Edward Conard

Top Ten New York Times Bestselling Author

  • “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
  • “…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 very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “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
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “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
  • “…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
  • “Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Thursday, July 16, 2026

AI Summary. The headline labor force participation rate — the share of people 16 and older working or looking for work — is a limited gauge of labor market health because participation varies greatly by age. Aging baby boomers and the addition of nearly 1.7m Americans 65 and older to population estimates add distortion.

Justin Fox Bloomberg
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Adjusted for the age composition of the population, US labor force participation, at 61.8%, is near an all-time high, reflecting delayed retirement of older workers.

Does the headline labor force participation rate accurately measure labor market health?

Core argument: The Bureau of Labor Statistics added nearly 1.7 million Americans aged 65 and older to its population estimates this year, reflecting belated adjustments stemming from the 2020 Census, which adds to distortions in the labor force participation rate.

The labor force participation rate is the number of people 16 and older who have jobs or are actively looking for them, divided by the civilian (that is, not uniformed military) noninstitutional (that is, not in prison or the like) population 16 and older. While this percentage can tell us useful things about, say, the sustainability of Social Security or the overall availability of labor, its validity as a gauge of the health of the labor market is limited by the reality that labor force participation varies greatly by age. It’s a flawed metric that is currently more flawed than usual as the youngest members of the giant baby boom generation age into their mid-60s. The addition this year of nearly 1.7 million 65-and-older Americans to the BLS population estimates, because of belated adjustments stemming from the 2020 Census, just adds to the distortions.

Takeaways by Macro Roundup® AI

  1. The Bureau of Labor Statistics added nearly 1.7 million Americans aged 65 and older to its population estimates this year, reflecting belated adjustments stemming from the 2020 Census, which adds to distortions in the labor force participation rate.
  2. The labor force participation rate divides people 16 and older who are working or actively looking for work by the civilian noninstitutional population 16 and older, a measure whose validity as a gauge of labor market health is limited because participation varies greatly by age.
  3. The aging of the youngest baby boomers into their mid-60s makes the participation rate more flawed than usual, though the measure still tells us useful things about Social Security sustainability and the overall availability of labor.

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.
  • AI, Immigration, and Collapsing Labor Force Participation — As labor force participation falls, a shrinking group of workers generates the income, taxes, and innovation supporting a growing number of non-workers, leaving the economy more fragile because labor shocks are concentrated among fewer participants. Labor scarcity raises the return on automation, robotics, and software, making growth depend on productivity rather than participation.
  • How Labor Force Participation Has Diverged Across Genders — Between 1976 and 2024 the trend labor force participation rate fell 10.1 percentage points for men and rose 8.2 points for women. Population aging lowered participation by about 4 points for each gender and rising education raised it (+6 for women, +3 for men), but the divergence is dominated by participation trends within age-gender groups.

AI Summary. The authors find no statistically significant evidence that $190bn in federal emergency K-12 school aid mitigated pandemic learning loss or raised district spending. Districts qualifying for additional funds saw local revenues fall by $907 per pupil over three years, about 8% of pre-pandemic average, roughly 80% from property taxes.

Jeffrey Clemens, Philip Hoxie and Stan Veuger National Bureau of Economic Research
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Exploiting a discontinuity in K-12 public school districts’ qualification for Covid emergency funding (ESSR), Clemens et al find that the funds did not mitigate learning loss. To a large extent, local districts used them to lower property taxes.

Do federal emergency education grants reduce student learning loss?

Core argument: Districts crossing the 5% poverty cutoff for additional ESSER funds saw local revenues fall an estimated $907 per pupil over three years, about 8% of the pre-COVID average.

