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
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  • “…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
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  • “…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


Monday, August 3, 2026

AI Summary. A Federal Reserve press conference that offered no forward guidance left the market's projected path for interest rates barely changed, since investors form their own view from the data. But the 30-year inflation-protected Treasury yield has only been higher for a few days at the worst of the 2008 crisis, suggesting possible damage to the Federal Reserve's credibility.

John Authers Bloomberg
Date Posted:
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The 30-year TIPS yield is at an all-time high – excluding a few days during the 2008 crisis.

Do rising long-term real yields signal damage to central bank credibility?

Core argument: The 30-year TIPS yield has been higher only for a few days at the worst of the 2008 crisis, which suggests possible damage to the Federal Reserve's credibility.

Kevin Warsh raised more questions than he answered at his press conference last Wednesday. Non-farm payrolls this week, and interventions from other Fed officials, might clarify things. For now, two points. First, Warsh confused people, but the point of not offering guidance is that the market forms its own view from the data, and the projected course of interest rates at the end of the week was barely changed. Second, something is afoot in long-term yields, which suggests possible damage to the Fed’s credibility. The 30-year TIPS (Treasury Inflation-Protected Security) yield has only ever been higher for a few days at the worst of the 2008 crisis. That’s not good.

Takeaways by Macro Roundup® AI

  1. The 30-year TIPS yield has been higher only for a few days at the worst of the 2008 crisis, which suggests possible damage to the Federal Reserve's credibility.
  2. Kevin Warsh's press conference confused market participants, yet the projected course of interest rates was barely changed by the end of the week, consistent with markets forming their own view from the data.
  3. Non-farm payrolls data and interventions from other Federal Reserve officials may clarify the questions left unanswered by Kevin Warsh's press conference.

Related Articles:

  • US 30-Year Yield Soars to Highest Since ‘07 After Fed Stands Pat — The 30-year US Treasury yield rose more than 10 basis points to a 19-year high after the Federal Reserve left rates unchanged, while two-year yields fell to 4.23%, 10-year yields rose to 4.66%, and the dollar dropped. Interest-rate swaps priced roughly 60% odds of a rate increase in September.
  • Are Government Bonds Safe in Times of War and Pandemic? — Government bonds severely underperform in wartime, in absolute terms and relative to equities, housing, and economic growth, unlike in financial crises when bonds tend to outperform stocks. The U.S. and U.K. reduced war-driven debt-to-GDP ratios without explicit default, using surprise inflation and financial repression that shifted fiscal burdens onto bondholders.
  • Global Debt Report 2026 — Gross central government borrowing across OECD countries rose 7% to a record $17tn, about 23% of GDP, and is projected to reach roughly $18tn, or 24% of GDP. The United States and Japan account for close to 80% of the area's refinancing requirements, with the US share rising from 57% to 70%.

AI Summary. A study of China's imperial civil service examination estimates that both exam performance and ties to powerful examiners had larger effects on career outcomes for high-performing candidates, indicating merit and networks were complements rather than substitutes. The authors argue this complementarity makes the influence of networks harder to distinguish from merit.

Ying Bai and Ruixue Jia National Bureau of Economic Research
Date Posted:
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From 1644–1905, Qing China staffed its bureaucracy through exams and patronage. Only 12.6% of exam graduates reached top office, but patronage favored stronger performers, illustrating how merit and connections can be complements rather than substitutes.

Do merit and connections reinforce each other in civil service careers?

Core argument: In China's imperial examination system, exam performance mattered more for candidates in the high-performing category, consistent with an institutional design that steered that elite group toward more prestigious careers.

Figure 5 studies the interplay between merit and networks by estimating the effects of exam performance and ties to powerful examiners separately for the high- and low-performing categories. The left panel shows the effects of exam performance for the two categories, while the right panel presents those of examiner power. Two patterns stand out. First, exam performance matters more for the high category, consistent with the institutional design that steered this elite group toward more prestigious careers. Second, ties to powerful examiners are also more valuable for the high category, pointing to a complementarity between merit and networks. To understand the implications of our finding on complementarity, it is useful to contrast it with the counterfactual of substitution. When merit and networks are complements (rather than substitutes), those who attained top office tend to exhibit both stronger exam performance and stronger connections. By contrast, under substitution, strong networks would compensate for weaker exam performance, and vice versa. Complementarity implies [a higher degree of meritocracy than substitution, as] successful candidates appear to have had better performance. Second, complementarity makes it harder to identify the influence of networks: their effects can operate under the guise of merit rather than as a visible substitute for it.

