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


Friday, July 10, 2026

AI Summary. Modeling U.S. venture-backed startups, the authors estimate that taxing capital gains as they accrue rather than at sale would cut founders' average ownership at exit by about 25% while raising the share of entrepreneurs with positive payoffs from roughly 16% to nearly 47%. Less risk-averse founders prefer taxation at sale.

Eduardo Azevedo, Florian Scheuer, Kent Smetters and Min Yang National Bureau of Economic Research
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~84% of venture backed founders end with zero exit value, while the top 2% capture ~80% of total exit value. Accrual-based taxation would reduce mean founder ownership stakes at exit by ~25%, but with fully refundable tax credits, raise the share of founders with >0 payoffs to ~47%.

How does taxing unrealized capital gains affect startup founders?

Core argument: The authors estimate that average founder shares at exit fall about 25% under accrual-based capital gains taxation relative to realization-based taxation, as advance taxation forces additional share sales before exit.

This paper examines how taxing unrealized capital gains affects entrepreneurship, combining a dynamic career-choice model with new evidence on all U.S. venture capital backed startups. Figure 1a plots a histogram of the positive company exit values. The distribution spans several orders of magnitude and is relatively similar to a lognormal, but with a right skew and fatter right tail. A stylized model highlights a key trade-off: accrual-based capital gains taxes dilute successful founders by forcing additional share sales before exit, a well known concern, yet they also provide insurance through tax credits to founders whose ventures fail, an aspect often overlooked. Quantitatively, advance taxation substantially reduces founders' ownership at exit: average founder shares fall about 25% under accrual-based taxation relative to realization based taxation. At the same time, accrual taxation increases the fraction of entrepreneurs with positive payoffs from around 16% to nearly 47%. Embedding these outcomes in a career-choice framework shows that the insurance value of accrual taxation partly offsets dilution costs: less risk-averse founders favor realization-based taxes, while more risk averse ones prefer accrual-based taxes. The strength of this insurance channel depends on the highly skewed distribution of entrepreneurial payoffs and the design of loss provisions under accrual-based taxation.

Takeaways by Macro Roundup® AI

  1. The authors estimate that average founder shares at exit fall about 25% under accrual-based capital gains taxation relative to realization-based taxation, as advance taxation forces additional share sales before exit.
  2. Accrual-based taxation raises the fraction of entrepreneurs with positive payoffs from around 16% to nearly 47%, providing insurance through tax credits to founders whose ventures fail.
  3. In the authors' career-choice framework, less risk-averse founders favor realization-based taxes while more risk-averse founders prefer accrual-based taxes, with the insurance channel's strength depending on the skewed payoff distribution and loss-provision design.

Related Articles:

  • Killer Incentives: Status Competition and Pilot Performance during World War II — Analysis of over 5,000 German World War II fighter pilots finds that public peer recognition was associated with higher victory scores among skilled pilots without higher mortality, while average pilots gained little in victories but died at higher rates. The authors conclude status-based awards can have uneven effects in high-risk settings.
  • 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.
  • Never Enough: Dynamic Status Incentives in Organizations — Data on over 5,000 German fighter pilots show performance rose markedly as pilots approached the eligibility threshold for each medal in a tiered awards ladder and slumped immediately after receiving it, with the effect repeating at each successive rung. The authors estimate the ladder added 3,000–5,000 aerial victories, 5–10% of the total.

AI Summary. The cyclically adjusted price-earnings ratio, which compares stock prices to a ten-year average of earnings, stands at a high level because rapid earnings growth at companies exposed to the artificial intelligence boom has lifted prices faster than the slow-moving earnings average. The measure was designed to smooth volatile earnings distorted by temporary booms and busts.

Jesper Rangvid Rangvid's Blog
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Rapid earnings growth has left Shiller’s CAPE at its second highest level ever – above its 1929 level. CAPE’s all-time high was in spring 2000, after which US equities lost ~ half their value.

Does rapid earnings growth make the cyclically adjusted P/E look expensive?

Core argument: A common critique of CAPE is that it can send misleading signals when earnings grow rapidly and stock prices rise alongside them, because the ten-year earnings average increases only gradually and pushes CAPE up.