Emergency funding for K-12 public schools was an important component of recession spending packages during COVID, involving $190 billion in additional expenditure. We see no evidence that ESSER funds helped to mitigate learning loss, at least in the short run. We find no statistically significant evidence that districts increased expenditures in SY 2021 or SY 2022. We do find evidence that districts that qualified for additional ESSER funds had statistically significant reductions in local revenues that were in excess of their ESSER funds. This pass-through of federal funds may partially explain why ESSER had minimal impacts on learning loss for districts around the 5% poverty threshold. Our estimates suggest that over the three years, crossing the qualification cutoff for additional ESSER funds is associated with a $907 per pupil decrease in local revenues, or about 8% of the pre-COVID average. We show the decline in local revenues as an event study in Figure 3, which includes a flat pre-COVID trend in local revenues per pupil across the qualification threshold. In Table 5,Column 5 [], we can see that about 80% of the revenue decline came from decreases in revenues from property taxes, [which fell] by $718 per pupil across the 3 years. The findings apply specifically to districts in the neighborhood of the 5% poverty threshold for qualifying for additional ESSER funds.

Takeaways by Macro Roundup® AI

  1. Districts crossing the 5% poverty cutoff for additional ESSER funds saw local revenues fall an estimated $907 per pupil over three years, about 8% of the pre-COVID average.
  2. About 80% of that local revenue decline came from property taxes, which fell by $718 per pupil across the three years.
  3. The authors find no evidence that ESSER emergency K-12 funding, totaling $190 billion, mitigated learning loss in the short run, and no statistically significant increase in district expenditures in SY 2021 or SY 2022.

Related Articles:

AI Summary. The author argues that a surge in money growth beginning in 2020 put upward pressure on inflation to a degree unprecedented in the sample period since 1967, and that subsequent monetary tightening produced strong disinflationary pressures. Had policymakers tracked money growth using a price-target model, they might have tightened sooner and avoided some of the inflation.

Peter Ireland, Stephen Miran and Nouriel Roubini Hudson Bay Capital
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Ireland, Miran, and Roubini compare the actual price level to the predictions of an equilibrium model relating prices to money supply. Predicted inflation hit a 60-year high in 2020–21, months before inflation surged and then crashed once the Fed hiked.

Would tracking money growth have helped policymakers tighten sooner?

Core argument: The money growth surge beginning in 2020 and continuing into 2021 put upward pressure on inflation to a degree unprecedented in the post-1967 sample period, according to the graphs in Figure 3.

The graphs in Figure 3 show quite clearly how the surge in money growth starting in 2020 and continuing in 2021 put enormous upward pressure on inflation, to a degree unprecedented in the post-1967 sample period. And while the large and negative price gaps that followed in 2022 and 2023 are likewise indicative of strong disinflationary pressures applied through subsequent monetary tightening, one can’t see these graphs without asking: Had Federal Open Market Committee members been monitoring measures of money growth with the help of the P-star [price target based on monetary aggregates] model, might they have ended QE and raised interest rates sooner and more quickly, thereby avoiding at least some of the post-2020 inflation? Of course, massive fiscal expansion was another driver of the post-2020 surge in inflation, as suggested by fiscal theories of the price level. The model simply observes that regardless of its originating source, excessive money growth signals that inappropriate macroeconomic policies are fueling higher inflation. Fiscal expansions that expand money supply will be reflected in a P-star model.

Takeaways by Macro Roundup® AI

  1. The money growth surge beginning in 2020 and continuing into 2021 put upward pressure on inflation to a degree unprecedented in the post-1967 sample period, according to the graphs in Figure 3.
  2. The large negative price gaps of 2022 and 2023 indicate strong disinflationary pressures from subsequent monetary tightening, raising the question of whether FOMC members using the P-star model would have ended quantitative easing and raised interest rates sooner and more quickly.
  3. Massive fiscal expansion was another driver of the post-2020 inflation surge, as suggested by fiscal theories of the price level, and fiscal expansions that expand the money supply are reflected in a P-star model.

