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


Thursday, August 13, 2026

AI Summary. Corporate earnings have risen faster than stock prices, with earnings excluding Amazon and Alphabet up 32%, evidence against a bubble explanation for the stock market's disconnect from GDP. Bank of America calculates median S&P 500 earnings growth has accelerated to 13% from 8%, with real revenue up around 8%.

Greg Ip Wall Street Journal
Date Posted:

A Bank of America analysis finds the median earnings growth of S&P 500 firms has accelerated to 13% from 8% two years ago. Total revenue, adjusted for inflation and currency changes, excluding energy and financial firms, is up ~8%.

Do rising earnings undercut the bubble explanation for stock market gains?

Core argument: Excluding Amazon.com and Alphabet, whose results were inflated by investment gains, S&P 500 earnings rose 32% in the second quarter so far, with earnings outpacing stock prices over the past year.

There are several potential explanations for why the stock market has disconnected from GDP. One is that it’s a bubble. Another is that it tells us something about the future, namely that growth is going to accelerate. In a bubble, stock prices typically go up faster than earnings, inflating valuations. But in the last year, earnings have risen faster than prices. Exclude Amazon.com and Alphabet, whose results were inflated by investment gains, and earnings were up a stunning 32% in the second quarter so far. The boom isn’t just a tech or AI story. The median earnings growth of S&P 500 companies has accelerated to 13% from 8% two years ago, according to Bank of America. The bank calculates that total revenue for the index excluding energy and financial companies, and adjusted for inflation and currency changes, is up around 8%, much more than GDP.

Takeaways by Macro Roundup® AI

  1. Excluding Amazon.com and Alphabet, whose results were inflated by investment gains, S&P 500 earnings rose 32% in the second quarter so far, with earnings outpacing stock prices over the past year.
  2. Median earnings growth of S&P 500 companies has accelerated to 13% from 8% two years ago, according to Bank of America, indicating the boom is not confined to technology and AI.
  3. Bank of America calculates that S&P 500 revenue excluding energy and financial companies, adjusted for inflation and currency changes, is up around 8%, much more than GDP.

Related Articles:

  • Are US Corporate Profit Margins Too High? — US after-tax non-financial corporate profit margins remain elevated by historical standards, estimated at 7.6% versus a post-1949 high of 8.2%, while employee pay as a share of non-financial corporate gross value added has fallen from 66% to 56%. One argument holds that subdued demographic growth leads companies to prioritize maximizing margins over expanding capacity.
  • The Summer I Turned Pretty — A warning sign in a boom cycle is when companies closest to final demand weaken while capital spending beneficiaries keep thriving, as when telecom operators' shares rolled over while communications equipment stocks kept rising. Semiconductor stock prices and free cash flow are soaring while large cloud providers' shares stagnate and their free cash flow plummets.
  • Momentum, Rotation and the Value in Growth — After a fifteen-year stretch in which US equities, technology and growth stocks led, equity gains have broadened geographically, with the US the weakest of the major regions. The five largest US stocks now trade at a price-to-earnings ratio only marginally above the other 495, after holding a consistent premium since 2017.

AI Summary. A $42bn auction of 10-year US Treasury notes cleared at a yield of 4.683%, the highest for the benchmark security since 2007, as investors demanded more compensation to finance the US government. The yield came in just above the level prevailing in the market before bidding closed, indicating demand slightly lagged expectations.

Michael MacKenzie and Greg Ritchie Bloomberg
Date Posted:

An auction of $42B of 10-Year Treasuries drew “decent” demand, with the yield rising to 4.683% — the highest 10-year yield at auction since 2007.

Are investors demanding higher yields to finance US government borrowing?

Core argument: A $42 billion auction of 10-year US Treasuries cleared at a yield of 4.683%, the highest for the benchmark security since 2007.

A $42 billion auction of 10-year US Treasuries resulted in the highest yield for the benchmark securities since 2007, luring decent appetite from investors who’ve been demanding more compensation to finance the US government. The yield at Wednesday’s sale came in at 4.683%, the most since the global financial crisis, and just above the prevailing level seen in the market before the 1 p.m. bidding deadline in New York — a sign that demand only slightly lagged expectations.

Takeaways by Macro Roundup® AI

  1. A $42 billion auction of 10-year US Treasuries cleared at a yield of 4.683%, the highest for the benchmark security since 2007.
  2. The auction yield came in just above the level prevailing in the market before the 1 p.m. New York bidding deadline, a sign that demand only slightly lagged expectations.
  3. The 10-year Treasury sale drew decent appetite from investors who have been demanding more compensation to finance the US government.

Related Articles:

  • The Global Fiscal Train Wreck — Ten-year forward yields ten years ahead have risen across major advanced economies, not just the US, a global theme the author attributes to the debt buildup during the pandemic. The author argues economies have begun shifting from a good to a bad debt equilibrium, which he sees behind the rally in precious metals prices tied to a "debasement trade.
  • 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. Tanker tracking data identify at least 5m barrels a day of oil still transiting the Strait of Hormuz, and allowing for vessels crossing undetected the true figure could reach 7m–9m. Growing oil spills visible on satellite imagery indicate attacks on tankers alongside efforts to keep the waterway open.