When it comes to valuing the stock market, one critique of CAPE is that it can send misleading signals during periods when earnings are growing rapidly and stock prices are rising alongside them. The reason is that the ten-year average of earnings increases only gradually because rapidly rising current earnings are averaged together with older earnings that may have grown much more slowly. This causes CAPE to rise. This is essentially the situation today. Companies exposed to the AI boom have experienced extraordinary earnings growth, and their stock prices have followed suit. But the ten-year average of earnings has not increased nearly as quickly, leaving CAPE at a high level. It is important to note that Shiller was fully aware of this discrepancy between a slowly moving average and rapidly rising current earnings. In fact, he designed CAPE with exactly this in mind. His argument was that earnings are highly volatile, so a smoothed measure of earnings provides a better estimate of the ‘fair’ value of stocks than current earnings, which can be distorted by temporary booms and busts.

Takeaways by Macro Roundup® AI

  1. A common critique of CAPE is that it can send misleading signals when earnings grow rapidly and stock prices rise alongside them, because the ten-year earnings average increases only gradually and pushes CAPE up.
  2. Companies exposed to the AI boom have experienced extraordinary earnings growth and rising stock prices, while the ten-year average of earnings has not increased nearly as quickly, leaving CAPE high.
  3. Shiller designed CAPE aware that a slowly moving earnings average would diverge from rapidly rising current earnings, arguing that smoothed earnings better estimate stocks' fair value than current earnings distorted by temporary booms and busts.

Related Articles:

  • Competitive Advantage Period: The Neglected Value Driver — Data indicate persistence in returns on invested capital has increased since 2000, with large companies the main beneficiaries; the information technology sector's aggregate return was 19% versus a 10.8% median from 1970 to 2024. Of about 13,800 U.S. public firms listing from 1976 to 2019, 18% survived.
  • A Slower AI Payoff Would Be Everyone’s Problem — If artificial intelligence profits arrive later than expected, committed capital spending and depreciation would still hit on schedule, squeezing margins, stretching balance sheets toward more debt and possible ratings downgrades, and repricing equities. Because a handful of large technology firms dominate the indices, the author argues the damage would spread to chips, power, data centers and the broader market.
  • 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. 33% of U.S. adults live in households with at least two generations of adults, and 49% of adults under 30 live with a parent — up 6 percentage points since 2022 and 12 points since 2019. Overall 13% of adults live alone, rising to 20% among those 60 and older.

Alicia Lloro, Ellen Merry, Anna Tranfaglia, Mike Zabek, et al. Federal Reserve Board
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Federal Reserve survey data finds that in 2025, 49% of American adults under the age of 30 lived with a parent, up 12pp from 37% in 2019 prior to the pandemic.

Are more young adults living with their parents?

Core argument: Among U.S. adults under age 30, 49% lived with a parent in 2025, up 6 percentage points since 2022 and 12 percentage points since 2019, just before the pandemic.

Most frequently, people lived with a spouse, partner, or children under age 18. Yet, 33% of adults lived in households with at least two generations of adults. Specifically, 19% of adults lived with their adult children (age 18 or older), and 15% lived with a parent. Two percent of adults simultaneously lived with a parent and an adult child. The share of young adults who live with their parents has increased in recent years. In 2025, 49% of adults under age 30 lived with a parent. This share was up by 6 percentage points since 2022, and up 12 percentage points since 2019, just before the pandemic. Conversely, adults aged 60 and older were more likely to live alone than were younger adults. Overall, 13% of people lived alone in 2025. Among those ages 60 and older, a higher 20% were living alone.

Takeaways by Macro Roundup® AI

  1. Among U.S. adults under age 30, 49% lived with a parent in 2025, up 6 percentage points since 2022 and 12 percentage points since 2019, just before the pandemic.
  2. In 2025, 33% of U.S. adults lived in households with at least two generations of adults, with 19% living with adult children age 18 or older, 15% with a parent, and 2% with both.
  3. In 2025, 13% of people in the U.S. lived alone, with the share reaching 20% among those ages 60 and older.