Related Articles:

  • Money and Inflation — The M2 money supply has contracted for the first time in sixty years, shrinking at an annual rate of nearly 5%, yet inflation has remained high rather than turning to deflation. The author argues this undercuts the claim that money supply growth drives inflation, since the same logic implies severe deflation should now follow.
  • State Dependence of Monetary Policy During Global Supply Chain Disruptions — The authors present descriptive evidence that global supply chain disruptions were associated with elevated transportation costs, goods supply-demand imbalances, and a surge in goods prices, steepening the aggregate supply curve. In the disrupted state, a contractionary monetary policy shock produces muted responses in real output and spare capacity but a substantially stronger decline in goods prices.
  • What Next for r*? A Capital Market Equilibrium Perspective On The Natural Rate of Interest — A capital-market equilibrium model estimates that the steady-state safe natural rate of interest across advanced economies has fallen from about 5% to about 0%, driven by slower growth, demographics, higher mark-ups, and rising risk premia. The author estimates that artificial-intelligence-driven growth and heightened inflation risk could each raise it by about 1 percentage point.

AI Summary. US inflation-protected Treasury yields have broken above their post-2008 highs, indicating the real cost of capital is rising, while nominal 20- and 30-year Treasury yields remain within their three-year ranges. The article argues an artificial-intelligence-driven investment boom has raised demand for capital, and that corporate debt-to-equity ratios have fallen and interest coverage has surged since Covid.

Tan Kai Xian Gavekal
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Tan Kai Xian argues the rising cost of capital in the US is unlikely to be the reason that non-AI CAPEX is as low as it is, as “healthy profitability has allowed businesses outside the tech hyperscaler sector to fund their capex internally.”

Are rising real yields a sign of an investment boom?

Core argument: Yields on long-term US Treasury inflation-protected securities have broken above their post-2008-crisis highs, while nominal 20-year and 30-year Treasury yields remain within their ranges of the past three years, indicating the real cost of capital in the US is rising.

US real yields are rising. Long-term nominal yields are trending higher, too. But nominal yields on 20-year and 30-year treasuries are still within their ranges of the past three years. In contrast, the yields on long-term US treasury inflation-protected securities have broken above their post-2008-crisis highs. This means the real cost of capital in the US is rising. AI optimism has led to an investment boom fueled by capital that remains relatively cheap compared with the returns on capital. The resulting demand for capital has seen the cost of capital begin to rise. This makes sense in an economic upcycle. And the dynamic could continue for a good while yet; the US is likely nearer the beginning of this growth phase than the end. Corporate debt-to-equity ratios have fallen since Covid, interest coverage ratios have surged, and healthy profitability has allowed businesses outside the tech hyperscaler sector to fund their capex internally.

Takeaways by Macro Roundup® AI

  1. Yields on long-term US Treasury inflation-protected securities have broken above their post-2008-crisis highs, while nominal 20-year and 30-year Treasury yields remain within their ranges of the past three years, indicating the real cost of capital in the US is rising.
  2. AI optimism has driven an investment boom funded by capital still cheap relative to returns on capital, and the resulting demand for capital has begun pushing the cost of capital higher, consistent with an economic upcycle.
  3. Corporate debt-to-equity ratios have fallen since Covid and interest coverage ratios have surged, with healthy profitability allowing businesses outside the tech hyperscaler sector to fund capital expenditure internally.

Related Articles:

  • Capital Allocation — Internal financing has been the main source of capital for U.S. corporations, with steady new debt issuance except in recession years, consistent with a stable capital structure. Companies have retired equity on average, and net equity issuance remains negative even after accounting for stock-based compensation.
  • Cover Ratios for Hyperscaler Bonds Declining — 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.
  • US Stock Market To Stop Shrinking For First Time In 23 Years — Goldman Sachs estimates that net supply of US equity — new shares issued less shares removed by buybacks and take-privates — will be roughly flat in 2026 after being negative since 2003, with a larger influx expected in 2027 as lock-up periods on this year's initial public offerings expire.

AI Summary. The present value of future rental payments from the roughly $2.2tn artificial intelligence compute backlog, after deducting the capital spending needed to deliver that compute, equals only about 15% of the backlog. That thin implied-equity layer means the contracts hold value only if customers stay creditworthy, capital remains available, and the infrastructure earns competitive returns for years.