Takeaways by Macro Roundup® AI

  1. In China's imperial examination system, exam performance mattered more for candidates in the high-performing category, consistent with an institutional design that steered that elite group toward more prestigious careers.
  2. Ties to powerful examiners were also more valuable for the high-performing category, pointing to complementarity between merit and networks rather than substitution.
  3. Complementarity implies a higher degree of meritocracy than substitution, since those attaining top office tended to show both stronger exam performance and stronger connections, and it makes the influence of networks harder to identify because it can operate under the guise of merit.

Related Articles:

  • Elite Strategies for Big Shocks: The Case of the Fall of the Ming — A study of China's Ming-to-Qing dynastic transition finds elite families in Central China lost influence in the short run but their descendants regained and tightened their hold on power under the new dynasty, even as the hardest-hit regions stayed worse off. The authors attribute the recovery to emphasis on portable civil-service exam skills.
  • The Inheritance Of Social Status: England, 1600 to 2022 — Using a genealogical database of 422,374 English people with rarer surnames, the authors find social status persists strongly even among distant relatives, with status correlations declining by a constant factor of 0.79 per step in the lineage across all status measures and eras studied. The authors argue this constancy suggests social interventions have modest effects.
  • For Whom the Bell Curve Tolls: A Lineage of 400,000 English Individuals 1750-2020 Shows Genetics Determines Most Social Outcomes — A study of 402,000 English individuals across 1750–2020 estimates an intergenerational occupational status correlation of 0.88 and a genetic correlation between spouses of 0.76, which the authors interpret as a strong genetic basis for the persistence of social status. The authors argue that highly assortative mating around status genetics limits what policy can do to raise social mobility.

AI Summary. The yen's rebound from a four-decade low points to US-Japan joint intervention larger than earlier episodes in which US contributions stayed under $1bn, with Japan alone estimated to have spent $53bn in a single day. Expectations are building for interest-rate increases by both the Federal Reserve and the Bank of Japan.

Erica Yokoyama, Yoshiaki Nohara, and Kanoko Matsuyama Bloomberg
Date Posted:

The US and Japan will keep supporting the yen—the BOJ through higher rates, and the US by buying yen with euros or dollars and letting Japan borrow dollars against Treasuries rather than sell them outright, protecting Treasury-market functioning.

Can joint currency intervention reverse a four-decade currency low?

Core argument: Japan is estimated to have spent $53 billion on Thursday supporting the yen, a likely single-day record, after the currency hit a four-decade low.

It's still unclear how much Washington spent to help lift the yen from its four-decade low. But the currency’s rebound points at interventions larger than in 1998 and 2011, when US contributions didn’t surpass the $1 billion mark. Japan alone is estimated to have spent $53 billion on Thursday — a likely single-day record. Speculation is emerging of further joint moves. Expectations are rising for the Federal Reserve and Bank of Japan to raise interest rates in September, after the central bank in Tokyo held its benchmark rate on Friday but flagged inflation risks. Doubts over Prime Minister Sanae Takaichi’s big spending plans also raise the likelihood of renewed yen weakening, furthering the case for joint action.

Takeaways by Macro Roundup® AI

  1. Japan is estimated to have spent $53 billion on Thursday supporting the yen, a likely single-day record, after the currency hit a four-decade low.
  2. The yen's rebound points to US intervention larger than in 1998 and 2011, when Washington's contributions did not exceed $1 billion, though the amount spent remains unclear.
  3. Expectations are rising for the Federal Reserve and Bank of Japan to raise interest rates in September, after the Bank of Japan held its benchmark rate while flagging inflation risks.

