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
  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “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
  • “…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
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “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
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Friday, June 26, 2026

AI Summary. Memory and storage chip costs used across consumer electronics have risen, with Nintendo, Microsoft and Sony raising device prices and Apple's chief executive saying higher prices are coming. Average hourly earnings for electrical and wiring-installation contractors rose 6.5% year over year, versus 3.6% for all private-sector workers.

Justin Lahart Wall Street Journal
Date Posted:

Higher electricity costs and increased memory chip demand from the AI buildout are fueling inflation. Consumer prices for computer software and accessories were up ~15% y/y in May.

Is the data-center buildout raising consumer electronics prices and wages?

Core argument: Average hourly earnings for electrical and wiring-installation contractors rose 6.5% in April from a year earlier, compared with 3.6% for all private-sector workers, with such workers in demand from data-center construction.

Memory and storage chips are used in a broad array of consumer-electronics products that includes everything from videogame consoles to cars. Nintendo, Microsoft and Sony have all raised prices on devices. Higher price tags are coming to Apple products, too, according to Chief Executive Tim Cook, who told The Wall Street Journal that the jump in costs was unlike anything he had seen “in any area in over 40 years.” The AI build-out could also add to labor costs. Wages for workers who are in demand from data-center construction have been picking up: Average hourly earnings for electrical and wiring-installation contractors were up 6.5% in April from a year earlier, which compared with 3.6% for all private-sector workers.

Takeaways by Macro Roundup® AI

  1. Average hourly earnings for electrical and wiring-installation contractors rose 6.5% in April from a year earlier, compared with 3.6% for all private-sector workers, with such workers in demand from data-center construction.
  2. Nintendo, Microsoft and Sony have all raised prices on devices, and memory and storage chips are used in products ranging from videogame consoles to cars.
  3. Apple Chief Executive Tim Cook told The Wall Street Journal that higher price tags are coming to Apple products and that the jump in costs was unlike anything he had seen "in any area in over 40 years.".

Related Articles:

  • US Workers Lose Buying Power After War Drives Up Prices — Inflation has outstripped wage growth in key private-sector industries including healthcare, finance, and retail for two straight months, largely because of a surge in energy prices driven by the Iran war. Gasoline prices have fallen since an interim US-Iran peace deal but remain nearly $1 a gallon above pre-conflict levels.
  • Electric Fury — Rising US electricity costs are burdening consumers and stirring voter anger, with the rapid build-out of artificial intelligence data centers, tariffs, and upgrades to an aging grid pushing power prices higher at rates unseen in decades. Utility bills have moved to the center of US politics alongside grocery prices.
  • America’s Electricity Gap — US power consumption has risen more in the past two years than in the previous 15 combined, yet supply has not kept pace and electricity prices have climbed more in four years than in the prior 14. The US Energy Information Administration projects generation to grow another 4.6%, with commercial users including data centers driving most added demand.

AI Summary. Half of the 18 Federal Reserve policymakers submitting interest rate projections penciled in at least one rate hike, and the median projection for core inflation rose to 2.5%. The authors still expect no hikes and argue that reduced Federal Reserve transparency could make financial conditions and economic outcomes more volatile.

Jan Hatzius Goldman Sachs
Date Posted:

GS notes “half of 18 participants submitting rate projections penciled in one or more rate hikes in the remainder of 2026”, though GS is holding its projection at zero. Warsh’s opposition to forward guidance was not a surprise, but its intensity was.

Does less central bank transparency make financial conditions more volatile?

Core argument: Half of the 18 FOMC participants submitting interest rate projections penciled in one or more rate hikes for the remainder of 2026, and the median core PCE inflation projection for 2027Q4 rose to 2.5%.

The first FOMC meeting under Chairman Warsh was more hawkish than expected. Half of the 18 participants that submitted interest rate projections penciled in one or more rate hikes in the remainder of 2026, and the median projection for core PCE inflation in 2027Q4 rose to 2.5%. While this has increased the upside risks, our baseline forecast remains for no hikes.We think [hikes] are less likely than markets are pricing [Exhibit 5]. We had expected Warsh’s refusal to provide either a “dot” or verbal guidance about upcoming rate decisions, but his broader comments on Fed communications with financial markets went further: “So I think financial markets perform best when they react to incoming data.The more that markets are paying attention to what's happening in the real economy, deciding what’s good data and what’s less good data, the more financial markets can price what they believe is the most likely and what are the tail risks.” Since the Fed essentially controls short-term interest rates and the interest rate path matters for asset pricing, it is inevitable that markets ask how the Fed will react to incoming information. A significant reduction in Fed transparency could make financial conditions—and thus economic outcomes—more volatile as market assumptions about the Fed’s thinking become subject to fewer reality checks.

