Edward Conard

Top Ten New York Times Bestselling Author

  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…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 fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…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 must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Tuesday, January 20, 2026

AI Summary. A selloff in Japanese government bonds sent yields on some maturities to record highs, prompting hedge funds to unwind trades, life insurers to sell bonds, and at least one corporate bond investor to withdraw from a deal. Traders attributed the rout to doubts about Japan's fiscal health amid planned tax cuts and higher spending.

Ruth Carson, Taiga Uranaka, Lisa Du, and Finbarr Flynn Bloomberg
Date Posted:

“Tepid” demand at a 20-year debt auction catalyzed disorderly selling of Japanese debt amidst continuing concern about the country’s indebtedness, particularly in light of plans to cut taxes and boost spending. Yields on 30 and 40-year bonds jumped 25bps.

Are fiscal doubts pushing Japanese bond yields to record highs?

Core argument: Yields on some Japanese government bonds hit all-time highs in a sudden Tuesday afternoon selloff that market participants described as the most chaotic Tokyo trading session in recent memory.

What started as an unremarkable day on Tokyo trading desks quickly morphed into what several market participants described as the most chaotic session in recent memory. While concerns about Japan‘s fiscal position had been simmering for weeks, they suddenly boiled over on Tuesday afternoon with little warning — sending yields on some bonds to all-time highs. The rout left some hedge funds rushing to unwind losing trades, pushed life insurers to dump bonds and caused at least one corporate bond investor to pull out of a multi-million dollar deal. Even as traders struggled to pinpoint an immediate catalyst for the selloff, the overriding worry was clear: Prime Minister Sanae Takaichi’s plans to cut taxes and boost spending are raising doubts about the financial health of one of the world’s most indebted governments. “This is basically the market pricing in a Liz Truss moment in Japan,” said Masahiko Loo, senior fixed-income strategist at State Street Investment Management.

Takeaways by Macro Roundup® AI

  1. Yields on some Japanese government bonds hit all-time highs in a sudden Tuesday afternoon selloff that market participants described as the most chaotic Tokyo trading session in recent memory.
  2. The Japanese bond rout left some hedge funds rushing to unwind losing trades, pushed life insurers to dump bonds and caused at least one corporate bond investor to pull out of a multi-million dollar deal.
  3. Traders struggled to pinpoint an immediate catalyst for the Japanese bond selloff, citing worry over Prime Minister Sanae Takaichi's plans to cut taxes and boost spending, which State Street strategist Masahiko Loo called the market pricing in a Liz Truss moment in Japan.

Related Articles:

  • 2026 Japan Economic Outlook: Steady Fundamentals, Policy Risks Ahead — 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.
  • 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.
  • Is Japan “Normal” Again? — Yields on long-term Japanese government debt have risen to their highest since the 1990s while the yen remains cheap relative to its history. One benign reading is that Japan has exited post-bubble stagnation, with modest inflation and faster wage and income growth aligning with higher interest rates.

AI Summary. Neo-mercantilism is thriving in both China, which pairs infant-industry promotion with large trade surpluses, and in a United States focused on external deficits and protecting domestic markets. The author argues this will likely fracture the world economy, and that a new multilateral treaty could include a mechanism to combat large structural trade surpluses.

Martin Wolf Financial Times
Date Posted:

China’s refusal to address its excess saving will likely fracture the global economy, Wolf argues. He suggests reviving Keynes’ attempt, rejected by the US at Bretton Woods, to make surplus countries, not deficit ones, bear the burden of adjustment.

Will the spread of neo-mercantilism fracture the world economy?

Core argument: China has embraced infant-industry promotion and built huge trade surpluses, while Trump's US is no less neo-mercantilist in its preoccupation with external deficits and protection of domestic markets.

