Edward Conard

Top Ten New York Times Bestselling Author

  • “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
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “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
  • “…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
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…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
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Wednesday, January 7, 2026

AI Summary. Euro area growth is forecast at 1.4% on a fourth-quarter-over-fourth-quarter basis, slightly above 1.3%, as German fiscal expansion and resilient consumer spending are offset by structural drags. The authors estimate China's export push will cut real GDP by 0.9% in Germany and 0.6% in Italy over four years.

Sven Jari Stehn, Filippo Taddei, Alexandre Stott, James Moberly, et al. Goldman Sachs
Date Posted:

GS forecasts overall Euro area real growth of 1.4% in 2026 Q4/Q4 as fiscal expansion in Germany is offset by the ongoing China Shock, which GS forecasts will drive a .9% hit to German GDP over the next four years.

Will fiscal expansion lift Euro area growth despite Chinese export competition?

Core argument: Euro area growth is forecast at 1.4% on a Q4/Q4 basis this year, up slightly from 1.3% the prior year and broadly in line with consensus.

We expect 2026 to be a better year for the Euro area economy than 2025 on the back of the German fiscal expansion, reduced global tariff tensions and resilient consumer spending. That said, we only look for a small growth improvement as Europe faces notable structural drags from Chinese export competition and weak potential growth. As a result, we forecast Euro area growth of 1.4% on a Q4/Q4 basis this year, up slightly from last year’s pace of 1.3%, but broadly similar to the consensus. Cyclical improvement is likely to be capped by significant structural headwinds. In particular, our analysis suggests that China’s renewed export push will weigh on European trade via rising imports and higher export competition. We estimate that these effects are likely to be most pronounced in Germany with a total 0.9% hit to real GDP over the next four years, followed by Italy (0.6%) with smaller effects in France and Spain (0.4% each).

Takeaways by Macro Roundup® AI

  1. Euro area growth is forecast at 1.4% on a Q4/Q4 basis this year, up slightly from 1.3% the prior year and broadly in line with consensus.
  2. The cyclical improvement is attributed to German fiscal expansion, reduced global tariff tensions and resilient consumer spending, while structural drags from Chinese export competition and weak potential growth cap the gain.
  3. China's renewed export push is estimated to weigh on European trade through rising imports and higher export competition, with a total hit to real GDP over the next four years of 0.9% in Germany, 0.6% in Italy and 0.4% each in France and Spain.

Related Articles:

  • 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.
  • Europe’s Green Energy Rush Slashed Emissions—and Crippled the Economy — Europe has cut carbon emissions 30% from 2005 levels versus 17% in the US, while the shift to renewables has helped push electricity prices higher across much of the continent. Average electricity prices for heavy industry in the European Union are roughly 2x those in the US and 50% above China.
  • The Future of European Competitiveness – A Competitiveness Strategy for Europe — A European Union competitiveness report attributes the EU's labour productivity growth gap with the US largely to weaker activity in information and communications technology and large-scale digital services; excluding main ICT sectors, EU productivity was broadly at par with the US from 2000-2019. It estimates Europe's investment share must rise about 5 percentage points of GDP.

AI Summary. Irregular migrant arrivals to the European Union recorded by its border agency have fallen about 25% over 11 months and have declined since a peak of 380,000, while new asylum applications dropped roughly 26% over nine months as fewer Syrians sought protection after the Assad regime's fall.

Laura Dubois Financial Times
Date Posted:

In 2015, over 1.75mm irregular migrants entered the EU seeking protection. An EU crackdown on irregular migration has brought that number to <250,000 in 2025, down from the recent peak of 380,000 in 2023.

Are irregular migrant arrivals and asylum applications in Europe declining?

Core argument: Irregular migrant arrivals to the EU recorded by Frontex fell 25% in the 11 months to November 2024 and have declined continuously since a peak of 380,000 arrivals in 2023.

