Edward Conard

Top Ten New York Times Bestselling Author

  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…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
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…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
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Tuesday, July 14, 2026

AI Summary. The surge of baby boomers, women, and immigrants entering the US labor force between 1960 and 1980 was difficult for the economy to absorb, and young workers' wages fell sharply after peaking in the early 1970s. The author argues those entrants kept occupying jobs and suppressing demand for new workers until retirement.

Steven Ruggles Proceedings of the National Academy of Sciences
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Accounting for both inflows and the overhang of previous labor market entrants, Ruggles predicts a labor shortage such that “Americans born in the 2020s might be the first cohort in a half century that earns significantly more than their parents did.”

How does a large influx of workers affect young workers' wages?

Core argument: Wages for young U.S. workers declined sharply after peaking in 1973, as the economy struggled to absorb the influx of workers entering the labor force between 1960 and 1980 from the baby-boom cohort, rising female participation, and increased immigration.

Figure 3A highlights the influx of workers that occurred between 1960 and 1980, as the large baby-boom cohort entered the labor force, female labor-force participation expanded, and immigration rose [see Figure 2 for a detailed breakdown]. It was difficult for the economy to absorb all the new workers, and wages for young people declined sharply after peaking in 1973. Figure 3A does not, however, provide a valid measure of labor-market competition because the baby boomers and newly employed women and immigrants did not suddenly vanish after they entered the labor force; they kept working and occupying jobs until they eventually retired decades later. The glut of workers entering the labor force in the 1970s would continue to stifle demand for new workers until their eventual exit from the labor force, a process that is still in progress. The index of employment competition shown in Figure 3B is [a better] measure of relative cohort size than 3A. It represents the cumulative net labor-market entries over the previous five decades as a % of the working-age population in the current decade. As shown in Figure 1C, we are already seeing signs of an uptick in the wages of young workers, and as the demographic shortage accelerates we may finally see real wages of the young exceed the levels of the early 1970s.

Takeaways by Macro Roundup® AI

  1. Wages for young U.S. workers declined sharply after peaking in 1973, as the economy struggled to absorb the influx of workers entering the labor force between 1960 and 1980 from the baby-boom cohort, rising female participation, and increased immigration.
  2. Decennial labor-force entries alone misstate labor-market competition, because baby boomers, newly employed women, and immigrants kept occupying jobs and stifling demand for new workers until their retirements, a process still in progress.
  3. An index of employment competition measuring cumulative net labor-market entries over the previous five decades as a percentage of the current decade's working-age population is offered as a better gauge of relative cohort size, with young workers' wages already showing an uptick.

Related Articles:

  • Baby Busts and Growth Booms: Demographic Change and the Macroeconomy — A 1pp lower birth rate 20 years earlier is associated with 22 log points higher output per worker 20 years later and 29 log points higher after 40 years, about 0.73pp faster annual growth. The authors find lower birth rates are also associated with more labor-saving patents, larger high-tech shares, and higher productivity growth.
  • Technology and the Baby Bust Paradox — Aging populations create structural incentives to automate, and the argument is that demographic change could become one of the strongest long-run drivers of artificial intelligence deployment. Technology-producing economies may benefit twice, offsetting their own labor shortages while exporting automation, robotics, and AI to other aging societies.
  • Can A Depopulating America Still Flourish? — US labor force participation among women aged 25-54 has reached all-time highs, exceeding its previous 1999 peak, yet remains over 4 points below Europe's level and nearly 6 points below Japan's. About 3.5m prime-age American women are neither working nor looking for work, without children at home or husbands, compared with roughly 7m such men.

AI Summary. The US consumer price index fell 0.4% from the prior month, driven by a decline in gasoline prices, while the measure excluding food and energy was flat, according to Bureau of Labor Statistics data. Annual gauges remained elevated, with headline prices up 3.5% and the core measure up 2.6%.

Mark Niquette Bloomberg
Date Posted:

US headline CPI declined in June for the first time in six years, falling 0.4% from May, led by the decline in gasoline prices; core was ~ unchanged. Headline and core CPI are up 3.5% and 2.6% y/y respectively. Real wages rose after 2 months of decline.