Related Articles:

  • Shadow Government Bond Yields in the G10 — The author estimates "shadow" 30-year government bond yields for Germany, Spain, Italy, Greece and Japan — what long-term yields would be if central banks withdrew support such as Japanese government bond purchases and the European Central Bank's backstop facilities. These estimates assume no outright central bank selling, so they represent a lower bound on how high yields could go.
  • Global Debt Report 2026 — Gross central government borrowing across OECD countries rose 7% to a record $17tn, about 23% of GDP, and is projected to reach roughly $18tn, or 24% of GDP. The United States and Japan account for close to 80% of the area's refinancing requirements, with the US share rising from 57% to 70%.
  • Yen Hits Four-Decade Low in Historic Slide That’s Rattled Japan — The yen weakened past 161.95 per dollar to its lowest level since 1986, putting traders on alert for Japanese intervention to support the currency. The weak yen is lifting exporters' profits and Japanese stocks to record highs while raising import costs for oil and gas and fueling inflation that hurts consumers.

AI Summary. A concentrated set of highly correlated assets financed with 3-4x leverage meant a large move in one part of the market forced selling elsewhere. Funds holding no idle cash sold liquid winners such as semiconductors and other artificial intelligence names to fund SpaceX purchases, with index inclusion triggering further forced reallocation.

Paul Kedrosky Applied Complexity
Date Posted:

Kedrosky argues the catalyst for the blowup of a highly leveraged hedge fund last week was the SpaceX IPO, which forced selling of winners to fund purchases of SpaceX stock.

How does leverage in concentrated correlated assets spread selling across markets?

Core argument: Situational Awareness argues that a concentrated set of highly correlated assets financed with 3–4x leverage meant a large move in one part of the system forced selling everywhere else.

[Situational Awareness] owned a concentrated set of highly correlated assets, financed with 3-4x leverage, enough that a large move in one part of the system forced selling everywhere else. SpaceX provided the initial disturbance in this complex and tightly-coupled system. Its enormous valuation, combined with a relatively small public float, created a rebalancing problem. Funds do not keep idle piles of cash waiting for a major new listing. They sell what they already own to buy what they want to or must own, and they sell the most liquid names (because it's easy), and usually the winners (to lock in gains). That meant selling semiconductors and other AI winners to fund SpaceX purchases. Its subsequent addition to the Nasdaq-100 index triggered another round of forced reallocation, made more violent and systemic by all the ETF-abetted leverage in the system, like SOXL, but especially single-name ETFs. When SpaceX itself began falling, the pressure evolved, but the damage had been done.

Takeaways by Macro Roundup® AI

  1. Situational Awareness argues that a concentrated set of highly correlated assets financed with 3–4x leverage meant a large move in one part of the system forced selling everywhere else.
  2. SpaceX's enormous valuation combined with a relatively small public float created a rebalancing problem, as funds, holding no idle cash, sold the most liquid names — semiconductors and other AI winners — to fund SpaceX purchases.
  3. SpaceX's addition to the Nasdaq-100 triggered another round of forced reallocation, made more violent and systemic by ETF-abetted leverage such as SOXL and especially single-name ETFs, according to Situational Awareness.

Related Articles:

  • The Coming Mega-IPO Flow & Funding Problem of 2026 — Adjusted for inflation, SpaceX alone would rank as the second-largest initial public offering ever, behind Saudi Aramco, and three such listings together would exceed the entire 1995–2000 dot-com wave. Funding that equity supply requires selling existing holdings, and index rule changes make passive funds forced buyers, pressuring large-cap technology stocks.
  • SpaceX and OpenAI Are Ending Wall Street’s Era of Stock Scarcity — JPMorgan projects that share sales will add roughly $1.5tn of stock to the US equity market over the next two years even after buybacks, which would be the strongest net equity issuance since at least the late 1990s. Equity has grown cheaper relative to debt as a funding source.
  • SpaceX — To Boldly Raise Money Where No IPO Has Gone Before — Goldman Sachs research finds that large companies floating 7% or less of their shares at initial public offering have 54% of shares in circulation two years later, while across its full sample of listings a 24% float at debut became 69% within 24 months.

AI Summary. China's reported current account surplus of about 4% of GDP is roughly 3 percentage points above the International Monetary Fund's estimated norm, implying a currency undervaluation of about 20%. Adjusting for surging gold imports and a misreported investment income deficit would lift the surplus to about 6% of GDP and the estimated undervaluation to 30–35%.

Brad Setser Council on Foreign Relations
Date Posted:

Properly accounting for imports of gold and chips, China’s current account surplus is ~6% of GDP. Using the IMF formulation, Setser argues this implies the renminbi is undervalued btw 30–35%.

How undervalued is China's currency given its current account surplus?