After a major policy overhaul over the past two years [European Commission president Ursula von der Leyen said], "Europe is managing migration responsibly. The figures speak for themselves." Irregular arrivals of migrants to the EU recorded by its border agency Frontex dropped by 25% in the 11 months to November 2024, and have been continuously declining since a recent peak of 380,000 arrivals registered in 2023. New asylum applications have also decreased by around 26% in the first nine months of last year, according to Eurostat data, as fewer Syrians are applying for protection since the fall of the authoritarian regime of Bashar al-Assad in late 2024. The fall in the overall number of irregular arrivals recorded in 11 months of 2025 has been mostly driven by fewer people arriving through the eastern Mediterranean and western Africa.

Takeaways by Macro Roundup® AI

  1. Irregular migrant arrivals to the EU recorded by Frontex fell 25% in the 11 months to November 2024 and have declined continuously since a peak of 380,000 arrivals in 2023.
  2. New asylum applications in the EU dropped around 26% in the first nine months of last year, according to Eurostat data, as fewer Syrians sought protection after the fall of Bashar al-Assad's regime in late 2024.
  3. European Commission president Ursula von der Leyen said Europe is managing migration responsibly after a major policy overhaul, while the fall in irregular arrivals recorded over 11 months of 2025 was driven mostly by fewer people coming via the eastern Mediterranean and western Africa.

Related Articles:

  • Africa Needs 1 Billion Jobs by the End of the Century. Where Will It Find Them? — Africa's population, now about 1.5bn, is projected to reach 4bn by 2100, with sub-Saharan Africa approaching 3.5bn and Nigeria's working-age population forecast to exceed 320m. Between 2005 and 2020, Congo, Nigeria, Ethiopia and other large states averaged only one job created for every two entrants to the working-age population.
  • Germany Opened Its Doors to Migrants. Now It’s Struggling to Cope — Germany recorded 6.43m more arrivals than departures over a decade, the largest inflow of any country outside the US, with migrants at 18.8% of the population versus 15.3% in the US. Noncitizens, 15% of the population, accounted for 41% of crimes, up from 28.7%, according to police statistics.
  • Changing Sub-Saharan Africa’s Growth Trajectory — Sub-Saharan Africa's working-age population is growing nearly 3% a year, versus close to zero in much of the world, and is projected to exceed China's within about a decade and reach a quarter of the global total. With modest productivity growth near 2%, the region is likely among the world's fastest-growing.

AI Summary. Purchasing managers' surveys show the US manufacturing contraction has extended into a third year, with factory employment down 0.6% over the year to November. Surveys indicate manufacturing export orders and import volumes contracted strongly following the announcement of high tariffs, and factory managers report confusion and difficulty making long-term plans.

Economist Staff The Economist
Date Posted:
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There is little evidence of reshoring as measured by the US manufacturing purchasing managers’ index, which shows that new export orders and imports have been contracting since 2022, and have downticked sharply since Liberation Day.

Have tariffs revived US manufacturing?

Core argument: U.S. manufacturing employment fell 0.6% in the year to November, and the manufacturing contraction indicated by purchasing managers' surveys is entering its third year after the two-year recession that preceded Trump's January inauguration.

By the time Mr. Trump took office in January, America had been in a two-year manufacturing recession, according to purchasing managers’ surveys. Nearly a year on, however, the Trumpian manufacturing renaissance is conspicuous by its absence. The two-year manufacturing contraction is now hitting its third year, and factories have continued to shed jobs; employment fell by 0.6% in the year to November. Surveys suggest that export orders and import volumes for manufacturing have registered a strong contraction since Mr. Trump announced high tariffs on “Liberation Day” in April, one that goes beyond the wider weakness in manufacturing. Factory bosses report confusion and difficulty making long-term plans.

Takeaways by Macro Roundup® AI

  1. U.S. manufacturing employment fell 0.6% in the year to November, and the manufacturing contraction indicated by purchasing managers' surveys is entering its third year after the two-year recession that preceded Trump's January inauguration.
  2. Surveys indicate manufacturing export orders and import volumes have contracted strongly since Trump announced high tariffs on "Liberation Day" in April, a decline beyond the broader weakness in manufacturing.
  3. Factory bosses report confusion and difficulty making long-term plans, and the Trumpian manufacturing renaissance is absent nearly a year into Trump's term.

