than $1 billion the equivalent of 5% of their assets.
  2. If the measure reaches the November state ballot and wins approval, it would apply retroactively to anyone residing in California as of Jan. 1, 2026, with a resident holding $20 billion facing a one-time $1 billion tax payable over five years.
  3. Billionaires including Peter Thiel and Google co-founder Larry Page are considering cutting or reducing their ties to California by the end of the year because of the proposed measure.

Related Articles:

  • Taxing Top Wealth: Migration Responses and Their Aggregate Economic Implications — Swedish data show that when a wealth-taxed entrepreneur emigrates, employment at their businesses falls 33%, value-added 34%, tax payments 50%, and investment 21%, but 60% of closed firms are absorbed by other domestic companies. The authors estimate aggregate effects on employment and investment are small.
  • Behavioral Responses to State Income Taxation of High Earners: Evidence from California — A California ballot measure raising top marginal income tax rates by up to 3 percentage points prompted an additional 0.8% of the affected tax base to leave the state, with an estimated income elasticity of 2.5–3.2 for high earners who stayed. The authors estimate these responses eroded 45.2% of windfall revenues within one year and 60.9% within two.
  • How to Tax Wealth — A wealth tax applies to net assets regardless of the return earned, making it equivalent to taxing an assumed rather than actual flow of capital income. As a result, effective tax rates on returns fall as returns rise and climb toward infinity as returns approach zero, with tax still owed on loss-making assets.

AI Summary. Poland will require real estate developers to include bomb shelter space in most new buildings, as it works to overhaul civilian defences against the threat of Russian aggression. Despite leading NATO in military spending at almost 5% of GDP, it has invested little in population protection, with most shelters dating to the communist era.

Raphael Minder Financial Times
Date Posted:

Poland will require bomb shelters to be built in most new buildings from 2026. The government is also allocating €3.8B for new bomb shelter construction, as the country prepares for a general war with Russia.

Is Poland requiring bomb shelters in new buildings to boost civilian defense?

Core argument: Poland will require real estate developers to allocate space for bomb shelters in most new buildings starting in 2026, as it overhauls civilian defences against the threat of Russian aggression.

Poland will force real estate developers to allocate space for bomb shelters in most new buildings from 2026, as the frontline state confronts the mammoth task of overhauling its lacklustre civilian defences against the threat of Russian aggression. Despite proportionally leading Nato in military spending, at almost 5% of GDP, the government has invested little in protecting its population. Most of its shelters were built in the communist era and are now in dire condition. It is a “gigantic problem”, said Sławomir Cenckiewicz, head of Poland’s national security bureau and a key adviser to President Karol Nawrocki. “We really have to increase our civilian resilience …Poland in recent years has focused on the modernisation of the armed forces and forgot about this.”

Takeaways by Macro Roundup® AI

  1. Poland will require real estate developers to allocate space for bomb shelters in most new buildings starting in 2026, as it overhauls civilian defences against the threat of Russian aggression.
  2. Poland leads NATO proportionally in military spending at almost 5% of GDP, but its government has invested little in protecting its population, with most shelters dating from the communist era and now in dire condition.
  3. Sławomir Cenckiewicz, head of Poland's national security bureau and a key adviser to President Karol Nawrocki, called the state of civilian defences a "gigantic problem," saying Poland focused on modernising its armed forces and forgot about civilian resilience.

Related Articles:

  • Military Youth Service, a Cold War Relic, Makes a Comeback in France — France is reviving voluntary military service as a rite of passage for young people, starting with a 10-month program aimed at recruiting 3,000 people, mostly age 18 or 19, to supplement 200,000 active troops, scaling to 50,000 a year by 2035. In a "major crisis," service would become mandatory for people with certain skills if Parliament authorizes a draft.
  • German Army Struggles to Get Gen Z Recruits ‘Ready for War’ — Germany's armed forces commissioner warned the country is not moving closer to its target of 203,000 active troops by 2031, as the military slightly shrank amid high dropout rates, with a quarter of new recruits leaving within six months. Conscientious objector applications reached 2,998, up from 200 in 2021.
  • Waking the Sleeping European Giant — Europe, at roughly 500m people and a $26tn economy with world-class aerospace, shipbuilding, pharmaceutical, vehicle and weapons manufacturers, has the material basis to be a military superpower. National militaries' preference for home-country suppliers has left subscale defense firms, and common procurement could raise output and lower unit costs.

Tuesday, December 30, 2025

AI Summary. Average hourly earnings have grown 30% since 2019 while consumer prices rose 26%, leaving real wages up 4%.

Torsten Sløk Apollo
Date Posted:
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Real wages are up 4% since 2019. During that period, the price level has risen 26%, outpaced by average hourly earnings, which grew 30%.

