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


Monday, January 26, 2026

AI Summary. Data on over 5,000 German fighter pilots show performance rose markedly as pilots approached the eligibility threshold for each medal in a tiered awards ladder and slumped immediately after receiving it, with the effect repeating at each successive rung. The authors estimate the ladder added 3,000–5,000 aerial victories, 5–10% of the total.

Leonardo Bursztyn, Ewan Rawcliffe and Hans-Joachim Voth National Bureau of Economic Research
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Performance of Nazi fighter pilots rose as they neared eligibility for a medal and fell off upon receipt, prompting periodic offerings of new medals. This “hierarchical system of status-based incentives” raised net shootdowns by an estimated 5 to 10%.

Do tiered status awards repeatedly boost worker performance?

Core argument: The authors estimate that the German air force's ladder of successive medals added 3,000–5,000 aerial victories to German pilots' wartime tally, 5–10% of the total 54,835 victories in their data.

We provide direct evidence from WWII that one organization, the German air force, successfully created a ladder of highly coveted medals, providing status-based incentives for fighter pilots. The number of rungs on the ladder increased periodically as more workers earned the top awards. The successive medals potentially provided pilots with an incentive to keep exerting effort. Our study demonstrates that this system successfully increased performance. Of the total 54,835 aerial victories in our data, 39.5% were scored by the 10% most able pilots by our measure of ability. Moreover, 8.6% were scored the top 1% of pilots alone. We first employ a modified event-study design and data on the monthly performance of over 5,000 German pilots to demonstrate that pilot performance increases markedly as they approach the eligibility threshold for a medal. Success rates in aerial combat immediately slump after receiving the award, suggesting a sharp change in incentives and effort. We show that this incentive effect is weaker for pilots who already possess other markers of high social status, in line with predictions from a standard signaling game. As pilots approach the successive medal in the ladder, the same effort path repeats itself. Our empirical results show that a hierarchical system of status-based incentives can repeatedly elicit effort due to status concerns. The net effect of the medal ladder was substantial—we estimate that it added between 3,000 and 5,000 victories to German pilots’ tally during the war (5-10% of the total). [Only 19% of the sample survived the war.]

Takeaways by Macro Roundup® AI

  1. The authors estimate that the German air force's ladder of successive medals added 3,000–5,000 aerial victories to German pilots' wartime tally, 5–10% of the total 54,835 victories in their data.
  2. Using a modified event-study design on monthly performance of over 5,000 German pilots, the authors find performance rises markedly as pilots approach a medal's eligibility threshold and slumps immediately after the award, with the pattern repeating for each successive medal.
  3. The top 10% of pilots by the authors' ability measure scored 39.5% of all aerial victories and the top 1% scored 8.6%, while the incentive effect was weaker for pilots already holding other markers of high social status.

Related Articles:

  • Killer Incentives: Status Competition and Pilot Performance during World War II — Analysis of over 5,000 German World War II fighter pilots finds that public peer recognition was associated with higher victory scores among skilled pilots without higher mortality, while average pilots gained little in victories but died at higher rates. The authors conclude status-based awards can have uneven effects in high-risk settings.
  • Ed Conard Debates Furman On “The Expected Value of Risk Taking” — A debate on U.S. fiscal policy argues that spending increases, rather than the tax increases needed to fund them, slow growth, and that higher taxes would reduce the expected value of America's innovative risk-taking. The argument holds that cutting debt below 100% of GDP is critical.
  • Long-Term Shareholder Returns: Evidence From 64,000 Global Stocks — A study of about 64,000 global stocks estimates net global stock market wealth creation of $75.7tn, with returns highly concentrated: the top 159 firms (0.25%) account for half of net wealth creation and the top 1,526 (2.39%) account for all of it. Fewer than half of stocks beat one-month US Treasury bills, 42.6% of non-US and 44.8% of US stocks.

AI Summary. An implied equity risk premium computed from the US stock index level and expected cash flows from dividends, buybacks and earnings growth yields an expected stock return of 8.41%, or 4.23% above the 10-year Treasury yield of 4.18%. That premium sits in the middle of its historical range, unlike the 2.05% low reached at the end of 1999.