Related Articles:

  • Does Manufacturing Matter? — 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.
  • The Incidence of Tariffs: Rates and Reality — The authors estimate that tariff pass-through into US import prices was 80% in 2018–2019 and 94% more recently, while exchange-rate pass-through was low in both periods. Because imported inputs matter for US manufacturing, they argue much of the tariff burden falls on US producers, roughly a 1–2 percentage-point tax on manufacturing.
  • America is Losing Blue Collar Jobs — US industrial employment has fallen by 65,000 over the past year and is down 123,000 from its early-2025 peak, with manufacturing and transportation accounting for most losses and construction job gains slowing to 52,000 from 191,000 the prior year. The author attributes the decline to tariffs raising input costs, immigration enforcement hitting construction, and cuts to industrial policy subsidies.

AI Summary. US tariffs as high as 35% on certain goods not compliant with the US-Mexico-Canada trade agreement have coincided with falling Canadian exports, weaker business confidence and investment, a softening labor market, and a contraction in Canadian output. Canada has responded by aiming to double non-US exports within 10 years, expanding fiscal spending and deregulation, and keeping monetary policy loose.

Ben Melkman, Adam Zimbler and Cengiz Cemaloglu Bridgewater Associates
Date Posted:

Before the new American tariff regime in 2025, exports drove ~⅓ of Canada’s national income, with ~75% of exports going to the US. In response, Ottawa is attempting to double their share of exports to countries other than the US by 2035.

How is Canada responding to US tariffs and falling exports?

Core argument: US tariffs as high as 35% on certain non-USMCA-compliant goods, alongside uncertainty over the USMCA's future, sent Canadian exports plummeting and pushed Canadian GDP growth into contraction in Q2 2025.

The shift in US policy created a significant domestic economic shock—with tariffs as high as 35% on certain non-USMCA-compliant goods and the future of the USMCA itself highly uncertain, Canadian exports have plummeted. Business confidence and investment fell accordingly, the labor market continued to soften, and Canadian GDP growth fell into contraction in Q2 2025. With little leverage to force US policy retracement, Canada has had to look inward and rapidly adapt. Canadian policy makers have responded with a three-pronged approach aimed at reducing dependence on the US and driving economic growth: [First], they are diversifying trade away from the US with an explicit goal of doubling non-US exports over the next 10 years. [Second], they are pursuing rapid fiscal expansion and deregulation, planning to spend billions of new dollars on infrastructure and defense projects, mandating the federal government to procure from domestic producers, fast-tracking projects of national importance, and decreasing business and personal income taxes to stimulate growth, among other policies. [Third], the Bank of Canada has continued to run loose and more proactive monetary policy despite an acceleration in underlying inflation measures.

Takeaways by Macro Roundup® AI

  1. US tariffs as high as 35% on certain non-USMCA-compliant goods, alongside uncertainty over the USMCA's future, sent Canadian exports plummeting and pushed Canadian GDP growth into contraction in Q2 2025.
  2. Canada is diversifying trade away from the US with an explicit goal of doubling non-US exports over the next 10 years, as business confidence, investment, and the labor market have weakened.
  3. Canadian policy makers are pursuing fiscal expansion and deregulation—billions in new infrastructure and defense spending, domestic procurement mandates, fast-tracked projects of national importance, and lower business and personal income taxes—while the Bank of Canada keeps monetary policy loose despite accelerating underlying inflation.

Related Articles:

  • ‘Just Being Ghosted’: Canada’s Youth Face Deepening Job Crisis — Canada's unemployment rate has risen to 6.9% from 6.6% at the start of the year, with youth unemployment at 15% and the share of young people employed at its lowest level since 1998, excluding the Covid-19 years. The share of job seekers unemployed longer than six months is also the largest since 1998.
  • Canada’s Growth Challenge: Why The Economy Is Stuck In Neutral — Canada's labor productivity is about 30% below the United States and roughly 10% below Australia's, and Canada has fallen from the 6th to the 18th most productive economy in the OECD. The authors attribute this to a shortfall in investment outside real estate, construction, and public services, plus negative multifactor productivity growth.
  • A “Heat Dome” of Immigration — Canada has adopted some of the most aggressive immigration policies in the OECD, adding 1.273m residents in a year to reach a population of 41m — proportionally equivalent to the US admitting more than 10m immigrants annually. Canadians are increasingly angry as housing prices soar, sprawl expands, and traffic worsens.

