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


Thursday, April 30, 2026

AI Summary. The authors find that startups with a larger share of tasks doable by generative AI cut employment beginning immediately after ChatGPT's release, with technically proficient founders restructuring teams toward higher-skill roles. Venture investors made smaller but more numerous deals, and new firm entry offset the decline in total startup employment.

Abhinav Gupta, Franklin Qian, Elena Simintzi and Yifan Sun Working Paper
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The release of ChatGPT was followed by rapid employment declines in startups with a large share of tasks that could be done by AI. The subsequent restructuring saw many new, smaller startups that employed a higher share of senior workers.

How does generative AI reshape startup hiring and venture investment?

Core argument: Startups with a larger share of tasks accomplishable by generative AI reduced employment sharply in the first quarter after ChatGPT's release, with no evidence of anticipation and monotonic declines thereafter, which the authors read as supporting a causal interpretation.

Using variation in task exposure across firms, industries, and markets, we show that startups with higher exposure to Gen AI [more precisely, a larger share of tasks accomplishable by AI], adjusted rapidly after the introduction of ChatGPT. A [negative] employment effect appears sharply in the first quarter following the release, with no evidence of anticipation, supporting a causal interpretation. Employment declines monotonically thereafter, through the end of the sample [Figure 1]. The reorganization of startup teams was concentrated among technically proficient founders, who adopted AI tools more aggressively and restructured their workforces around higher-skill, more flexible roles [Figure 3]. VCs in Gen AI-intensive sectors made smaller initial investments per firm but expanded the number of deals, broadening their exposure across a larger set of AI-related startups. This shift toward a more diversified, exploratory investment approach fueled a wave of new startup formation [Figure 4]. Employment among incumbent startups declined, but the surge in new firm entry muted the net effect on total startup employment. However, the share of managerial workers increased, indicating a shift in the structure of employment rather than a simple change in its level [Figure 2].

Takeaways by Macro Roundup® AI

  1. Startups with a larger share of tasks accomplishable by generative AI reduced employment sharply in the first quarter after ChatGPT's release, with no evidence of anticipation and monotonic declines thereafter, which the authors read as supporting a causal interpretation.
  2. Venture capitalists in generative AI-intensive sectors made smaller initial investments per firm but expanded their number of deals, a more diversified, exploratory approach that fueled a wave of new startup formation.
  3. Employment among incumbent startups declined while a surge in new firm entry muted the net effect on total startup employment, and the share of managerial workers rose, indicating a shift in the structure of employment rather than its level.

Related Articles:

  • Continued Rise in Business Formation — The gap between growth-oriented and value-oriented new business applications is widening, a divergence likely driven by a proliferation of startups built around artificial intelligence. Large language models are lowering the barriers to starting a business.
  • Attention (And Money) Is All You Need: Why Universities Are Struggling to Keep AI Talent — The annual compensation gap between top industry and academic artificial intelligence researchers widened from roughly $294,000 to $1.5m, coinciding with accelerating academic out-migration toward large incumbent technology firms. Researchers who move to industry cut paper production by about 63% while increasing patent filings nearly sixfold, consistent with a shift from open science toward proprietary innovation.
  • Which Entrepreneurs Boost Productivity? — The authors find that a minority of entrepreneurs are "transformative" — generating disproportionate productivity gains, scoring high on IQ tests, being well-educated, and hiring research and development workers. They argue that economies with more such entrepreneurs and R&D workers sustain higher long-run productivity growth.

AI Summary. U.S. gross domestic product rose at an inflation-adjusted 2% annual rate in the first quarter, below the 2.2% economists expected, while overall business investment grew at a 10.4% annual rate, the strongest in nearly three years. One estimate attributes about half of the quarter's growth to AI-related investment in equipment and intellectual property.

Harriet Torry Wall Street Journal
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Real GDP grew at a 2% annualized rate in Q1, driven by strong business investment, which increased 10.4% annualized. Even though most computer equipment is imported, AI-related investment may have driven ~half of GDP growth.

Is AI investment driving half of U.S. economic growth?

