Edward Conard

Top Ten New York Times Bestselling Author

  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “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
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “…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, February 9, 2026

AI Summary. Government bonds severely underperform in wartime, in absolute terms and relative to equities, housing, and economic growth, unlike in financial crises when bonds tend to outperform stocks. The U.S. and U.K. reduced war-driven debt-to-GDP ratios without explicit default, using surprise inflation and financial repression that shifted fiscal burdens onto bondholders.

Zhengyang Jiang, Hanno Lustig, Stijn Van Nieuwerburgh and Mindy Xiaolan National Bureau of Economic Research
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US government bonds, normally safe assets, become risky in times of war because of negative real returns due to bursts of inflation. As in the fiscal theory of the price level, capital losses on the debt erase government liabilities and thus help absorb fiscal shocks.

Do government bonds remain safe assets during wars and pandemics?

Core argument: Government bonds severely underperform during wartime in absolute terms and relative to equities, housing, and GDP growth, contradicting the conventional wisdom that government bonds are safe assets.

The U.S. and the U.K. have managed to bring down high government debt/GDP ratios resulting from wars without resorting to explicit default, but rather through a combination of surprise inflation and financial repression. Contrary to the conventional wisdom that government bonds are safe assets, government bonds severely underperform in wartime, not only in absolute terms, but also relative to equities, housing, and GDP growth rates. This result contrasts with the returns to government bonds during financial crises, when bonds tend to outperform stocks. Wars and pandemics are different because fiscal spending is much higher and governments force bondholders to bear a substantial share of that fiscal burden through a combination of financial repression and surprise inflation.

Takeaways by Macro Roundup® AI

  1. Government bonds severely underperform during wartime in absolute terms and relative to equities, housing, and GDP growth, contradicting the conventional wisdom that government bonds are safe assets.
  2. The U.S. and U.K. reduced high war-driven government debt/GDP ratios without explicit default, relying instead on a combination of surprise inflation and financial repression that forced bondholders to bear a substantial share of the fiscal burden.
  3. Bond performance in wars and pandemics contrasts with financial crises, when government bonds tend to outperform stocks, a difference attributed to much higher fiscal spending during wars and pandemics.

Related Articles:

  • Foreign Holdings of US Treasuries Climbed to Record in November — Foreign holdings of US Treasuries rose $112.8bn to a record $9.36tn, a figure reflecting both net purchases and valuation changes, according to US Treasury Department data. Increases in Norwegian, Canadian and Saudi holdings offset a $6.1bn decline in China's stockpile to $682.6bn, its lowest since 2008.
  • Can Treasury Markets Add and Subtract? — The authors estimate that Treasury yields rise on days when official cost estimates reveal deficit-increasing legislation, with a one-time 1 percentage point increase in the deficit-to-GDP ratio raising the 10-year yield by 0.75 basis points, or 6.75 basis points for a persistent deficit shock. The response reflects higher expected inflation and term premia alongside lower convenience yields.
  • Government Debt in Mature Economies. Safe or Risky? — When governments insulate taxpayers rather than bondholders from unfunded spending shocks, government bond yields rise as debt is marked to market, shifting the risk to bondholders — a "risky debt" regime the authors argue better fits recent experience. In that regime, large-scale central bank asset purchases give government bonds temporary price support at a net loss to taxpayers.

AI Summary. A nominee to lead the Federal Reserve has backed a new version of a 1951 Treasury-Federal Reserve agreement that would spell out the size of the central bank's balance sheet alongside the Treasury's debt-issuance plans. Analysts argue such a public pact could tie monetary operations to government deficits and resemble a framework for controlling bond yields.

Ye Xie, Michael MacKenzie, and Maria Eloisa Capurro Bloomberg
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Warsh has raised the prospect of revisiting the Fed’s relationship with Treasury, potentially allowing “a public agreement that synchronizes the Fed’s balance sheet with Treasury financing [and] explicitly ties monetary operations to deficits.”

Would a new Fed-Treasury accord tie monetary policy to deficits?

Core argument: Fed nominee Warsh supports a new version of the 1951 Treasury-Fed accord, telling CNBC that such an agreement could state plainly the Fed's balance-sheet size while the Treasury lays out its debt-issuance plans.