AI Summary. The authors estimate that erosion of the premium investors pay for long-term US Treasuries reflects a weakening of their hedging property, accounting for roughly a 12 basis point drop in that premium. Short-term Treasuries retained their safe-asset hedging role, consistent with a rotation toward shorter maturities and gold.

Viral Acharya and Toomas Laarits National Bureau of Economic Research
Date Posted:

A substantial fraction of the run-up in long maturity Treasury yields associated with the Tariff War can be attributed to a reduction in their value as a hedging asset, as the covariance between stock and bond returns turned positive.

Does weaker hedging explain the drop in long-term Treasury convenience yields?

Core argument: Applying estimates from a 2005–2024 sample, the authors calculate that the shift in the long-term bond's hedging property can account for approximately a 12 bps drop in Treasury convenience yields in April 2025.

[The convenience yield is proxied by] the yield differential between a synthetic nominal Treasury—constructed out of Treasury Inflation Protected Security (TIPS) and inflation swaps—and a traded nominal Treasury. We construct the TIPS-Treasury premium at the 2, 5, and 10-year horizons using the nominal and real fitted yield curves. Convenience yield erosion for long bonds is consistent with a reduction in the hedging property, reflected in a rising stock-bond covariance. The short end of the Treasury curve, however, continued to exhibit the safe-asset hedging property. April 2025 stands at odds with the historical data in that the covariance between convenience yield innovations and stock prices was positive. Applying estimates from the 2005-2024 sample, this shift in the hedging property of the long-term bond can account for an approximately 12 bps drop in convenience yields in April 2025. These effects are consistent with a withdrawal of safe-asset investors from long-term Treasuries and a rotation towards shorter-term Treasuries and gold. On days where Treasuries were a risk asset - comoving positively with equity returns – gold instead behaved as a hedge, showing negative correlations with equity returns.

Takeaways by Macro Roundup® AI

  1. Applying estimates from a 2005–2024 sample, the authors calculate that the shift in the long-term bond's hedging property can account for approximately a 12 bps drop in Treasury convenience yields in April 2025.
  2. April 2025 stands at odds with historical data in that the covariance between convenience yield innovations and stock prices was positive, while the short end of the Treasury curve continued to exhibit the safe-asset hedging property.
  3. On days when Treasuries comoved positively with equity returns, behaving as a risk asset, gold instead acted as a hedge with negative correlations to equity returns, consistent with safe-asset investors withdrawing from long-term Treasuries and rotating toward shorter-term Treasuries and gold.

Related Articles:

  • The Debasement Trade Roars Back — Currencies of low-public-debt countries such as Switzerland and Sweden are showing increasing correlation with daily moves in gold and silver prices. Sweden's krona has traditionally been highly volatile without safe-haven attributes, a pattern the article attributes to the "debasement trade.
  • 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.
  • Are U.S. Treasuries Still “Convenient”? — Measures of the extra value investors place on U.S. Treasuries for their liquidity and safety have declined, with the AAA-corporate-to-Treasury spread falling from 67 to 36 basis points and the 10-year swap spread moving from 2 to 26 basis points. Such declines are consistent with large fiscal deficits and higher government debt.

Thursday, January 8, 2026

AI Summary. US nonfarm productivity, or employee output per hour, rose at a 4.9% annualized rate following an upwardly revised 4.1% gain the prior quarter, according to the Bureau of Labor Statistics. Unit labor costs fell 1.9% after a prior-quarter decline, the first back-to-back drop since 2019.

Vince Golle Bloomberg
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Productivity, or nonfarm employee output per hour, soared to a 4.9% annualized rate in Q3 – its highest pace since 2023 – back-to-back with a strong Q2, revised upward to 4.1%. Unit labor costs declined by 1.9% as efficiency gains offset wage gains.

Is US productivity accelerating while labor costs fall?

Core argument: US nonfarm productivity rose at a 4.9% annualized rate, its fastest pace in two years, following an upwardly revised 4.1% gain in the second quarter, according to the Bureau of Labor Statistics.