Aswath Damodaran Musings on Markets
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Using nominal cash flow projections, the IRR for the S&P 500 was 8.41% on Jan 1. Subtracting the 10-year Treasury rate (4.18%) yields an ERP of 4.23%. Damodaran notes, “The current ERP is almost exactly equal to the average for the 1960–2025.”

Is the US equity risk premium within its historical range?

Core argument: Damodaran computes an implied equity risk premium of 4.23% for US stocks on January 1, 2026, from an expected return of 8.41% at an index level of 6845.5 minus the 4.18% US 10-year Treasury bond rate.

I will revert to my favored metric for the US equity market, the implied equity risk premium, which in addition to looking at stock price levels, the growth in earnings and the cash return, also brings in the level of rates. The implied equity risk premium, as I compute it, is based upon the index level and the expected cash flows (from dividends and buybacks, augmented by earnings growth), and [the computation of] an internal rate of return for stocks. Netting out the riskfree rate yields an equity risk premium. Given the index level on January 1, 2026, of 6845.5, and the expected cash flows that I computed on that date (using the dividends and buybacks in the trailing 12 months as my starting point, and growing them at the same rate as earnings), I obtain an expected return on stocks of 8.41%. Subtracting the US 10-year T Bond rate of 4.18% on that day yields an equity risk premium of 4.23% for the US. [Taking into account the May 2025 downgrade of US sovereign debt from AAA to AA1 and subtracting the implied 23bp default premium from the T Bond lowers the riskless nominal rate to 3.95 and raises the ERP to 4.46]. Unlike the end of 1999, when the ERP got as low as 2.05%, the current ERP is more in the middle of the historic range.

Takeaways by Macro Roundup® AI

  1. Damodaran computes an implied equity risk premium of 4.23% for US stocks on January 1, 2026, from an expected return of 8.41% at an index level of 6845.5 minus the 4.18% US 10-year Treasury bond rate.
  2. Adjusting for the May 2025 downgrade of US sovereign debt from AAA to AA1 by subtracting an implied 23bp default premium lowers the riskless nominal rate to 3.95% and raises the equity risk premium to 4.46%.
  3. The current implied equity risk premium sits in the middle of its historic range, unlike the end of 1999, when Damodaran's measure fell as low as 2.05%.

Related Articles:

  • Stocks Near Highest Valuations Since 1880 — The cyclically adjusted price-earnings ratio, which divides stock prices by the average of the past 10 years of inflation-adjusted earnings to smooth business-cycle swings, stands near its highest level since 1880. Because it uses a decade of earnings rather than one year, it is a gauge of sustainable earnings power.
  • 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.
  • American Unexceptionalism — The S&P 500 has outperformed other developed-market equities by a cumulative 150% over the past fifteen years, but the authors attribute about 80% of that gap to a strengthening dollar and expanding relative valuations rather than fundamentals such as dividends, buybacks, and organic growth. U.S. valuations sit around the 90th percentile on price-to-earnings measures.

AI Summary. All of the increase in the S&P 500's operating margin over the past 20 years has come from tech-related sectors — information technology, communication services and consumer discretionary — while operating margins for non-tech companies have stayed near 9%.

Torsten Sløk Apollo
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Since 2007, the S&P 500’s operating margins have grown 4pp to 16% as a share of revenue. All of the increase has come from tech-related sectors. Operating margins for non‑tech firms have been stable at ~9%.

Is all S&P 500 margin expansion coming from tech sectors?

Core argument: All of the increase in the S&P 500's operating margin over the past 20 years has come from tech-related sectors, defined as communication services, consumer discretionary and information technology.

Operating margin measures the share of revenue left after covering operating expenses such as wages, materials and overhead. The chart shows that over the past 20 years, all of the increase in the S&P 500’s operating margin has come from tech‑related sectors [Tech related includes communication services, consumer discretionary and information technology], while operating margins for non‑tech companies have stayed near 9%.