Warsh has voiced support for overhauling the relationship between the Treasury and the Fed with a new version of an agreement struck in 1951. That pact had dramatically limited the Fed’s footprint in the bond market — something that’s not true today, after trillions of dollars of securities purchases during the global financial and Covid crises. The nominee did say in a CNBC interview last year that an agreement could “describe plainly and with deliberation” what the Fed’s balance-sheet size would be, with the Treasury laying out its debt-issuance plans. Looming over any Fed-Treasury talks would be Trump, who last year argued that one of the central bank’s duties in setting interest rates is to mind the government’s debt costs. Those are currently running at an annual clip of around $1 trillion, or half the budget deficit. “Rather than insulating the Fed, it could look more like a framework for yield-curve control,” Tim Duy, chief US economist at SGH Macro Advisors, said of the accord. “A public agreement that synchronizes the Fed’s balance sheet with Treasury financing explicitly ties monetary operations to deficits.”

Takeaways by Macro Roundup® AI

  1. Fed nominee Warsh supports a new version of the 1951 Treasury-Fed accord, telling CNBC that such an agreement could state plainly the Fed's balance-sheet size while the Treasury lays out its debt-issuance plans.
  2. Tim Duy, chief US economist at SGH Macro Advisors, argues such an accord could look more like a framework for yield-curve control than insulation for the Fed, because synchronizing the Fed's balance sheet with Treasury financing ties monetary operations to deficits.
  3. US government debt costs are running at an annual clip of around $1 trillion, or half the budget deficit, and Trump has argued that minding those costs is one of the Fed's duties in setting interest rates.

Related Articles:

  • Fiscal Dominance and the Return of Zero-Interest Bank Reserve Requirements — Fiscal dominance requires governments to fund deficits at the margin with non-interest-bearing debt, and the revenue from inflation taxation—both expected and unexpected—is limited. The authors argue a US fiscal dominance episode could end the payment of interest on bank reserves and restore requirements that banks hold large zero-interest reserves against deposits.
  • Convenience Lost — The authors find that fiscal expansion and the resulting rise in Treasury supply pushed convenience yields to zero on short-term Treasurys and below zero on long-term ones, reducing the revenue the U.S. earns from issuing safe, liquid assets. They argue shortening the debt's maturity structure cannot fully offset this, and that international investors may turn to alternative long-term safe assets.
  • 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. Stock price reactions to large artificial intelligence capital spending announcements have shifted from rewarding to penalizing companies, with the valuation multiple markets assign to such spending collapsing and likely turning negative. Technology companies once valued for low debt and low capital intensity are now among the leaders in both.

Paul Kedrosky Notes on Complexity
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The Mag7 had a (marginal) capex multiplier of ~$60 in 2024 and $15 in 2025. By January 2026, this multiplier had likely turned negative, as the four largest capex announcements “collectively destroyed $475B of market cap on $320B of incremental guidance.”

Are markets now penalizing companies for large AI capital spending?

Core argument: The author's analysis shows the market multiple awarded to AI-related capex has collapsed and likely turned negative, reversing an earlier period when companies were rewarded for promising vast capex increases.

Initially companies were rewarded by markets for promising vast [AI related] capex increases. The future isn't cheap! But that reaction to spending is now reversing, as stock price reactions to outsized spending announcements have increasingly shown. This may be belated, but it was inevitable. Tech companies, once valued for their low debt and low capital intensity, are now among the leaders in both, a dubious distinction. And don't get me started about maintenance capital implied by current spending. Markets have come to similar views, reversing the multiple it gives public companies for AI capex. Check the following graph, from my analysis, to see how the AI capex multiple has collapsed, and likely gone negative. Again, this shouldn't be surprising. As Ben Graham famously said, “In the short run, the market is a voting machine but in the long run, it is a weighing machine”. Markets have, however briefly, begun weighing AI-related capex, and found its current size ... portly.

