Edward Conard

Top Ten New York Times Bestselling Author

  • “…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 fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…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
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Monday, March 30, 2026

AI Summary. The author estimates the oil market needs to destroy at least 8m barrels a day of demand, more than the combined consumption of Germany, France, the UK, Italy, and Spain. Because the US, Canada, Europe, Japan, and China make up nearly 55% of use, the burden would fall on Africa, Latin America, and much of Asia.

Javier Blas Bloomberg
Date Posted:

Blas argues the drawdown of stocks and the use of bypass pipelines have absorbed ~60% of the oil supply loss to this point. Going forward, the market will clear via “demand destruction” of at least 8mm bpd, initially largely in emerging markets.

Which regions bear the burden of oil demand destruction?

Core argument: The author calculates the oil market needs to destroy at least 8 million barrels a day of demand, more than the combined consumption of Germany, France, the UK, Italy, and Spain.

If my math is right, the market needs to “destroy” demand by at least 8 million barrels a day or so. That’s more than the combined consumption of Germany, France, the UK, Italy, and Spain. Poorer nations will be priced out by richer ones or peers with the means to subsidise fuel prices and impose export bans. Look at the distribution of the oil market: The US, Canada, Europe, Japan, and China account for nearly 55% of consumption. That means six out of 10 barrels of global use are in places that usually have the wherewithal to pay up. Most of the initial demand destruction is going to happen elsewhere in places that simply can’t afford the prices. The burden will be firmly concentrated in Africa, Latin America, and much of Asia. Over the next few weeks, if the war continues, fuel pumps there will run dry and factories will close.

Takeaways by Macro Roundup® AI

  1. The author calculates the oil market needs to destroy at least 8 million barrels a day of demand, more than the combined consumption of Germany, France, the UK, Italy, and Spain.
  2. The US, Canada, Europe, Japan, and China account for nearly 55% of global oil consumption, meaning six out of 10 barrels are used in places that usually have the means to pay up.
  3. The author argues most initial demand destruction will be concentrated in Africa, Latin America, and much of Asia, where fuel pumps will run dry and factories will close if the war continues.

Related Articles:

  • Why This Jump in Gas Prices Feels Different — The U.S. average gasoline price rose by nearly $1 a gallon, from about $2.90 to $3.70, according to the Energy Information Administration — the second-largest four-week increase in at least 30 years, exceeded only by the jump after Hurricane Katrina. With the typical U.S. driver covering about 1,000 miles a month, that adds up to $50 monthly.
  • Fighting Words: The Energy Transition in 2026 — Estimates based on primary energy overstate how much electricity is needed to replace oil in passenger cars, since electric motors convert 80%-90% of electricity into motion versus about 18% for gasoline cars. Measuring useful final energy net of waste heat avoids this "primary energy fallacy": the US consumed 45 exajoules of useful final energy versus 95 exajoules of primary energy.
  • Hormuz Disruption May Impact Global Agriculture Prices — Disruption to fertilizer supplies could raise grain prices mainly by cutting grain output, through yield losses from delayed or sub-optimal nitrogen application and shifts toward less fertilizer-intensive crops; fertilizer accounts for about 20% of grain costs. Regions with later crop calendars, such as Europe and the Southern Hemisphere, are more exposed than the US.

AI Summary. Persian Gulf oil cargoes reach Asia in about 10–20 days, Europe and Africa in 20–35 days, and the US Gulf Coast in 35–45 days, so a supply disruption unfolds as a rolling shock moving westward. Asia feels the squeeze first, with Europe affected more by rising costs and competition than outright shortages.

Natasha Kaneva, Lyuba Savinova and Artem Fakhretdinov J.P. Morgan
Date Posted:

Global oil inventories fell 155mm barrels in the 1st 3 weeks of March, primarily due to a 211mm barrel drop in oil in transit. Onshore inventories have been largely stable, Asian deliveries from the Gulf will stop on ~ April 1 driving demand destruction.