Takeaways by Macro Roundup® AI

  1. All of the increase in the S&P 500's operating margin over the past 20 years has come from tech-related sectors, defined as communication services, consumer discretionary and information technology.
  2. Operating margins for non-tech S&P 500 companies have stayed near 9% over the past 20 years.
  3. Operating margin measures the share of revenue remaining after operating expenses such as wages, materials and overhead.

Related Articles:

  • Concentrated Growth: The Role Of The IT Sector — Since 1988, total factor productivity in the information technology sector has risen about 178%, versus about 12% across all non-IT sectors combined, while aggregate productivity rose about 40%. The IT sector accounts for roughly 45% of cumulative aggregate productivity growth, once sectoral linkages to downstream industries are weighted in.
  • 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.
  • End of an Era: The Coming Long-Run Slowdown in Corporate Profit Growth and Stock Returns — The authors estimate that declining interest and corporate tax rates accounted for over 40% of real corporate profit growth from 1989 to 2019, while falling risk-free rates explain the entire expansion in price-to-earnings multiples. Real earnings before interest and taxes grew slightly more slowly than in 1962–1989, at 2.2% versus 2.4% per year.

AI Summary. Yields on Japan's 30-year government bonds have exceeded those in Germany and China, with Goldman Sachs suggesting they could eventually match equivalent US Treasury yields. Absent a policy shift in Japan, one asset manager projects the 10-year yield could jump at least 1.25 percentage points to 3.5%.

Mia Glass, Ruth Carson, and John Cheng Bloomberg
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Early in 2025, Japan’s 30-year yield was 300bp below the average yield on developed-market bonds. Over the last year that gap has ~halved. Currently Japanese investors own ~$5T of foreign assets.

Are rising Japanese bond yields a risk for global markets?

Core argument: Masayuki Koguchi, executive chief fund manager at Mitsubishi UFJ Asset Management, said Japan's 10-year government bond yield may jump at least 1.25 percentage points to 3.5% absent a policy shift in Japan.

Yields on 30-year JGBs were above those in Germany and China by last year. A recent trading note from Goldman Sachs suggests that at some point the yield will climb to mirror that of the equivalent Treasury. The march higher is also evident on the closely watched 10-year bond — a benchmark that is so pivotal to borrowing costs across financial markets that it was a cornerstone of the BOJ’s former yield-curve control regime. Without some kind of policy shift in Japan, the 10-year yield may jump at least 1.25 percentage points to hit 3.5%, said said Masayuki Koguchi [executive chief fund manager at Mitsubishi UFJ Asset Management].

Takeaways by Macro Roundup® AI

  1. Masayuki Koguchi, executive chief fund manager at Mitsubishi UFJ Asset Management, said Japan's 10-year government bond yield may jump at least 1.25 percentage points to 3.5% absent a policy shift in Japan.
  2. Yields on 30-year Japanese government bonds exceeded those in Germany and China by last year, and a Goldman Sachs trading note suggests the yield will at some point climb to mirror the equivalent Treasury.
  3. Japan's 10-year government bond yield is also marching higher, a benchmark so pivotal to borrowing costs across financial markets that it was a cornerstone of the Bank of Japan's former yield-curve control regime.

Related Articles:

  • Five Charts On The Global Bond Market Sell-Off — 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.
  • 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.
  • 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. The historical relationship in which gold prices fall as real 10-year Treasury yields rise has broken down, since gold pays no interest and would normally become less attractive as rates rise. The author argues this reflects a "debasement trade," with investors seeking safe havens on fears governments will inflate away unsustainable public debt.

Robin Brooks Robin Brooks Substack
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Gold has risen 50% since Powell’s Jackson Hole speech. Identifying a breakdown of the historical relationship between gold and the real 10-year yield, Brook notes “Historically, gold prices fall when real rates rise.”

Why has gold stopped falling when real interest rates rise?

Core argument: The historical inverse relationship between gold prices and real 10-year Treasury yields has broken down, which the author characterizes as a structural break in the debasement trade.