Takeaways by Macro Roundup® AI

  1. The author's analysis shows the market multiple awarded to AI-related capex has collapsed and likely turned negative, reversing an earlier period when companies were rewarded for promising vast capex increases.
  2. Stock price reactions to outsized AI spending announcements have increasingly reversed, a shift the author calls belated but inevitable.
  3. Tech companies, once valued for low debt and low capital intensity, now rank among the leaders in both, a distinction the author calls dubious given the maintenance capital implied by current spending.

Related Articles:

  • The Macro Implications of the AI Capex Boom — 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.
  • Four Takeaways from Microsoft’s Satya Nadella at WEF Today — 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.
  • 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.

AI Summary. S&P 500 companies account for 18% of total US employment, 21% of total US capital expenditure, roughly half of economy-wide corporate profits, and less than half of outstanding corporate debt. Privately owned firms account for almost 80% of job openings, and 81% of firms with revenues above $100m are private.

Torsten Sløk, Rajvi Shah, and Shruti Galwankar Apollo
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While 81% of American firms with revenue greater than $100mm are private, S&P 500 firms made up over half of economy-wide corporate profits at the end of 2025, while representing 18% of the workforce.

How much of the US economy do public companies represent?

Core argument: Employment at S&P 500 companies accounts for 18% of total US employment, and their capital expenditures make up 21% of total US capex.

Most of the time in financial markets is spent on discussing Nvidia, Apple and Coca-Cola, but these firms and the rest of the S&P 500 companies only make up a very small part of the US economy. For example, employment in S&P 500 companies is only 18% of total US employment. Similarly, capex by S&P 500 companies is only 21% of total capex in the US economy. [Notable] facts about public markets and private markets: [One] employment in S&P 500 companies is 18% of total US employment. [Two] employment in firms with more than 500 employees is 24.9 million, and total US employment is 160 million. [Three] privately owned firms account for almost 80% of job openings. [Four] 81% of firms with revenues greater than $100 million are private. [Five] Less than half of all corporate debt outstanding is from S&P 500 companies. [Six] S&P 500 profits make up roughly half of economy-wide corporate profits. [Seven] Capex by S&P 500 companies is 21% of total capex in the US economy. Bottom line: Public markets are a small part of the overall economy.

Takeaways by Macro Roundup® AI

  1. Employment at S&P 500 companies accounts for 18% of total US employment, and their capital expenditures make up 21% of total US capex.
  2. Privately owned firms account for almost 80% of US job openings, and 81% of firms with revenues above $100 million are private.
  3. S&P 500 companies account for roughly half of economy-wide corporate profits and less than half of all corporate debt outstanding.

Related Articles:

  • The Economic Divide Between Big and Small Companies Is Growing — High inflation, more cautious consumers, and tariffs are weighing on small-business earnings and prompting cutbacks, as smaller firms are less able than larger ones to withstand economic headwinds. Private firms with fewer than 50 workers have steadily shed jobs over the past six months.
  • 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.
  • Which U.S. Stocks Generated the Highest Long-Term Returns? — Of the 29,078 U.S. common stocks in a database spanning nearly a century, 51.6% had negative cumulative returns, while 17 stocks returned more than 5m% — led by Altria at 265m%. Those top performers averaged annualized returns of just 13.47%, underscoring the value of time invested.

AI Summary. Long-run data for France, Sweden and the UK show inheritance flows fell from roughly 15-25% of national income around 1900 to 10-15%, and the inherited share of private wealth dropped from about 80% to 40-60%, implying more wealth is now accumulated through work, saving and entrepreneurship.

Daniel Waldenström Aeon
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Existing data show ~80% of private wealth in early 20th-century Europe was inherited. In France and Sweden that fell to ~40% by 1975, but has since risen. In the US, the share of inherited wealth hovered btw 50 and 60% over the last century.

Has the inherited share of private wealth declined over the past century?

Core argument: Inherited wealth's share of private wealth in Europe has fallen from roughly 80% in the early 20th century to between 40 and 60%, while the US has maintained a similarly lower level throughout the past century.