Related Articles:

  • Changes in Milestones of Adulthood — Among US young adults aged 25–34, the share completing a high school or college degree rose 9 percentage points to 83%, while the share ever married fell 18 points to 44% and the share living with a child fell 16 points to 39%. Economic milestones became more common as family formation milestones became less common.
  • The Happiness Crash of 2020 — Survey data show that after 2020 self-reported happiness fell across groups, compressing pre-existing differences — the black-white gap narrowed from 14 points to 6 — while the marital happiness premium of more than 30 points survived intact. Confidence in major public and private institutions declined nearly across the board, with double-digit drops common and losses spanning all parties and ideologies.
  • Rising Young Worker Despair in the United States — In the United States, mental despair once peaked in middle age but now declines steadily with age, a shift the authors attribute to rising despair among workers under 40. The hump-shaped age pattern persists among those unemployed or unable to work, while it remains flat for homemakers, students, and retirees.

AI Summary. Mentions of billionaires in Democratic fundraising emails quadrupled to a peak above 20% of all emails sent and have held near 15%, making anti-billionaire messaging a mainstay. Anti-AI populism remains far smaller and is entering Democratic rhetoric not as a jobs or safety issue but as something billionaires are building.

Andy Hall Free Systems
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An analysis of Democratic party fundraising emails finds mentions of billionaires spiked in 2025 and remained elevated. Hall argues, “AI is currently entering Democratic rhetoric through the anti-billionaire frame—the oligarchy story makes AI legible as a villain.”

How is artificial intelligence entering Democratic fundraising rhetoric?

Core argument: Billionaire mentions in Democratic fundraising emails quadrupled in the weeks after the January 2025 inauguration, peaking above 20% of all emails sent and holding near 15% since.

For most of the past decade, anti-billionaire language was a niche product. Then came January 2025. In the weeks after an inauguration billionaire mentions in Democratic emails quadrupled, peaking above 20% of all emails sent and holding around 15% ever since. Anti-billionaire fundraising tactics are now a mainstay of Democratic messaging. Economic populism is widespread, particularly in the form of billionaire bashing; anti-AI populism is much, much smaller, but just starting to show signs of growth. And the way it’s growing matters. AI is not currently entering Democratic rhetoric as a jobs issue or a safety issue—it’s entering as the newest thing the billionaires are building, pushed first by the same progressive members who pioneered billionaire bashing before it conquered the rest of the party. Today, AI sits in Democratic fundraising rhetoric almost exactly where the billionaire sat in 2019—a message popular mostly with the party’s left flank, and not commonplace in the party as a whole.

Takeaways by Macro Roundup® AI

  1. Billionaire mentions in Democratic fundraising emails quadrupled in the weeks after the January 2025 inauguration, peaking above 20% of all emails sent and holding near 15% since.
  2. Anti-AI populism in Democratic messaging remains far smaller than billionaire bashing, entering party rhetoric not as a jobs or safety issue but as the newest thing billionaires are building.
  3. AI messaging is pushed first by the same progressive members who pioneered billionaire bashing, and sits roughly where anti-billionaire rhetoric sat in 2019: popular with the party's left flank, not commonplace across the party.

Related Articles:

  • The Record Divide Between Corporate Profits and Worker Pay — Labor's share of gross domestic income fell to 51%, the lowest since records began in 1947, while profits' share rose to 12.1%, the highest since 1950. Inflation-adjusted hourly wages are up 3% since the end of 2019, compared with a 50% rise in profits.
  • This Doommaxxing Has Got to Stop — The author argues that negative narratives, including pessimism about new technology, played an underappreciated role in the economic climate of the Great Depression, alongside more widely studied causes such as sweeping bank failures, a weak initial Federal Reserve response, and a tariff regime that reduced global trade.
  • America’s Support for Capitalism Has Declined Over Last Decade — Just under half of Americans say capitalism is working very or somewhat well, down from 60% about a decade ago, according to a Wall Street Journal-NORC survey. Only 12% say democracy is working very or extremely well, and 16% say average citizens have considerable influence on politics.

AI Summary. About 10,000 new firms have entered the US defense market in two years, and nontraditional companies received over $120bn in contract obligations in fiscal 2025, while munitions contract obligations have risen 330% since fiscal 2010. The Defense Department is signing large-scale multiyear munitions agreements and backing a rare earth supply chain outside Chinese control.