Core argument: U.S. GDP rose at a seasonally and inflation-adjusted 2% annual rate in the first quarter, below the 2.2% growth economists surveyed by The Wall Street Journal had expected, according to the Commerce Department.

The Commerce Department said U.S. gross domestic product—the value of all goods and services produced across the economy—rose at a seasonally and inflation adjusted 2% annual rate in the first quarter. Economists surveyed by The Wall Street Journal had expected GDP growth of 2.2% for the January-to-March period. The first quarter saw a strong increase in business spending on categories tied closely to AI, like equipment and intellectual property products, underscoring just how much AI has become an engine for the nation’s economy. Overall business investment increased at a 10.4% annual rate in the quarter, the strongest growth in nearly three years. “Even after accounting for the fact that most computer equipment is imported, AI investment seems like it accounted for about half of the overall GDP growth in the first quarter,” said Oliver Allen, an economist at Pantheon Macroeconomics.

Takeaways by Macro Roundup® AI

  1. U.S. GDP rose at a seasonally and inflation-adjusted 2% annual rate in the first quarter, below the 2.2% growth economists surveyed by The Wall Street Journal had expected, according to the Commerce Department.
  2. Overall business investment increased at a 10.4% annual rate in the first quarter, the strongest growth in nearly three years, with strong gains in AI-linked categories such as equipment and intellectual property products.
  3. Oliver Allen, an economist at Pantheon Macroeconomics, said that even after accounting for most computer equipment being imported, AI investment seems to have accounted for about half of first-quarter GDP growth.

Related Articles:

  • Corporate America Is Minting Money—and Not Just in Tech and Finance — Earnings per share for S&P 500 companies are estimated to grow more than 13% year over year for a sixth straight quarter, with sales growth and improving margins accompanying the gains. Share buybacks are contributing less to earnings growth than in many quarters, with the gap between earnings-per-share and net income growth just under 1 percentage point.
  • We’re Using So Much AI That Computing Firepower Is Running Out — Surging AI demand is straining computing capacity: Anthropic's Claude programming interface recorded 98.95% uptime over a 90-day span, below the 99.99% software companies typically promise, as its annualized revenue run rate climbed from $9bn to $14bn to $30bn. The company has capped how much usage customers can consume during weekday peak morning hours.
  • Taiwan’s Modern Miracle — Taiwan's economy has grown more than 12% over the past year, its fastest annual pace in nearly 50 years, as AI chip demand lifts net exports and pushes manufacturing to nearly 40% of output. Its trade surplus is flowing into outbound direct investment and foreign lending rather than US bonds.

AI Summary. The four largest US cloud providers — Amazon, Meta, Microsoft, and Google parent Alphabet — plan to spend $725bn on AI infrastructure this year, 77% more than the record $410bn spent the prior year. Google reported faster cloud growth than its rivals.

Stephen Morris, Ryan McMorrow, Hannah Murphy, Rafe Rosner-Uddin, et al. Financial Times
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The four hyperscalers are set to spend ~$725B on CAPEX in 2026, ~77% more than in the previous year.

Are the largest cloud providers sharply increasing AI infrastructure spending?

Core argument: The big four hyperscalers — Amazon, Meta, Microsoft, and Alphabet — raised their combined AI infrastructure capital spending plans to $725bn this year, 77% above last year's record $410bn.

Google outshone its rivals in first-quarter earnings with faster cloud growth as the search giant and its Big Tech peers upped their AI infrastructure spending plans again to $725bn this year. The big four “hyperscalers,” which include Amazon, Meta, Microsoft, and Google parent Alphabet, are together expecting to spend 77% more in capital expenditures than a record $410bn last year.

Takeaways by Macro Roundup® AI

  1. The big four hyperscalers — Amazon, Meta, Microsoft, and Alphabet — raised their combined AI infrastructure capital spending plans to $725bn this year, 77% above last year's record $410bn.
  2. Google outshone its Big Tech rivals in first-quarter earnings with faster cloud growth, while joining peers in raising AI infrastructure spending plans.