Core argument: China's reported current account surplus of roughly 4% of GDP sits 3 percentage points above the IMF's estimated norm, implying a currency undervaluation of roughly 20% using the IMF's own calculations.

China’s current account surplus is now reported to be around 4% of GDP—or 3 percentage points higher than what the IMF estimates it should be. That works out, using the IMF’s own calculations, to an undervaluation of roughly 20%. If adjustments are made for China’s surging gold imports (1.5% of GDP in Q2) and its obviously misreported investment income balance (China reports a deficit of $125 billion on $4 trillion in net assets, something that no one—the IMF included—can explain) the current account surplus would rise to around 6 percent of GDP and the estimated undervaluation would increase to between 30 and 35%. The upward adjustment to China’s surplus should not be controversial: the customs surplus excluding gold is now an incredible 7% of China’s GDP, the services deficit is only 1% of GDP and a long history of surpluses should lead to a positive net foreign asset position and thus external investment income (as in Korea, Taiwan and Japan).

Takeaways by Macro Roundup® AI

  1. China's reported current account surplus of roughly 4% of GDP sits 3 percentage points above the IMF's estimated norm, implying a currency undervaluation of roughly 20% using the IMF's own calculations.
  2. Adjusting for China's gold imports (1.5% of GDP in the second quarter) and its unexplained investment income deficit of $125 billion on $4 trillion of net assets would lift the surplus to about 6% of GDP and the estimated undervaluation to 30–35%.
  3. China's customs surplus excluding gold stands at 7% of GDP against a services deficit of only 1% of GDP, and its long history of surpluses should yield positive external investment income, as in Korea, Taiwan and Japan.

Related Articles:

  • Who Will Win The War Of Neo-Mercantilists? — China's manufacturing export surplus is around 2% of world GDP, roughly twice the largest surplus Japan ever ran, while domestic demand has stalled. Unexplained negative net income of about $125bn on its $4tn in net foreign assets, versus an expected $100bn surplus, supports the argument that the renminbi is about 30% undervalued.
  • Global Views: Bending, Not Breaking — China's export-oriented goods sector is supporting GDP growth of 5% year-on-year, with growth forecast at 4.7% for 2026, though the economy remains highly unbalanced. The authors expect strong production and sluggish demand to push the current account surplus further to record levels as a share of global output, leaving the yuan undervalued by more than 20% against the dollar.
  • Is China’s Surplus Really Shrinking? — China's manufacturing surplus excluding gold and semiconductors keeps rising. Excluding gold imports equal to 1.5 percentage points of GDP, China's goods surplus would be close to 7% of GDP.

Tuesday, August 4, 2026

AI Summary. Japan's two traditional options for supporting a weak yen — much higher Japanese interest rates or large sales of dollars and US Treasuries — would both pressure US yields, as Japan holds about $1tn of Treasuries. US willingness to back Japan via its exchange stabilization fund and the Federal Reserve's international repo facility suggests officials see that risk.

Katie Martin Financial Times
Date Posted:
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To shield Treasuries from selloffs and higher yields, the US prefers its own yen support tools: ESF yen purchases as a signal and the Fed’s rarely used FIMA facility, lending Japan dollars against Treasuries to forestall direct Japanese Treasury sales.

Does supporting the yen serve US Treasury market interests?

Core argument: Japan holds $1tn of US Treasuries, the world's largest such holdings and just under 4% of the total outstanding, so Japanese dollar sales to prop up the yen would add a large seller to the Treasury market.

Japan has two traditional routes to push up the battered yen. One is a massive rise in Japanese interest rates, and the other is massive sales of dollars — i.e., of US Treasuries. Neither would be good news for the US. Japanese yields are already seriously elevated by historical standards — 2.8% on the 10-year and 4% on the 30-year. The US is just not in a position to lose a big buyer of Treasuries when its own 10-year yield is tickling 4.7% and the 30-year is well over 5. And it certainly can’t tolerate a big seller of Treasuries, in the form of Japanese authorities selling dollars, hoping to prop up the yen. (Japan’s Treasury holdings already lead the world, at $1tn, or just below 4% of the total outstanding.) Much better to stand behind Japan and hope to scare off the yen sellers. Recent use has been made of the Exchange Rate Stabilization Fund [ESF] to signal that intent. Bessent has also said he will encourage the Fed to bump up Fima, the Fed’s international repo facility, in the coming months. This tool has rarely been wheeled out since it was established during the 2020 Covid shock. Its current $60bn per counterparty, per day limit has been reached just once. The fact that US authorities approved the use of this facility suggests the US side sees potential risk that fx intervention could push up US Treasury yields.