Jerry McGinn and A.J. Dilts Center for Strategic and International Studies
Date Posted:

The Pentagon is expanding the defense industrial base. The share of spending going to new entrants has risen; these firms were awarded ~$120B in contracts last year. CSIS argues the US “has made meaningful progress” toward wartime readiness.

Is the US defense industrial base scaling up for wartime production?

Core argument: Munitions contract obligations have risen 330% since FY 2010, and the Pentagon is signing multiyear agreements with munitions producers and suppliers on a historic scale in response to increased demand and depleted inventories.

Roughly 10,000 new firms have entered the market in the past two years and nontraditional companies received over $120 billion in contract obligations in FY 2025, adding competition and innovation to the sector. Munitions contract obligations have risen 330% since FY 2010. Spurred by this increased demand and depleted inventories, the Pentagon is signing multiyear agreements with munitions producers and suppliers on a historic scale. In addition to developing magazine depth, the DOD is prioritizing magazine breadth, placing an increased emphasis on equipping the Joint Force with a “high-low mix” of both exquisite and affordable missiles and interceptors. Stockpiles require resilient supplies of subcomponents, and new firms and forms of government-industry collaboration are reshaping the solid rocket motor (SRM) sub-sector. At the bedrock of defense supply chains, unprecedented commitments of public and private capital are focused on establishing a secure mine-to-magnet rare earth supply chain outside Chinese control.

Takeaways by Macro Roundup® AI

  1. Munitions contract obligations have risen 330% since FY 2010, and the Pentagon is signing multiyear agreements with munitions producers and suppliers on a historic scale in response to increased demand and depleted inventories.
  2. Roughly 10,000 new firms entered the market over the past two years, and nontraditional companies received over $120 billion in contract obligations in FY 2025, adding competition and innovation to the sector.
  3. Alongside magazine depth, the Defense Department is prioritizing magazine breadth through a "high-low mix" of exquisite and affordable missiles and interceptors, while commitments of public and private capital target a mine-to-magnet rare earth supply chain outside Chinese control.

Related Articles:

  • America’s Fight Back Against China Starts In Los Angeles—In Flip-Flops — El Segundo, California has developed a self-reinforcing entrepreneurial cluster of defense and hardware startups founded by former employees of SpaceX, Palantir and Anduril who cashed in stock options to launch their own firms. One of them, drone maker Neros, says it has America's highest drone production rate and has worked to remove Chinese technology, including circuit boards, from its products.
  • Air Force Buys New Generation of Drones Made to Strike Deep Into Enemy Territory — The U.S. Air Force has agreed to deals with Anduril and General Atomics for autonomous drone jet fighters designed to help manned warplanes strike targets deep in enemy territory. The larger General Atomics FQ-42 carries missiles internally, while Anduril's FQ-44 carries munitions externally on its wings; costs are classified.
  • The U.S. Wants to Break China’s Drone Dominance. Here’s Where It Will Struggle — Fielding a drone fleet able to compete with China requires the U.S. to break China's monopoly on batteries and motors and to cut the cost of other components, where weak domestic demand is a key obstacle. Chinese producers hold 80% of the U.S. commercial drone market, and experts warn building mass-production infrastructure could take a decade or more.

Monday, July 13, 2026

AI Summary. The Congressional Budget Office estimates that a permanent 0.5 percentage point increase in annual productivity growth would lower publicly held federal debt after 30 years by 39% of GDP, offsetting roughly half the projected rise from 101% of GDP to 175%. Higher revenue and slower spending growth outweigh higher interest costs.

Karen Dynan, Douglas Elmendorf and Louise Sheiner National Bureau of Economic Research
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CBO baseline projects debt-to-GDP rising from 101% in 2026 to 175% in 2056. Dynan et al. study how AI might modify that projection. In all but their most optimistic scenario, TFP grows 0.5pp faster, and AI offsets 39–49 pp of that 74pp increase.

How much would faster productivity growth reduce federal debt?

Core argument: A permanent 0.5 pp increase in annual total factor productivity growth would lower publicly held federal debt after 30 years by 39% of GDP relative to CBO's extended baseline, offsetting roughly half of the projected rise.