Related Articles:

  • Chart of the Day: AI Capex Ate the Economy in Q4 — The Bureau of Economic Analysis revised quarterly US GDP growth down to 0.7% annualized, with the category capturing servers and computer chips contributing 0.66 percentage points and the rest of the economy about 0.04 points. Including data center structures and power buildout, AI-related capital spending may account for roughly 0.80 points, exceeding total growth.
  • 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.
  • 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.

AI Summary. The White House opposes Anthropic's proposal to extend access to its Mythos artificial-intelligence model to roughly 70 more companies and organizations, which would raise the total with access to about 120. Officials cited security concerns about a model capable of conducting cyberattacks, and doubts that Anthropic has enough computing power to serve that many users without degrading government use.

Robert McMillan and Amrith Ramkumar Wall Street Journal
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The White House opposes Anthropic expanding the number of firms and organizations with access to Mythos from ~50 to ~120, citing both security concerns and worry that the new demand on Anthropic’s compute would hamper the government’s own use of Mythos.

Should access to a cyberattack-capable AI model be widened?

Core argument: Anthropic proposed granting roughly 70 additional companies and organizations access to its Mythos AI model, which would raise the total with access to about 120 entities, according to people familiar with the matter.

The White House opposes a plan from Anthropic to expand access to its powerful artificial-intelligence model Mythos, complicating the rollout of an AI tool capable of carrying out cyberattacks and sowing widespread disruptions online. Anthropic recently proposed letting roughly 70 additional companies and organizations use Mythos, which would have brought the total number of entities with access to about 120, people familiar with the matter said. Administration officials told the company they oppose the move because of concerns about security, the people said. Some White House officials also worried that Anthropic wouldn’t have access to enough computing power to serve that many more entities without hampering the government’s ability to use it effectively, one of the people said.

Takeaways by Macro Roundup® AI

  1. Anthropic proposed granting roughly 70 additional companies and organizations access to its Mythos AI model, which would raise the total with access to about 120 entities, according to people familiar with the matter.
  2. Administration officials told Anthropic they oppose the expansion because of security concerns, with Mythos described as capable of carrying out cyberattacks and sowing widespread disruptions online.
  3. Some White House officials worried Anthropic wouldn't have enough computing power to serve that many more entities without hampering the government's ability to use Mythos effectively, one of the people said.

Related Articles:

  • China’s Own Mythos Is Coming — America Must Prepare — The authors argue the US can extend its estimated seven-month lead in artificial intelligence by closing gaps in export controls: halting all AI chip exports to China including less advanced models, curbing smuggling networks, blocking cloud and remote access to controlled chips and US models, and restricting chipmaking equipment.
  • Misanthropic: On Mythos, Bad Human Behaviors and Systems Vulnerabilities — Anthropic reports that its Mythos model has detected thousands of high-severity cyber vulnerabilities, including ones found by chaining multiple obscure software weaknesses, and that these hacking skills are emergent rather than a designed capability. Mythos completed a corporate network attack simulation estimated to take an expert over 10 hours, which no other frontier model had solved.
  • Anthropic Model Scare Sparks Urgent Bessent, Powell Warning to Bank CEOs — The US Treasury and Federal Reserve convened Wall Street leaders over concerns that Anthropic's Mythos artificial intelligence model and similar systems could usher in an era of greater cyber risk. The meeting aimed to ensure banks are aware of the possible risks and are taking precautions to defend their systems.

AI Summary. The authors propose an economic deterrence strategy in which the United States and allied countries sign economic security agreements and use "avalanche decoupling"—ratcheting tariffs or quotas that phase out specific Chinese imports over time—to deter Chinese action against Taiwan. Applied first to sensitive goods such as drones and medicines, it could later extend to a broader share of trade.

Eyck Freymann Foreign Affairs
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A Taiwan crisis might be deterred by decoupling. Freymann advocates an initial “avalanche decoupling,” limited to sensitive products such as drones and drugs. If China crosses red lines, the US could “take the same approach to a broader share of trade.”

Can gradual trade decoupling deter China from attacking Taiwan?

Core argument: An economic deterrence strategy would show China that the United States and its allies could use a Taiwan crisis to trigger a gradual restructuring of the global economy on their own terms, pushing the burden of economic escalation back onto Xi Jinping.