How does an oil supply disruption spread across regions?

Core argument: Gulf cargoes reach Asia in roughly 10–20 days, Europe and Africa in about 20–35 days, and the US Gulf Coast in roughly 35–45 days, so the supply disruption rolls westward sequentially rather than striking all regions at once.

Voyage times set the clock: cargoes from the Gulf reach Asia in roughly 10-20 days, arriving first in India and later in Northeast Asia. Europe and Africa follow, with transit times of about 20-35 days, while the US Gulf Coast sits at the far end of the chain at roughly 35-45 days. Much like during COVID, the shock unfolds sequentially rather than simultaneously—a rolling supply disruption moving westward, dictated by shipping times and buffered unevenly by regional inventories. This means Asia—heavily reliant on Gulf crude and products—is already feeling the squeeze as pre-closure cargoes have largely dried up. Africa is next. Europe is likely to feel the impact by mid-April, as the last February loadings arrive without replacement, but the shock is shaped more by rising costs and competition with Asia than by outright shortages.

Takeaways by Macro Roundup® AI

  1. Gulf cargoes reach Asia in roughly 10–20 days, Europe and Africa in about 20–35 days, and the US Gulf Coast in roughly 35–45 days, so the supply disruption rolls westward sequentially rather than striking all regions at once.
  2. Asia, heavily reliant on Gulf crude and products, is already feeling the squeeze as pre-closure cargoes have largely dried up, with Africa next in line.
  3. Europe is likely to feel the impact by mid-April as the last February loadings arrive without replacement, with the shock shaped more by rising costs and competition with Asia than by outright shortages.

Related Articles:

  • You Can’t Print Molecules — Rebuilding after a disruption to a key shipping strait would require governments to finance defense, strategic reserves, domestic energy production, and infrastructure at the same time that inflation expectations are raising funding costs. The author argues capital will rotate out of asset-light sectors that thrived on open sea lanes and cheap energy into asset-heavy physical ones.
  • Shattered Assumptions And The Energy Quandary — The author argues that energy, rather than fixed income, now serves as the true hedge to equity positions, pushing investors, companies and countries to review their energy allocations and policies. Chinese government bonds diversified equity risk when no other major bond market did, which the author attributes to China being the only major economy without a meaningful inflation problem.
  • Fighting Words: The Energy Transition in 2026 — Estimates based on primary energy overstate how much electricity is needed to replace oil in passenger cars, since electric motors convert 80%-90% of electricity into motion versus about 18% for gasoline cars. Measuring useful final energy net of waste heat avoids this "primary energy fallacy": the US consumed 45 exajoules of useful final energy versus 95 exajoules of primary energy.

AI Summary. The authors estimate that a slowdown in US health care spending reflects technology-associated changes in health and site of care (21% of the slowdown, double that in Medicare), more elastic long-run supply (6%), market changes reducing and making demand more elastic (11–27%), improved population health (7%), and slower price growth net of upcoding (24%).

David Cutler and Lev Klarnet Brookings Papers On Economic Activity
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In 2024, medical spending as a share of GDP was just above its 2010 level and 15% ($977B) below its 2010 forecast; 21% of the gap was due to technology, 24% to price reductions, and 11–27% to reforms such as prior authorization and higher deductibles.

What explains the slowdown in US health care spending?

Core argument: Technology-associated changes in health and site of care account for 21% of the overall U.S. health care cost slowdown and double that share in Medicare, according to the authors' estimates.