Productivity, or nonfarm employee output per hour, soared at a 4.9% annualized rate after an upwardly revised 4.1% advance in the second quarter, data from the Bureau of Labor Statistics showed Thursday. US economic growth powered ahead in the third quarter at the fastest pace since 2023, despite a slowing labor market. Unit labor costs — what businesses pay employees to produce one unit of output — dropped 1.9%, following a decrease in the prior quarter. That marked the first back-to-back declines since 2019. In addition to helping contain labor costs, the resurgence in productivity in mid-2025 suggests companies are attempting to mitigate the impact of higher duties on imported goods. It also highlights how companies can use technology to get by with lean staffing. The latest figures may foreshadow future productivity gains, with the flood of investment in artificial intelligence and various incentives for capital spending in President Donald Trump’s One Big Beautiful Bill Act. The drop in employment costs illustrates a bifurcation in the economy, whereby the labor market has softened despite solid economic growth.

Takeaways by Macro Roundup® AI

  1. US nonfarm productivity rose at a 4.9% annualized rate, its fastest pace in two years, following an upwardly revised 4.1% gain in the second quarter, according to the Bureau of Labor Statistics.
  2. Unit labor costs fell 1.9% after declining in the prior quarter, the first back-to-back drops since 2019, illustrating a bifurcated economy in which the labor market has softened despite solid growth.
  3. The mid-2025 productivity resurgence suggests companies are attempting to mitigate the impact of higher duties on imported goods and using technology to get by with lean staffing, while AI investment and capital-spending incentives in the One Big Beautiful Bill Act may foreshadow further gains.

Related Articles:

  • SF FedViews: Solid Growth, but Small Cracks Have Emerged — Since the second half of 2023, four-quarter US productivity growth has averaged nearly 2.5%, well above the pre-pandemic trend of about 1% to 1.25%, supporting real GDP growth. It remains unclear whether this reflects a higher productivity regime fostered by rising AI use or a temporary post-pandemic reorganization surge.
  • Industry Growth Patterns: A Closer Look At Output, Productivity, And Hours Worked From 1990 To 2024 — Since 1990, U.S. output growth has come mostly from productivity gains rather than hours worked, with productivity growing faster than hours in every period; productivity grew roughly 2.5x as fast as hours from 2007 to 2019 and more than 4x as fast from 2019 to 2024. Output growth decelerated from 1990 to 2019 before a moderate resurgence after 2019.
  • OECD Economic Outlook, Volume 2025 Issue 2: Resilient Growth but with Increasing Fragilities — U.S. real GDP grew at a 1.1% annualized rate over the first half of 2025, but excluding booming AI-related investment output contracted 0.1%, with non-AI investment weakening. The OECD identifies a correction in equity markets lifted by expectations of high AI returns as a key downside risk to its projections.

AI Summary. Japan's government debt-to-GDP ratio has continued to decline despite an ongoing primary deficit, because the government's interest payment rate (0.8%) is far below nominal GDP growth (3.9%), a gap the authors call the widest since 1980 and worth roughly -7 percentage points a year.

Akira Otani, Tomohiro Ota, Yuriko Tanaka and Andrew Tilton Goldman Sachs
Date Posted:

Japan’s Debt-to-GDP is falling at about 7pp per year, despite primary deficits, and will continue to fall until at least 2040 in all 3 GS scenarios; Japan is in a “bonus phase” where the effective interest rate (2.5% in FY25) is greater than nominal growth (3.9% in FY25).

Can a debt-to-GDP ratio fall while deficits continue?

Core argument: Japan's gap between its government interest payment rate (FY2025: 0.8%) and nominal GDP growth (3.9%) has widened to its largest since 1980, producing a natural decline in the debt-to-GDP ratio averaging about -7 pp per year.