Takeaways by Macro Roundup® AI

  1. Half of the 18 FOMC participants submitting interest rate projections penciled in one or more rate hikes for the remainder of 2026, and the median core PCE inflation projection for 2027Q4 rose to 2.5%.
  2. The baseline forecast remains for no rate hikes, with hikes judged less likely than markets are pricing despite upside risks raised by the first FOMC meeting under Chairman Warsh.
  3. Warsh said financial markets perform best when they react to incoming data, though a significant reduction in Fed transparency could make financial conditions and economic outcomes more volatile.

Related Articles:

  • Home Alone: Inflation And The New Fed Chair — Current readings on labor market tightness, manufacturing price pressures, supply chain tightness and the output gap resemble conditions that have historically preceded Federal Reserve rate increases rather than cuts, and futures markets are pricing in hikes. Averaging several monetary policy rules implies a policy rate of 4.00%–4.85% versus the current 3.50%–3.75%.
  • US Daily: June FOMC Recap: Hikes Look More Likely but Are Still Not Our Base Case — Nine Federal Reserve policymakers projected an interest-rate increase in 2026 and the median projection for core inflation in 2027 rose to 2.5%, a hawkish surprise that lifted market pricing for the end-2026 policy rate by 0.2 percentage points. The authors still expect the Federal Reserve to leave its policy rate unchanged this year.
  • The Case for Higher U.S. Rates — Underlying U.S. inflation continues to run faster than the Federal Reserve's target and may be accelerating slightly, while growth, consumer spending, and a healthy job market keep wages rising about 1 percentage point faster than in the years just before the pandemic. On that evidence, the author argues rate increases, not cuts, are the appropriate policy.

AI Summary. SpaceX's $25bn bond offering has weakened in secondary trading, with paper losses relative to Treasuries totaling roughly $305m. Traders attribute the selling to fast-money accounts seeking quick profits rather than buy-and-hold investors, though the company also won investment-grade ratings despite expectations of years of negative cash flow.

Caleb Mutua, Ying Luthra, and Brian Smith Bloomberg
Date Posted:

SpaceX’s $25B bond sale is unraveling in the secondary markets. The sharp selloff suggests “fast-money accounts… piled into the deal,” highlighting how difficult investors still find it to price AI-era companies with unconventional risk profiles.

Why are losses mounting on a record corporate bond sale?

Core argument: Paper losses on SpaceX's $25 billion bond offering totaled roughly $305 million as of late Thursday relative to Treasuries, with traders saying they cannot recall another recent deal that widened this sharply in the secondary market.

SpaceX’s blockbuster bond sale is weakening so quickly in the secondary market that traders say they can’t recall another recent deal that widened this sharply. Paper losses on SpaceX’s $25 billion offering have mounted since the debt began trading and totaled roughly $305 million as of late Thursday relative to Treasuries. Traders say the moves suggest fast-money accounts, rather than traditional buy-and-hold investors, piled into the deal looking to flip it for a quick profit. Even if there are more technical reasons behind the selling, the virtually unprecedented magnitude points to SpaceX’s unique profile. The company won investment grades despite expectations for years of negative cash flow and a dependence on Elon Musk that Fitch Ratings deemed a ‘key rating constraint.’

Takeaways by Macro Roundup® AI

  1. Paper losses on SpaceX's $25 billion bond offering totaled roughly $305 million as of late Thursday relative to Treasuries, with traders saying they cannot recall another recent deal that widened this sharply in the secondary market.
  2. Traders say the moves suggest fast-money accounts seeking to flip the SpaceX deal for a quick profit, rather than traditional buy-and-hold investors, piled into the offering.
  3. SpaceX won investment-grade ratings despite expectations for years of negative cash flow and a dependence on Elon Musk that Fitch Ratings deemed a "key rating constraint.".