[In the Base Case], faster economic growth [improves the federal budget and debt outlook] through four channels. First, [higher] incomes increase federal revenue, [while] the progressive tax system [modestly] raises revenue relative to GDP. CBO [estimates] that a [permanent] 0.5 pp increase in annual TFP growth would raise revenue after [30 years] by 0.14% of GDP. Second, [although] faster growth increases [some] federal spending, spending rises [more slowly] than GDP, [reducing noninterest outlays] relative to GDP. Under our [assumptions], discretionary spending falls from 6.1% of GDP in 2025 to 4.5% in 2056. Third, because faster growth does not [change the stock of] existing debt, that debt becomes smaller relative to GDP. Fourth, [stronger] growth generally raises interest rates, increasing the [cost] of new borrowing and [refinancing] existing debt. This represents a partial offset to the [fiscal gains]. [On balance], additional annual TFP growth of 0.5 pp would lower publicly held federal debt after [30 years] by 39% of GDP relative to CBO’s extended baseline. CBO’s extended baseline shows federal debt rising from 101% of GDP in 2026 to 175% in three decades, so this hypothesized increase in growth would offset roughly half of that projected rise.

Takeaways by Macro Roundup® AI

  1. A permanent 0.5 pp increase in annual total factor productivity growth would lower publicly held federal debt after 30 years by 39% of GDP relative to CBO's extended baseline, offsetting roughly half of the projected rise.
  2. CBO's extended baseline shows federal debt rising from 101% of GDP in 2026 to 175% three decades later, and CBO estimates a permanent 0.5 pp increase in TFP growth would raise revenue after 30 years by 0.14% of GDP.

Related Articles:

  • Can AI Avert the Impending Federal Budget Crisis? — U.S. GDP per capita, about $87,000, is projected to reach $102,000 by 2035 with 1.8% annual productivity growth, or $110,000 with 2.7% growth. Because the healthcare sector has been slow to adopt AI, health spending is projected to rise from 18.3% of GDP to 21% under slower growth and 21.7% under faster growth.
  • U.S. Treasury Investors Are Long in AI — The authors find U.S. government debt has a large positive productivity beta, because the tax code makes federal revenue highly sensitive to productivity growth while spending commitments change little, leaving bondholders implicitly long productivity growth. They argue greater market confidence in sustained productivity gains from AI could substantially reprice government debt, lowering nominal yields.
  • The Budget and Economic Outlook: 2026 to 2036 — The Congressional Budget Office projects the federal deficit will grow from $1.9tn (5.8% of GDP) to $3.1tn (6.7%) over a decade, above the 3.8% averaged over the past 50 years, with rising net interest costs driving much of the increase. Federal debt held by the public is projected to rise from 101% to 120% of GDP.

AI Summary. Net foreign inflows into US equities have reached a record high, driven in large part by overseas investors seeking artificial intelligence exposure unavailable in their home markets. Because most foreign equity investors leave currency risk unhedged, a pullback in these inflows if AI disappoints poses a significant downside risk to the US dollar.

Torsten Sløk Apollo
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Net foreign inflows into US equities are at a record high as investors seek AI exposure. Sløk notes that most foreign equity investors do not hedge FX risk, which implies downside risk to the dollar if net inflows slow.

Does the dollar depend on foreign inflows chasing AI stocks?

Core argument: Net foreign inflows into US equities have surged to a record high, driven in large part by overseas investors seeking AI exposure unavailable in their home markets.

Net foreign inflows into US equities have surged to a record high, driven in large part by overseas investors seeking AI exposure they cannot get in their home markets. With most foreign equity investors not hedging their FX risk, the bottom line is that if AI disappoints, the resulting pullback in these inflows would be a significant downside risk to the US dollar.

Takeaways by Macro Roundup® AI

  1. Net foreign inflows into US equities have surged to a record high, driven in large part by overseas investors seeking AI exposure unavailable in their home markets.
  2. Most foreign equity investors do not hedge their FX risk, leaving the US dollar exposed to shifts in these inflows.
  3. If AI disappoints, the resulting pullback in foreign equity inflows would pose a significant downside risk to the US dollar.