Did a monthly drop in consumer prices leave annual inflation elevated?

Core argument: The US consumer price index fell 0.4% from May, its first decline since 2020, dragged down by the biggest drop in gasoline prices since 2022, according to Bureau of Labor Statistics data.

The consumer price index fell 0.4% from May, dragged down by the biggest decline in gasoline prices since 2022, according to Bureau of Labor Statistics data. Excluding food and energy, the index was flat from the prior month. While the monthly inflation figures were tame, annual gauges continued to point to elevated inflation: The headline index was up 3.5% from a year earlier and the core measure was 2.6% higher. A separate report Tuesday combined the inflation figures with recent wage data. Thanks to the drop in gasoline prices, Americans saw real average hourly earnings rise 0.1% from a year earlier after declines in the prior two months.

Takeaways by Macro Roundup® AI

  1. The US consumer price index fell 0.4% from May, its first decline since 2020, dragged down by the biggest drop in gasoline prices since 2022, according to Bureau of Labor Statistics data.
  2. Core CPI, excluding food and energy, was flat from the prior month, while annual gauges remained elevated, with headline CPI up 3.5% and the core measure up 2.6% from a year earlier.
  3. Real average hourly earnings for Americans rose 0.1% from a year earlier, aided by the drop in gasoline prices, after declines in the prior two months.

Related Articles:

  • Inflation and Debt — Congressional Budget Office long-term projections show sustained primary deficits of 2% of GDP driving the debt-to-GDP ratio steadily higher, a path the agency itself labels unsustainable. Closing a 2% of GDP fiscal gap is economically straightforward for a growing country at peace, but inflation or default would not resolve the problem, since prospective deficits still require continued borrowing.
  • Fiscal Narratives for US Inflation — Fiscal theory attributes the deflation of the deep recession to a fall in real interest rates that lowered real interest costs on government debt, an effect that outweighed large deficits. The predicted deflation spiral and the hyperinflation forecast from quantitative easing both failed to materialize.
  • Do Voters Punish Inflation or Pay Cuts? Inflation and Real Wages in U.S. Elections — An analysis of U.S. counties estimates that where wages grew faster than prices, voters supported the incumbent party more, while counties with larger real wage losses than average shifted more toward the opposition. A one-standard-deviation larger real wage loss is associated with shifts of roughly 0.10 and 0.19 percentage points in vote share and margin.

AI Summary. China's trade surplus with the European Union reached a record, rising 27% year-on-year to $32.9bn in a single month, with its surplus with Germany more than doubling while falling 81% with France. Over the first half of the year, Chinese exports to the bloc rose 17% to $312.3bn while imports rose 9% to $135.6bn.

Bloomberg Staff Bloomberg
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China’s trade surplus with the European Union increased 27% y/y to $32.9B in June. China’s surplus with Germany more than doubled.

Is China's trade surplus with the European Union reaching record levels?

Core argument: China's trade surplus with the EU rose 27% from a year earlier to $32.9 billion in June, with exports to the bloc reaching a record, according to Chinese customs data.

China’s trade surplus with the European Union climbed to a fresh high, keeping the issue of growing imbalances high on the agenda as the bloc weighs new measures to shield local industries. With exports to the EU soaring to a record, China’s surplus with the bloc rose 27% from a year earlier to $32.9 billion in June, according to Chinese customs data released on Tuesday. The country’s surplus with Germany more than doubled year-on-year while plunging 81% with France. For the first half of the year, China imported $135.6 billion of goods from the EU, up 9% from a year earlier. Meanwhile its exports amounted to $312.3 billion during the period, a gain of 17%.

Takeaways by Macro Roundup® AI

  1. China's trade surplus with the EU rose 27% from a year earlier to $32.9 billion in June, with exports to the bloc reaching a record, according to Chinese customs data.
  2. China exported $312.3 billion of goods to the EU in the first half of the year, up 17%, while importing $135.6 billion from the bloc, up 9%.
  3. China's surplus with Germany more than doubled from a year earlier while its surplus with France fell 81%, as the EU weighs new measures to shield local industries.