Takeaways by Macro Roundup® AI

  1. Japan holds $1tn of US Treasuries, the world's largest such holdings and just under 4% of the total outstanding, so Japanese dollar sales to prop up the yen would add a large seller to the Treasury market.
  2. Japan's two traditional routes to lift the yen — a massive rise in Japanese interest rates or massive sales of dollars — are both unwelcome for the US, whose 10-year yield is near 4.7% and 30-year above 5%.
  3. US authorities have used the Exchange Rate Stabilization Fund to signal support for the yen, and Bessent said he will encourage the Fed to raise its Fima international repo facility, whose $60bn per counterparty per day limit has been reached once.

Related Articles:

  • US and Japan Aim to Transform Yen Landscape With Joint Moves — The yen's rebound from a four-decade low points to US-Japan joint intervention larger than earlier episodes in which US contributions stayed under $1bn, with Japan alone estimated to have spent $53bn in a single day. Expectations are building for interest-rate increases by both the Federal Reserve and the Bank of Japan.
  • Shadow Government Bond Yields in the G10 — The author estimates "shadow" 30-year government bond yields for Germany, Spain, Italy, Greece and Japan — what long-term yields would be if central banks withdrew support such as Japanese government bond purchases and the European Central Bank's backstop facilities. These estimates assume no outright central bank selling, so they represent a lower bound on how high yields could go.
  • Global Debt Report 2026 — Gross central government borrowing across OECD countries rose 7% to a record $17tn, about 23% of GDP, and is projected to reach roughly $18tn, or 24% of GDP. The United States and Japan account for close to 80% of the area's refinancing requirements, with the US share rising from 57% to 70%.

AI Summary. Currency intervention can't stem yen depreciation in the medium term because the decline is driven by Japanese government bond yields capped by the Bank of Japan to avert a debt crisis, and Japan can't afford higher yields. The author argues Japan could instead sell government financial assets to pay down gross debt and strengthen the yen.

Robin Brooks Robin Brooks Substack
Date Posted:

Despairing of stabilizing the yen by the usual interventions and claiming Japan’s gross debt is partially offset by assets worth ~100–110% of GDP, Brooks exhorts Japan to sell assets worth 10% of GDP to prevent yen depreciation without higher yields.

Can currency intervention stop the yen's decline?

Core argument: Brooks argues FX intervention cannot stem Yen depreciation in the medium term because the decline is driven by Japanese government bond yields capped by the Bank of Japan to prevent a debt crisis, and only higher yields could stabilize the Yen sustainably.

My basic view is that intervention can’t possibly hope to stem Yen depreciation in the medium term because that is driven by Japanese government bond yields that are being capped by the Bank of Japan (BoJ) to prevent a debt crisis. Only higher yields can stabilize the Yen sustainably. Japan can’t afford those, and there’s nothing FX intervention - even with US involvement - can do to change that. So what should Japan do? Japan’s net debt is a lot lower than its gross debt. The difference is financial assets, which can be sold to pay down gross debt. Even a small sale of government assets - say ten percent of GDP - would get huge recognition in markets and would help strengthen the Yen without needing to let bond yields rise. The current political equilibrium is still one of denial on this; however, which is why, in my opinion, the Yen will ultimately resume its march towards $/JPY 180. [Ed. note] Brooks uses the older IMF-style gross/net comparison, not the revised figures - approximately 207% gross, 137% standard net, and hence a 70-point gap. Brooks does not claim all 110% is readily saleable. Rather, at least some can be sold “in fairly short order.”

Takeaways by Macro Roundup® AI

  1. Brooks argues FX intervention cannot stem Yen depreciation in the medium term because the decline is driven by Japanese government bond yields capped by the Bank of Japan to prevent a debt crisis, and only higher yields could stabilize the Yen sustainably.
  2. Brooks contends Japan could sell government financial assets equal to roughly 10% of GDP, drawing wide market recognition and helping strengthen the Yen without letting bond yields rise, since Japan's net debt is well below its gross debt.
  3. Brooks expects the Yen to resume its march toward $/JPY 180, as Japan's political equilibrium remains one of denial about selling government assets.