An economic deterrence strategy would show China that the United States and its allies could use a Taiwan crisis to trigger a gradual restructuring of the global economy on their own terms and to their own benefit. A web of bilateral and multilateral economic security agreements would create the basis for this new international economic architecture, pushing the burden of economic escalation back onto Xi. The driving mechanism for such a restructuring would be “avalanche decoupling,” a process by which the United States and like-minded allies use ratcheting tariffs or quotas to phase out specific imports from China over time. In peacetime, the United States and its allies can use avalanche decoupling to break dependencies on China for a small number of highly sensitive products such as drones and medicines, leaving the vast majority of trade with China unchanged. Doing so now—before a crisis takes place—would establish the proof of concept. Then, if China crosses U.S. red lines in the future, the allies could take the same approach to a broader share of trade, possibly on an accelerated basis and working with a larger coalition.

Takeaways by Macro Roundup® AI

  1. An economic deterrence strategy would show China that the United States and its allies could use a Taiwan crisis to trigger a gradual restructuring of the global economy on their own terms, pushing the burden of economic escalation back onto Xi Jinping.
  2. "Avalanche decoupling" would use ratcheting tariffs or quotas to phase out specific imports from China over time, applied in peacetime to a small number of highly sensitive products such as drones and medicines while leaving most trade with China unchanged.
  3. A web of bilateral and multilateral economic security agreements would create the basis for a new international economic architecture, and if China crossed U.S. red lines, the allies could apply the same approach to a broader share of trade, possibly faster and with a larger coalition.

Related Articles:

  • US Notches One of Its Biggest Annual Trade Gaps Since 1960 — The US goods and services trade deficit reached $901.5bn for the year, one of the largest in data going back to 1960. US companies increased imports of computers and accessories by nearly $145bn from the prior year, an acceleration in demand that reflects large-scale artificial intelligence investment.
  • An Anatomy of the Great Reallocation in US Supply Chain Trade — China's share of US direct imports fell from a peak of about 22% in 2017 to roughly 16% in 2022, 13% in 2024, and about 9% by mid-2025 — matching its share when it joined the World Trade Organization. Vietnam, Mexico, and more recently Taiwan have been the main gainers.
  • How to Fight an Economic War — China earned about $3.4bn from exporting rare-earth elements and magnets in a year, while the U.S. Geological Survey estimates a 30% disruption to U.S. supply of the rare-earth element neodymium alone would cut U.S. GDP by 2.2%, over $600bn. This asymmetry gives Chinese export controls their leverage.

Friday, May 1, 2026

AI Summary. The share of the US population receiving food stamps doubled from 6% to 12% over roughly 25 years, with real costs per capita rising 179% to $279 a year, though both remain below their post-Great-Recession peak. Households with an elderly person now outnumber those with a child, reversing the early-2000s pattern.

Angela Rachidi American Enterprise Institute
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About 40mm Americans, 12% of the population, receive SNAP benefits, up from 6% in 2000. In 2023, only 34% of these households included children, down from 49% in 2010, while 36% contained an elderly person, up from 16% in FY2010.

How have food stamp enrollment, costs, and recipient households changed?

Core argument: The share of the U.S. population receiving SNAP doubled from 6% in FY2000 to 12% in FY2025, while real SNAP costs per capita rose 179%, from roughly $100 to $279 per year in 2024 dollars.

Comparing FY2000 with FY2025, the share of the population receiving SNAP doubled from 6% to 12%, while real SNAP costs per capita increased by 179%—from roughly $100 per year to $279 (in 2024 dollars). Despite this growth, per capita participation and costs in FY2025 remained below their pre-pandemic peak in 2013, which coincided with the aftermath of the Great Recession and changes in eligibility and other policies stemming from the 2008 Farm Bill. SNAP is countercyclical, meaning that all else equal, the number of people receiving SNAP should rise during recessions because of increased unemployment and decline as the economy recovers, [though] overall SNAP participation has grown faster than changes in the unemployment rate alone would predict. Over the long run, and especially since FY2020 (due to the Thrifty Food Plan’s increase in the maximum SNAP benefit), costs per capita have not returned to prerecession levels after a period of high unemployment. In FY2023, the share of SNAP households containing an elderly person (36%) exceeded the share containing a child (34%) for the first time. This was a sharp departure from the early 2000s, when more than half of SNAP households contained a child and less than 20% included an elderly person (Figure 2).