Related Articles:

  • The Real Problem With Global Trade — Asia's $1.5tn trade surplus is larger as a share of world output than at any point since 1945 and is the only large surplus in the global economy. Exchange rates have a meaningful impact on trade balances: China's surplus reached about 10% of its output amid renminbi depreciation, then fell below 2% after a 40% real appreciation.
  • 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.
  • China Shock 2.0 The Cost Of Germany’s Complacency — An analysis published by Bloomberg attributes roughly 40% of Germany's shortfall in economic output to lost export markets, another 40% to higher energy prices, and the remaining 20% to weak domestic demand, bureaucracy and other factors. The author argues German politics overemphasizes bureaucracy while China's pressure on the country's industrial base erodes export demand.

AI Summary. Dubai-based port operator DP World is in talks to build a new multipurpose port and a container terminal on the United Arab Emirates' east coast at Fujairah, which would bypass the Strait of Hormuz and reduce reliance on its Jebel Ali hub. The project's structure and financing have yet to be finalized.

Nicolas Parasie, Andrew England and Alice Hancock Financial Times
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DP World is planning on building a new port on the UAE’s east coast, bypassing the Strait of Hormuz, within 18 months.

Can a new east coast port bypass the Strait of Hormuz?

Core argument: DP World is planning a new multipurpose port and a container terminal at Fujairah on the United Arab Emirates' east coast that would bypass the Strait of Hormuz and reduce Dubai's dependence on its flagship Jebel Ali hub.

DP World is planning to build a new port and a container terminal on the United Arab Emirates’ east coast that would reduce Dubai’s dependence on its flagship Jebel Ali hub and bypass the Strait of Hormuz. The Dubai-based port operator is in talks to develop a brand new multipurpose port in the coastal area of Fujairah and a new terminal at the existing harbour in the same emirate, people familiar with the matter said. DP World was now discussing a term sheet with government officials, with the new project’s structure and financing yet to be finalised, the people said. The new port could be completed as soon as within a year and a half, a senior company official said.

Takeaways by Macro Roundup® AI

  1. DP World is planning a new multipurpose port and a container terminal at Fujairah on the United Arab Emirates' east coast that would bypass the Strait of Hormuz and reduce Dubai's dependence on its flagship Jebel Ali hub.
  2. A senior DP World official said the new Fujairah port could be completed as soon as within a year and a half.
  3. DP World is discussing a term sheet with government officials, with the project's structure and financing yet to be finalised, according to people familiar with the matter.

Related Articles:

  • Disappearing Gulf Capital: The Iran War Risk Wall Street Isn’t Watching — Saudi Arabia has withdrawn large financial commitments including a $200m gift to New York's Metropolitan Opera and support for the LIV golf league, and no equally large sovereign capital pool—Japan, Norway, or Singapore—is positioned to replace Gulf funds. A pullback could push US artificial intelligence firms toward greater reliance on debt issuance.
  • You Can’t Print Molecules — Rebuilding after a disruption to a key shipping strait would require governments to finance defense, strategic reserves, domestic energy production, and infrastructure at the same time that inflation expectations are raising funding costs. The author argues capital will rotate out of asset-light sectors that thrived on open sea lanes and cheap energy into asset-heavy physical ones.
  • U.S. Economy Less Vulnerable To Geopolitical Oil Price Shocks Than In The Past — The United States became a net oil exporter in late 2019, and oil and oil product spending fell from near 8% of GDP in 1980 to 3% in 2024. The authors estimate a 15% global oil supply disruption would now cut annualized U.S. real GDP growth by 0.3pp, versus 1.7pp in the rest of the world.

AI Summary. The US has deployed Saronic Corsairs, 24-foot uncrewed speedboats built in Texas that travel more than 1,000 miles, carry payloads up to 1,000 pounds, and cost less than $1m each. Their maker, Saronic, raised $1.75bn at a $9.25bn valuation from investors including 8VC, Caffeinated Capital, and Andreessen Horowitz.