Related Articles:

  • US and Japan Aim to Transform Yen Landscape With Joint Moves — The yen's rebound from a four-decade low points to US-Japan joint intervention larger than earlier episodes in which US contributions stayed under $1bn, with Japan alone estimated to have spent $53bn in a single day. Expectations are building for interest-rate increases by both the Federal Reserve and the Bank of Japan.
  • Shadow Government Bond Yields in the G10 — The author estimates "shadow" 30-year government bond yields for Germany, Spain, Italy, Greece and Japan — what long-term yields would be if central banks withdrew support such as Japanese government bond purchases and the European Central Bank's backstop facilities. These estimates assume no outright central bank selling, so they represent a lower bound on how high yields could go.
  • Global Debt Report 2026 — Gross central government borrowing across OECD countries rose 7% to a record $17tn, about 23% of GDP, and is projected to reach roughly $18tn, or 24% of GDP. The United States and Japan account for close to 80% of the area's refinancing requirements, with the US share rising from 57% to 70%.

AI Summary. Oracle's cost of capital appears to be rising fastest among major players: its shares have lost roughly 60% of their value, S&P Global Ratings has cut it to BBB- (just above junk), and its debt trades above BB yields. Oracle reported $55.7bn capital expenditure, negative free cash flow of $23.7bn, and long-term debt rising to $124.7bn.

Louis-Vincent Gave Gavekal
Date Posted:

Louis-Vincent Gave notes Oracle’s outstanding debt represents ~7% of the total junk bond market and suggests a downgrade “could create genuine issues for the broader US high-yield debt market.”

Is one major AI spender facing a sharply rising cost of capital?

Core argument: Oracle reported fiscal 2026 capital expenditure of $55.7bn, or 82.6% of revenue, and negative free cash flow of -$23.7bn, funded by long-term debt rising from $76.3bn to $124.7bn.

Of the major players, Oracle seems to be experiencing the fastest increase in its cost of capital. Since last September, the Oracle share price has lost roughly -60% of its value. But perhaps more worrying is the debt. Oracle has now been downgraded to BBB- by S&P Global Ratings (just above junk) though Oracle debt is trading well above the yields offered on BB debt. Today, the five-year credit default swap on Oracle trades at 200bp, while the five-year CDS on the BB index changes hands at roughly 115bp. A gap that will likely push the ratings agencies to downgrade Oracle further? A downgrade would reflect the fact that the numbers simply do not look good. Oracle reported fiscal 2026 capital expenditure of US$55.7bn, or 82.6% of revenue. The company delivered a negative free cash flow of -US$23.7bn, all this funded by an increase in long-term debt from US$76.3bn to US$124.7bn. On top of this, the company reported a further US$248bn of future data-center lease obligations not yet on the balance sheet!

Takeaways by Macro Roundup® AI

  1. Oracle reported fiscal 2026 capital expenditure of $55.7bn, or 82.6% of revenue, and negative free cash flow of -$23.7bn, funded by long-term debt rising from $76.3bn to $124.7bn.
  2. Oracle's five-year credit default swap trades at 200bp versus roughly 115bp for the five-year BB index, even though S&P Global Ratings rates Oracle BBB-, just above junk.
  3. Oracle's share price has lost roughly 60% of its value since September, and the company reported a further $248bn of future data-center lease obligations not yet on the balance sheet.

Related Articles:

  • They’re Shooting at Everyone!: The Yossarian Effect in Capital Markets — A concentrated set of highly correlated assets financed with 3-4x leverage meant a large move in one part of the market forced selling elsewhere. Funds holding no idle cash sold liquid winners such as semiconductors and other artificial intelligence names to fund SpaceX purchases, with index inclusion triggering further forced reallocation.
  • The Market Is Asking Questions — Markets are weighing whether the trillions committed upfront to AI data centers, chips, and power will generate returns above the cost of capital before those assets depreciate. With the buildout increasingly funded by debt rather than internal cash flow and borrowing spreads widening, financing costs could rise until new data-center spending no longer clears its return hurdle.
  • 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. The US is projected to cut greenhouse gas emissions 27–41% below 2005 levels by 2040 under federal and state policies currently on the books. In the high-emissions scenario, reductions slow through the early 2030s and then reverse, while in the low-emissions scenario, clean technologies' cost competitiveness accelerates declines through 2040.