The government debt-to-GDP ratio, one of the major indicators of fiscal soundness, has continued to decline in Japan—in contrast to other developed countries—and is expected to continue falling even after accounting for this fiscal year's supplementary budget and next fiscal year's initial budget. The decline in the government debt-to-GDP ratio, despite the ongoing primary deficit, is due to the “r – g effect” - “natural decline” in the government debt-to GDP ratio that occurs when the government's interest payment rate (r) (interest payments ÷ outstanding government debt), which is the growth rate of the numerator, is lower than the nominal GDP growth rate (g), the growth rate of the denominator. In Japan, the gap between the interest payment rate (FY2025: 0.8%) and the GDP growth rate (same period: 3.9%) has widened to its largest level since 1980, and as a result, the natural decline in the government debt-to-GDP ratio has recently averaged about -7 pp per year. For this reason, it can be said that the current Japanese economy is in a "bonus stage," where fiscal soundness is not easily undermined even with fiscal deficits. [This will diminish over time], as we expect the BOJ to accelerate its pace of rate hikes from once a year to semi-annually, with the policy rate reaching 1% with a 25bp hike in July 2026. Our view on the terminal rate is 1.5%, equal to the neutral rate level.

Takeaways by Macro Roundup® AI

  1. Japan's gap between its government interest payment rate (FY2025: 0.8%) and nominal GDP growth (3.9%) has widened to its largest since 1980, producing a natural decline in the debt-to-GDP ratio averaging about -7 pp per year.
  2. Japan's government debt-to-GDP ratio continues to fall despite an ongoing primary deficit, in contrast to other developed countries, and is expected to keep declining even after this fiscal year's supplementary budget and next fiscal year's initial budget.
  3. The Bank of Japan is expected to accelerate rate hikes from once a year to semiannually, taking the policy rate to 1% with a 25bp hike in July 2026 and to a terminal rate of 1.5%, equal to the neutral rate.

Related Articles:

  • Japanese Births Set To Fall Below Lowest Official Forecasts In 2025 — 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.
  • 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.
  • 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. Japan's net government debt equals 120% of GDP, the lowest ratio since 2009, with gross debt at about 233% and projected to reach 195% by 2034. Analysts attribute the decline to nominal economic growth, which includes inflation rather than stripping it out.

Chris Anstey Bloomberg
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Japan’s gross outstanding debt has fallen to 233% of GDP, and is set to hit 195% in 2034, its lowest level since 2008. Its net debt, which subtracts debt held by the BOJ and illiquid assets held by the government, among other things, is now 120% of GDP.

Does nominal growth including inflation shrink a government debt burden?

Core argument: Japan's net debt, excluding government-held assets, equals 120% of GDP according to Morgan Stanley estimates, the lowest ratio since 2009 based on International Monetary Fund figures.

The fiscal austerians at Japan’s powerful Ministry of Finance would be the last ones to advertise it, but the nation long known as the world’s biggest debtor has been steadily shrinking its borrowing burden. The achievement reflects a key insight of the late Prime Minister Shinzo Abe’s so-called Abenomics program: The importance of nominal economic growth. Abe had even set a target for nominal GDP, which — unlike real GDP, the metric most often cited in economic coverage — doesn’t strip out inflation. That’s what’s taking down Japan’s debt burden. On a net basis (excluding assets held by the government), outstanding borrowing equals 120% of GDP, according to Morgan Stanley’s estimates. And that marks the lowest ratio since 2009, International Monetary Fund figures show. MOF doesn’t like net figures, warning that many government assets are illiquid and unlikely to be sold for cash. (Some future privatizing administration may have other ideas.) The ministry instead emphasizes gross debt [which. By that count, Japan’s ratio has come down to about 233%, on a trajectory to hit 195% by 2034, Bloomberg Economics estimates — a projection that would take it to the lowest since 2008.

Takeaways by Macro Roundup® AI

  1. Japan's net debt, excluding government-held assets, equals 120% of GDP according to Morgan Stanley estimates, the lowest ratio since 2009 based on International Monetary Fund figures.
  2. Japan's gross debt ratio, the measure emphasized by the Ministry of Finance, has fallen to about 233% and is projected by Bloomberg Economics to reach 195% by 2034, which would be the lowest since 2008.
  3. The decline in Japan's debt burden reflects nominal GDP growth, which unlike real GDP does not strip out inflation, a metric the late Prime Minister Shinzo Abe targeted under Abenomics.