Have wages grown faster than consumer prices?

Core argument: Average hourly earnings have risen 30% since 2019 while the CPI price level rose 26%, leaving real wages up 4% over the period.

When discussing affordability, it is important to note that while the CPI price level has increased 26% since 2019, wages have increased 30%.

Takeaways by Macro Roundup® AI

  1. Average hourly earnings have risen 30% since 2019 while the CPI price level rose 26%, leaving real wages up 4% over the period.
  2. Wage growth of 30% since 2019 has outpaced the 26% increase in consumer prices, a point relevant to discussions of affordability.

Related Articles:

  • The Middle Class Is Buckling Under Almost Five Years of Persistent Inflation — US prices for goods and services are 25% above 2020 levels, and 44% of middle-income respondents in the University of Michigan consumer sentiment survey said their finances were worse than a year earlier versus 23% who said better, with most citing higher prices. Retailers report middle-income customers pulling back on discretionary spending.
  • Income In the United States: 2024 — U.S. median household income was $83,730, not statistically different from the prior year's $82,690, according to Census Bureau estimates. Across most demographic subgroups, median household income was higher or not statistically different from the prior year, with the exception of Black households, which saw a decline.
  • Affordability, Part III — Modern economies apart from Japan almost never experience outright deflation: Greece's slump with 28% unemployment brought only a few percent decline in prices, and the 2007-2009 U.S. recession slowed inflation without reversing it. Policymakers who promise to lower the overall price level cannot deliver and will face political backlash.

AI Summary. Manufacturing capacity carries military and geopolitical importance, as shown by economic warfare over products like semiconductors and magnets. The policy-relevant question is not whether manufacturing is geopolitically useful but how much should be spent boosting it given resource constraints, and whether to target defense, dual-use, chokepoint, or broad civilian production.

Chris Miller Chris Miller's Newsletter
Date Posted:
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Though sympathetic to the “reindustrialize America” impulse, and concerned about national security, Miller argues for more careful strategic thought. “Ships and magnets matter, while t-shirts don’t. What we disagree about is everything in between.”

How much should be spent boosting manufacturing, and which kinds?

Core argument: Sander Tordoir offers the best argument against embracing deindustrialization, that "Europe will need drones and tanks, not just consultants," since the ability to make things carries military and geopolitical importance.

The best argument against [an] embrace of deindustrialization came from Sander Tordoir, “Europe will need drones and tanks, not just consultants.” The ability to make stuff has military and geopolitical importance. The claim that manufacturing matters for geopolitical power is obvious in the abstract. We’ve all studied the “arsenal of democracy.” We’ve lived through economic warfare around manufactured products like chips and magnets. Yet the policy relevant question is not “is manufacturing geopolitically useful?” but rather “given resource constraints and a preexisting factor allocation, how much should we spend to boost our manufacturing capabilities?” Should we target a) defense, b) dual use, c) chokepoint, or d) across-the-board civilian production? We haven’t put much collective thought into the answers. We agree that chips and magnets matter, while t-shirts don’t. What we disagree about is everything in between.

Takeaways by Macro Roundup® AI

  1. Sander Tordoir offers the best argument against embracing deindustrialization, that "Europe will need drones and tanks, not just consultants," since the ability to make things carries military and geopolitical importance.
  2. The policy-relevant question is not whether manufacturing is geopolitically useful but how much should be spent boosting manufacturing capability given resource constraints and an existing factor allocation.
  3. Whether to target defense, dual-use, chokepoint, or across-the-board civilian production has received little collective thought, with agreement that chips and magnets matter and t-shirts do not, and disagreement over everything in between.

Related Articles:

  • Capital Is Making a Comeback — Tangible investment in property, factories and equipment fell from 12.5% to 8.5% of private gross domestic product, while intangible investment in intellectual property, software and process knowledge rose from about 11.5% to 16.75%. The author argues demand for tangible capital investment will now have to rise.
  • 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.
  • Industrial Policy and Economic Security — 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.

AI Summary. The largest US private companies raised a record $150bn, surpassing the prior high of $92bn, as investors poured money into leading artificial intelligence firms including OpenAI and Anthropic. Venture capitalists say the cash would help insulate founders against an investment downturn while also funding growth.

George Hammond Financial Times
Date Posted:

According to Carta data, the “hottest” American AI startups raised $150B in 2025, in part as a hedge against a potential AI “bust” in 2026.

Are AI start-ups raising record cash to guard against a downturn?

Core argument: The biggest US private companies raised a record $150bn in 2025, according to PitchBook data, surpassing the previous high of $92bn set in 2021, as investors rushed to back top AI groups including OpenAI and Anthropic.