Shelby Holliday and Alistair MacDonald Wall Street Journal
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The US successfully used three drone boats to attack an Iranian submarine and ship maintenance facility. This is the American military’s first combat use of one-way sea attack drones, which have largely been pioneered by Ukraine.

Are low-cost uncrewed speedboats becoming a new naval weapon?

Core argument: The Saronic Corsair sea drones used in the attack on Iran are 24-foot speedboats that can travel more than 1,000 miles and carry payloads of up to 1,000 pounds, costing less than $1 million apiece.

The vessels deployed in [the] attack, known as Saronic Corsairs, are 24-foot-long speedboats that can travel more than 1,000 miles and carry payloads of up to 1,000 pounds. They arrived in the Middle East in late March after the war started, according to a U.S. official. The boats are made in Texas by Saronic, an American company co-founded by a former Navy SEAL. They cost less than $1 million apiece and are designed to carry out a range of missions, according to a company spokesperson. Saronic has risen fast in the defense-tech industry and is backed by prominent investors, including Joe Lonsdale’s 8VC, Caffeinated Capital and Andreessen Horowitz. Earlier this year, the company said it had raised $1.75 billion at a $9.25 billion valuation.

Takeaways by Macro Roundup® AI

  1. The Saronic Corsair sea drones used in the attack on Iran are 24-foot speedboats that can travel more than 1,000 miles and carry payloads of up to 1,000 pounds, costing less than $1 million apiece.
  2. The Corsairs arrived in the Middle East in late March after the war started, according to a U.S. official, and are made in Texas by Saronic, co-founded by a former Navy SEAL.
  3. Saronic said it had raised $1.75 billion at a $9.25 billion valuation, with backers including Joe Lonsdale's 8VC, Caffeinated Capital and Andreessen Horowitz.

Related Articles:

  • Is the Industrial Base on a Wartime Footing? A Progress Report — 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.
  • Ukraine Claims Strike On Russian Submarine With Underwater Drones — Ukraine's Security Service says it used underwater drones alongside the Ukrainian Navy to strike a Russian Kilo-class submarine, vessels valued at about $400mn, and estimates sanctions and limited access to high-tech components could push replacement costs to $500mn.
  • The New Frontier for Drone Warfare Is Deep Underwater — New underwater drones can dive thousands of feet and operate for days with little human intervention, which advocates say suits them to intelligence gathering, protecting undersea infrastructure, and countering threats in the Pacific. Boeing is delivering five 85-foot Orca vehicles to the US Navy, and Australia is developing Ghost Shark with Anduril.

Wednesday, July 15, 2026

AI Summary. Using two centuries of U.S. data and a panel of advanced economies, the authors find government primary surpluses are more closely associated with debt-service costs than with debt-to-output ratios, which lose much of their explanatory power once debt service is accounted for. The association is stronger when financing conditions deteriorate.

Barry Eichengreen, Maxime Menuet and Gregory Donnat National Bureau of Economic Research
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Do primary surpluses respond to the stock of debt or to how costly it is to service? Eichengreen et al test this back to 1800. Though the impulse responses are consistent with both, once service costs enter the model, debt-to-GDP loses significance.

Do debt-service costs explain fiscal adjustment better than debt ratios?

Core argument: Using two centuries of U.S. data and a panel of advanced economies, the authors find primary surpluses are more closely associated with debt-service costs than with debt ratios, which lose much of their explanatory power once debt service is included.

Using two centuries of U.S. data and a panel of advanced economies, we show that primary surpluses are more closely associated with debt-service costs than with debt ratios. Once debt service is taken into account, debt ratios lose much of their explanatory power. The evidence also suggests that this relationship is state-dependent. Primary surpluses are more strongly associated with debt-service costs when financing conditions deteriorate, especially when the interest-growth differential [“r-g”] becomes unfavorable. Standard debt-based fiscal reaction functions may overlook an important dimension of fiscal sustainability by focusing on debt accumulation rather than on the budgetary burden it creates. Ultimately, sovereign debt becomes fiscally constraining not when debt ratios reach a particular threshold, but when financing conditions transform outstanding liabilities into an immediate budgetary burden.