Takeaways by Macro Roundup® AI

  1. The share of the U.S. population receiving SNAP doubled from 6% in FY2000 to 12% in FY2025, while real SNAP costs per capita rose 179%, from roughly $100 to $279 per year in 2024 dollars.
  2. In FY2023, the share of SNAP households containing an elderly person reached 36%, exceeding the 34% containing a child for the first time, against the early 2000s when over half contained a child and under 20% included an elderly person.

Related Articles:

  • 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.
  • Poverty and Dependency in the United States, 1939–2023 — Extending a consistent poverty measure back to 1939, the authors estimate US absolute poverty fell from 48.5% to 19.5% between 1939 and 1963, driven by growth in market income rather than government transfers net of taxes. Poverty fell no faster in the 24 years after the War on Poverty than before.
  • Government Benefit Programs Already Do A Lot To Help Low Income Families — For a two-adult, three-child family, existing taxes and government benefits bring take-home resources to about $58,000 with no earnings, $79,000 with $20,000 of earnings, and $90,000 with $80,000 of earnings plus $15,000 in employer health premiums. A $75,000 gap in earnings and work-related benefits narrows to $11,000 in take-home pay.

AI Summary. Sectors with the highest artificial intelligence adoption rates have also seen the strongest growth in new business applications, which one analysis interprets as evidence that AI is lowering the barriers to starting a company.

Torsten Sløk Apollo
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Since 2022, sectors with the highest AI adoption rates have also seen the strongest growth in new business applications, suggesting to Torsten Sløk that “AI is lowering the barriers to starting a company.”

Is AI lowering the barriers to starting a company?

Core argument: Sectors with the highest AI adoption rates have recorded the strongest growth in new business applications since 2022.

Sectors with the highest AI adoption rates have also seen the strongest growth in new business applications since 2022, showing that AI is lowering the barriers to starting a company.

Takeaways by Macro Roundup® AI

  1. Sectors with the highest AI adoption rates have recorded the strongest growth in new business applications since 2022.
  2. Torsten Sløk reads the link between AI adoption and new business applications as a sign that AI is lowering the barriers to starting a company.

Related Articles:

  • Generative AI and Entrepreneurship — The authors find that startups with a larger share of tasks doable by generative AI cut employment beginning immediately after ChatGPT's release, with technically proficient founders restructuring teams toward higher-skill roles. Venture investors made smaller but more numerous deals, and new firm entry offset the decline in total startup employment.
  • Attention (And Money) Is All You Need: Why Universities Are Struggling to Keep AI Talent — The annual compensation gap between top industry and academic artificial intelligence researchers widened from roughly $294,000 to $1.5m, coinciding with accelerating academic out-migration toward large incumbent technology firms. Researchers who move to industry cut paper production by about 63% while increasing patent filings nearly sixfold, consistent with a shift from open science toward proprietary innovation.
  • Which Entrepreneurs Boost Productivity? — The authors find that a minority of entrepreneurs are "transformative" — generating disproportionate productivity gains, scoring high on IQ tests, being well-educated, and hiring research and development workers. They argue that economies with more such entrepreneurs and R&D workers sustain higher long-run productivity growth.

AI Summary. The author estimates China's State Administration of Foreign Exchange holds roughly $1.8tn in dollar assets, about 55% of $3.3tn in reserves, while state commercial banks, policy banks, and the China Investment Corporation hold dollar assets outside that balance sheet. Summing these suggests China could hold more dollars off the reserve manager's books than on them.

Brad Setser Council On Foreign Relations
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Setser estimates that external dollar assets of state commercial and policy banks and CIC’s dollar assets are ~ on par with the ~$1.8T held by SAFE, and concludes that China has not reduced its dollar exposure and likely has ~$4T of dollar assets.

Does China hold more dollar assets outside its official reserves than inside?