Five factors are important in the slowdown in spending [Figure 16]. The first is technology-associated changes in health and site of care. These correspond to the subsequent innovations in our model. Together, technologies along these lines account for 21% of the overall cost slowdown and double that in Medicare. Second, long-run supply is more elastic than short-run supply, which lowers spending over time. This is particularly apparent in the impact of patent expiration for pharmaceuticals and in relative declines in imaging reimbursement. We estimate that greater long-run supply explains 6% of the spending slowdown. Third, a variety of market changes contribute to reduced and more elastic demand, including increased cost sharing paid by consumers, physicians not paid as much for using technologies, and insurers imposing restrictions on technology use - a rough guess is that these account for 11 to 27% of the spending slowdown. Fourth, the population is healthier in ways that reduce spending. This includes fewer hospitalizations for smoking-related conditions and reduced need for formal home health care. The birth rate has fallen as well, which reduces the need for care. We estimate improved population health explains 7% of the spending slowdown. A major component is slower price growth. Net of upcoding, we estimate lower price growth explains 24% of the spending slowdown.

Takeaways by Macro Roundup® AI

  1. Technology-associated changes in health and site of care account for 21% of the overall U.S. health care cost slowdown and double that share in Medicare, according to the authors' estimates.
  2. The authors estimate that slower price growth, net of upcoding, explains 24% of the health care spending slowdown, while market changes reducing demand — higher consumer cost sharing, lower physician payment for technology use, and insurer restrictions — account for a rough 11–27%.
  3. Improved population health explains an estimated 7% of the spending slowdown, through fewer smoking-related hospitalizations, reduced need for formal home health care, and a lower birth rate, while greater long-run supply elasticity explains 6%.

Related Articles:

  • Sick as a Dog — US healthcare stocks tracked technology-sector returns from 1989 to 2019 with lower volatility (15% vs 24%), but have since stagnated as technology advanced. Major pharmaceutical firms trade at forward price-to-earnings ratios of 8x–9x, biotech carries one of the market's largest valuation discounts, and 80% of biotech initial public offerings since 2018 have collapsed.
  • Saved by Medicaid: New Evidence on Health Insurance and Mortality from the Universe of Low-Income Adults — Using linked Census and tax records for 37m low-income adults, the authors estimate that state Medicaid expansions raised enrollment by 12 percentage points and cut mortality among low-income adults by 2.5%, implying a 21% reduction in the mortality hazard of new enrollees. They estimate direct budgetary costs of $5.4m per life saved and $179,000 per life-year saved.
  • The Great “Transfer”-mation — Government transfers rose from 8.2% of Americans' total personal income in 1970 to 17.6% in 2022, making them the third largest income source after work and investments. The share of U.S. counties drawing a quarter or more of personal income from transfers rose from under 1% in 1970 to 53% in 2022.

AI Summary. Eight mega-cap technology companies — Microsoft, Nvidia, Google, Apple, Amazon, Meta, Tesla, and Oracle — account for 85% of the S&P 500's decline, subtracting roughly 576 index points, while the remaining ~490 companies collectively added about 100 points. Because of their outsized index weights, benchmark performance reflects a handful of firms rather than broad market breadth.

Paul Kedrosky Notes on Complexity
Date Posted:

The S&P 500 is down ~7% year to date with 85% of the losses due to Kedrosky’s “Hateful Eight,” the Mag 7 and Oracle.

How much of the S&P 500's decline comes from eight companies?

Core argument: The "Hateful Eight" — the Magnificent 7 plus Oracle — account for 85% of the S&P 500's year-to-date drawdown, subtracting roughly 576 points while the index overall is down 7%.

Year-to-date, the S&P 500 index is down 7%, but that headline hides record concentration. The “Hateful Eight” — the Mag 7 + Oracle that drove index gains for the past two years — account for 85% of the year-to-date drawdown, subtracting roughly 576 points. The other ~490 companies collectively added about 100 points. For most of the past cycle, indexes were driven by number of mega-cap tech stocks. Now that is all reversing, with the broad market overwhelmed by losses in a handful of stocks with outsized weights. As you can see in the cluster, the largest negative contributors are in the same cohort: Microsoft, Nvidia, Google, Apple, Amazon, Meta, Tesla, and Oracle. Their declines vary, but their index impact is large because of their huge weights. Meanwhile, many smaller index members are up year-to-date, but their contributions get washed away. When leadership is this concentrated, index behavior becomes a function of a few balance sheets, not underlying breadth. And then sentiment flips, in particular about AI capex and associated debt, as it has, everything goes into reverse.