Related Articles:

  • AI Set to be Largest CapEx Cycle Ever … and Soon Majority Externally Financed — Hyperscaler and data-center investment is tracking toward $1.5tn annually by 2030, which in real terms would exceed the 2005-06 housing boom, the 1990s fiber peak, and the 1882 railroad peak combined. External debt and equity are projected to fund close to 90% of the buildout, making it dependent on credit markets.
  • Semiquincententacles — Leading artificial-intelligence labs are moving to usage-based token pricing on a cost-plus basis that includes total ownership costs, pushing token prices higher and giving some enterprises reason to migrate to cheaper open models. Frontier models remain necessary for cybersecurity, distillation training, agents, and scientific discovery, where maximum performance is required.
  • Investors Seek Protection From Risk Of AI Debt Bust — Trading volumes in credit default swaps — insurance-like contracts against debt defaults — tied to major US technology companies including Alphabet, Amazon, Broadcom, CoreWeave, Meta, Microsoft and Oracle have risen 90%, according to clearinghouse DTCC data. The increase is most pronounced for Oracle and CoreWeave, both raising billions in debt for data centre capacity.

AI Summary. OpenAI is leaning toward delaying its initial public offering until next year, according to people involved in the company's deliberations. Advisers have cautioned that retail investor enthusiasm may be limited, following a decline in SpaceX's stock after its public offering and choppy markets in which technology stocks have dragged down indexes.

Rob Copeland and Mike Isaac New York Times
Date Posted:

OpenAI’s IPO may be pushed to 2027 after advisors reported to the firm that its offering “may not find much enthusiasm from retail investors” due to the downward slide of SpaceX after its successful offering.

Is a major AI company delaying its public offering amid weak markets?

Core argument: OpenAI is leaning toward delaying its initial public offering until next year, according to three people involved in the company's deliberations, a shift away from its most aggressive aspirations.

OpenAI is leaning toward holding off its initial public offering until next year, three people involved in the company’s deliberations said. A cascade of recent developments has caused OpenAI’s executives to shift away from their most aggressive aspirations. Top of mind is what has happened to Elon Musk’s SpaceX after its I.P.O. this month. Since then, SpaceX’s stock has been on a downward slide. Global markets have also been choppy in recent weeks, with tech stocks dragging down indexes as investors question whether A.I. companies will live up to their sky-high promises. That has caused OpenAI’s advisers, in conversations with the company over the past week, to caution that it may not find much enthusiasm from retail investors for its own shares, two of the people involved said.

Takeaways by Macro Roundup® AI

  1. OpenAI is leaning toward delaying its initial public offering until next year, according to three people involved in the company's deliberations, a shift away from its most aggressive aspirations.
  2. SpaceX's stock has slid since its initial public offering this month, a development that is top of mind for OpenAI's executives.
  3. OpenAI's advisers cautioned the company that it may not find much enthusiasm from retail investors for its shares, according to two people involved, as choppy global markets and falling tech stocks reflect investor questions about whether A.I. companies will meet their promises.

Related Articles:

  • SpaceX and OpenAI Are Ending Wall Street’s Era of Stock Scarcity — JPMorgan projects that share sales will add roughly $1.5tn of stock to the US equity market over the next two years even after buybacks, which would be the strongest net equity issuance since at least the late 1990s. Equity has grown cheaper relative to debt as a funding source.
  • Semiquincententacles — Leading artificial-intelligence labs are moving to usage-based token pricing on a cost-plus basis that includes total ownership costs, pushing token prices higher and giving some enterprises reason to migrate to cheaper open models. Frontier models remain necessary for cybersecurity, distillation training, agents, and scientific discovery, where maximum performance is required.
  • The State of the AI Economy — An analysis estimates the AI ecosystem generated $110bn in revenue over 12 months excluding double-counting, with the most recent month annualizing to a $175bn run rate. After separating AI-specific capital spending from the roughly $120bn hyperscalers already spent annually and depreciating compute over 6 years, revenues attributable to hyperscalers roughly cover depreciation.

AI Summary. Statistical comparisons with other advanced economies estimate that UK goods trade volumes would be 10–15% higher had they grown in line with the average of other major economies, a decline prior studies link to a 2–4% reduction in output through weaker productivity. The authors also estimate a roughly 10% business investment shortfall, implying an output hit of just over 2%.