Gold is a symptom of something much bigger. We’re at the start of a global debt crisis, with markets increasingly fearful governments will attempt to inflate away out-of-control debt. Gold is just one of many assets that are getting a “safe haven” bid as part of this phenomenon. The debasement trade is a “structural break:” the black line in the chart shows the natural log of the XAU/$ gold price in Bloomberg, while the blue line shows the real 10-year Treasury yield, which I have inverted and am showing on the right axis. Historically, gold prices fall when real rates rise. That makes sense because gold doesn’t pay interest, so the opportunity cost of holding it goes up when interest rates rise. The problem is that this relationship has broken down in spectacular fashion. The “fear factor” from unsustainable fiscal policy in so many countries is large. Countries with lots of public debt ignore this at their peril.

Takeaways by Macro Roundup® AI

  1. The historical inverse relationship between gold prices and real 10-year Treasury yields has broken down, which the author characterizes as a structural break in the debasement trade.
  2. Gold's rise reflects the start of a global debt crisis, according to the author, as markets increasingly fear governments will attempt to inflate away out-of-control debt.
  3. Gold is one of many assets receiving a safe-haven bid driven by a large fear factor from unsustainable fiscal policy in many countries, which heavily indebted governments ignore at their peril.

Related Articles:

  • Return of the Three-Headed Bond Monster Over Tokyo — 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.
  • Global Debt Report 2025 — About 60% of fixed-rate government debt in advanced economies maturing by 2027 — roughly $9tn — was issued before the recent interest-rate tightening, with weighted average yields below 2% versus projected 10-year rates near 3.6%, implying refinancing at nearly double the original cost. France, Spain, the UK, and the US face heightened vulnerability, with maturing debt exceeding 15% of GDP.
  • Brazil’s Slow-Burning Economic Crisis Might Be the U.S. Future — Brazil illustrates a feedback loop in which higher interest rates raise debt-servicing costs—now over 7% of GDP—which in turn lift risk premia and inflation expectations, making fiscal policy less sustainable still. U.S. long-term rates have not fallen despite Federal Reserve cuts, partly reflecting an $11tn debt increase and markets pricing the risk that debt is managed through higher inflation.

AI Summary. China's military newspaper has accused two top generals — the vice chair of the Central Military Commission and the People's Liberation Army's chief of staff — of trampling the "chairman responsibility system" that gives China's leader supreme decision-making power over the armed forces, alongside corruption charges.

Kathrin Hille, Demetri Sevastopulo and Joe Leahy Financial Times
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The two remaining professional officers on China’s Central Military Commission are under investigation by the CCP for undermining Xi’s control of the military. Only Xi and a political commissary now remain, giving Xi sole operational control.

Is China purging top generals to protect the leader's command authority?

Core argument: China's military accused Central Military Commission vice chair Zhang Youxia and CMC member Liu Zhenli, the People's Liberation Army's chief of staff, of having "severely trampled on and damaged the chairman responsibility system," which vests supreme military decision-making power in Xi Jinping.

China’s military has accused its top general of undermining the command authority of Xi Jinping, suggesting that ensuring the powers of the Chinese leader is behind a probe of Zhang Youxia announced on Saturday, rather than just charges of corruption. Zhang, vice chair of the Central Military Commission, and Liu Zhenli, another CMC member and the People’s Liberation Army’s chief of staff, had “severely trampled on and damaged the chairman responsibility system”, the military’s official newspaper PLA Daily said in an editorial published on Sunday. Under the Chinese constitution, the leader of the state and Chinese Communist Party (CCP) chairs the CMC and has supreme decision-making power over the military. This “chairman responsibility system” is designed to secure the party’s absolute control over the armed forces. The PLA mouthpiece’s editorial said the two generals had “seriously abetted political and corruption problems that affect the [Communist] party’s absolute leadership over the military and endanger the foundation of the party’s rule”.

Takeaways by Macro Roundup® AI

  1. China's military accused Central Military Commission vice chair Zhang Youxia and CMC member Liu Zhenli, the People's Liberation Army's chief of staff, of having "severely trampled on and damaged the chairman responsibility system," which vests supreme military decision-making power in Xi Jinping.
  2. A PLA Daily editorial framed the investigation of Zhang Youxia around the undermining of Xi Jinping's command authority rather than corruption charges alone.
  3. The PLA Daily said Zhang Youxia and Liu Zhenli "seriously abetted political and corruption problems" affecting the Communist Party's absolute leadership over the military and endangering the foundation of the party's rule.