Takeaways by Macro Roundup® AI

  1. The "Hateful Eight" — the Magnificent 7 plus Oracle — account for 85% of the S&P 500's year-to-date drawdown, subtracting roughly 576 points while the index overall is down 7%.
  2. The other roughly 490 S&P 500 companies collectively added about 100 points, with many smaller members up but their contributions washed away by mega-cap declines.
  3. Microsoft, Nvidia, Google, Apple, Amazon, Meta, Tesla, and Oracle are the largest negative contributors, and their index impact is large because of their huge weights even though their declines vary.

Related Articles:

  • One Hundred Years in the U.S. Stock Markets — Over a century, U.S. publicly traded stocks generated roughly $91tn in shareholder wealth enhancement, with returns strongly positively skewed and dominated by a relatively small number of high-performing firms. Because most possible outcomes fall below the mean in a skewed distribution, the authors argue financial planning should focus on median outcomes or the full distribution.
  • 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.
  • Chart of the Day: AI Capex, From Bonanza to Burden — 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.

AI Summary. An analysis of tens of thousands of responses on policy preferences and sociopolitical beliefs finds that widely used AI chatbots nudge users away from extreme positions toward more moderate, expert-aligned stances. The author estimates Grok guides conversations toward the centre-right, while OpenAI's GPT, Google's Gemini, and China's DeepSeek nudge toward a centre-left worldview.

John Burn-Murdoch  Financial Times
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John Burn-Murdoch finds that while social media amplifies fringe views, LLMs “nudge people away from the most extreme positions,” suggesting AI could be “technocratising,” in contrast to “social media’s radically democratising influence.”

Do AI chatbots nudge users toward moderate political views?

Core argument: Across tens of thousands of responses on policy preferences and sociopolitical beliefs, the author finds that the most widely used AI chatbots nudge users away from the most extreme positions toward more moderate, expert-aligned stances.

I used a dataset of tens of thousands of responses to questions on policy preferences and sociopolitical beliefs to test whether and how the most widely used AI chatbots shape conversations about politics and society. The results strongly support the theory of AI chatbots as depolarising and technocratising. While different AI platforms behave in subtly different ways, all of them nudge people away from the most extreme positions and towards more moderate and expert-aligned stances. On average, Grok guides conversations about policy and society towards the centre-right — a rightward push for most people but a moderating nudge towards the centre for those who start out as conservative hardliners. OpenAI’s GPT, Google’s Gemini, and the Chinese model DeepSeek all exert similarly sized nudges towards a centre-left worldview — a slight leftward nudge for most people but a moderating push away from fringe leftwing positions. These are only the results of one analysis, and it is also possible that usage patterns and the models themselves will evolve in ways that deviate from the patterns I found. But at the very least, there is cause for optimism that the next information revolution may take us in a less corrosive direction than the last.

Takeaways by Macro Roundup® AI

  1. Across tens of thousands of responses on policy preferences and sociopolitical beliefs, the author finds that the most widely used AI chatbots nudge users away from the most extreme positions toward more moderate, expert-aligned stances.
  2. Grok on average guides policy and society conversations toward the centre-right, pushing most users rightward while moderating those who begin as conservative hardliners toward the centre.
  3. OpenAI's GPT, Google's Gemini, and the Chinese model DeepSeek exert similarly sized nudges toward a centre-left worldview, slightly leftward for most users and away from fringe left-wing positions for others.