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.
  • Peak Dollar Strength — 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.
  • A Slower AI Payoff Would Be Everyone’s Problem — If artificial intelligence profits arrive later than expected, committed capital spending and depreciation would still hit on schedule, squeezing margins, stretching balance sheets toward more debt and possible ratings downgrades, and repricing equities. Because a handful of large technology firms dominate the indices, the author argues the damage would spread to chips, power, data centers and the broader market.

AI Summary. Short-maturity US Treasury yields rose to multi-year highs as tensions with Iran pushed oil prices up, fueling speculation that the Federal Reserve will need to raise interest rates to combat inflation. The two-year yield climbed as much as four basis points to 4.25%, the five-year to 4.35%, and the 10-year to 4.60%.

Greg Ritchie, Matthew Burgess, and Masaki Kondo Bloomberg
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US two-year yields hit 4.25%, their highest level since the start of 2025, and the five-year rate hit 4.35%. The benchmark 10-year yield added 3bps rising to 4.60%.

Are rising oil prices pushing Treasury yields to multi-year highs?

Core argument: The US two-year Treasury yield rose as much as four basis points to 4.25%, its highest since February 2025, as renewed tensions with Iran pushed oil prices higher.

Short-maturity US Treasury yields climbed to their highest levels since early 2025 as renewed tensions with Iran pushed up oil prices, fanning speculation that the Federal Reserve will need to raise interest rates to combat inflation. The rate-sensitive two-year yield rose as much as four basis points to 4.25%, the highest since February 2025, while the five-year rate hit a similar peak of 4.35%. The benchmark 10-year yield added three basis points to 4.60%, the highest since May.

Takeaways by Macro Roundup® AI

  1. The US two-year Treasury yield rose as much as four basis points to 4.25%, its highest since February 2025, as renewed tensions with Iran pushed oil prices higher.
  2. The five-year Treasury rate reached a similar peak of 4.35%, while the benchmark 10-year yield added three basis points to 4.60%, its highest since May.
  3. Higher oil prices fanned speculation that the Federal Reserve will need to raise interest rates to combat inflation, lifting short-maturity Treasury yields.

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%.
  • Japan’s Borrowing Costs Soar to 30-Year High On Debt Fears — Japan's 10-year government bond yield reached 2.87%, its highest since 1996, in a sell-off investors attribute to a $2.3tn, 14-year government spending plan and concern the Bank of Japan will let inflation exceed its 2% target. The premium for borrowing 10 years rather than two widened to 1.4 points.
  • The Dangerous Brew That’s Rattling Bond Markets — U.S. inflation has remained above the Federal Reserve's 2% target since 2022 while government borrowing runs high and companies borrow heavily to fund AI build-out. Even so, the 30-year Treasury yield reached a 19-year high of 5.18% while the 10-year yield, at 4.67%, sat below its October 2023 level.

AI Summary. US wealth at the top follows a power law, with the richest 25 Americans holding 70% of the wealth of the top 100, and the top 100 holding 70% of the top 400's. The author argues the degree of skew depends on taxation, noting effective corporate tax rates fell from near 40% to about 12%.

Paul Krugman Krugman Wonks Out
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Krugman argues that concentrated business ownership leads wealth to follow a power law that is “highly skewed to the very top,” and that the steady reduction in corporate taxation since 1960 has sharply increased that skewness.

Does the tax system shape how concentrated top wealth becomes?

Core argument: The effective U.S. corporate tax rate has fallen from close to 40% in the 1950s to around 12%, reflecting both lower rates and expanded loopholes.

People who have much of their wealth invested in a particular business may experience large gains if that business (or the industry in which that business operates — e.g., the technology industry) does well, large losses if the business does badly. This approach can explain why the distribution of wealth, even among the very wealthy, is well described by a power law that is highly skewed toward the top. Thus the combined wealth of the 25 richest people in America is 70% of the combined wealth of the top 100, and the wealth of the top 100 is in turn 70% of the combined wealth of the top 400. But what determines the level of skewness toward the top? One major factor is surely the extent to which those who are already wealthy are able to keep the returns from their wealth and use those returns to accumulate even more wealth. And that factor, in turn, depends a lot on the tax system. In particular, the U.S. used to have high rates of taxation on corporate profits. Much of this taxation fell on the wealthy, and this reduced their ability to accumulate even more wealth. But as a result of both lower rates and of expanded loopholes, the effective corporate tax rate has fallen from close to 40% in the 1950s to around 12% (see gallery].