Neo-mercantilism is thriving in China, which has not only embraced infant-industry promotion, but created huge trade surpluses. Trump’s US is no less neo-mercantilist: he is obsessed with external deficits and the need to protect domestic markets. My colleague, Robin Harding, has raised disturbing worries about China: the Chinese, he suggests, do not want to import anything manufactured elsewhere. Their aim, he argues, is domination of global manufacturing.The triumph of neo-mercantilism raises two fundamental issues. The first is where it will lead. Some argue that the world will fracture. This seems likely. The second question is whether the fracturing can be managed. One could imagine an effort (albeit not under Trump) to design a new multilateral economic treaty. In the process, one could even include something John Maynard Keynes wanted to achieve at Bretton Woods, namely, a way to combat huge structural trade surpluses. These, he believed, imposed ruinous constraints upon others. In the 1940s he could not persuade the US, then a huge surplus country.

Takeaways by Macro Roundup® AI

  1. China has embraced infant-industry promotion and built huge trade surpluses, while Trump's US is no less neo-mercantilist in its preoccupation with external deficits and protection of domestic markets.
  2. Robin Harding argues that the Chinese do not want to import anything manufactured elsewhere and that their aim is domination of global manufacturing.
  3. A fracturing of the world economy appears likely, and managing it could require a new multilateral economic treaty incorporating the aim John Maynard Keynes failed to secure at Bretton Woods: a way to combat huge structural trade surpluses.

Related Articles:

  • China Is Making Trade Impossible — Interviews with Chinese economists, technologists and business leaders yielded no clear answer to what products China would want to buy from the rest of the world in future, beyond commodities, luxury goods and higher education. The author argues China sees nothing it cannot eventually make better and cheaper itself, undermining trade as a two-way exchange.
  • 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 Has No Choice But To Intervene On Trade — Manufacturing competitiveness is argued to stem largely from lower labor costs relative to productivity, so policies that raise the household share of income weaken competitiveness while countries that suppress wages gain at trade partners' expense. The author argues Europe must therefore intervene in its external accounts to offset foreign trade intervention rather than cut wages and welfare.

AI Summary. A New York Times analysis of federal data finds about 230,000 people deported after arrests inside the US and 270,000 at the border, with interior deportations already exceeding the prior administration's four-year total. Southwest border crossings have fallen to record lows, and roughly 40,000 people self-deported for a stipend.

Albert Sun New York Times
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A NYT analysis finds there were likely ~230,000 US interior deportations in 2025 more than the total over Biden’s four years. The previous recent peak of interior deportations was less than 200,000 in 2012.

How many people have been deported, and from where?

Core argument: The Trump administration deported about 230,000 people arrested inside the U.S. over the past year, exceeding the total from interior arrests during the entire four years of the Biden administration, according to a New York Times analysis of federal data.

Over the past year, President Trump’s administration has deported about 230,000 people who were arrested inside the country and another 270,000 at the border, a New York Times analysis of federal data shows. The number of deportations from interior arrests since Mr. Trump took office is already higher than the total during the entire four years of the Biden administration. At the same time, the number of people trying to cross the Southwest border has fallen to record lows. As a result, far fewer people were arrested and deported from the border than in the preceding few years. Another roughly 40,000 people returned to their countries after signing up to “self-deport” and receive a stipend through a novel program and app provided by the administration.

Takeaways by Macro Roundup® AI

  1. The Trump administration deported about 230,000 people arrested inside the U.S. over the past year, exceeding the total from interior arrests during the entire four years of the Biden administration, according to a New York Times analysis of federal data.
  2. Another roughly 270,000 people were deported after arrest at the border, fewer than in the preceding few years as attempted Southwest border crossings fell to record lows.
  3. Roughly 40,000 people returned to their countries after signing up to "self-deport" and receive a stipend through a novel program and app provided by the Trump administration.

Related Articles:

  • The Demographic Outlook: 2026 to 2056 — The Congressional Budget Office projects the US population rises from 349m to 364m between 2026 and 2056, with annual growth slowing from 0.3% over the next decade to 0.1% thereafter before reaching zero and then shrinking. Declining fertility is projected to push deaths above births starting in 2030, increasingly offsetting net immigration.
  • Foreign-Born Number and Share of U.S. Population at All-Time Highs in January 2025 — The U.S. foreign-born population reached 53.3m, or 15.8% of the population, the highest level in American history, exceeding the shares recorded in 1890 (14.8%) and 1910 (14.7%) during the "Great Wave" of immigration. A four-year increase of 8.3m is larger than that of any four-year period in American history and exceeds the 7.9m increase over the prior 12 years.
  • The Cost of Illegal Immigration — The US foreign-born population rose by 6.6mm to 51.6mm over a roughly three-year span, lifting immigrants to 15.6% of the population, above the prior records of 14.8% in 1890 and 14.7% in 1910. The authors estimate about 13.7mm illegal immigrants now live in the US, a net increase of 3.7mm.