Paul Kedrosky Applied Complexity
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Kedrosky notes the AI revenue backlog is not a large safety margin: “Slower AI growth, weaker lab valuations, or restricted capital-market access could sharply reduce the present value of long-dated, generally unsecured commitments.”

How much economic value underlies the AI compute backlog?

Core argument: The net present value of future AI compute rental payments, after deducting the capex needed to provide that compute, equals only about 15% of the roughly $2.2tn hyperscaler capital expenditure backlog.

Remarkably little economic value sits beneath the massive AI capital expenditure backlog. The net present value of future rental payments—after deducting the capex required to provide the compute—equals only about 15% of the roughly $2.2 trillion backlog. That thin implied-equity layer means the headline contracts are valuable only so long as customers remain creditworthy, capital stays available, and the infrastructure earns competitive returns over many years. That is heroic stuff at this scale.

Takeaways by Macro Roundup® AI

  1. The net present value of future AI compute rental payments, after deducting the capex needed to provide that compute, equals only about 15% of the roughly $2.2tn hyperscaler capital expenditure backlog.
  2. The thin implied-equity layer means headline AI compute contracts hold value only if customers remain creditworthy, capital stays available, and the infrastructure earns competitive returns over many years.

Related Articles:

  • More Money, More Problems — 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.
  • 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.
  • Cover Ratios for Hyperscaler Bonds Declining — 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.

AI Summary. Black and Hispanic students make up about 62% of New York City public school enrollment but about 10% of the incoming freshman class at the city's eight most prestigious high schools, where roughly 80% of seats went to Asian and white students. Asian students are about 19% of public school enrollment and received 57% of specialized-school offers.

Matthew Haag New York Times
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62% of New York City public school students are black or Hispanic, and 19% are Asian. Stuyvesant, an elite public school, offered admission to 777 students. Three offers went to black students, and 21 to Hispanics; 69% went to Asian students.

How do admissions at elite public high schools compare with district enrollment?

Core argument: Stuyvesant High School made 3 of its 777 admissions offers to Black students and 21 to Hispanic students, together a nearly one-third decline from the previous freshman class.

About 62% of the students in the city’s public schools are Black or Hispanic. At [NYC] eight most prestigious high schools, about 10% of the students in the incoming freshman class are expected to be Black or Hispanic, roughly the same as last year. About 80% of the seats went to Asian and white students. At Stuyvesant High School in Manhattan, often considered the most selective of the city’s specialized high schools, three of the 777 offers were made to Black students, and 21 were for Hispanic students, together representing a nearly one-third decline from the previous freshman class. About 19% of all public school students are Asian, but they received 57% of the offers for the specialized schools for the fall. The rates were higher at some schools, including 69% at Stuyvesant and 78% at Queens High School for the Sciences at York College.

Takeaways by Macro Roundup® AI

  1. Stuyvesant High School made 3 of its 777 admissions offers to Black students and 21 to Hispanic students, together a nearly one-third decline from the previous freshman class.
  2. Black and Hispanic students make up about 62% of New York City public school enrollment but about 10% of the incoming freshman class at the city's eight most prestigious high schools, roughly unchanged from last year.
  3. Asian students account for about 19% of New York City public school students but received 57% of specialized high school offers for the fall, including 69% at Stuyvesant and 78% at Queens High School for the Sciences at York College.

Related Articles:

  • White Flight from Asian Immigration: Evidence from California Public Schools — In California public schools, the authors estimate that the arrival of one Asian student in a high-socioeconomic-status suburban district is associated with the departure of 1.5 white students, alongside rising academic performance. They suggest this reflects parental concerns about academic competition rather than housing market dynamics or direct racial animus.
  • Do Adults Have the Skills They Need to Thrive in a Changing World? — An international assessment of adult skills describes numeracy proficiency levels ranging from counting objects and adding small whole numbers at the lowest level, to extracting information from tables and graphs and performing basic arithmetic with money and percentages at Level 1, up to analysing complex mathematical information and critically evaluating whether data support a claim at Level 5.
  • Americans and Affirmative Action: How the Public Sees the Consideration of Race in College Admissions, Hiring — Survey research finds more Americans disapprove than approve of colleges considering race and ethnicity in admissions: half of U.S. adults said they disapprove of selective colleges weighing race and ethnicity to increase diversity, a third approved, and 16% were unsure. In another survey, 82% said colleges should not consider race or ethnicity, versus 17% who said they should.