Takeaways by Macro Roundup® AI

  1. Using two centuries of U.S. data and a panel of advanced economies, the authors find primary surpluses are more closely associated with debt-service costs than with debt ratios, which lose much of their explanatory power once debt service is included.
  2. The evidence suggests the relationship is state-dependent, with primary surpluses more strongly associated with debt-service costs when financing conditions deteriorate, especially when the interest-growth differential ("r-g") becomes unfavorable.
  3. The authors argue standard debt-based fiscal reaction functions may overlook a dimension of fiscal sustainability, since sovereign debt becomes fiscally constraining when financing conditions turn outstanding liabilities into an immediate budgetary burden rather than at a particular debt-ratio threshold.

Related Articles:

  • Inflation and Debt — Congressional Budget Office long-term projections show sustained primary deficits of 2% of GDP driving the debt-to-GDP ratio steadily higher, a path the agency itself labels unsustainable. Closing a 2% of GDP fiscal gap is economically straightforward for a growing country at peace, but inflation or default would not resolve the problem, since prospective deficits still require continued borrowing.
  • 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.
  • How Might Fiscal Policy Respond to the Rise of Artificial Intelligence? — 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.

AI Summary. Technology-driven investment booms have historically ended in sharp corrections with wider economic fallout, and the current artificial intelligence build-out is on track to outgrow every previous episode within three years measured from its pre-boom trough. The expansion is increasingly funded by borrowing through bonds, special purpose vehicles and non-bank lenders, alongside circular financing arrangements that create interconnectedness among firms.

Phurichai Rungcharoenkitkul Bank of International Settlements
Date Posted:

A BIS analysis argues the AI buildout is outpacing prior infrastructure booms and warns, “The larger the boom, the deeper the eventual bust.” Their model suggests that investment is 50% above the efficient level.

Is the AI build-out outpacing past technology investment booms?

Core argument: Firms expanding AI capital expenditure have turned increasingly to borrowing through bond issuance, special purpose vehicles, and non-bank lenders, and such leverage aggravates the fragility of rapid investment ramp-ups.

Technological breakthroughs are typically accompanied by investment booms and buoyant macroeconomic activity. Exuberance about the promise of new technologies intensifies competition among firms eager to capture a share of the revenues. The race to get ahead can result in excessive investment that makes the boom unsustainable and prone to disruption. This fragility is further aggravated by the leverage that accompanies the rapid ramp-up of investment. This boom-bust pattern recurs across history, from the US canal mania in the 1830s and the British railway mania in the 1840s to the roaring 20s and the dotcom boom in the late 90s. These episodes all ended in sharp corrections with wider economic fallout. Relative to its pre-boom trough, the current build-out is on track to outgrow every previous episode only three years. The rapid capex expansion has led some to resort increasingly to borrowing, not only through bond issuance but also through special purpose vehicles and non-bank lenders. Some firms have also engaged in so-called circular financing, in which a firm engaging in the build-out takes an equity position in an AI lab in exchange for the lab’s commitment to purchase future compute. Such arrangements have enabled greater deployment of capital, but they also create interconnectedness, shown in panel (b) of Figure 1.

Takeaways by Macro Roundup® AI

  1. Firms expanding AI capital expenditure have turned increasingly to borrowing through bond issuance, special purpose vehicles, and non-bank lenders, and such leverage aggravates the fragility of rapid investment ramp-ups.
  2. Circular financing, in which a firm engaged in the build-out takes an equity position in an AI lab in exchange for the lab's commitment to purchase future compute, has enabled greater capital deployment while creating interconnectedness.

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.
  • Have We Entered an Era of High Productivity Growth? — Labor productivity has grown solidly while the San Francisco Federal Reserve's total factor productivity index, which adjusts for the equipment and technology workers use, has grown modestly, suggesting gains so far reflect better tools rather than broader advances. A regime-switching model puts the probability of a high-productivity regime at 57% using labor productivity and 21% using total factor productivity.
  • 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.