AI Summary. Individual-level immigration court and parole data indicate net unauthorized immigration has turned increasingly negative, averaging -48,000 per month over the first seven months of the year and reaching -89,000 in July. The authors estimate this pace implies an annual total of -576,000, compared with the Congressional Budget Office's projection of -290,000.

Daniel Wilson and Xiaoqing Zhou Federal Reserve Bank of Dallas
Date Posted:
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Illegal immigration to the US plunged in 2024, nearing zero by year-end, while exits began to accelerate in 2025. FRBD estimates that 2025 net outflows averaged 48,000/month through July, suggesting a cumulative 576,000 exits through the end of the year.

How negative has net unauthorized immigration become this year?

Core argument: Net unauthorized immigration reached -89,000 in July and averaged -48,000 monthly in 2025 through July, which, if sustained, implies an annual total of -576,000, according to estimates drawn from immigration court and parole case data.

We draw on newly available, individual-level data from immigration court proceedings and parole cases, along with other aggregate information, to track recent trends in unauthorized immigration at both the national and local levels. Our analysis leads to two key findings. First, it shows that net unauthorized immigration has been increasingly negative since early 2025 (Chart 1). By July, it reached -89,000 with no indication the decline is leveling off. These data show that unauthorized immigration inflows rose sharply after early 2021, peaked in early 2024 and then fell rapidly (Chart 2A). Exits have increased sharply since early 2025, driven by both removals and self-deportation. Together, these estimates show that net unauthorized immigration has declined since January 2024 and has become increasingly negative since early 2025. The 2024 decline was primarily driven by a sharp drop in entries, reaching near zero by early 2025. The further net decline in 2025 reflects a steep rise in exits. We estimate that net unauthorized immigration has averaged -48,000 monthly in 2025 through July. If that average holds constant through the remainder of the year, it would imply an annual total of –576,000. By contrast, the CBO’s latest projection for “other foreign nationals,” which assumes higher got-aways and lower removals than our estimate, is –290,000 in 2025 (Chart 3).

Takeaways by Macro Roundup® AI

  1. Net unauthorized immigration reached -89,000 in July and averaged -48,000 monthly in 2025 through July, which, if sustained, implies an annual total of -576,000, according to estimates drawn from immigration court and parole case data.
  2. Unauthorized immigration inflows rose sharply after early 2021, peaked in early 2024 and fell to near zero by early 2025, while exits have risen sharply since early 2025, driven by both removals and self-deportation.
  3. The CBO's latest projection for "other foreign nationals" in 2025 is -290,000, assuming higher got-aways and lower removals than the authors' estimate of -576,000.

Related Articles:

  • America’s Immigration Mess: An Illustrated Guide — Current Population Survey estimates indicate America's foreign-born population surpassed 50m for the first time and exceeded 15% of the national population, above the prior peak of 14.8% recorded in 1890. Mass immigration during that earlier wave was associated in contemporary opinion with widening income and wealth gaps and depressed wages for less-skilled native-born men, and sweeping national restrictions followed.
  • Macroeconomic Implications Of Immigration Flows In 2025 And 2026: January 2026 Update — The authors estimate that job growth consistent with full employment was 20,000–50,000 a month in the second half of 2025, while reported nonfarm payroll growth averaged about 14,500 and unemployment rose 0.3 percentage points. They project immigration policy changes will keep potential employment growth low, reducing GDP growth by roughly 0.2 percentage points in 2025 and 0.1 in 2026.
  • Where Did All the American-Born Roofers Go? — The share of foreign-born workers in US construction is now nearly twice that of other industries, after being equal in the 1970s and 1980s, and 9 of 10 construction workers are nonunion. Unionized construction workers earn $1.15 for every $1 the average American worker earns hourly, down from $1.71, while nonunion construction workers earn 86 cents.