Friday, July 17, 2026

AI Summary. US equities have underperformed other major regions, with Europe outperforming the US by 12%, Japan by 17% and emerging markets by 27%, while US Treasuries have lagged most other developed-market and emerging-market bond markets except Japan. The author argues US long-bond yields appear poised to break higher, as even a softer-than-expected inflation reading failed to spark a bond rally.

Louis-Vincent Gave Gavekal
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Louis-Vincent Gave questions American equities’ outperformance going forward, noting that since January 2025, Europe and Japan have outperformed the US by 12% and 17%, respectively, as measured by MSCI total returns in dollars.

Are US stocks and bonds underperforming other major markets?

Core argument: Since Trump's inauguration, US equities have lagged other major regions, with Europe outperforming the US by 12%, Japan by 17%, and emerging markets by 27%.

Since Trump was sworn in, US equity markets have actually not outperformed the other major regions. Quite the contrary: Europe has outperformed the US by 12%, Japan has outperformed by 17%, and emerging markets by 27%. Since Trump was sworn in, US treasuries have underperformed most major emerging market bond markets and almost all other OECD bond markets, with one notable exception: Japan. Japan’s bond markets have been in full meltdown for the past two years. Staying on US treasuries, the yields on US long bonds look like they really want to break out on the upside. Even a recent downside surprise on US inflation did not prove enough to trigger a rally in US bonds.

Takeaways by Macro Roundup® AI

  1. Since Trump's inauguration, US equities have lagged other major regions, with Europe outperforming the US by 12%, Japan by 17%, and emerging markets by 27%.
  2. US Treasuries have underperformed most major emerging market bond markets and almost all other OECD bond markets since Trump took office, the exception being Japan, whose bond markets have been in full meltdown for two years.
  3. Yields on US long bonds appear to be pushing toward an upside breakout, and a downside surprise on US inflation did not trigger a rally in US bonds.

Related Articles:

  • The Dollar’s Hidden Dependence on the AI Trade — 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.
  • 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 Debasement Trade Is Unraveling and Kevin Warsh Is One Big Reason — The "debasement trade" — favoring gold and Bitcoin over a dollar seen as vulnerable to inflationary, fiscal and monetary excess — has been a defining market narrative, but a new Federal Reserve chairman's emphasis on price stability as the overriding priority lifted the dollar and long-dated Treasuries at the expense of gold and crypto.

AI Summary. The gap between 30-year and 10-year US Treasury yields has widened to 0.5 percentage points from 0.2, which suggests investors are more wary of future deficits, inflation, or random shocks. Dealers now buy only 10–15% of Treasurys at auction, down from 40–50% previously, according to JPMorgan Chase data.

Greg Ip Wall Street Journal
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A JPM analysis finds the dealers’ share of Treasury auctions has declined from between ~43% and ~51% across maturities in 2010 to between ~11% and ~15% today. Greg Ip cautions “Maybe end-users just love Treasurys; or maybe dealers are reluctant to risk their own capital.”

Are rising long-term bond yields signaling investor wariness about deficits?

Core argument: The 30-year Treasury yields 0.5 percentage points more than the 10-year, up from 0.2 in early 2025, a relatively steeper rise suggesting investors are more wary of future deficits, inflation, or random shocks.

The 30-year Treasury yields 0.5 percentage points more than the 10-year, up from 0.2 in early 2025. Treasury prices, which move in the opposite direction to yields, get more sensitive to risks as maturity lengthens. Thus, the relatively steeper rise in 30-year yields means investors are more wary of future deficits, inflation, or random shocks. The International Monetary Fund has found that on auction days, the 30-year yield has moved much more since 2022 than in the prior eight years. It notes government-bond yields globally have risen relative to swap rates, a benchmark borrowing rate, which may mean dealers want more compensation for carrying Treasurys in their inventory. In 2010, dealers routinely bought 40% to 50% of Treasurys at auction (end-users such as foreign central banks and pension funds bought the rest). This year, they only bought 10% to 15%, according to JPMorgan Chase data.