Core argument: Roughly 55% of China's $3.3 trillion in reserves, about $1.8 trillion, is a reasonable estimate of SAFE's dollar holdings, which include a sizable share of U.S. equities rather than fixed income alone.

55% of China’s $3.3 trillion in reserves is roughly $1.8 trillion. That is a reasonable estimate of SAFE’s dollar holdings (which include a decent chunk of U.S. equities; it isn’t all in fixed income). SAFE’s quarterly data shows state commercial banks had $1 trillion in dollar assets (versus $300 billion in dollar liabilities abroad) at the end of Q4, and probably more like $1.1 trillion in dollar assets now. The policy banks have an undisclosed foreign portfolio. But AIDdata estimated that they could hold close to $1 trillion in claims on the world—and most of those seem to be in dollars. And, of course, the bulk of the China Investment Corporation’s (CIC) private equity investments will be dollar-based. That suggests that the bulk of the CIC’s $450 billion in foreign assets are dollars. Sum it up, and China, Inc. could hold more dollars off SAFE’s balance sheet than on SAFE’s balance sheet.

Takeaways by Macro Roundup® AI

  1. Roughly 55% of China's $3.3 trillion in reserves, about $1.8 trillion, is a reasonable estimate of SAFE's dollar holdings, which include a sizable share of U.S. equities rather than fixed income alone.
  2. SAFE's quarterly data show China's state commercial banks held $1 trillion in dollar assets against $300 billion in dollar liabilities abroad at the end of the fourth quarter, with dollar assets probably closer to $1.1 trillion since.
  3. AidData estimated China's policy banks could hold close to $1 trillion in claims on the world, most of them apparently in dollars, and with the bulk of the China Investment Corporation's $450 billion in foreign assets dollar-based, China Inc. could hold more dollars off SAFE's balance sheet than on it.

Related Articles:

  • 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.
  • Don’t Blame America’s Current Account Deficit On the Dollar — Foreign official purchases of dollars are too small to mirror the US current account deficit, and net official financial inflows have fluctuated around zero even as the deficit widened; the euro area runs a current account surplus despite the euro's reserve role. The author argues materially reducing the US fiscal deficit is the key policy prerequisite for global rebalancing.
  • The U.S. Trade Deficit: Myths and Realities — Taxing capital inflows would weaken the dollar but could raise domestic interest rates and depress investment, harming long-term growth, while an interest rate cut absent recession would be inflationary and erode any real depreciation needed to durably improve the trade balance. Fiscal restraint could weaken the dollar and reduce the trade deficit.

AI Summary. Foreign capital flowing into the US is shifting from government purchases of US Treasury bonds toward private foreign investment in US stocks and other riskier assets. This means a share of future gains from US productivity-enhancing investment will flow to these foreign investors, who are likely more willing to sell and exit if returns worsen.

Timothy Taylor Conversable Economist
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Taylor warns that as foreign investment in US assets shifts from government Treasury purchases to nongovernment purchases of US equities, “future gains from US productivity-enhancing investment will be flowing to foreign[ers].”

How is the shift toward foreign private investment changing US borrowing?

Core argument: The historical US pattern of borrowing cheaply through foreign government and central bank purchases of Treasury bonds while US investors bought higher-return, riskier assets abroad is shifting.

As one looks more closely at [the US trade deficit] there are some yellow flags waving. For example, it used to be that the US economy could pay low interest rates when borrowing (for example, when governments or central banks in other countries purchased US Treasury bonds), and then US investors putting money abroad would instead tend to buy higher-return and riskier investments. From an overall macro point of view, the US economy was borrowing cheap and investing for a higher return. But this pattern is shifting. Instead of foreign governments buying US Treasury bonds, it’s becoming more common for non-government foreign investors to put money into the US stock market and other investments. As a result, a share of the future gains from US productivity-enhancing investment will be flowing to these foreign investors. Also, these non-government foreign investors are likely to be more willing to sell and flee if returns on these riskier US investments take a turn for the worse. Thus, the accumulated effect of these annual imbalances raises some cause for concern.