James Moberly and Sven Jari Stehn Goldman Sachs
Date Posted:

A GS analysis suggests that the UK’s GDP is somewhere between 4 and 6% below a counterfactual path where Brexit did not take place, though GS conjectures that the largest growth effects are likely behind us.

How much output has leaving a trade bloc cost Britain?

Core argument: UK goods trade volumes would be 10–15% higher had they grown in line with the average of other G7 economies, reflecting higher trade frictions outside the EU, with a smaller shortfall in services trade.

We start by examining empirically how much UK real GDP has underperformed other advanced economies since 2016 using a “Doppelgänger” analysis.This method uses statistical techniques to find the best combination of other countries that match the path of UK real GDP before the referendum and uses this same combination to project what might have happened thereafter. Studies consider three mechanisms through which Brexit could have lowered long-term output: (1) international trade, (2) business investment and (3) immigration. We estimate that goods trade volumes would be 10-15% higher in a counterfactual in which volumes had grown in line with the average of other G7 economies, reflecting higher trade frictions outside of the EU (Exhibit 4, left), and to a less extent service trade (Exhibit 4, right). Previous studies suggest that a decline in trade intensity of this magnitude could have reduced GDP by 2-4% through reduced productivity. Second, UK investment growth fell below its pre-2016 trend (Exhibit 5, left). Our Doppelgänger estimates for investment point to a shortfall of around 10% relative to other economies. At least some of this underperformance likely reflected Brexit uncertainty. (Exhibit 5, right). Our estimates on the business investment channel imply an output hit of just over 2% by end-2025. Third, Brexit has affected immigration flows into the UK.

Takeaways by Macro Roundup® AI

  1. UK goods trade volumes would be 10–15% higher had they grown in line with the average of other G7 economies, reflecting higher trade frictions outside the EU, with a smaller shortfall in services trade.
  2. Previous studies suggest a decline in trade intensity of that magnitude could have reduced UK GDP by 2–4% through lower productivity.
  3. "Doppelgänger" estimates point to a UK business investment shortfall of around 10% relative to other economies, implying an output hit of just over 2% by end-2025.

Related Articles:

  • The Economic Impact of Brexit — The authors estimate that Brexit reduced UK GDP by 6% to 8%, investment by 12% to 18%, and employment and productivity each by 3% to 4%, with effects accumulating gradually. Survey data indicate these impacts reflect elevated uncertainty, reduced demand, diverted management time, and greater misallocation of resources.
  • The Great Bond Car Wreck — in Slow Motion — Long-term government bond yields have risen simultaneously across the US, Japan, the UK and France, which Barclays attributes to too much debt, too little fiscal discipline, and no political appetite to address either. Equities have been resilient, though the 10-year Treasury yield now exceeds the S&P 500 earnings yield by the widest margin since the dot-com bust.

Monday, June 29, 2026

AI Summary. Linking patents to scientific papers through shared phrases, the authors find China's innovation has grown markedly more self-reliant across nearly all technology areas the U.S. treats as strategically important. In an aggregate grouping of these areas, the share of patent phrases traced to Chinese-produced articles rose from 2% to 24%, while the U.S.-produced share fell from 31% to 18%.

ZIyu Chen and Christopher Esposito Arxiv
Date Posted:

Using shared scientific phrases to link patents to papers, Chen and Esposito found that the share of phrases found on Chinese-produced articles rose from 2% in 2000 to 24% in 2025, while the share found on US-produced articles dropped from 31% to 18%.

Is China's innovation drawing more on its own science than America's?

Core argument: Across an aggregate grouping of U.S.-designated Critical Technology Areas, the share of scientific phrases in Chinese patents traced to domestically produced articles rose from 2% in 2000 to 24% in 2025, while the U.S.-produced share fell from 31% to 18%.

Linking patents to papers based on shared scientific phrases, we found that the self-reliance of China’s innovation has risen sharply and broadly. This is not an artifact of measurement— it holds when we limit the analysis to high-impact journals, when we analyze highly-precise idea combinations, when we examine China’s largest firms and top universities, and when we infer a patent’s scientific content from the English-language U.S. filing of the same invention. It is pronounced across nearly all of the technology areas that the U.S. government treats as strategically important, and it is driven by two core processes: China produces science built on older foreign originated ideas at scale, and it originates a rapidly-growing share of the new phrases used in its own inventions. We mapped CNIPA [China National Intellectual Property Administration] patents to Critical Technology Areas (CTAs) and found that the self-reliance of Chinese innovation rose substantially across them (Figure 2). Across an aggregate grouping of CTAs, the share of phrases found on domestically-produced articles rose from 2% in 2000 to 24% in 2025, while the share found on U.S.-produced articles dropped from 31% to 18%. Only in 3 fields (Biotechnology, Quantum Technology, and High Performance Computing) were such phrases more likely to be found on U.S.-produced articles, and even then these gaps were small and shrinking rapidly.