Related Articles:

  • 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.
  • The Sinister Disappearance Of China’s Bosses — China's liuzhi detention system operates alongside normal policing, requiring no court approval and denying detainees lawyers, with windowless cells, constant lighting and round-the-clock supervision. Stock-exchange filings show 39 executives at listed companies disappearing into the system by the end of September, exceeding the prior year's record.
  • China Sees Lowest Attendance at Plenum Since Cultural Revolution — A tally by Bloomberg News found only 168 of the 205 members of China's Communist Party Central Committee attended the party's fourth plenum, the lowest attendance rate since the Cultural Revolution, with 42 officials including alternate members absent without explanation. The tally suggests the anti-corruption purges are wider than publicly known.

Tuesday, January 27, 2026

AI Summary. Research defining an industry "run-up" as a cumulative return of 100% or more over two years finds that such run-ups do not predict unusually low average future returns, though they do raise the probability of a crash, defined as a 40% drawdown. Volatility, turnover, and equity issuance help predict those crashes.

Michael Mauboussin and Dan Callahan Morgan Stanley
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Evidence from 147 large US and international “runups” in an industry’s portfolio indicates that average post-runup returns are similar to the market average. The higher likelihood of a crash is offset by higher returns absent a crash.

Do large industry price run-ups predict lower future returns or crashes?

Core argument: Greenwood, Shleifer, and You identified 40 U.S. industry run-ups from 1926 to 2014 and 107 international sector run-ups from 1985 to 2014, defining a run-up as a cumulative return of 100% or more, absolute and relative to the market, over two years.

Greenwood, Shleifer, and You defined a run-up as a cumulative return of 100% or more, both absolute and relative to the market, over the prior two years for a value-weighted portfolio of stocks within an industry. Further, they specified that the industry’s absolute return had to be up 50% or more over the previous five years. The run-up started the first month that the conditions were met. They identified 40 such run-ups in the U.S. from 1926 to 2014 and 107 in international sectors from 1985 to 2014. Their headline finding was that Fama is right in the sense that a run-up does not predict unusually low future returns, on average. Exhibit 13 shows the results for run-ups of U.S. industries. On the left are the 24 months prior to the first month in which the industry’s return crosses their threshold of a run-up, and on the right is the price performance for the following 48 months. Just over half of the run-ups had a crash, defined as a 40% drawdown from any price in the two years following the first run-up. The average return of all episodes after run-ups was not dissimilar to the market overall, though run-ups increased the probability of a crash, and signals along the way, including volatility, turnover, and equity issuance, helped predict it. A separate paper found that crashes often followed sharp increases in invested capital, a measure of investment intensity.

Takeaways by Macro Roundup® AI

  1. Greenwood, Shleifer, and You identified 40 U.S. industry run-ups from 1926 to 2014 and 107 international sector run-ups from 1985 to 2014, defining a run-up as a cumulative return of 100% or more, absolute and relative to the market, over two years.
  2. Just over half of the run-ups were followed by a crash, defined as a 40% drawdown from any price in the two years after the run-up began, though average returns after run-ups were not dissimilar to the market overall.
  3. Volatility, turnover, and equity issuance helped predict crashes following run-ups, and a separate paper found that crashes often followed sharp increases in invested capital, a measure of investment intensity.

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.
  • Predictable Financial Crises — Historical data indicate that when credit and asset prices grow rapidly over three years, the probability of a financial crisis within the next three years is 40%, versus 7% in stable periods. The authors find 63% of crises were preceded by such credit-market overheating, which also forecasts weaker medium-term economic growth.
  • Stocks Near Highest Valuations Since 1880 — The cyclically adjusted price-earnings ratio, which divides stock prices by the average of the past 10 years of inflation-adjusted earnings to smooth business-cycle swings, stands near its highest level since 1880. Because it uses a decade of earnings rather than one year, it is a gauge of sustainable earnings power.