Hannah Kolus, Ben King, Parker Case, Michael Gaffney, et al. Rhodium Group
Date Posted:

Rhodium projects that under current policy, US GHG emissions will be 26–29% under the 2005 level in four years, driven by an influx of natural gas and renewable production. Their forecast for 2040 is 27-41% below the 2005 level.

How much will US greenhouse gas emissions fall under current policies?

Core argument: The US is on track to cut greenhouse gas emissions 27–41% below 2005 levels in 2040, considering all federal and state policies on the books as of June 2026.

The US is on track to reduce greenhouse gas (GHG) emissions by 27-41% below 2005 levels in 2040, considering all relevant federal and state policies on the books as of June 2026. These emissions outcomes represent divergent futures after the late 2020s. In the high-emissions scenario, the emissions reductions that have characterized the last 20 years slow through the early 2030s before reversing direction altogether, with growing emissions through most of that decade. In the low-emissions case, the economic competitiveness of clean technologies relative to fossil incumbents, alongside an imperative for “speed-to-power” for large loads, continues—and accelerates—GHG emission declines through 2040.

Takeaways by Macro Roundup® AI

  1. The US is on track to cut greenhouse gas emissions 27–41% below 2005 levels in 2040, considering all federal and state policies on the books as of June 2026.
  2. In the high-emissions scenario, the emissions declines of the past 20 years slow through the early 2030s and then reverse, with US emissions growing through most of that decade.
  3. In the low-emissions scenario, the economic competitiveness of clean technologies relative to fossil incumbents and a "speed-to-power" imperative for large loads accelerate US emissions declines through 2040.

Related Articles:

  • Fighting Words: The Energy Transition in 2026 — Estimates based on primary energy overstate how much electricity is needed to replace oil in passenger cars, since electric motors convert 80%-90% of electricity into motion versus about 18% for gasoline cars. Measuring useful final energy net of waste heat avoids this "primary energy fallacy": the US consumed 45 exajoules of useful final energy versus 95 exajoules of primary energy.
  • The Most Amazing Climate Policy Figure — U.S. carbon dioxide emissions from fossil fuels moved closely with GDP from 1992 to about 2005, after which the two decoupled, with GDP continuing to rise while emissions fell.
  • The U.S. Is Forfeiting the Clean-Energy Race to China — China installed 277 gigawatts of wind and solar capacity in seven months, roughly four times the utility-scale additions U.S. federal analysts project for all power sources over a full year. Chinese firms' global market share in batteries and solar modules has reached 75% or higher, according to BloombergNEF.

AI Summary. Chinese patent data indicate that critical technology patenting is dominated by private firms and public universities rather than state-owned enterprises, with universities playing a larger role and large firms a smaller share than in the United States. Fewer than 10% of these patents involve inventors with U.S. training or employment.

Josh Lerner, Namrata Narain, Dimitris Papanikolaou, Amit Seru, et al. National Bureau of Economic Research
Date Posted:

China’s critical-technology innovation is produced chiefly by private firms and universities, not directly by state-owned enterprises or the PLA.

Who drives China's critical technology patenting?

Core argument: Fewer than 10% of Chinese critical technology patents involve inventors with U.S. training or employment, and the U.S. patent system relies substantially more on inventors with foreign backgrounds than the Chinese system does.

Patents, while an imperfect measure, have long been used to understand innovation in Western nations. In this paper, we use Chinese domestic awards to shed light on the Chinese innovative ecosystem. We suggest that many preconceptions about Chinese innovation are at odds with what is revealed by the patent data. Chinese critical technology patenting is dominated by private firms and public universities rather than state-owned enterprises, with universities playing a far larger role than in the United States. Also distinct from the United States is the low overall share of large firms. Direct foreign inventor linkages remain limited: fewer than ten percent of Chinese critical technology patents involve inventors with U.S. training or employment, while the U.S. patent system itself exhibits substantially greater reliance on inventors with foreign backgrounds than the Chinese system. Finally, the increase in Chinese critical technology patenting has not come at the cost of quality. Chinese patents have converged towards or even exceeded U.S. patents using several textual measures in most critical technologies, despite the massive increase in volume.