Takeaways by Macro Roundup® AI

  1. Across an aggregate grouping of U.S.-designated Critical Technology Areas, the share of scientific phrases in Chinese patents traced to domestically produced articles rose from 2% in 2000 to 24% in 2025, while the U.S.-produced share fell from 31% to 18%.
  2. The authors attribute China's rising innovation self-reliance to two processes: China produces science built on older foreign-originated ideas at scale, and it originates a rapidly growing share of the new scientific phrases used in its own inventions.
  3. Only in biotechnology, quantum technology, and high performance computing were phrases in Chinese patents more likely to appear in U.S.-produced articles, and the authors report those gaps as small and shrinking rapidly.

Related Articles:

  • China and the Future Of Science — China graduates about 5x as many medical and biomedical students as the US each year, 7x as many engineers, and nearly double the number of science and engineering PhDs, while one-sixth to one-fifth of US science and engineering graduates are themselves Chinese. One study found returning Chinese scientists lead-author 2.5x more papers than peers who stay in the US.
  • How China Is Outperforming the United States in Critical Technologies — The Australian Strategic Policy Institute's Critical Technology Tracker finds China leads in 57 of 64 critical technology categories while the United States leads in 7, and that China surpasses the United States in top-tier scientific publications across all 8 technology domains. In energy and environment China accounts for 46% of top-tier publications versus 10% for the United States.
  • The US Is The World’s Science Superpower — But For How Long? — International students on temporary visas received more than a third of US science and engineering doctorates, including 59% in computer science, with most coming from China and India, and 77% of Chinese doctoral recipients said they intended to stay in the US. The US hosts 15% of the world's international students, down from 23%.

AI Summary. Earnings growth at the seven largest US technology companies is converging toward that of the rest of the S&P 500 while their valuation premium compresses, which the author argues increasingly favors value stocks over growth stocks.

Torsten Sløk, Rajvi Shah, and Shruti Galwankar Apollo
Date Posted:

The Mag 7’s P/E premium over the rest of the S&P 500 is at its lowest level in more than a decade. Sløk argues “the setup increasingly favors value over growth.”

Are big tech's narrowing earnings advantage shifting markets toward value stocks?

Core argument: The Magnificent 7's earnings growth is converging toward that of the S&P 493, eroding the decade-long case for growth that rested on those seven companies out-earning the rest of the market.

The decade-long case for growth rested on the Mag 7 out-earning everything else, but with earnings growth converging toward the S&P 493 and their valuation premium compressing, the setup increasingly favours value over growth.

Takeaways by Macro Roundup® AI

  1. The Magnificent 7's earnings growth is converging toward that of the S&P 493, eroding the decade-long case for growth that rested on those seven companies out-earning the rest of the market.
  2. The Magnificent 7's valuation premium is compressing, a setup that increasingly favours value over growth.

Related Articles:

  • Opportunities and Expectations: The Present Value of Growth Opportunities in Valuation — A stock's value can be split into steady-state value from current operations and the "present value of growth opportunities" from future value-creating investments, which has averaged 35% of the S&P 500's price historically. Lower shares of price attributed to growth opportunities have been associated with higher subsequent returns, most clearly at the extremes.
  • SpaceX and OpenAI Are Ending Wall Street’s Era of Stock Scarcity — JPMorgan projects that share sales will add roughly $1.5tn of stock to the US equity market over the next two years even after buybacks, which would be the strongest net equity issuance since at least the late 1990s. Equity has grown cheaper relative to debt as a funding source.
  • 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. U.S. margin debt — money investors borrow from brokerages to buy securities — rose 54% from a year earlier to a record $1.4tn, according to the Financial Industry Regulatory Authority. Assets in leveraged exchange-traded funds, which magnify daily stock moves by two or three times, nearly doubled to a record $220bn.