AI Summary. Bond-market inflation forecasts and surging earnings expectations suggest Japan's rising government bond yields reflect economic normalization rather than an impending fiscal crisis. Japan's primary deficit is trending toward zero, it runs a current account surplus and holds more foreign assets than foreigners hold in Japan, and its central bank and finance ministry retain tools to counter unwanted yield spikes.

John Authers Bloomberg
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The sharp rise in Japanese yields may not spark an international crisis. It is partly post-slump normalization, extreme new stimulus may not materialize, and Japan’s debt is partially mitigated by its CA surplus and positive net investment position.

Do rising Japanese bond yields reflect normalization rather than fiscal trouble?

Core argument: Bond-market-implied inflation forecasts suggest traders assume Japan's endemic deflation is over, and surging earnings expectations show confidence in Corporate Japan, supporting the argument that JGBs reflect healthy economic normalization.

Inflation forecasts generated by the bond market suggest that traders are now assuming that Japan’s endemic deflation is over. Earnings expectations have surged, showing confidence in Corporate Japan. So there are reasonable arguments that JGBs reflect a healthy economic normalization. Arguments that a true fiscal crisis is in the offing hinge on Japan’s massive stock of debt and Takaichi’s determination to borrow more in a bid to get the economy moving. How likely is she to overplay her hand and overextend? Concerns over fiscal sustainability (and therefore fears of an imminent crisis) [may be] overdone: The LDP may fail to win a large majority in the Feb. 8 election. Takaichi is not Truss – Tokyo is clearly aware of bond market risk. The primary deficit is trending to zero. The BOJ and MOF have plenty of tools to address unwanted spikes in yields. Despite its huge pile of debt, Japan is stable. It maintains a current account surplus (unlike the US). Also unlike the US, it has a positive net international investment position, meaning that it holds more foreign assets than foreigners hold assets in Japan.

Takeaways by Macro Roundup® AI

  1. Bond-market-implied inflation forecasts suggest traders assume Japan's endemic deflation is over, and surging earnings expectations show confidence in Corporate Japan, supporting the argument that JGBs reflect healthy economic normalization.
  2. Fears of an imminent Japanese fiscal crisis rest on Japan's massive debt stock and Takaichi's determination to borrow more, though Japan's primary deficit is trending to zero and the LDP may fail to win a large majority in the Feb. 8 election.
  3. Japan maintains a current account surplus and a positive net international investment position, holding more foreign assets than foreigners hold in Japan, unlike the US, while the BOJ and MOF retain tools to address unwanted yield spikes.

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.
  • 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.
  • Five Charts On The Global Bond Market Sell-Off — 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.

AI Summary. A G10 dollar index recalculated to exclude Japan shows the dollar has fallen below its earlier trading range, indicating broad-based dollar weakness. Sustained yen weakness had previously made the dollar appear stronger than it was.

Robin Brooks Robin Brooks Substack
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The Dollar is weakening against a variety of currency indices, with or without the yen and/or EMs. “No matter how you cut the data, the Dollar is tumbling.”

Has yen weakness been masking broad-based dollar decline?

Core argument: The G10 Dollar index has fallen below the range in which it traded during the second half of last year, a decline that holds whether or not Japan is included in the index.

The black line in the chart is the G10 Dollar index. The blue line modifies this index by dropping Japan. This mutes the Dollar drop of recent days, but this effect is outweighed by sustained Yen weakness in the months leading up to last week, when Yen weakness made the Dollar look stronger than it really was. The net effect of these two things is that the G10 Dollar has fallen below the range it traded in during the second half of last year. Across the board, the picture is therefore quite alarming. No matter how you “cut” the data, the Dollar is tumbling.

Takeaways by Macro Roundup® AI

  1. The G10 Dollar index has fallen below the range in which it traded during the second half of last year, a decline that holds whether or not Japan is included in the index.
  2. Excluding Japan from the G10 Dollar index mutes the Dollar's recent drop, but that effect is outweighed by sustained Yen weakness in the preceding months, which had made the Dollar look stronger than it was.