Takeaways by Macro Roundup® AI

  1. The 30-year Treasury yields 0.5 percentage points more than the 10-year, up from 0.2 in early 2025, a relatively steeper rise suggesting investors are more wary of future deficits, inflation, or random shocks.
  2. The International Monetary Fund has found the 30-year Treasury yield has moved much more on auction days since 2022 than in the prior eight years, and that government-bond yields globally have risen relative to swap rates.
  3. Dealers bought only 10% to 15% of Treasurys at auction this year, down from 40% to 50% routinely in 2010, when end-users such as foreign central banks and pension funds bought the rest, according to JPMorgan Chase data.

Related Articles:

  • 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.
  • 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.
  • 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.

AI Summary. Chinese startup Moonshot priced its latest AI model at roughly the same level as Anthropic's Sonnet, a premium over other Chinese models, and said it has 2.8tn parameters and a 1m token context window. Artificial Analysis ranked the model ahead of Anthropic's Opus 4.8 on some frontier benchmarks, the first Chinese open-weight model to do so.

Jeanny Yu and Sunny Bangia Bloomberg
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A Chinese startup’s new open-weight Kimi K3 model has performance on par with leading American frontier models. Only Anthropic’s Claude Fable 5 and OpenAI’s GPT-5.6 outperform Kimi K3 overall.

Are Chinese AI models competing on capability rather than price?

Core argument: Moonshot's Kimi K3 has 2.8 trillion parameters and a 1 million token context window, and Artificial Analysis ranked it ahead of Anthropic's Opus 4.8 on some frontier benchmarks, the first Chinese open-weight model to do so.

Moonshot’s release shows that China’s AI race is evolving beyond a competition on cost alone. The startup priced its latest model at roughly the same amount as Anthropic Sonnet, a premium compared to other Chinese models based on its strong capabilities. Moonshot also claimed it surpassed Z.AI’s most advanced offering on coding tasks. That’s stoking concerns that competition in China’s AI sector is intensifying even as the country’s sector leaders race onto global markets. Moonshot said its latest model has 2.8 trillion parameters and a 1 million token context window, gauges of its capability. Artificial Analysis ranked Kimi K3 ahead of Anthropic’s Opus 4.8 on some frontier benchmarks, making it the first Chinese open-weight model to achieve that milestone.

Takeaways by Macro Roundup® AI

  1. Moonshot's Kimi K3 has 2.8 trillion parameters and a 1 million token context window, and Artificial Analysis ranked it ahead of Anthropic's Opus 4.8 on some frontier benchmarks, the first Chinese open-weight model to do so.
  2. Moonshot priced its latest model at roughly the same level as Anthropic's Sonnet, a premium over other Chinese models based on its strong capabilities, indicating China's AI race is evolving beyond competition on cost alone.
  3. Moonshot claimed its latest model surpassed Z.AI's most advanced offering on coding tasks, stoking concerns that competition within China's AI sector is intensifying as the country's sector leaders race onto global markets.

Related Articles:

  • 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.
  • Why .400 Hitters Disappeared — and What It Means for AI — Artificial intelligence models' capability gains are shrinking in percentage terms, falling from about 15% relative to the baseline early on to roughly 10% for the same absolute increment, narrowing the gap between frontier and good-enough models. The author argues this points to a commoditizing market where price, not minor model differences, becomes the main differentiator, pressuring frontier firms' margins.
  • Cover Ratios for Hyperscaler Bonds Declining — 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.

AI Summary. Alphabet, Meta, Amazon, and Oracle have issued more than $300bn of debt since the start of 2025, including roughly $80bn in British pounds, euros, and Japanese yen, quickly making them among the largest names in those bond indexes. About 79% of those bonds now trade at wider spreads than on their first day.