Related Articles:

  • The End Of The Gatekeepers — Social media has expanded who produces and broadcasts political information, and an analysis of the ideological positions of those sharing political content finds extreme views on both left and right are heavily over-represented relative to traditional media, where moderate positions were well-represented. The author argues this has eroded norms that kept radicals on the fringe.
  • China Punishes ‘Excessively Pessimistic’ Social Media Users — China's internet regulator has launched a campaign to remove online content that incites "excessively pessimistic sentiment," panic, or defeatist ideas such as "hard work is useless." Authorities have punished bloggers who advocated working less, an influencer who said forgoing marriage and children made financial sense, and a commentator who said China's quality of life lags Western countries.
  • Teens Used To Be Happier. What Changed? — The share of US high school seniors describing themselves as "very happy" peaked at 24.8% and remained around 24.4% before falling to 11.4% at its low, recovering only to 12.7%, well below the 17.9% recorded before the pandemic. The decline coincided with smartphones and social media becoming pervasive.

Tuesday, March 31, 2026

AI Summary. The authors estimate that declining U.S. military procurement spending from the 1950s to the 1990s explains roughly 18–30% of the decline in manufacturing employment and just under 10% of the rise in top-decile income inequality. They argue Cold War procurement raised demand for manufacturing workers and helped sustain tight labor markets for low-skill workers.

Ilyana Kuziemko, Donato Onorato and Suresh Naidu National Bureau of Economic Research
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Defense spending played a major role in sustaining tight labor markets for low-skill workers following the Second World War. Drops in procurement spending between the 1950s and the 1990s explain between 18 and 30% of the decline in manufacturing employment.

How much did falling military procurement drive manufacturing decline and inequality?

Core argument: The authors estimate the 1950s–1990s decline in U.S. military procurement spending explains roughly 18–30% of the decline in manufacturing and just under 10% of the rise in top-ten inequality.

We have shown that in the decades immediately following World War II, the Cold War was a major factor sustaining tight labor markets. On the labor demand side, military procurement increased demand for manufacturing workers and put downward pressure on the share of income flowing to the richest households. We can explain roughly between 18 and 30% of the decline in manufacturing and just under ten percent of the rise in top-ten inequality by the 1950s to 1990s decline in procurement spending. We thus conclude that Cold War procurement—while under-studied in the modern, quantitative economics literature on inequality—played a major role in sustaining tight labor markets for low-skill workers in the decades immediately after World War II and creating political coalitions in support of hawkish foreign policy and military expenditure. Figure 8 panel (a) shows that manufacturing employment is highly sensitive to defense spending, consistent with our state-year evidence. As is well known, manufacturing booms during World War II, but, less discussed, plummets in the years between World War II and Korea. After bouncing back during Korea, it slowly declines alongside the declining defense share of GDP until both series experience an uptick during Vietnam. Overall, the relationship remains highly significant even after taking out a linear time trend and dropping the World War II period.

Takeaways by Macro Roundup® AI

  1. The authors estimate the 1950s–1990s decline in U.S. military procurement spending explains roughly 18–30% of the decline in manufacturing and just under 10% of the rise in top-ten inequality.
  2. The authors conclude that Cold War military procurement raised demand for manufacturing workers, pressured the share of income flowing to the richest households downward, and sustained tight labor markets for low-skill workers after World War II.
  3. U.S. manufacturing employment booms in World War II, plummets before Korea, rebounds during Korea, then declines alongside the defense share of GDP until an uptick during Vietnam, a relationship that remains highly significant after removing a linear time trend.

Related Articles:

  • The Intellectual Spoils of War? Defense RD, Productivity and International Spillovers — The authors estimate that a 10% increase in government-financed R&D, largely defense, is associated with a 4.3% rise in privately funded R&D across OECD countries, indicating "crowding in" rather than "crowding out." They also find international spillovers raise private R&D abroad, though the overall effect on US productivity growth is modest.
  • The Old Economy Begins To Take Its Revenge — The author argues that capital rotates between the financial economy's asset-light booms and the physical economy, with commodity capacity constraints and the use of critical materials as geopolitical leverage now making returns on physical investment more attractive. In this view, higher interest rates reflect the better returns and capital spending needed to expand production capacity.
  • Capital Is Making a Comeback — Tangible investment in property, factories and equipment fell from 12.5% to 8.5% of private gross domestic product, while intangible investment in intellectual property, software and process knowledge rose from about 11.5% to 16.75%. The author argues demand for tangible capital investment will now have to rise.