AI Summary. China recorded 7.92mn births, down from 9.54mn a year earlier and the lowest since 1949, while 11.31mn people died and the population fell 3.39mn to 1.405bn. The figures indicate China is still not seeing benefits from measures to bolster its fertility rate after loosening the "one-child" policy.

Eleanor Olcott Financial Times
Date Posted:

China reported that 7.92mm babies were born in 2025, the lowest number since 1949. Overall, the population fell 3.39mm to 1.405B as the fertility rate fell to .98.

Are China's policies to raise the fertility rate working?

Core argument: China recorded 7.92mn births in 2025, down from 9.54mn in 2024 and the lowest number since 1949, according to government figures.

The government reported that 7.92mn babies were born in 2025, down from 9.54mn the year before, and the lowest number of births since 1949. Last year, 11.31mn people died. China’s population fell 3.39mn to 1.405bn. The figures, which come after a one-off rise in births in 2024, indicate that China is still not seeing the benefit from measures seeking to bolster the fertility rate — the average number of children born to a woman over her lifetime — following the loosening of its “one-child” policy in 2016.

Takeaways by Macro Roundup® AI

  1. China recorded 7.92mn births in 2025, down from 9.54mn in 2024 and the lowest number since 1949, according to government figures.
  2. China's population fell 3.39mn to 1.405bn, as 11.31mn deaths outnumbered the 7.92mn births.
  3. The birth figures follow a one-off rise in births in 2024 and indicate that China is still not seeing the benefit from measures to bolster the fertility rate since the 2016 loosening of its "one-child" policy.

Related Articles:

  • ‘No Marriage, No Children’ Is China’s Ticking Timebomb — China registered about 6.1m marriages in its most recent year, the lowest since public records began in 1986 and less than half the 2013 peak, with roughly 30% of 30-year-olds unmarried versus 15% a decade earlier. Births of 9.54m were the second-lowest since the People's Republic of China was founded in 1949.
  • Chinese Kindergartens In Crisis As Enrollments Plunge 25% in 4 Years — China's kindergarten enrollment fell by 12mn children from a peak of 48mn, and the number of kindergartens serving children aged 3-5 dropped by 41,500 from a high of nearly 295,000, according to the country's ministry of education. Annual births have fallen by nearly half from a peak of 17.9mn to 9.3mn.
  • Depopulation Globally and in the Asia-Pacific: The Shape of Things to Come — Population aging and fertility below replacement levels are connected to a revolution in family structure in which families grow smaller, fewer people marry, and voluntary childlessness becomes common across countries. As a result, families become less able to bear the demands that may be placed on them.

AI Summary. China has mobilized thousands of fishing boats to form floating barriers at least 200 miles long, a level of coordination analysts say could give Beijing new ways to assert control in contested seas. Analysts note such boat masses could also serve as missile and torpedo decoys, overwhelming radars and drone sensors.

Chris Buckley, Agnes Chang and Amy Chang Chien New York Times
Date Posted:

In early January, 1,400 Chinese fishing boats assembled into a rectangle stretching more than 200 miles in the East China Sea, following a similar event in late December when 2,000 fishing boats assembled in two long, parallel formations.

Can fishing fleets give China new ways to control contested seas?

Core argument: China mobilized thousands of fishing boats twice within weeks to form floating barriers at least 200 miles long, showing a level of coordination that could give Beijing more ways to impose control in contested seas.

China quietly mobilized thousands of fishing boats twice in recent weeks to form massive floating barriers of at least 200 miles long, showing a new level of coordination that could give Beijing more ways to impose control in contested seas. The two gatherings, weeks apart in the same waters, suggested a coordinated effort, analysts said. The masses of the smaller boats could also act “as missile and torpedo decoys, overwhelming radars or drone sensors with too many targets,” said Thomas Shugart, a former U.S. naval officer now at the Center for a New American Security.