Silicon Valley’s hottest start-ups have raised $150bn in funding this year as their financial backers advise them to build “fortress balance sheets” to protect them in case the artificial intelligence investment boom turns to bust in 2026. PitchBook data showed that the biggest US private companies raised a record haul in 2025, smashing the previous high of $92bn raised in 2021, with investors rushing to back top AI groups such as OpenAI and Anthropic. Venture capitalists and industry experts said the money would help insulate founders against an investment downturn as public markets begin to fret over heavy spending on AI infrastructure — as well as fuelling growth.

Takeaways by Macro Roundup® AI

  1. The biggest US private companies raised a record $150bn in 2025, according to PitchBook data, surpassing the previous high of $92bn set in 2021, as investors rushed to back top AI groups including OpenAI and Anthropic.
  2. Venture capital backers are advising AI start-ups to build "fortress balance sheets" to protect them in case the artificial intelligence investment boom turns to bust in 2026.
  3. Venture capitalists and industry experts said the funding would both insulate founders against an investment downturn and fuel growth, as public markets begin to fret over heavy spending on AI infrastructure.

Related Articles:

  • Is It a Bubble? — Transformational technologies have historically generated excessive enthusiasm and investment, producing more infrastructure than needed, asset prices that prove too high, and losses for those funding them, while also accelerating adoption. AI enthusiasm is argued to fit this pattern, with debt financing having the potential to magnify the effects.
  • 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.
  • Bursting the Bubble in the AI Debate — Amazon, Alphabet, Microsoft, Meta, and Oracle have shifted from asset-light business models to a capital-intensive approach, while investors continue to value them as though nothing material has changed. Valuing their property, plant, and equipment at cost and applying a 10x price-to-book multiple to the rest would put their market values at roughly half current levels.

AI Summary. Per capita GDP in the US grew a cumulative 20% over a decade, about 2% a year, outpacing Latin American economies; Colombia, Peru and Chile fared best in the region but still fell well short, while Mexico and Brazil underperformed. The author argues Ecuador's and Argentina's dollar pegs preclude growth.

Robin Brooks Robin Brooks Substack
Date Posted:

Robin Brooks attributes low per capita GDP growth in Latin America btw 2014 and 2024 relative to the US to “poor governance that allows a narrow elite to capture most of the wealth being created.”

How does Latin American per capita growth compare with America's?

Core argument: U.S. per capita GDP grew a cumulative 20% between 2014 and 2024, about 2% per year, a pace no Latin American economy comes remotely close to matching.

The chart shows growth in per capita GDP between 2014 and 2024. There’s a couple of points worth making. First, no one comes remotely close to the US, which grew a cumulative 20% in that decade, i.e. two percent per year. Second, there are three groups of countries in Latin America: (i) Colombia (CO), Peru (PE) and Chile (CL); (ii) Mexico (MX) and Brazil (BR); and (iii) Ecuador (EC) and Argentina (AR). The first group has done reasonably well compared to the rest of the region, but still falls substantially short of the US. The second group should be doing much better and it’s here that the growth puzzle is most vexing and profound. The third group is countries that insist on pegging to the Dollar (Ecuador’s dollarization is really just an extreme version of a Dollar peg), which kills any hope for growth.

Takeaways by Macro Roundup® AI

  1. U.S. per capita GDP grew a cumulative 20% between 2014 and 2024, about 2% per year, a pace no Latin American economy comes remotely close to matching.
  2. Latin America splits into three growth groups over 2014–2024, with Colombia, Peru and Chile doing reasonably well by regional standards yet still falling substantially short of the U.S.
  3. Mexico and Brazil should be doing much better, presenting the region's most vexing growth puzzle, while Ecuador's dollarization and Argentina's dollar peg kill any hope for growth, the author argues.

Related Articles:

  • The Unexpected Winner of Rising American Tariffs Is Mexico — Mexican government data show manufacturing exports to the U.S. rose almost 9% over an 11-month period versus a year earlier, as a nearly 6% drop in auto-industry exports was offset by a 17% surge in other manufactured goods. U.S.–Mexico goods trade is on track to reach a record near $900bn.
  • Mexico’s Growth Stagnation — Mexico's growth has fallen to near zero as an investment boom from recent years faded into a drag on growth and private consumption returned to the weakness seen in the five years before the pandemic. Despite strong exports to the US, the gains from trade are not reaching enough of the population, making the stagnation a structural problem.
  • An Anatomy of the Great Reallocation in US Supply Chain Trade — China's share of US direct imports fell from a peak of about 22% in 2017 to roughly 16% in 2022, 13% in 2024, and about 9% by mid-2025 — matching its share when it joined the World Trade Organization. Vietnam, Mexico, and more recently Taiwan have been the main gainers.