Figure 1 [tracks inheritance flows] using long-run data for France, Sweden and the UK. Around 1900, inheritance flows amounted to roughly 15-25% of national income, compared with 10-15% today. Meanwhile, inheritance flows relative to total private wealth have declined steadily over the past century, with no recent reversal. Most strikingly, while roughly 80% of private wealth in early 20th-century Europe was inherited, that share has fallen to between 40 and 60%, whereas the US has maintained a similarly lower level throughout the past century. In other words, a far greater share of wealth is now accumulated over individual lifetimes through work, saving, and entrepreneurship. In fast-growing, lower-wealth economies such as China and India, inheritance flows amount to a relatively modest 6-7% of national income. By contrast, in richer but more slowly growing economies like Japan, Germany and France, inheritance flows are nearly twice as large, at around 11-12%.

Takeaways by Macro Roundup® AI

  1. Inherited wealth's share of private wealth in Europe has fallen from roughly 80% in the early 20th century to between 40 and 60%, while the US has maintained a similarly lower level throughout the past century.
  2. Inheritance flows in France, Sweden and the UK ran at roughly 15–25% of national income around 1900 versus 10–15% today, and have declined steadily relative to total private wealth with no recent reversal.
  3. Inheritance flows amount to 6–7% of national income in fast-growing, lower-wealth economies such as China and India, against around 11–12% in richer, more slowly growing Japan, Germany and France.

Related Articles:

AI Summary. Global annual births peaked at about 146m and have been falling since. The authors project that if the world converged on an average of 1.5 children per woman, annual births would fall below 16m by 2300, and any rate below two children per two adults implies indefinite decline.

Michael Geruso and Dean Spears Journal of Economic Perspectives
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Low fertility is likely to persist as a global phenomenon as pro-natal policies have been insufficient to “adequately challenge conventions, challenge social orders, and challenge what gets society’s attention, power, and investment.”

How far would global births fall under persistently low fertility?

Core argument: Global annual births peaked at 146 million in 2012 and have been falling since, compared with roughly 30 million in 1700 and an estimated 18 million per year 2000 years ago, per Kaneda and Haub (2022).

At the start of Figure 1, in 1700, there were perhaps about 30 million births annually. For comparison, estimates from Kaneda and Haub (2022) indicate that there were perhaps 18 million births per year globally 2000 years ago. In 2012, at the peak, there were 146 million births worldwide. Annual births have been falling since. In the hypothetical scenario in which the world converged to an average total fertility rate of 1.5 and held at that level, then by 2300, annual global births would have fallen back down below 16 million. Thus, birth rates that are already common today in most of the world would lead to a decline in the number of global births that could be more rapid than the increase of recent centuries. Moreover, notice that the decline does not end where the graph does: As long as birth rates hold at any level below two children per two adults—even at some steady, unchanging level—the slide down would continue indefinitely. What about much more transformative changes, larger than anything yet seen. Could that avoid global depopulation? Nobody has tried anything that would adequately challenge conventions, challenge social orders, and challenge what gets society’s attention, power, and investment.

Takeaways by Macro Roundup® AI

  1. Global annual births peaked at 146 million in 2012 and have been falling since, compared with roughly 30 million in 1700 and an estimated 18 million per year 2000 years ago, per Kaneda and Haub (2022).
  2. In a hypothetical scenario where the world converges on a total fertility rate of 1.5 and holds there, annual global births would fall below 16 million by 2300, a decline that could be more rapid than the increase of recent centuries.
  3. As long as birth rates hold at any level below two children per two adults, even a steady one, the decline in global births would continue indefinitely.

Related Articles:

  • 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.
  • The Downside of Fertility — In developed countries that modernized very rapidly, men do considerably less housework and care for others at home relative to women than in countries with more continuous growth. Larger gender gaps in household and caring hours are strongly correlated with lower fertility rates across these countries.
  • The US Has One of the Highest Fertility Rates Among Peer Countries — The tempo-adjusted fertility rate, which accounts for shifts in the timing of births, shows the US rate falling since roughly 2009-10 and dropping below the 2.1 births-per-woman replacement level around 2017, reaching 1.82 in 2022. The US decline is less severe than in many peer countries.