Takeaways by Macro Roundup® AI

  1. China mobilized thousands of fishing boats twice within weeks to form floating barriers at least 200 miles long, showing a level of coordination that could give Beijing more ways to impose control in contested seas.
  2. The two gatherings occurred weeks apart in the same waters, which analysts said suggested a coordinated effort.
  3. Thomas Shugart, a former U.S. naval officer now at the Center for a New American Security, said the massed smaller boats could act as missile and torpedo decoys, overwhelming radars or drone sensors with too many targets.

Related Articles:

  • Xi Jinping Says He Is Preparing China for War — China's leadership has emphasized war readiness, announcing a 7.2% increase in the defense budget—which has doubled over the past decade—and plans to reduce dependence on foreign grain imports. China has also opened National Defense Mobilization recruitment offices across the country, while cities in Fujian Province opposite Taiwan build or upgrade air-raid shelters.
  • Xi Jinping’s Purge Of Military Officers Raises Doubts About China’s Readiness For War — The heads of all but one of China's five regional military commands are unaccounted for, under investigation, or fired, and commanders of the navy and ground force have been targeted following those of the rocket force. Heads of several departments under the Central Military Commission have disappeared from public view, and scores of political commissars have been ousted or investigated.
  • World’s Top Hedge Fund Bridgewater Dumps All China Stocks In Retreat From Market — Hedge fund Bridgewater exited positions in 16 Chinese stocks worth a combined $1.41bn and closed its indirect exposure through China-focused exchange-traded funds, according to its US regulatory filing. The firm shifted toward US mega-cap technology stocks, raising its stakes in Nvidia by 154%, Microsoft by 112%, Meta Platforms by 90% and Alphabet by 84%.

Wednesday, January 21, 2026

AI Summary. Artificial intelligence capital spending is estimated to add roughly 1.4 percentage points to US growth in one year and about 1.5 points the next, comparable to business investment's contribution during the tech bubble. A material part of that estimate reflects profits at Nvidia and a few other chipmakers that are unlikely to be recycled back into the economy.

Greg Jensen, Danny DeBois and Adam Zimbler Bridgewater Associates
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Bridgewater forecasts real US GDP growth of 2.8% in 2026, with AI capex contributing 1.4pp (50%) this year and 1.5pp in 2027.

How much is AI capital spending adding to US growth?

Core argument: The authors estimate AI capex will boost US GDP growth by roughly 140 basis points in 2026 and 150 basis points in 2027, sums on par with business investment's contribution to growth during the tech bubble.

The impact on US GDP is very large—we estimate AI capex as providing a ~140bp boost to US growth in 2026 and a ~150bp boost in 2027. These are massive sums, on par with the contribution of business investment to growth in the tech bubble. That said, a material part of the estimate comes from Nvidia and a couple other chipmakers’ profits, which are unlikely to be recycled back into the economy (including profits they receive from selling chips to data centers being constructed in the rest of the world). It’s very rare—even unprecedented—to have such high GDP growth driven in large part by profits that are captured and saved by a narrow set of companies. AI is not yet delivering significant productivity gains outside of a few specific segments of the labor market, but it is getting closer to being able to deliver more widespread impact.

Takeaways by Macro Roundup® AI

  1. The authors estimate AI capex will boost US GDP growth by roughly 140 basis points in 2026 and 150 basis points in 2027, sums on par with business investment's contribution to growth during the tech bubble.
  2. A material part of that AI capex estimate comes from the profits of Nvidia and a couple of other chipmakers, including profits on chips sold to data centers built outside the US, which are unlikely to be recycled back into the economy.
  3. AI is not yet delivering significant productivity gains outside a few specific segments of the labor market, though the authors judge it to be getting closer to more widespread impact.

Related Articles:

  • Weekend Thinking: A Cul-de-Sac With a View — Leading AI developers are shipping smaller, more frequent model updates, creating an impression of momentum through release frequency rather than the magnitude of change. The author argues the bet that scaling data, compute, and model size would produce artificial general intelligence has not paid off, pushing labs back toward harder problems like continual learning and new architectures.
  • Tracking AI’s Contribution to GDP Growth — Investment in information processing equipment, software, research and development, and data centers contributed 0.97 percentage points to real GDP growth over the first three quarters of 2025, or 39% of total growth, compared with 0.81 percentage points and 28% during the dot-com investment boom of 2000.
  • 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. Microsoft's chief executive says the price of AI model usage ("tokens") falls by roughly half every three months. Commentary argues that such rapid deflation pulls demand forward, encourages overbuilding, and commoditizes models, shifting competitive advantage to orchestration and context rather than the model layer.