Related Articles:

  • Different Dollar Downside — The authors estimate the US dollar remains roughly 15% overvalued and argue a sharper depreciation could follow if US labor-market weakness forces deeper Federal Reserve rate cuts, particularly against a highly undervalued yen. They also flag a derating of US tech exceptionalism as a risk, since demand for US equities has helped fund the current account deficit.
  • 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.
  • Global Debt Report 2025 — About 60% of fixed-rate government debt in advanced economies maturing by 2027 — roughly $9tn — was issued before the recent interest-rate tightening, with weighted average yields below 2% versus projected 10-year rates near 3.6%, implying refinancing at nearly double the original cost. France, Spain, the UK, and the US face heightened vulnerability, with maturing debt exceeding 15% of GDP.

AI Summary. The U.S. Census Bureau estimates net international migration peaked at 2.7m in 2024 and fell to 1.3m in 2025, with a projected decline to roughly 321,000 in 2026 if current trends continue. The Bureau notes that continued trends would produce the first net negative migration in more than 50 years.

Census Staff United States Census Bureau
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New Census estimates suggest the overall US population grew by 1.8mm or .5% btw July 2024 and July 2025. Net migration was 2.7mm in 2024 and 1.3mm in 2025. They project net migration declining to 321,000 in 2026.

Is net international migration to the US falling sharply?

Core argument: U.S. net international migration fell from a peak of 2.7 million in 2024 to 1.3 million as of July 1, 2025, according to the Census Bureau's Vintage 2025 population estimates.

The U.S. Census Bureau released a new series of population estimates that reflect demographic change since the 2020 Census. International migration is one of the most dynamic sources of demographic change and that has certainly been the case this decade. The new Vintage 2025 estimates show a historic decline in net international migration (NIM). Specifically, NIM: 1. Peaked at 2.7 million in 2024. 2. Declined to 1.3 million in 2025 (as of July 1). 3. Is projected to further decline to approximately 321,000 in 2026 if current trends continue. Currently, the estimates of NIM are trending toward negative net migration. If those trends continue, it would be the first time the United States has seen net negative migration in more than 50 years.

Takeaways by Macro Roundup® AI

  1. U.S. net international migration fell from a peak of 2.7 million in 2024 to 1.3 million as of July 1, 2025, according to the Census Bureau's Vintage 2025 population estimates.
  2. The Census Bureau projects net international migration will decline further to approximately 321,000 in 2026 if current trends continue.
  3. Census Bureau estimates of net international migration are trending toward negative net migration, which if sustained would be the first net negative migration in the United States in more than 50 years.

Related Articles:

  • 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.
  • 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.
  • New Data Show Intensifying Unauthorized Immigration Decline, With Large Local Variations — 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.

AI Summary. Many quantum computers depend on dilution refrigerators, produced by a few small firms in the US, Britain and Finland, and on critical minerals such as niobium, concentrated in Brazil, and tantalum, mined in Africa and mostly processed in China. China has announced mass production of a domestic dilution refrigerator and has been buying niobium mines.

Chris Miller and Josh Zoffer Washington Post
Date Posted:

Chris Miller and Josh Zoffer caution that, depending on which quantum technologies mature, the US is facing several potential “chokepoints” in terms of exotic materials and processing needed to scale the technology.

Do supply chains for equipment and minerals constrain quantum computing leadership?

Core argument: Dilution refrigerators needed to cool many quantum computers are produced largely by a few small companies in the U.S., Britain and Finland, while Chinese media announced mass production of a homegrown dilution refrigerator.

Most quantum systems require intense cooling. Today, the dilution refrigerators that are needed to cool many types of quantum computers are largely produced by a few small companies in the U.S., Britain and Finland. Chinese media recently announced mass production of a homegrown dilution refrigerator. Beijing is not leaving this to chance. Quantum computing will require greater use of certain exotic materials. The risks of relying on China for rare earths and critical minerals, many of which are required for quantum systems, have become clear. Depending on which specific quantum technologies mature, we may need more of the critical mineral niobium, which today is found almost exclusively in Brazil. China’s already begun buying up niobium mines. Tantalum, another important material for some quantum systems, is largely produced in Nigeria, Rwanda and the Democratic Republic of the Congo, and mostly processed in China. Quantum computing may still sound like science fiction, but the scale-up phase is approaching. The race is now about supply chains as much as science and engineering.