Takeaways by Macro Roundup® AI

  1. The effective U.S. corporate tax rate has fallen from close to 40% in the 1950s to around 12%, reflecting both lower rates and expanded loopholes.
  2. The combined wealth of America's 25 richest people equals 70% of the top 100's wealth, which in turn equals 70% of the top 400's, a pattern described by a highly skewed power law.
  3. Concentrated wealth held in a single business or industry, such as technology, can bring large gains or losses, an approach that helps explain why wealth follows a power law skewed toward the top.

Related Articles:

  • Comment On “How Much Tax Do Billionaires Pay?” — After adjusting existing estimates for families filing on multiple tax returns, double-counted capital income, missing taxes, and standard income definitions, the author finds the top 400 effective tax rate exceeds the overall rate by 13 percentage points, though it remains below the rate paid by the top 0.01% ranked by income.
  • How Much Tax Do US Billionaires Pay? Evidence from Administrative Data — Using administrative tax data, the authors estimate the 400 wealthiest Americans paid a total effective tax rate of 23.8% of economic income, down from about 30% earlier in the decade and below the average rate for the full US population. The decline followed a drop in corporate taxes paid.
  • End of an Era: The Coming Long-Run Slowdown in Corporate Profit Growth and Stock Returns — The authors estimate that declining interest and corporate tax rates accounted for over 40% of real corporate profit growth from 1989 to 2019, while falling risk-free rates explain the entire expansion in price-to-earnings multiples. Real earnings before interest and taxes grew slightly more slowly than in 1962–1989, at 2.2% versus 2.4% per year.

AI Summary. China, Russia, and the US are investing more than $200bn in military space capabilities, placing hundreds of satellites in orbit over the past five years, while Europe lags due to misaligned interests, limited national budgets, and too few heavy launchers. Europe's Ariane 6 carries about 22,000 kg but is limited to roughly 10 launches a year.

Gerry Doyle and Alan Crawford Bloomberg
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Europe has very limited launch capacity relative to other great powers, limiting its ability to reconstruct satellite constellations, which are expected to be destroyed quickly in the opening hours of a general war.

Is Europe falling behind in the military space race?

Core argument: China, Russia, and the US are investing more than $200 billion in military space efforts, placing hundreds of satellites in orbit over the last half-decade and testing weapons on Earth and in space.

Satellites for observation, communications, and precise geolocation have been military necessities for years, and new weapons such as orbital interceptors and inspection systems are heading in that direction. China, Russia, and the US are pouring more than $200 billion into such efforts, putting hundreds of satellites in orbit over the last half-decade and testing weapons on Earth and in space. Missing from this intensifying race is Europe, hobbled by misaligned interests, limited national budgets, and the lack of a crucial piece of space technology: enough heavy launchers to make scores of trips to orbit each year. China’s Long March 5 and Russia’s Proton-M and Angara A5 launchers can each take about 25,000 kilograms (55,116 pounds) to orbit. The SpaceX Falcon Heavy can carry almost 64,000 kg. Ariane 6, operated by the France-based commercial launch provider Arianespace SA, can carry about 22,000 kg — but booster production and infrastructure limit it to about 10 launches per year.

Takeaways by Macro Roundup® AI

  1. China, Russia, and the US are investing more than $200 billion in military space efforts, placing hundreds of satellites in orbit over the last half-decade and testing weapons on Earth and in space.
  2. Europe's Ariane 6 can lift about 22,000 kg to orbit, versus about 25,000 kg for China's Long March 5 and Russia's Proton-M and Angara A5, and almost 64,000 kg for SpaceX's Falcon Heavy.
  3. Booster production and infrastructure limit Ariane 6, operated by Arianespace SA, to about 10 launches per year, short of the scores of trips to orbit each year Europe would need.

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