AI Summary. Ten-year Treasury yields and inflation-protected Treasury yields moving together indicate markets are pricing higher real interest rates rather than an inflation premium, since higher expected inflation would raise nominal yields alone. A forecast recession would instead show up as lower real and nominal interest rates.

John Cochrane The Grumpy Economist
Date Posted:

Since the start of the war, the nominal ten-year and the TIPS yield moved up in concert (25–30bps), indicating a rise in long real rates, reflecting expected monetary tightening along with loose fiscal policy due to the war.

Are rising bond yields signaling higher real rates rather than inflation?

Core argument: Plotting 10-year Treasury yields against 10-year inflation-indexed Treasurys, with the lower line shifted up by 2% to fit the same graph, suggests no direct inflation premium, since higher expected inflation would raise nominal yields while leaving inflation-protected yields alone.

I plotted here the path of 10 year Treasurys along with 10 year indexed Treasurys. The lower line is shifted up by 2% so they fit on the graph together. This graph suggests that we are not seeing a direct inflation premium. Higher expected inflation would directly raise the Treasury yield, leaving the inflation-protected yield alone. So the lower line is forecasting higher real interest rates. It may be forecasting that the Fed will raise interest rates, and prices being sticky, that won’t have an effect on inflation. If it’s the end of the world, (I don’t think so) that would be an end with explicit write-down, and we are seeing a default premium, not a premium for default via inflation. These graphs are also not suggesting a forecast recession: that would be revealed by lower real and nominal interest rates. Investors are betting that public finances across the Eurozone “are going to deteriorate,” said Jean-François Robin, global head of research at Natixis CIB, as countries spend “a lot of public money” to absorb the shock.

Takeaways by Macro Roundup® AI

  1. Plotting 10-year Treasury yields against 10-year inflation-indexed Treasurys, with the lower line shifted up by 2% to fit the same graph, suggests no direct inflation premium, since higher expected inflation would raise nominal yields while leaving inflation-protected yields alone.
  2. The inflation-indexed line points to higher real interest rates, possibly forecasting that the Fed will raise rates while sticky prices blunt any effect on inflation, and neither line suggests a recession, which would show up as lower real and nominal rates.
  3. Investors are betting that public finances across the Eurozone "are going to deteriorate" as countries spend "a lot of public money" to absorb the shock, said Jean-François Robin, global head of research at Natixis CIB.

Related Articles:

  • Are Government Bonds Safe in Times of War and Pandemic? — 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.
  • Why Did Inflation Rise And Fall In 2021-24? Channels And Evidence From Expectations — Across countries, unexpectedly higher government deficits relative to earlier International Monetary Fund forecasts are associated with unexpectedly higher inflation, measured by each factor's contribution to the increase in public debt, a relationship the author finds statistically significant. This evidence is consistent with a fiscal channel for inflation.
  • Fiscal Influences on Inflation in OECD Countries, 2020-2022 — Across 21 economies, the authors find that headline and core inflation responded positively to a measure of government spending increases scaled by pre-pandemic debt-to-GDP and average debt duration. Estimated coefficients of 0.4–0.5 suggest 40–50% of the extra spending was financed through inflation, with the rest through conventional public finance.

AI Summary. Foreign official institutions' Treasury holdings in custody at the New York Federal Reserve have fallen by $82bn to $2.7tn, the lowest level since 2012, as countries sell US government bonds to support their economies and currencies. Analysts attribute the selling to currency market intervention aimed at limiting depreciation and higher local-currency oil prices.