Tuesday, February 10, 2026

AI Summary. An analysis merging Labor Department, Homeland Security, and American Community Survey data estimates the average H-1B visa worker earns about 16% less than a comparable US-born worker, implying payroll savings near $100,000 over a six-year visa term. Simulations suggest a $150,000–$200,000 visa fee would barely reduce hiring while raising $10bn–$20bn annually.

George Borjas National Bureau of Economic Research
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Adjusting for worker quality, H1-B holders earn ~16% less than peers (software developers ~26% less). With H1-Bs capped at 85k, excess demand means a $150k fee would have little effect on the number of workers hired, while raising their mean skill level.

How much would a large visa fee reduce skilled foreign hiring?

Core argument: The average H-1B worker earns about 16% less than a US-born worker in the same locality with the same education, age, gender, and occupation, according to data merged from Labor Condition Applications, I-129 petitions, and the American Community Survey.

The analysis merged data from three distinct sources: the Labor Condition Application (LCA) filed with DOL for temporary positions to be filled by foreign persons, the I-129 forms filed with DHS petitioning the entry of a specific foreign-born person through the H-1B program, and the American Community Surveys (ACS) that provides the “baseline” sample of native workers. The evidence indicated that the average H-1B worker earns about 16% less than a US-born worker in the same locality and with the same education, age, gender, and occupation. Since these high-skill workers typically earn more than $100,000 annually, the average payroll savings resulting from a single H-1B hire nears $100,000 over the term of the six-year visa term. [Thus] firms might be willing to pay a substantial fee for the “privilege” of hiring such a worker. The simulation of an economic model of the employer’s hiring decision, combined with the excess demand for the foreign workers, revealed that imposing a visa fee between $150,000 and $200,000 may not change the number of H-1B workers hired all that much. The fee, however, will generate revenues totaling between $10 billion and $20 billion annually and change the skill composition of the H-1B workforce, making it more skilled.

Takeaways by Macro Roundup® AI

  1. The average H-1B worker earns about 16% less than a US-born worker in the same locality with the same education, age, gender, and occupation, according to data merged from Labor Condition Applications, I-129 petitions, and the American Community Survey.
  2. Because these high-skill workers typically earn more than $100,000 annually, the average payroll savings from a single H-1B hire approaches $100,000 over the six-year visa term.
  3. A simulation of an employer hiring model, combined with excess demand for foreign workers, indicates a visa fee between $150,000 and $200,000 may change the number of H-1B workers hired little while generating $10 billion to $20 billion annually and making the H-1B workforce more skilled.

Related Articles:

  • The Extreme Shortage of High IQ Workers — Semiconductor manufacturing requires workers of above-average intelligence, with the most demanding roles needing IQs in the top 1 in 1,000 — a pool of about 164,000 people in the US, of whom perhaps 100,000 can be placed in such professions. The author argues this scarcity explains reliance on high-IQ workers abroad and on smarter tools and non-human intelligence.
  • Third-Country Effects of U.S. Immigration Policy — U.S. H-1B visa denial rates rose from about 6% to 16%, and the authors estimate a 10 percentage point rise in denials increases Canadian applications by 30%, roughly one Canadian application per four forgone visas. More exposed Canadian firms increased sales and hired about 0.5 native workers per immigrant.
  • Top Talent, Elite Colleges, and Migration: Evidence from the Indian Institutes of Technology — Among top scorers on India's Joint Entrance Exam for the Indian Institutes of Technology, 62% of the top 100 and 36% of the top 1,000 migrated abroad within eight years, primarily to the U.S. for graduate school. The authors argue elite schools shape migration by signaling ability and providing access to networks.

AI Summary. Global electricity demand is projected to grow faster than the world economy throughout the forecast period, driven by electricity-intensive industries, air conditioning, data centres and continued electrification. US electricity demand is forecast to rise about 2% a year over 2026-2030, more than twice the past decade's rate, with data centres accounting for almost half that growth.

Eren Çam, Marc Casanovas, John Moloney and Matthew Davis International Energy Agency
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Since 2024, global electricity demand has outpaced GDP, which it had previously tracked – a “trend shift” in the relation between the two. IEA forecasts US demand will grow ~2% annually btw 2026 and 2030, twice the 2016–2025 rate.

Is electricity demand growing faster than the global economy?