Jack Pitcher Wall Street Journal
Date Posted:

US margin debt rose 54% y/y to a record $1.4T in May, according to regulatory data. While leverage amplifies returns, it also leaves investors exposed to steeper downsides. Charles Schwab recently tightened margin requirements.

Is investor borrowing to buy stocks at record levels?

Core argument: U.S. margin debt — money investors borrow from brokerages to buy securities — rose 54% from a year earlier to a record $1.4 trillion in May, according to FINRA data.

U.S. margin debt, or what investors borrow from their brokerages to buy securities, rose 54% to a record $1.4 trillion in May from a year earlier, according to FINRA [Financial Industry Regulatory Authority] data. Meanwhile, high-risk leveraged exchange-traded funds that produce double or triple the daily move of underlying stocks are growing rapidly, as is trading in options tied to them. Buyers ranging from hedge funds to teenagers on Robinhood have poured money into leveraged ETFs this year, helping to nearly double the assets in these funds to a record $220 billion between March 30 and June 3, according to FactSet.

Takeaways by Macro Roundup® AI

  1. U.S. margin debt — money investors borrow from brokerages to buy securities — rose 54% from a year earlier to a record $1.4 trillion in May, according to FINRA data.
  2. Assets in leveraged exchange-traded funds, which deliver double or triple the daily move of underlying stocks, nearly doubled to a record $220 billion between March 30 and June 3, according to FactSet.
  3. Buyers of leveraged ETFs range from hedge funds to teenagers on Robinhood, and trading in options tied to these funds is growing rapidly alongside the funds themselves.

Related Articles:

  • The State of the AI Economy — An analysis estimates the AI ecosystem generated $110bn in revenue over 12 months excluding double-counting, with the most recent month annualizing to a $175bn run rate. After separating AI-specific capital spending from the roughly $120bn hyperscalers already spent annually and depreciating compute over 6 years, revenues attributable to hyperscalers roughly cover depreciation.
  • Is It a Bubble? — Transformational technologies have historically generated excessive enthusiasm and investment, producing more infrastructure than needed, asset prices that prove too high, and losses for those funding them, while also accelerating adoption. AI enthusiasm is argued to fit this pattern, with debt financing having the potential to magnify the effects.
  • AI Set to be Largest CapEx Cycle Ever … and Soon Majority Externally Financed — Hyperscaler and data-center investment is tracking toward $1.5tn annually by 2030, which in real terms would exceed the 2005-06 housing boom, the 1990s fiber peak, and the 1882 railroad peak combined. External debt and equity are projected to fund close to 90% of the buildout, making it dependent on credit markets.

AI Summary. Net positioning across major currencies shows markets are broadly long the US dollar. The author argues this bullishness is misplaced because the Federal Reserve is less hawkish than markets assume and falling oil prices should pull inflation down, leaving the dollar at peak strength.

Robin Brooks Robin Brooks Substack
Date Posted:

Noting net positions in the dollar are on the historical high side, and discounting evidence from last week’s FOMC meeting that the Fed is potentially amenable to rate hikes in the face of inflation, Brooks argues the dollar is poised for a fall.

Has the dollar reached peak strength?

Core argument: Net positioning across the world's major currencies shows markets long the Dollar across the board, a degree of Dollar bullishness the author describes as among the strongest seen in a long time.

The black line in the chart summarizes net positioning against the Dollar across the world’s major currencies. When that line is negative, as it is now, markets are long the Dollar across the board. Markets are currently as bullish on the Dollar as I’ve seen in a long time. A lot of this optimism is in my view built on sand, because the recent Fed meeting wasn’t nearly as hawkish as everyone seems to think. Oil prices have been tumbling, which is going to pull down inflation in coming months. That’s not an environment where the Fed can or should hike. There’s no sign underlying inflation is running out of control. All this means we’re currently at peak Dollar strength. The Dollar should fall from here.

Takeaways by Macro Roundup® AI

  1. Net positioning across the world's major currencies shows markets long the Dollar across the board, a degree of Dollar bullishness the author describes as among the strongest seen in a long time.
  2. The author argues Dollar optimism is built on sand because the recent Fed meeting was not as hawkish as markets believe, and tumbling oil prices will pull inflation down in coming months.
  3. Citing no sign that underlying inflation is running out of control and no environment in which the Fed can or should hike, the author concludes the Dollar is at peak strength and should fall from here.