Takeaways by Macro Roundup® AI

  1. Dilution refrigerators needed to cool many quantum computers are produced largely by a few small companies in the U.S., Britain and Finland, while Chinese media announced mass production of a homegrown dilution refrigerator.
  2. Niobium, a critical mineral that some maturing quantum technologies would require in greater quantities, is found almost exclusively in Brazil, and China has begun buying up niobium mines.
  3. Tantalum, important for some quantum systems, is largely produced in Nigeria, Rwanda and the Democratic Republic of the Congo and mostly processed in China.

Related Articles:

  • Why China Keeps Winning The Trade War — Governments seeking supply-chain leverage face limited visibility into their own supply chains, and China's rare earth licensing requirements for multinationals may be partly intended to give Beijing that visibility and allow more precise targeting of future restrictions. Effective measures must impose asymmetric costs, and keeping foreign manufacturers dependent on drip-fed supply is central to Beijing's strategy.
  • Google Unveils Quantum Computing Breakthrough on Willow Chip — Google says its "Quantum Echoes" algorithm, run on its Willow quantum chip and detailed in a paper in Nature, is verifiable on other quantum computers and ran 13,000x faster than the world's best classical supercomputer. Google says the advance points to useful quantum applications in medicine and materials science within five years.
  • IBM Has a Roadmap to a ‘Fault-Tolerant’ Quantum Computer by 2029 — IBM has laid out a roadmap for building a fault-tolerant quantum computer by 2029, citing advances in reducing errors in quantum bits and a technique for identifying and correcting errors in real time using conventional computing. Amazon and Google are also pursuing quantum error correction with dedicated chips.

AI Summary. China’s youth unemployment rate has eased slightly for four consecutive months, though competition for jobs remains intense amid deflationary pressures and a growing mismatch between workers’ skills and available vacancies. The rate had reached 18.9% after a record 12.2m university students graduated, the highest level since students were excluded from the data.

Kandy Wong and Alice Li South China Morning Post
Date Posted:

China’s youth unemployment (16–24) continued to decline from its recent peak in August of 18.9%, falling to 16.5% in December. The unemployment rate for workers 25–29 also fell to 6.9%.

Is China's youth unemployment easing despite intense job competition?

Core argument: China's youth unemployment rate fell slightly in December for the fourth consecutive month, easing from August's 18.9%, the highest level since students were excluded from the data in December 2023.

China’s youth unemployment rate fell slightly in December for the fourth consecutive month, though competition for jobs remains intense as policymakers confront deflationary pressures and a labour market marked by a growing mismatch between skills and vacancies. That figure has eased since August after a record 12.2 million university students graduated over the summer, pushing the jobless rate to 18.9% – the highest level since students were excluded from the data in December 2023. In June that year, youth unemployment had hit a headline-grabbing 21.3%.

Takeaways by Macro Roundup® AI

  1. China's youth unemployment rate fell slightly in December for the fourth consecutive month, easing from August's 18.9%, the highest level since students were excluded from the data in December 2023.

Related Articles:

  • The True Cost of China’s Falling Prices — Prices fell for 51 of 67 consumer items tracked over a two-year period in China, while the broader GDP deflator, which includes upstream sectors, declined for 10 straight quarters, indicating deflation is more entrenched in industry. The share of "zombie" firms whose profits cannot cover debt interest rose from 19% to 34% over five years.
  • Macro Outlook 2026: Sturdy Growth, Stagnant Jobs, Stable Prices — China's growth is forecast at 4.8%, above the 4.5% consensus, with robust manufacturing offset by a housing drag on output estimated at about 1.5 percentage points as property sales run 60% below peak. Strong manufacturing and weak domestic demand are projected to lift China's current account surplus toward 1% of global output.
  • 14-Hour Shifts and $1 a Delivery—but China’s Army of Gig Workers Keeps Growing — Self-employed workers make up about 30% of China's nonagricultural workforce, up from 20% in 2013, while the number of ride-hailing drivers tripled to 7.5 million over four years even as rides grew about 60%. The influx of workers into gig work is putting downward pressure on pay.