Core argument: US electricity demand is forecast to rise on average by around 2% over 2026–2030, more than twice the rate observed over 2016–2025, with data centres expected to account for almost half of the projected growth.

A trend shift in the link between electricity demand and economic growth is taking place on a global scale, amid strong demand increases from electricity-intensive industries, air conditioning (AC), data centres and continued electrification of end-use sectors. Over the past three decades, global electricity consumption has only grown significantly faster than the world economy during periods associated with economic shocks, such as the aftermath of the 2000-2001 recession, the 2008-2009 financial crisis or during 2020 amid the pandemic. However, 2024 marked the first normal year when electricity demand grew much more rapidly than the economy. Although this trend saw a slight reversal in 2025 amid weather impacts, electricity demand growth is projected to eclipse the pace of GDP expansion throughout our forecast period. For the 2026-2030 period, US electricity demand is forecast to rise on average by around 2%, more than twice the rate observed over the past decade (2016-2025). Data centres’ electricity consumption is expected to account for almost half of the projected growth. Demand growth in the buildings sector, excluding data centres, will also remain significant. The industrial sector – including new industries with large loads such as semiconductor production and battery manufacturing – will be another major contributor to growth.

Takeaways by Macro Roundup® AI

  1. US electricity demand is forecast to rise on average by around 2% over 2026–2030, more than twice the rate observed over 2016–2025, with data centres expected to account for almost half of the projected growth.
  2. Global electricity demand growth is projected to exceed the pace of GDP expansion throughout the forecast period, amid strong demand from electricity-intensive industries, air conditioning, data centres and continued electrification of end-use sectors.
  3. 2024 marked the first normal year in which global electricity consumption grew much more rapidly than the economy, a pattern previously tied to periods of economic shock such as the 2000–2001 recession, the 2008–2009 financial crisis and 2020.

Related Articles:

  • Power Politics: Energy Self-Sufficiency in a Modern Mercantilist World — China leads in adding power to the grid, with more than 30,000 miles of ultra-high-voltage transmission lines versus zero in the US and lead times for large transformers of 48 weeks against a US average of 143 weeks. This positions China to accommodate new demand sources such as artificial intelligence.
  • The Real China Model — China generates more electricity annually than the United States and European Union combined, having added capacity equivalent to the United Kingdom's total supply each year. Electricity makes up nearly 30% of China's energy use, versus 22% in the US and 21% globally, and its share is growing about 6% a year.
  • 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.

AI Summary. Labor's share of total economic output in the US fell from 58% in 1980 to 51.4%, while profits' share rose from 7% to 11.7%. Contributing factors include weakened union and outsourcing-related bargaining power, a shift toward shorter-lived capital such as computers, software and intellectual property, and automation, with labor's share of factory value added falling from 66% to 45%.

Greg Ip Wall Street Journal
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Btw 1980 and Q3:2025, labor’s share of GDI fell from 58 to 51.4%, while corporate profits rose 4.7pp to 11.7%, which Ip links to the rise of profitable firms that use little labor and “the disconnect between a buoyant economy and pessimistic households.”

Why has labor's share of economic output fallen while profits rose?

Core argument: Labor's share of U.S. gross domestic income fell from 58% in 1980 to 51.4% in the third quarter of last year, while profits' share rose from 7% to 11.7%.

The shift to capital from labor has been under way for more than 40 years. Labor received 58% of the total proceeds of economic output, as measured by gross domestic income (conceptually similar to GDP), in 1980. By the third quarter of last year that had plummeted to 51.4%. Profits’ share, meanwhile, rose from 7% to 11.7%. In the 1980s and 1990s, the demise of unions and the spread of outsourcing sapped workers’ bargaining power. The nature of capital also changed: Businesses spent less on long-lived buildings and factories and more on computer equipment, software and intellectual property that must be replaced every few years. And then there is automation. Its impact showed up first in manufacturing as machines, robots and computers took the place of workers. In 1980, 66% of value added in factories went to labor as wages and benefits, said Pascual Restrepo, a Yale University economist. By the 2000s, that was down to 45%.