Related Articles:

  • Currency Moves Can Drive Rebalancing — Trade responds to exchange-rate changes with a lag of roughly 8 to 12 quarters, and after the dollar fell from its mid-1980s peak the US trade deficit dropped from about 3% to about 1% of GDP while Japan's surplus fell from 4% to 2%. The author argues currency appreciation, not fiscal consolidation, drove that rebalancing.
  • The Dollar has Further to Fall — The author argues the dollar has considerably further to fall, noting Federal Reserve data show its real value nearly two standard deviations above its average since 1973, a level matched only twice before, each followed by depreciations of 25-30%. Financing the $1.1tn US current account deficit requires matching net capital inflows.
  • Global Debt Report 2026 — Gross central government borrowing across OECD countries rose 7% to a record $17tn, about 23% of GDP, and is projected to reach roughly $18tn, or 24% of GDP. The United States and Japan account for close to 80% of the area's refinancing requirements, with the US share rising from 57% to 70%.

AI Summary. The yen weakened past 161.95 per dollar to its lowest level since 1986, putting traders on alert for Japanese intervention to support the currency. The weak yen is lifting exporters' profits and Japanese stocks to record highs while raising import costs for oil and gas and fueling inflation that hurts consumers.

Mia Glass and Carter Johnson Bloomberg
Date Posted:

The yen hit its lowest level against the dollar since 1986, following the Plaza Accord. Bloomberg analyst Brendan Fagan argues, “Absent official action, there’s no reason for the yen to arrest its structural decline.”

How does a weakening yen affect Japanese stocks and consumers?

Core argument: The yen depreciated as much as 0.1% to 161.96 per dollar, its weakest level since 1986, breaching the 161.95 mark touched in July 2024 during an earlier Japanese campaign to support the exchange rate.

The yen slid to its weakest level against the dollar since 1986, a milestone that will generate unease in Japan and put traders on high alert for authorities wading into the market. The currency depreciated as much as 0.1% to 161.96 versus the greenback, breaching the 161.95 mark touched in July 2024 during an earlier campaign by Japan to shore up the exchange rate. The last time the yen traded at this level, it was barreling in the opposite direction, midway through a massive and years-long rally that followed a currency accord engineered by the US. This time, the yen is sliding, and Japan is on its way out of an economic funk that lasted for a generation. The currency weakness is boosting the profits of exporters and, in turn, helping the nation’s stock market to record highs. But import costs are swelling, notably for oil and gas shipments priced in dollars. The ensuing inflation is hurting consumers, who are paying more for everything from food to electricity, and threatening to undermine the popularity of Prime Minister Sanae Takaichi’s government.

Takeaways by Macro Roundup® AI

  1. The yen depreciated as much as 0.1% to 161.96 per dollar, its weakest level since 1986, breaching the 161.95 mark touched in July 2024 during an earlier Japanese campaign to support the exchange rate.
  2. Yen weakness is boosting Japanese exporters' profits and helping the nation's stock market reach record highs, while swelling import costs, notably for oil and gas shipments priced in dollars.
  3. Inflation is raising Japanese consumers' costs for everything from food to electricity and threatens to undermine the popularity of Prime Minister Sanae Takaichi's government.

Related Articles:

  • Can Japan Escape Its Debt Trap? — Japan's real effective exchange rate for the yen has fallen below Turkey's lira, signaling something profoundly wrong. Japan's gross government debt stands at 240% of GDP versus net debt of 130%, and selling some of the government's financial assets to pay down debt would reduce upward pressure on yields and downward pressure on the yen.
  • Global Debt Report 2026 — Gross central government borrowing across OECD countries rose 7% to a record $17tn, about 23% of GDP, and is projected to reach roughly $18tn, or 24% of GDP. The United States and Japan account for close to 80% of the area's refinancing requirements, with the US share rising from 57% to 70%.
  • Japan’s Debt Puzzle: Sovereign Wealth Fund from Borrowed Money — Japan's public sector operates as a highly leveraged sovereign wealth fund, funding risky assets by borrowing from banks and depositors at below-market rates, with returns sustaining its debt-to-GDP ratio above 200% without primary surpluses. The authors argue the resulting duration and currency mismatches expose Japan to mark-to-market losses that could trigger a fiscal crisis or a run on the yen.