AI Summary. Data center construction spending rose 23% year over year and made up 8% of private nonresidential construction, while spending on manufacturing buildings—nearly a quarter of that category—fell 22% to a seasonally adjusted annual rate of $174bn, according to the U.S. Census Bureau. Nonresidential construction materials costs are up more than 55% since early 2020.

Bob Tita Wall Street Journal
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Spending on data center construction in May rose 23% y/y, while construction spending on manufacturing buildings fell 22%. The data center buildout could be crowding out non-tech-related fixed investment.

Is data center building the only part of nonresidential construction growing?

Core argument: Data center construction spending rose 23% year-over-year in May and accounted for 8% of total private nonresidential construction spending, according to the U.S. Census Bureau.

Spending on data center construction in May rose 23% from a year earlier, according to the U.S. Census Bureau. Data centers accounted for 8% of the total spending on private, nonresidential construction. Construction spending on manufacturing buildings dropped 22% year-over-year in May to a seasonally adjusted annual rate of $174 billion. Manufacturing makes up the largest part of private, nonresidential construction, accounting for nearly a quarter of the spending in May, according to the Census Bureau. Materials costs for nonresidential construction are up more than 55% since early 2020 and even higher for fabricated steel, copper wire, and some other individual materials, according to the government’s producer price index.

Takeaways by Macro Roundup® AI

  1. Data center construction spending rose 23% year-over-year in May and accounted for 8% of total private nonresidential construction spending, according to the U.S. Census Bureau.
  2. Construction spending on manufacturing buildings fell 22% year-over-year in May to a seasonally adjusted annual rate of $174 billion, while manufacturing remained nearly a quarter of private nonresidential construction spending, according to the U.S. Census Bureau.
  3. Materials costs for nonresidential construction are up more than 55% since early 2020, with larger increases for fabricated steel, copper wire, and some other materials, according to the government's producer price index.

Related Articles:

  • Midyear Outlook — Tech-related investment rose 30% from year-ago levels while all other capital spending fell, a divergence the author argues reflects the AI boom bidding away scarce physical inputs such as electricians, grid capacity, metals, and construction labor. With hyperscalers' free cash flow now exhausted, over 80% of projected capital spending in coming years will require external financing.
  • The Other US Capex Question — Business investment outside artificial intelligence has been weak, contributing just 1.54% to total capital expenditure growth. The author argues AI investment is not crowding out other projects, since the spread between return on capital and cost of capital has stayed positive and US nonfinancial corporations' capital spending is below their gross savings.
  • 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.

AI Summary. Public filings indicate AI compute backlogs—contracts for future supply generating no current revenue—exceed $2.2tn, but under reasonable assumptions the net present value of those rental payments after required capital spending equals only about 15% of the backlog. Slowing AI revenue or lost capital-markets access could raise risk premiums on these obligations.

Jason Thomas Carlyle
Date Posted:

AI infrastructure firms have a $2.2T revenue backlog — but it’s unsecured and could evaporate if labs falter. Netting out the capex to deliver it and discounting at 14%, implies equity is thin – just ~15% of the backlog, Carlyle finds.

Are trillions in AI compute backlogs worth much less than advertised?

Core argument: Public filings suggest AI compute backlogs — contracts for future supply that yield no current revenue — now exceed $2.2 trillion.

Public filings suggest that AI compute backlogs [contracts for future supply that yields no current revenue] now exceed $2.2 trillion. For AI infrastructure providers, these contracts represent both an asset (the discounted present value of compute rental payments from AI labs) and a liability (the discounted present value of the hardware purchases, data center rent, and utility outlays necessary to deliver the promised compute). The implied "equity" in the infrastructure layer looks thin: under reasonable assumptions, the net present value of the rental payments, after the capex required to deliver them, equals only about 15% of the backlog. A deceleration in AI revenue, a derating of the labs, or a loss of capital-markets access could raise the risk premium applied to these longer-dated, unsecured cash flows enough to make these “remaining performance obligations” more trouble than they're worth, imperiling demand for memory chips.