Takeaways by Macro Roundup® AI

  1. Labor's share of U.S. gross domestic income fell from 58% in 1980 to 51.4% in the third quarter of last year, while profits' share rose from 7% to 11.7%.
  2. Yale economist Pascual Restrepo says labor's share of value added in U.S. factories fell from 66% in 1980 to 45% by the 2000s, as machines, robots and computers took the place of workers.
  3. The decline of unions and the spread of outsourcing in the 1980s and 1990s sapped workers' bargaining power, while business spending shifted from long-lived buildings and factories toward computer equipment, software and intellectual property that must be replaced every few years.

Related Articles:

  • A Macroeconomic Perspective on Stock Market Valuation Ratios — The authors argue that a decline in labor's share of US corporate value added, combined with weak corporate investment, mechanically raises valuation-to-earnings ratios even without changes in expected returns or growth. They find corporate enterprise value rose alongside an equal-sized increase in free cash flow's share of value added.
  • Superstar Firms Through The Generations — Among the largest US industrial firms, those founded between 1880 and 1920 remain the most represented, while top retailers and wholesalers have averaged 60–70 years old and large services firms cluster around founding dates of 1960–1980. The authors model such a "special generation" as arising from adopting a scalable technology plus learning-by-doing.
  • 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. Alphabet raised almost $32bn of debt across dollar, sterling, and Swiss franc offerings, including an ultra-rare 100-year sterling note, reflecting the funding needs of tech firms building artificial intelligence capacity. Demand was strong, with US tranches drawing more than $100bn of orders and the century bond nearly 10x oversubscribed.

Ronan Martin and Tasos Vossos Bloomberg
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As part of a $32B debt issuance, Alphabet is issuing an “ultra-rare” 100-year sterling bond – “the first sale with such an extreme maturity by a technology firm since the dot-com era,” according to Bloomberg.

How large is investor appetite for tech debt funding AI buildouts?

Core argument: Alphabet is raising almost $32 billion of debt in under 24 hours, following a $20 billion seven-part dollar sale with record-breaking sterling and Swiss franc offerings.

Alphabet is set to raise almost $32 billion in debt in less than 24 hours, showing the enormous funding needs of tech giants competing to build out their artificial intelligence capabilities — and the huge appetite from credit markets to fund them. The Google parent followed Monday’s $20 billion seven-part dollar debt sale with sterling and Swiss franc-denominated offerings which broke records in both markets. The sterling issue includes an ultra-rare 100-year note — the first sale with such an extreme maturity by a technology firm since the dot-com era, according to data compiled by Bloomberg. Demand was high across the deals, with the US tranches getting more than $100 billion of orders, according to people with knowledge of the matter. The sterling century bond has drawn close to ten times orders for the £1 billion ($1.4 billion) on offer. Such a wide range of maturities in different markets meant there was something for investors of all stripes — from asset managers and hedge funds to the pension funds and insurers that favor longer-dated debt.

Takeaways by Macro Roundup® AI

  1. Alphabet is raising almost $32 billion of debt in under 24 hours, following a $20 billion seven-part dollar sale with record-breaking sterling and Swiss franc offerings.
  2. The US tranches of Alphabet's debt sale drew more than $100 billion of orders, and the £1 billion ($1.4 billion) sterling century bond attracted close to ten times the amount on offer, according to people with knowledge of the matter.
  3. Alphabet's sterling issue includes a 100-year note, the first sale with such an extreme maturity by a technology firm since the dot-com era, according to data compiled by Bloomberg.

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  • Big Tech’s $680bn Buy-Now-Book-Later Problem — Morgan Stanley's accounting team estimates that splitting hyperscaler capital spending into AI and non-AI components, with graphics chips assumed to last up to six years and warehouses 15 years, could quadruple Alphabet's depreciation expense within several years and lift Oracle's from $4bn to $56bn, equal to 28% of expected revenue.
  • 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.

AI Summary. Japanese stocks rose while government bond yields eased slightly, leaving Japanese markets positioned for a cyclical breakout with stocks far outperforming bonds. A more assertive Japanese foreign policy and a weak yen — which has drawn Chinese tourists and investors into Japan and made Japanese exporters more competitive — risk friction with China.