Paul Kedrosky Applied Complexity
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Citing Microsoft’s Nadella’s comments on the state of frontier LLMs “at this point it’s a multi-model world” and “token pricing basically drops by a half every three months,” Kedrosky forecasts a “brutally competitive transition where models commoditize.”

How does rapidly falling AI pricing shift competitive advantage away from models?

Core argument: Microsoft CEO Satya Nadella said at the World Economic Forum that AI token pricing drops by roughly half every three months.

[Satya Nadella] "And by the way, look at the token pricing, right? Token pricing basically drops by, you know, a half every three months." [Kedrosky] The claim that token prices are dropping by roughly half on a very short cycle should be startling. Extreme deflation changes behavior. It pulls demand forward, encourages overbuilding, and shortens the useful life of capital. It also means today’s impressive revenue numbers can coexist with tomorrow’s margin compression. If tokens are collapsing in price this fast, then any business model that depends on sustained scarcity at the model layer is fragile. Models are inputs. Orchestration and context are the product. Taken together, this is a description of a deflationary, brutally competitive transition where models commoditize, infrastructure races ahead of outcomes, and advantage shifts to whoever can actually reorganize work. If that diffusion stalls, the bubble argument gets stronger. If it succeeds, the winners will look very different from today’s narrative.

Takeaways by Macro Roundup® AI

  1. Microsoft CEO Satya Nadella said at the World Economic Forum that AI token pricing drops by roughly half every three months.
  2. Kedrosky argues that token price deflation this fast pulls demand forward, encourages overbuilding, and shortens the useful life of capital, allowing impressive revenue today to coexist with margin compression later.
  3. Kedrosky argues that models commoditize while orchestration and context become the product, leaving any business model dependent on sustained scarcity at the model layer fragile.

Related Articles:

  • The Geopolitics of AI: Decoding the New Global Operating System — The performance gap between the top American and Chinese AI models narrowed from 9.3% to 1.7%, with Chinese firms relying on cheaper open-source models—DeepSeek prices usage 20-40x below OpenAI's ChatGPT. This price advantage could win adoption in developing countries and build dependency on Chinese AI ecosystems.
  • Smothering Heights — The four largest cloud computing firms are devoting rising shares of revenue to capital spending and research, with Meta's combined share reaching 70%. Unlike past investment booms, this one has been financed mostly from internal cash flow: 28 direct AI stocks make up 50% of S&P 500 market value but just 5% of its net debt.
  • 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.

AI Summary. Futures prices imply essentially no chance the Federal Reserve raises rates over two years and over 90% odds of a cut within 12 months. The author argues this understates hike risk, citing prime-age employment near its multi-decade high and stable pay growth, and warns lower rates could unlock inflationary spending.

Matt Klein The Overshoot
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Markets’ near-certainty that the FFR will not rise between now and the end of 2027 clashes with data on jobs, retail spending, inflation, and household balance sheets showing high employment and upside risks to inflation, Klein argues.

Are markets underestimating the chance of interest rate increases?

Core argument: Futures prices on the CME's FedWatch tool as of January 16 implied no chance the Federal Reserve raises its 3.5%–3.75% target band during 2026, only a 2% chance of an increase by end-2027, and over 90% odds of at least a 0.25pp cut within 12 months.

According to the CME’s FedWatch tool, futures prices as of January 16 implied that there was no chance that the Federal Reserve will raise its short-term interest rate target band from 3.5%-3.75% over the course of 2026. Market prices implied that there was only a 2% chance that the short rate target could rise by the end of 2027, [and] the implied probability that the Fed will lower rates by at least 0.25pp over the next 12 months is over 90%. There are good reasons to think that the implied probability of rate increases over the next two years is too low. The most important feature of the current labor market is that 80.7% of Americans aged 25-54 had a job as of mid-December, which is essentially unchanged from the multi-decade high reached in mid-2023. Just as the “prime age” employment rate has been stable for years, so too have most measures of growth in the typical worker’s pay. [A “bizarre” drop in Dec. will likely be revised away]. Debt issuance remains low in absolute terms, relative to consumer spending, and, especially, relative to asset price increases. The danger, as I have warned before, is that lower interest rates could unlock so much spending that it would be extremely inflationary.