Kate Duguid, Michelle Chan and Ian Smith Financial Times
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The value of Treasuries held at the New York Fed by official institutions has fallen by $82B since February. Brad Setser speculates that the selling was driven by countries such as Turkey, India and Thailand who need additional dollars to purchase oil.

Why are foreign central banks selling US Treasuries?

Core argument: Treasuries held in custody at the New York Federal Reserve for official institutions fell $82bn since February 25 to $2.7tn, the lowest level since 2012, according to Fed data.

Foreign central banks have slashed their holdings of Treasuries at the New York Federal Reserve to the lowest level since 2012, as countries sell the US government bonds to prop up their economies and currencies in the wake of the Iran war. The value of Treasuries held in custody at the New York Fed by official institutions — a group that is largely made up of central banks but also includes governments and international institutions — has dropped by $82bn since February 25 to $2.7tn, according to Fed data. “A number of countries...don’t want their currencies to weaken further because it pushes up the local currency price of oil — and either means more fiscal subsidies or more pain for households. Hence the widespread decision to intervene in the currency market to try to limit depreciation and higher local currency oil prices,” Setser said.

Takeaways by Macro Roundup® AI

  1. Treasuries held in custody at the New York Federal Reserve for official institutions fell $82bn since February 25 to $2.7tn, the lowest level since 2012, according to Fed data.
  2. Foreign central banks are selling US Treasuries to prop up their economies and currencies in the wake of the Iran war, with official institutions also including governments and international institutions.
  3. Setser said countries intervened widely in currency markets to limit depreciation, which raises the local currency price of oil and means either more fiscal subsidies or more pain for households.

Related Articles:

  • $14 Trillion in IG Supply Coming to the Market — About $14tn of investment-grade fixed income supply is coming to market, combining roughly $10tn of US government debt to be refinanced over the next 12 months, a budget deficit near $2tn, and about $2tn of gross corporate bond issuance boosted by data-center builders. The author argues this growing supply is putting upward pressure on interest rates and credit spreads.
  • Foreigners Rebuff ‘Sell America’ and Buy a Net $1.6 Trillion in Assets — Treasury Department data show overseas investors bought a net $1.55tn of long-term US financial assets, up from $1.18tn the prior year, including $720bn in equities and just under $409bn in Treasury notes and bonds. China was a net seller of $208.6bn, with its Treasury holdings ending at $683.5bn.
  • China Is Not Dumping US Treasuries — China's state-owned financial institutions added $100bn in foreign assets in one month and $70bn the next, absorbing dollars from the country's trade surplus as exporters sought to sell dollars for renminbi. The author argues dollar accumulation has shifted from China's foreign exchange agency to state banks, which either buy Treasuries or lend to investors who do.

AI Summary. A worker-quality index built from US household survey data stayed within 1% of its starting level despite a shift toward more immigrant workers, while official nonfarm business productivity rose 8.2%. Lower predicted wages among Central American arrivals were offset by European and Asian immigrants, whose predicted wages exceed the US-born average by about 20%.

Serdar Ozkan and Nicholas Sullivan Federal Reserve Bank of St. Louis
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Labor productivity increased 8.2% over the 2023–2025 period, while a CPS-based measure of worker quality has stayed within 1% of its Q1 2023 level, despite significant changes in the immigrant-intensity of the labor force over the period.

Does a more immigrant-heavy workforce lower average labor productivity?

Core argument: The authors' CPS-based worker quality index stayed within less than 1% of its first quarter 2023 level across the three-year period, while BLS nonfarm business productivity rose 8.2% over the same span.