John Authers Bloomberg
Date Posted:

Japanese government bond yields have dropped slightly, and the Nikkei has risen ~7% since Takaichi’s decisive victory on Sunday. Authers notes that Sino-Japanese tensions are likely to rise, given Yen weakness and the likely increase in defense spending.

Are rising stocks and a weak yen setting up friction with China?

Core argument: The Nikkei 225 rose 2.8% in Tuesday morning trade after Monday's 3.9% gain, while Japanese government bond yields fell slightly, the combination Takaichi wanted.

The Nikkei 225 gained another 2.8% in Tuesday morning trade, following Monday’s 3.9% gain, while Japanese government bond yields dropped slightly, exactly the combination Takaichi wanted. Japanese markets are now unmistakably positioned for a cyclical breakout, with stocks far outperforming bonds. The difference between Japan and the US over the period of the two countries’ elections is stark. The main problem with a more assertive foreign policy is the effect it could have on China. Yen weakness could also be a critical issue, as it has encouraged Chinese tourists and investors into Japan, causing friction, while also making Japanese exporters far more competitive. It’s hard to see how this can carry on much longer. In both military and economic terms, the neighbors may find it hard to get on.

Takeaways by Macro Roundup® AI

  1. The Nikkei 225 rose 2.8% in Tuesday morning trade after Monday's 3.9% gain, while Japanese government bond yields fell slightly, the combination Takaichi wanted.
  2. Japanese markets are positioned for a cyclical breakout with stocks far outperforming bonds, a stark contrast with the United States over the period of the two countries' elections.
  3. Yen weakness has encouraged Chinese tourists and investors into Japan, causing friction, while making Japanese exporters far more competitive, and a more assertive Japanese foreign policy could affect relations with China.

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  • 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 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.
  • 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.

AI Summary. European venture capital investment rose 5% to €66bn, a post-pandemic high, with artificial intelligence deals accounting for more than 35% of all transactions at €23.5bn, up from €17.7bn the prior year. Investment in European defence and related technology start-ups rose 55% to a record $8.7bn.

Ivan Levingston, Sylvia Pfeifer, and George Hammond Financial Times
Date Posted:

Total European venture capital investment rose 5% to €66B in 2025, driven by AI and defense startups.

Are AI and defense start-ups driving European venture capital growth?

Core argument: European venture capital investment rose 5% to €66bn in 2025, a post-pandemic high, according to PitchBook, with gains driven by large deals for the continent's top AI and defence companies.

Total European venture capital investment rose 5% to €66bn in 2025, a post-pandemic high, according to PitchBook. Those gains were driven by big deals for the continent’s top AI and defence companies. Last year, AI-related deals accounted for more than 35% of all European venture capital transactions, worth €23.5bn. That marked an increase from €17.7bn for such deals in 2024. Outside AI, European start-ups focused on defence and related technologies saw investment soar 55% year on year to a record $8.7bn in 2025, according to the Nato Innovation Fund and research group Dealroom.

Takeaways by Macro Roundup® AI

  1. European venture capital investment rose 5% to €66bn in 2025, a post-pandemic high, according to PitchBook, with gains driven by large deals for the continent's top AI and defence companies.
  2. AI-related deals accounted for more than 35% of all European venture capital transactions, worth €23.5bn, up from €17.7bn in 2024.
  3. European start-ups focused on defence and related technologies drew a record $8.7bn in 2025, up 55% year on year, according to the Nato Innovation Fund and research group Dealroom.

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  • Will Higher Defence Spending Boost The European Economy? — Defense spending typically has a fiscal multiplier below one, meaning each euro spent raises GDP by less, so it is not a short-term growth strategy. One estimate holds that extra military spending worth 1% of GDP could lift output up to 2% long term if concentrated on research and development.
  • Why Every Country Needs To Master The Electric Tech Stack — Drones are the foundation of hard power in the early 21st century, so a country unable to produce them domestically is at a disadvantage. As electric motors overtake combustion engines as the core technology that makes machines move, the same supply chains and production processes used for electronics can also produce cars, drones, robots, and appliances.
  • 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.