Takeaways by Macro Roundup® AI

  1. Futures prices on the CME's FedWatch tool as of January 16 implied no chance the Federal Reserve raises its 3.5%–3.75% target band during 2026, only a 2% chance of an increase by end-2027, and over 90% odds of at least a 0.25pp cut within 12 months.
  2. The employment rate for Americans aged 25–54 stood at 80.7% in mid-December, essentially unchanged from the multi-decade high reached in mid-2023, with most measures of typical worker pay growth similarly stable.
  3. Debt issuance remains low in absolute terms, relative to consumer spending, and especially relative to asset price increases, posing the danger that lower interest rates could unlock so much spending that it would be extremely inflationary.

Related Articles:

  • More on the “Neutral” Interest Rate (R*) — Private economists and Federal Reserve officials disagree about the level of the "neutral" interest rate—the inflation-adjusted short-term rate expected to prevail with the economy at full strength and stable inflation. Averaging model-based and market-based estimates puts the neutral real rate near 1.5%, and with expected inflation above the Federal Reserve's 2% target, the neutral nominal rate is correspondingly higher.
  • Data Update 4 for 2025: Interest Rates, Inflation and Central Banks! — Interest rates are ultimately driven by macroeconomic fundamentals, with an "intrinsic risk-free rate" defined as the sum of the inflation rate and real GDP growth tracking the observed 10-year Treasury bond yield closely. On this view, central banks' influence comes from preferential access to data on those fundamentals, their capacity to alter them, and their credibility.
  • Trump Wants to Run the Economy Hot. There’s a Good Chance He’ll Succeed — A US tax law expanded deductions for state and local taxes, overtime, tips and seniors retroactively, but withholding tables adjusted only later, so workers get both higher take-home pay and refunds. One analyst estimates this injects nearly $200bn, lifting first-half annualized growth by up to half a percentage point.

AI Summary. Japan's debt overhang remains unaddressed, and the argument is that the yen is only in the early stages of debasement, with further depreciation ahead. On this view, the decoupling between interest rate differentials and the yen has much further to run, and policy will change only once yen devaluation forces it.

Robin Brooks Robin Brooks Substack
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Robin Brooks warns that despite the ~30% fall in the trade-weighted Yen versus the G10 since 2020 and the 200bps rise in Japan’s relative 30-year yield since 2024, Japan’s debt overhang means the yen will continue to depreciate until yields climb further.

Is the yen only in the early stages of depreciation?

Core argument: The author argues the Yen is only in the early stages of debasement and advises against buying the dip despite its prolonged depreciation.

When currencies have been depreciating for some time, there’s a natural tendency to want to buy the dip. Don’t do that for the Yen. Japan is in total denial on its debt overhang. That will only change once Yen devaluation gets the government to change course. We’re nowhere near that. As crazy as it sounds, we’re in my opinion only in the early stages of Yen debasement. The decoupling between rate differentials and the Yen has a lot further to go.

Takeaways by Macro Roundup® AI

  1. The author argues the Yen is only in the early stages of debasement and advises against buying the dip despite its prolonged depreciation.
  2. Japan's government remains in denial about its debt overhang, according to the author, and will change course only once Yen devaluation forces the issue.
  3. The decoupling between interest rate differentials and the Yen has much further to run, in the author's assessment.

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AI Summary. Bloomberg's precious metals index, covering silver, platinum and palladium, stands at a level last seen in 1980, when repeated rounds of stagflation drove a crisis of confidence in government-issued currencies. Such a rally amid growth and moderate inflation signals something serious is amiss.

John Authers Bloomberg
Date Posted:
Is Database:
Database

John Authers warns that the largest rally in precious metals since the stagflationary 1970s and early 1980s “is a clear sign that something serious is amiss.”

Does a precious metals rally amid growth signal something is amiss?