Tasos Vossos and Ronan Martin Bloomberg
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~79% of hyperscaler bonds issued since early 2025 “are currently indicated at a wider spread compared to their first trading day.” On average, the hyperscalers’ debt is down 1.4% on a total return basis.

How is heavy tech borrowing affecting global bond index performance?

Core argument: Alphabet, Meta, Amazon, and Oracle have issued more than $300 billion of debt since the start of 2025, including close to $80 billion in currencies such as the British pound, the euro, and the Japanese yen, according to data compiled by Bloomberg.

Alphabet, Meta, Amazon, and Oracle have issued more than $300 billion since the start of 2025, according to data compiled by Bloomberg. Close to $80 billion of the debt was issued in currencies including the British pound, the euro, and the Japanese yen — and the borrowers became some of the biggest names in those indexes practically overnight. About 79% of the sector’s bonds sold since early 2025 are currently indicated at a wider spread compared to their first trading day, according to data compiled by Bloomberg. They have fallen 3.3 points from their issue price on average and are 1.4% down on a total return basis. The bonds are currently among the worst performers in every market in which they were issued.

Takeaways by Macro Roundup® AI

  1. Alphabet, Meta, Amazon, and Oracle have issued more than $300 billion of debt since the start of 2025, including close to $80 billion in currencies such as the British pound, the euro, and the Japanese yen, according to data compiled by Bloomberg.
  2. About 79% of the sector's bonds sold since early 2025 are indicated at wider spreads than on their first trading day, falling 3.3 points from issue price on average and 1.4% on a total return basis, according to data compiled by Bloomberg.
  3. The hyperscalers' bonds rank among the worst performers in every market in which they were issued, and the borrowers became some of the biggest names in those indexes practically overnight.

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  • Cover Ratios for Hyperscaler Bonds Declining — 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.
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AI Summary. Unemployment has stayed at or below the Federal Reserve's estimated non-accelerating inflation rate of unemployment of under 4.5% for 57 months, tied for the longest such streak on record. The author argues this persistent labor market tightness is a key reason inflation has remained elevated and that keeping interest rates higher for longer is needed to reach the 2% target.

Torsten Sløk Apollo
Date Posted:
Is Database:
Database

US unemployment has been under the Fed’s 4.5% estimate of the non-accelerating inflation rate of unemployment (NAIRU) for 57 months. Sløk argues “persistent tightness is a key reason inflation has remained elevated.”

Does a persistently tight labor market keep inflation above target?

Core argument: U.S. unemployment has stayed at or below the Fed's estimated NAIRU of under 4.5% for 57 months, tied for the longest such streak on record, leaving the labor market in excess-demand territory for an unusually long time.

With the Fed estimating the non-accelerating inflation rate of unemployment (NAIRU) at below 4.5%, and unemployment having stayed at or below that level for 57 months, tied for the longest such streak on record, the labor market has been operating in excess-demand territory for an unusually long time. That persistent tightness is a key reason inflation has remained elevated: when unemployment runs below NAIRU, wages and prices face sustained upward pressure. Prior episodes of sub-4.5% unemployment were typically far shorter. The current one is one of the longest on record, which helps explain why the ongoing inflation overshoot since 2021 has been so stubborn. The bottom line is that a strong economy is the reason why inflation has been high, and only by keeping rates higher for longer can the Fed cool inflation down towards the FOMC’s 2% inflation target.

Takeaways by Macro Roundup® AI

  1. U.S. unemployment has stayed at or below the Fed's estimated NAIRU of under 4.5% for 57 months, tied for the longest such streak on record, leaving the labor market in excess-demand territory for an unusually long time.
  2. When unemployment runs below NAIRU, wages and prices face sustained upward pressure, which the author identifies as a key reason inflation has remained elevated since the overshoot began in 2021.
  3. Prior episodes of sub-4.5% unemployment were typically far shorter, and the author argues that only by keeping rates higher for longer can the Fed cool inflation toward the FOMC's 2% target.

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