Takeaways by Macro Roundup® AI

  1. Fewer than 10% of Chinese critical technology patents involve inventors with U.S. training or employment, and the U.S. patent system relies substantially more on inventors with foreign backgrounds than the Chinese system does.
  2. Chinese critical technology patenting is dominated by private firms and public universities rather than state-owned enterprises, with universities playing a far larger role and large firms a smaller share than in the United States.
  3. The rise in Chinese critical technology patenting has not come at the cost of quality, as Chinese patents have converged toward or exceeded U.S. patents on several textual measures in most critical technologies.

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  • The Growing Self-Reliance of Chinese Innovation — Linking patents to scientific papers through shared phrases, the authors find China's innovation has grown markedly more self-reliant across nearly all technology areas the U.S. treats as strategically important. In an aggregate grouping of these areas, the share of patent phrases traced to Chinese-produced articles rose from 2% to 24%, while the U.S.-produced share fell from 31% to 18%.
  • China’s Next-Generation Industrial Policy — China's export growth is concentrated in upstream, higher-tech goods: exports of intermediate inputs rose 26% and capital goods 32% between 2021 and 2024, while consumption goods exports were broadly flat. This shift embeds China deeper in global production systems and aligns with its long-running import substitution strategy of localizing entire value chains.

AI Summary. China's economy runs on parallel tracks: a property crash, a booming high-tech manufacturing sector, and university graduates trained for traditional white-collar jobs entering a labor market geared toward advanced manufacturing. Researchers at Stanford and Harvard found a swing from optimism to pessimism, with about 28% of citizens expecting living standards to improve.

Evan Osnos The New Yorker
Date Posted:

Reporting from a “quiet” Beijing, Evan Osnos observes, “For a long time, China looked west for visions of the future. These days, it favors its own.”

How does China's high-tech manufacturing boom coexist with public pessimism?

Core argument: About 28% of Chinese citizens expect their standard of living to improve, roughly half the share earlier this century, according to a Stanford and Harvard study of Chinese public opinion that found a swing "from optimism to pessimism.".

China now contains a series of parallel economies: alongside the wreckage of the property crash and the thriving hive of new technologies, there are legions of university graduates who trained for traditional white-collar jobs but entered a labor market increasingly geared toward high-tech manufacturing. A study of Chinese public opinion published last year by researchers at Stanford and Harvard offered a rare in-depth look at local attitudes and found a pronounced swing “from optimism to pessimism.” The share of citizens who expect their standard of living to improve has dropped to about twenty-eight percent, roughly half of what it was earlier this century. Xu Zhiyuan, an influential writer, has called this “a profoundly confused era,” marked by “an economic downturn, the uncertainty of international geopolitics and the enormous impact of A.I. all at once.” Last fall, government censors launched a campaign against “excessively pessimistic sentiment” online, including comments such as “Hard work is useless.”

Takeaways by Macro Roundup® AI

  1. About 28% of Chinese citizens expect their standard of living to improve, roughly half the share earlier this century, according to a Stanford and Harvard study of Chinese public opinion that found a swing "from optimism to pessimism.".
  2. China contains parallel economies: the wreckage of the property crash alongside thriving new technologies, with legions of university graduates trained for traditional white-collar jobs entering a labor market increasingly geared toward high-tech manufacturing.
  3. Chinese government censors launched a campaign against "excessively pessimistic sentiment" online, including comments such as "Hard work is useless.".

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  • 2025 Letter — China's economy features intense market competition, with firms continually expanding into each other's core businesses, a dynamic the author argues involves greater capitalist competition and greater capitalist excess than in the United States. The author attributes China's sideways-trending stock market in part to profits being competed away.
  • Is China’s High-Quality Investment Output Economically Viable? — China's technological progress and infrastructure do not refute claims of overinvestment, since overinvestment often produces real physical assets and technological gains yet still counts as overinvestment when it generates less real value than the resources, subsidies, and transfers it consumes. When such losses are capitalized, assets are carried above their real economic value.
  • Litigation Nation, Engineering Empire — Regrouping US college majors to match Chinese disciplines yields a 2:1 ratio of science and engineering to humanities and social sciences, the same ratio as in China. The author argues America's building slowdown reflects structural economic shifts—urbanization reached 70% by 1960 and 85% by 2020, shifting needs toward maintenance—rather than a lawyerly culture.