Core argument: Bloomberg's precious metals index, covering silver, platinum and palladium, stands at a level last seen in 1980, when repeated rounds of stagflation drove a crisis of confidence in fiat currencies.

Bloomberg’s index of [precious metals], including silver, platinum and palladium, is now at a level unseen since the chaotic conditions of 1980, when repeated rounds of stagflation drove a crisis of confidence in fiat currencies. To stage such a rally at a time of growth and moderate inflation is a clear sign that something serious is amiss.

Takeaways by Macro Roundup® AI

  1. Bloomberg's precious metals index, covering silver, platinum and palladium, stands at a level last seen in 1980, when repeated rounds of stagflation drove a crisis of confidence in fiat currencies.
  2. A precious metals rally of this magnitude occurring alongside growth and moderate inflation is a sign that something serious is amiss.

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  • 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.
  • Across The Rich World, Fiscal Crises Loom — An analysis estimates most rich countries could keep debt stable as a share of their economies with only small primary surpluses—Britain's required surplus is 0.3% of GDP—even if all debt were refinanced immediately at current rates, but the tightening needed to stabilize debt ratios exceeds 2% of GDP in Britain and America and 3% in France.

AI Summary. Insurance broker Aon reports global insured losses from natural disasters exceeded $127bn, with more than $100bn in the US, led by the Los Angeles wildfires, while total global economic losses from disasters reached about $260bn. More than half of those economic losses were uninsured, reflecting persistent coverage gaps in emerging markets.

Eva Xiao and Lee Harris Financial Times
Date Posted:

$100B of the $127B total global insured losses due to natural disasters in 2025 were in the US, according to an Aon report, ~$58B of which were caused by the Los Angeles fires. Overall global economic losses from disasters in 2025 totaled $260B.

How large were global insured and uninsured natural disaster losses?

Core argument: Global insured losses from natural disasters exceeded $127bn in 2025, with more than $100bn occurring in the US after the Los Angeles fires, according to insurance broker Aon.

Global insured losses of more than $127bn from natural disasters were dominated by more than $100bn occurring in the US in 2025 after the Los Angeles fires, according to a new industry report on climate and other extreme events. Overall global economic losses stemming from disasters, including thunderstorms and earthquakes, totalled about $260bn, according to the review by insurance broker Aon. But more than half of those losses remain not covered by insurance, highlighting the persistence of inadequate coverage in emerging markets, it said. “Extreme weather events are becoming more frequent and unpredictable, affecting new geographies and sectors, and challenging long-held assumptions about resilience,” wrote Greg Case, Aon chief executive. “Weather exposures are rising,” he noted. Insured losses from climate disasters were 27% higher than the long-term average since 2000.

Takeaways by Macro Roundup® AI

  1. Global insured losses from natural disasters exceeded $127bn in 2025, with more than $100bn occurring in the US after the Los Angeles fires, according to insurance broker Aon.
  2. Aon puts total global economic losses from disasters, including thunderstorms and earthquakes, at about $260bn, with more than half uninsured, highlighting the persistence of inadequate coverage in emerging markets.
  3. Insured losses from climate disasters ran 27% above the long-term average since 2000, and Aon chief executive Greg Case wrote that extreme weather events are becoming more frequent and unpredictable, affecting new geographies and sectors.

Related Articles:

  • The World Is Getting Riskier. Americans Don’t Want to Pay for It — Americans' resistance to paying to insure against risks from illness, old age, and natural and financial disasters is growing alongside those risks; JPMorgan estimated wildfires around Los Angeles caused $50bn in losses, of which only $20bn were insured. Socializing risk removes the price signal that encourages the insured to mitigate their own exposure.
  • Runaway Insurance Costs Bring Back Talk of Price Caps — State regulators have approved home insurance rate increases averaging 50% and auto increases averaging 42%, outpacing a 26% rise in consumer prices over the same period, according to S&P Global Market Intelligence and Labor Department data.
  • Insurance: Climbing Costs Cut Into Consumer Budgets — Bank of America internal data show median household property insurance payments (auto and home) rose 6% year-over-year and more than 40% over five years, lifting such payments to 5% of income. Younger generations saw the largest increases, though Gen X payments also rose 45%.