Takeaways by Macro Roundup® AI

  1. Public filings suggest AI compute backlogs — contracts for future supply that yield no current revenue — now exceed $2.2 trillion.
  2. Under reasonable assumptions, the net present value of AI compute rental payments, after the capex required to deliver them, equals only about 15% of the backlog, leaving thin implied equity in the infrastructure layer.
  3. A deceleration in AI revenue, a derating of the labs, or a loss of capital-markets access could raise the risk premium on these longer-dated, unsecured cash flows enough to imperil demand for memory chips.

Related Articles:

  • 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.
  • 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.
  • 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.

AI Summary. Investor demand for hyperscaler bond deals has weakened, with the cover ratio — dollars of investor orders per dollar of bonds issued — falling from nearly 5x to below 2x. This suggests investors may require wider spreads to absorb additional hyperscaler bond supply.

Torsten Sløk Apollo
Date Posted:

The cover ratio for hyperscaler debt issuance has declined from 5x in February 2026 to < 2x in July. Sløk notes yields may need to rise, “suggesting investors may need wider spreads to absorb additional hyperscaler supply.”

Is investor demand for hyperscaler bonds weakening?

Core argument: Cover ratios on hyperscaler bond deals, which measure dollars of investor orders per dollar of bonds issued, fell from nearly 5x in February 2026 to below 2x in July.

The cover ratio measures how many dollars of investor orders a bond deal receives for every dollar of bonds issued. For hyperscalers, it has fallen from nearly 5x in February 2026 to below 2x in July, suggesting investors may need wider spreads to absorb additional hyperscaler supply.

Takeaways by Macro Roundup® AI

  1. Cover ratios on hyperscaler bond deals, which measure dollars of investor orders per dollar of bonds issued, fell from nearly 5x in February 2026 to below 2x in July.
  2. The decline in hyperscaler cover ratios suggests investors may require wider spreads to absorb additional hyperscaler bond supply.

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AI Summary. Sub-Saharan Africa's cereal output is nearly 5x its 1960s level, but most gains came from cultivating more land rather than higher yields, and arable land per person has been falling for decades. Food and Agriculture Organisation data show cereal yields flat in recent years, with most African countries recording lower agricultural total factor productivity than a decade earlier.

Economist Staff The Economist
Date Posted:
Is Database:
Database

Most Sub-Saharan African countries had lower agricultural TFP in 2023 than they had a decade earlier. Btw 2008 and 2019, in the face of a rapidly rising population, small farms’ yields were falling by 3 to 4% per year.

Is Africa's crop growth coming from more land, not higher yields?

Core argument: Sub-Saharan Africa's farmers grow nearly five times as much cereal, such as maize and rice, as in the 1960s, but most of those gains came from cultivating more land rather than raising output per hectare.

In aggregate [sub-Saharan Africa's] farmers are growing more cereals, such as maize (corn) and rice, than ever: nearly five times as much as in the 1960s. But most of those gains came from cultivating more land, which cannot go on for ever. The amount of arable land per person has been falling for decades, and now sits at roughly the global average. That might not matter if farmers were also growing more crops per hectare. But recently gentle growth in agricultural productivity has given way to stagnation, perhaps even decline. Consider figures drawn from national statistics in Africa by the Food and Agriculture Organisation. Cereal yields did not grow between 2020 and 2024, the latest data point. Nor did total factor productivity (TFP), a measure of how efficiently inputs of all kinds (such as labour and machinery) are turned into produce. Most African countries had lower agricultural TFP in 2023 than a decade before.

Takeaways by Macro Roundup® AI

  1. Sub-Saharan Africa's farmers grow nearly five times as much cereal, such as maize and rice, as in the 1960s, but most of those gains came from cultivating more land rather than raising output per hectare.
  2. Cereal yields in Africa did not grow between 2020 and 2024, and neither did total factor productivity, a measure of how efficiently inputs such as labour and machinery are turned into produce, according to Food and Agriculture Organisation figures drawn from national statistics.
  3. Arable land per person in sub-Saharan Africa has been falling for decades and now sits at roughly the global average, while most African countries had lower agricultural total factor productivity in 2023 than a decade before.

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