Related Articles:

  • Japan Raises Interest Rates To Highest Level In 30 Years — The Bank of Japan raised its policy rate by 0.25 percentage points to around 0.75%, a three-decade high, and signalled readiness to continue tightening if conditions allow. The 10-year Japanese government bond yield rose 0.05 percentage points, passing 2% to its highest level since 1999, while the yen weakened to ¥156.77 per dollar.
  • 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. An executive order requires major defense contractors to end stock buybacks and dividends and cap executive pay at $5m a year until they invest more in factories and research, alongside a demand that Congress raise annual defense spending by over 50% to $1.5tn. Whether a president can mandate private capital allocation is unclear.

Anthony Capaccio and Siddharth Philip Bloomberg
Date Posted:

Trump called for a 50% increase in defense spending and issued an executive order requiring major defense contractors to stop buybacks, cease issuing dividends, and cap executive pay until they expand capex and R&D spending.

Can a president dictate how defense contractors deploy their capital?

Core argument: Trump demanded that Congress raise annual defense spending by more than 50% to $1.5 trillion for 2027.

[Trump] demanded that Congress heighten annual defense spending by more than 50% to $1.5 trillion for 2027. Trump signed an executive order [requiring] major defense contractors that work with the government end stock buybacks, stop issuing dividends and cap executive pay at $5 million a year until they invest more in factories and research to speed development. It remains unclear whether a president can mandate how private companies deploy their capital. Defense giants such as Lockheed, RTX, Northrop and General Dynamics spent nearly $50 billion cumulatively in 2023 and 2024 on dividends and share repurchases, Jefferies analysts said in a December research note. That compares to about $39 billion they spent on research and development and capital expenditures during the same period.

Takeaways by Macro Roundup® AI

  1. Trump demanded that Congress raise annual defense spending by more than 50% to $1.5 trillion for 2027.
  2. Trump signed an executive order requiring major defense contractors working with the government to end stock buybacks, stop issuing dividends and cap executive pay at $5 million a year until they invest more in factories and research to speed development.
  3. Lockheed, RTX, Northrop and General Dynamics spent nearly $50 billion cumulatively in 2023 and 2024 on dividends and share repurchases, against about $39 billion on research and development and capital expenditures over the same period, Jefferies analysts said.

Related Articles:

  • The Intellectual Spoils of War? Defense RD, Productivity and International Spillovers — The authors estimate that a 10% increase in government-financed R&D, largely defense, is associated with a 4.3% rise in privately funded R&D across OECD countries, indicating "crowding in" rather than "crowding out." They also find international spillovers raise private R&D abroad, though the overall effect on US productivity growth is modest.
  • ‘We Do Fail … a Lot’: Defense Startup Anduril Hits Setbacks With Weapons Tech — Defense startup Anduril has hit setbacks across several weapons programs, including engine damage to its unmanned Fury jet fighter in a ground test, a 22-acre fire caused by a counterdrone system test, and software that struggled to command unmanned boats. Former employees report its systems in Ukraine proved vulnerable to jamming.
  • Pentagon Pushes to Double Missile Production for Potential China Conflict — The Pentagon is pressing weapons makers to detail how they could raise output of 12 priority munitions for a potential conflict with China to 2.5x current volumes, and to describe how they might attract private capital or license technology to third-party manufacturers. Patriot interceptors are a particular priority, with the goal of roughly 2,000 per year.

AI Summary. South Korea's Hanwha Ocean, which bought the Philadelphia Shipyard, has pledged $5bn in upgrades and aims to produce up to 20 ships a year there, up from one or two recently, using automation and robotics from its South Korean operations. It is in talks with the Pentagon over potential vessel deals.

Timothy Martin Wall Street Journal
Date Posted:

Hanwha is investing at least $5B in the Philadelphia Shipyard in an effort to increase annual output from 1 or 2 ships to 20, and is seeking space to expand capacity beyond that.

Can foreign investment revive American commercial shipbuilding capacity?

Core argument: Hanwha Ocean aims to produce up to 20 ships a year at the Philadelphia Shipyard it bought just over a year ago, up from recent annual output of one or two vessels.