Takeaways by Macro Roundup® AI

  1. The historical US pattern of borrowing cheaply through foreign government and central bank purchases of Treasury bonds while US investors bought higher-return, riskier assets abroad is shifting.
  2. Non-government foreign investors are increasingly putting money into the US stock market and other investments, so a share of future gains from US productivity-enhancing investment will flow to those foreign investors.
  3. Non-government foreign investors holding riskier US assets are likely to be more willing to sell and flee if returns worsen, and the accumulated effect of these annual imbalances raises some cause for concern.

Related Articles:

  • Understanding Global Imbalances — The US, China, Germany, and Japan account for roughly two-thirds of global current account imbalances, with the US deficit at 4% of GDP financed by capital inflows into dollar assets. The average duration of a surplus or deficit spell roughly doubled since the 1980s, building large net foreign asset and liability positions.
  • The Dangerous Triumph Of Neo-Mercantilism — Neo-mercantilism is thriving in both China, which pairs infant-industry promotion with large trade surpluses, and in a United States focused on external deficits and protecting domestic markets. The author argues this will likely fracture the world economy, and that a new multilateral treaty could include a mechanism to combat large structural trade surpluses.
  • Debt, Deficits & Global Imbalances — Taxes or restrictions on short-term capital inflows were argued to be a more direct and potentially superior tool than tariffs for shrinking the trade deficit, since tariffs risk retaliation and supply-chain distortions. Proponents said such measures could reduce reliance on household and government borrowing to sustain employment, if paired with efforts to strengthen domestic demand and tradables capacity.

AI Summary. Advances in rockets, telescopes, satellites, artificial intelligence and robotics, alongside rising public and private space funding in the US and China, are expanding scientists' ability to probe space, with both countries planning crewed Moon landings. PwC projects cumulative lunar economy revenues of $94bn–$127bn over the 25 years to 2050.

Michael Peel and Clive Cookson Financial Times
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PwC forecasts that commercial space projects could generate between $94B and $127B over the next 25 years. In real terms, NASA spending is ~ on par with its “Space Race” level of the 1960s and 1970s.

Are new technologies and rising funding expanding space exploration?

Core argument: PwC projects cumulative revenues of $94bn–$127bn from lunar economy activities such as mining and tourism over the 25 years to 2050.

Rapid technological advances in rockets, telescopes, satellites, AI and robotics mean scientists can probe outer space like never before. At the same time, public and private funding for space programmes has risen steadily, especially in the US and China, which both plan on landing people on the Moon by the end of the decade. Both powers have their sights on the potential gains from the so-called lunar economy. PwC, the consultancy, projects total cumulative revenues of between $94bn and $127bn from activities such as mining and tourism over the 25 years to 2050.

Takeaways by Macro Roundup® AI

  1. PwC projects cumulative revenues of $94bn–$127bn from lunar economy activities such as mining and tourism over the 25 years to 2050.
  2. The United States and China both plan to land people on the Moon by the end of the decade, with each targeting the potential gains from the lunar economy.
  3. Advances in rockets, telescopes, satellites, AI and robotics, alongside steadily rising public and private space funding in the US and China, allow scientists to probe outer space as never before.

Related Articles:

  • It’s Not a Space Race, It’s the Space Olympics — The US operates 81% of commercial satellites in orbit and 86% of global effective launch capacity, with NATO allies second in satellites at 11% and China second in launch capacity at 9%. China is pursuing mega satellite constellations and reusable rockets, in many cases copying approaches already proven by US companies.
  • Has Starlink Already Won the New Space Race? — Starlink has launched more than 8,417 satellites, 39% of all satellites launched since the first artificial satellite reached orbit, and its roughly 7,300 operational satellites make up almost two-thirds of all operational spacecraft. It delivers low-latency broadband to over 5mn customers in 125 countries and is projected to generate $12bn in revenue and $2bn in free cash flow this year.
  • Building an Enduring Advantage in the Third Space Age — The United States and China each logged their highest-ever annual launch rates, at 103 and 66 launches, while Russia fell to 19 and Europe recorded three. The US accounted for roughly half of global launches but 81% of effective launch capacity, since Falcon 9 and Falcon Heavy comprised 93% of US launches.