On net, the U.S. workforce became meaningfully more immigrant-heavy from 2023 to 2024 and then partially reversed, all within a three-year window. Despite these compositional changes, our CPS-based worker quality index barely moved. It hovered within less than 1% of its first quarter 2023 level throughout the entire period, while BLS nonfarm business productivity climbed 8.2% over the same span. Why would swings in workforce composition leave average productivity nearly unchanged? Two reasons. First, the shifts in employment shares by place of birth, while noticeable, are small in absolute terms. Even with a 1pp rise in the U.S. employment share of lower-productivity, Latin American-born workers moved the needle on aggregate worker quality only modestly—far less than the roughly 8% productivity gain recorded by the BLS over the period. Second, not all immigrants are less productive than U.S.-born workers. Central American immigrants—who accounted for the largest single increment of the foreign-born workforce share—earn wages that fall about 25% below the U.S.-born average. In isolation, their growing employment shares put modest downward pressure on average productivity. But workers arriving from Europe, Asia, and other high-income regions display the opposite pattern: Their predicted wages exceed the U.S.-born average by about 20%, reflecting higher educational attainment and more highly compensated occupations.

Takeaways by Macro Roundup® AI

  1. The authors' CPS-based worker quality index stayed within less than 1% of its first quarter 2023 level across the three-year period, while BLS nonfarm business productivity rose 8.2% over the same span.
  2. A 1 percentage point rise in the U.S. employment share of lower-productivity Latin American-born workers shifted aggregate worker quality only modestly, far less than the roughly 8% productivity gain recorded by the BLS.
  3. Central American immigrants, the largest single increment of the foreign-born workforce share, earn wages about 25% below the U.S.-born average, while workers from Europe, Asia, and other high-income regions have predicted wages about 20% above it.

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  • An AI Productivity Boom? Don’t Count Your (Productivity Data) Chickens — Measured productivity can rise from compositional effects when lower-wage, lower-productivity workers leave the labor force, as happened during Covid and 2009, and immigration policy changes could produce a similar effect. Much of the recent productivity boost appears to come from capital utilization tied to increased investment in AI rather than workers becoming more productive using AI.
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AI Summary. China has moved to ban the burial of cremated remains in empty apartments as rapid urbanisation and population ageing strain limited city cemetery plots. Annual deaths have risen to 11.3mn from 9.8mn a decade earlier, outpacing 7.9mn births, while average funeral costs of about $5,400 rank second globally after Japan.

Joe Leahy and Wenjie Ding Financial Times
Date Posted:

Chinese funeral expenses were 45% of the mean annual wage in 2020. As real estate prices declined, many families started using empty apartments as “bone ash apartments.” The practice is being outlawed this week.

Are aging and urbanization straining China's burial capacity and costs?

Core argument: China recorded 11.3mn deaths in 2025, up from 9.8mn in 2015 and outpacing the 7.9mn births last year, as the country's population ages at one of the fastest paces in history.

The new law comes as China prepares to celebrate the Qingming grave-sweeping festival on Sunday. Rapid urbanisation has raised demand for limited cemetery plots in cities. Coupled with this, China’s population is ageing at one of the fastest paces in history. The number of deaths in 2025 was 11.3mn, up from 9.8mn in 2015 and outpacing 7.9mn births last year. In contrast to apartments, whose prices have fallen sharply since President Xi Jinping’s campaign that “properties are for living in, not for speculation,” cemetery plots have become prohibitively expensive. A global funeral expense survey in 2020 by the insurer SunLife showed that China’s average funeral expenses were the second-highest in the world at about Rmb 37,375 ($5,400), after Japan, accounting for about 45% of average annual wages. While residential properties in China carry 70-year usage rights from the government, cemetery plots come with only a 20-year lease.

Takeaways by Macro Roundup® AI

  1. China recorded 11.3mn deaths in 2025, up from 9.8mn in 2015 and outpacing the 7.9mn births last year, as the country's population ages at one of the fastest paces in history.
  2. SunLife's 2020 global funeral expense survey put China's average funeral cost at about Rmb 37,375 ($5,400), the second-highest in the world after Japan and roughly 45% of average annual wages.
  3. Chinese cemetery plots have become prohibitively expensive and carry only 20-year leases, versus 70-year usage rights for residential property, whose prices have fallen sharply since Xi Jinping's campaign that "properties are for living in, not for speculation.".

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