It was just over a year ago that Hanwha Ocean, one of the world’s largest shipbuilders, bought the Philadelphia Shipyard, a storied naval yard that has shriveled under competition from Asian competitors, particularly in China. Hanwha, which has deep pockets and extensive shipbuilding know-how, has vowed to plow $5 billion into upgrades and dramatically multiply the workforce. Hanwha is already in active conversations with the Trump administration, and primarily the Pentagon, for potential deals to make surface, subsurface and unmanned vessels, said Michael Coulter, who heads Hanwha Defense USA, the U.S. subsidiary of the South Korean conglomerate that makes ships, munitions and other military hardware. But first, “we simply need more space,” he said. The company aims to ultimately crank out up to 20 ships a year in Philadelphia, up from annual output of just one or two vessels recently. It plans to bring in modernized manufacturing methods—such as automation and robotics—from the firm’s world-class South Korean operations.

Takeaways by Macro Roundup® AI

  1. Hanwha Ocean aims to produce up to 20 ships a year at the Philadelphia Shipyard it bought just over a year ago, up from recent annual output of one or two vessels.
  2. Hanwha has pledged $5 billion for upgrades at the Philadelphia Shipyard and a greatly expanded workforce, importing modernized methods such as automation and robotics from its South Korean operations.

Related Articles:

  • Ship Wars — Shipyards tied to China's defense industrial base account for 15% of the country's active shipyards but 40% of commercial output by tonnage, with over 75% of their production built for firms outside China and Hong Kong. The authors argue these commercial revenues offset fixed costs and effectively subsidize China's naval expansion.
  • How South Korea’s Shipyards Could Save the US Navy — US shipyards had just five commercial ships under construction compared with 1,749 in China, and China's naval fleet is projected to grow from 370 to 475 vessels in a decade versus 297 to between 305 and 317 for the US Navy, whose major shipbuilding programs are behind schedule.
  • China’s Shipyards Are Ready for a Protracted War. America’s Aren’t — China produced more than half of the world's commercial shipbuilding output, while Europe accounts for about 5% and the US next to nothing, with most of the remainder built in South Korea and Japan. Analysts argue that in a protracted conflict China's wartime-scale yards could quickly accelerate production, replace lost ships, and repair damaged ones.

AI Summary. S&P Global projects copper demand will rise 50% to 42m tons by 2040 while production peaks near 33m tons in 2030 as ore quality declines at existing mines and new projects face permitting, financing and construction hurdles. The projected 10m-ton gap assumes recycled copper more than doubles to 10m tons.

James Attwood Bloomberg
Date Posted:
Is Database:
Database

S&P Global’s base case is that copper demand rises 50% from today’s level by 2040 due to growth from electrification, the AI buildout and global defense spending. That level of demand implies a 10mm ton gap over the period.

Will copper supply fall short of rising demand?

Core argument: S&P Global's base case has copper demand rising 50% to 42 million tons by 2040, while worldwide production peaks at about 33 million tons in 2030, leaving a 10-million-ton gap.

S&P Global’s base case is that copper demand rises 50% from today’s levels to 42 million tons by 2040. Worldwide production is expected to peak at about 33 million tons in 2030 as ore quality deteriorates at existing mines and new projects struggle with permitting, financing and construction hurdles. That would leave a 10-million-ton gap, the study finds, even after accounting for a sharp increase in recycled copper, which is expected to more than double to 10 million tons over the period. To be sure, such a supply deficit is largely hypothetical, with consumption limited to what’s available. As prices rise, copper could be engineered out of some products and supply expansion projects could become more profitable.

Takeaways by Macro Roundup® AI

  1. S&P Global's base case has copper demand rising 50% to 42 million tons by 2040, while worldwide production peaks at about 33 million tons in 2030, leaving a 10-million-ton gap.
  2. S&P Global attributes the expected production peak to deteriorating ore quality at existing mines and new projects struggling with permitting, financing and construction hurdles.
  3. S&P Global's projected deficit persists even after recycled copper more than doubles to 10 million tons, though the shortfall is largely hypothetical since consumption is limited to available supply and higher prices could engineer copper out of some products.

Related Articles:

  • The Hunt For Copper To Wire The AI Boom — Copper demand is being boosted by grid infrastructure for the green transition and by data centres for artificial intelligence, which miner Grupo México estimates require 27–33 tonnes of copper per megawatt, over twice the need of conventional data centres. BHP estimates copper used in data centres worldwide will grow sixfold by 2050.
  • 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.
  • 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.