Javier Blas Bloomberg
Date Posted:

US Energy Secretary Chris Wright reported that ~9mm bpd crossed Hormuz over the previous week. Javier Blas’s baseline was ~7mm but finds Wright’s claim plausible: “If we’re missing two tankers rather than one, that raises it to 9 million barrels.”

Is oil still flowing through the Strait of Hormuz despite attacks?

Core argument: Counting identified tankers in available data shows at least 5 million barrels a day transiting the Strait of Hormuz, before any adjustment for vessels that go uncounted.

By counting identified tankers using available data, we can safely say that, at the very least, 5 million barrels a day are transiting Hormuz. Then I like to add an adjustment factor for known unknowns — because I’m quite certain that more is happening. Say one supertanker a day is crossing in utmost secrecy; that pushes the count to 7 million barrels a day. If we’re missing two tankers rather than one, that raises it to 9 million barrels. It quickly adds up. There's a tell of what’s going on: Oil spills in the Strait of Hormuz, quite visible on the available satellite imagery, are growing by the day. It’s a sign that Iran is attacking tankers to keep the waterway closed, but also an indication that many are battling equally to keep it open — perhaps more successfully than we think.

Takeaways by Macro Roundup® AI

  1. Counting identified tankers in available data shows at least 5 million barrels a day transiting the Strait of Hormuz, before any adjustment for vessels that go uncounted.
  2. Assuming one supertanker a day crosses in secrecy raises the estimated flow through the Strait of Hormuz to 7 million barrels a day, and two missed tankers raise it to 9 million.
  3. Oil spills visible on satellite imagery of the Strait of Hormuz are growing by the day, an indication that Iran is attacking tankers to close the waterway while others work to keep it open.

Related Articles:

  • Brace for a Flood of Oil as Soon as Hormuz Reopens — No Gulf producer's oil output has fallen to zero, as engineers have rotated well shutdowns, choked flows to a trickle, and used pipelines bypassing the Strait of Hormuz to avoid clogging and pressure loss on restart. The author argues that reopening the strait will surprise observers with its speed.
  • 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.
  • Power Politics: Energy Self-Sufficiency in a Modern Mercantilist World — China leads in adding power to the grid, with more than 30,000 miles of ultra-high-voltage transmission lines versus zero in the US and lead times for large transformers of 48 weeks against a US average of 143 weeks. This positions China to accommodate new demand sources such as artificial intelligence.

AI Summary. Global copper demand is projected to rise about 50% to 42m metric tons by 2040, with supply falling short by as much as 10m, as electric vehicles require nearly 3x the copper of conventional cars. Analysts attribute the shortfall to declining ore grades, few large discoveries, and 17-year average development timelines.

John Authers Bloomberg
Date Posted:

Copper hit a new all-time high. The underlying driver is the accelerating pace of electrification, which S&P Global forecasts will increase copper demand by 50% over the next 15 years, which alongside supply constraints will likely create a supply shortfall of ~10mm metric tons by 2040.

Will copper supply fall short of rising demand by 2040?

Core argument: Global copper demand is expected to rise about 50% to 42 million metric tons by 2040, with supply expected to fall short by as much as 10 million metric tons.

AI-related demand is dwarfed by the huge energy transition — encompassing electric vehicles, renewables, and grid infrastructure. In general, EVs require nearly three times as much copper as conventional cars, and their rapidly growing sales add to demand. Global EV sales last year were 25% higher than total new-car sales in the US, the world's second-largest new-car market. Altogether, global copper demand is expected to shoot up by about 50%, rising to 42 million metric tons by 2040. Meanwhile, supply is expected to fall short by as much as 10 million. Freedom Broker argues that this will be driven by declining ore grades, limited large-scale discoveries — even as the global copper exploration budget has increased in recent years — and extended project development timelines averaging 17 years from discovery to production.

Takeaways by Macro Roundup® AI

  1. Global copper demand is expected to rise about 50% to 42 million metric tons by 2040, with supply expected to fall short by as much as 10 million metric tons.
  2. Electric vehicles require nearly three times as much copper as conventional cars, and global EV sales last year ran 25% above total new-car sales in the US, the world's second-largest new-car market.
  3. Freedom Broker attributes the projected copper shortfall to declining ore grades, limited large-scale discoveries despite increased global exploration budgets, and development timelines averaging 17 years from discovery to production.

Related Articles:

  • US Copper Problem Is Processing, Not Supply, Study Finds — The US constraint in copper is processing capacity rather than raw supply: domestic mine output and scrap are exported in large volumes, often to China, to be refined into the copper cathode used in manufacturing. Analysis by Benchmark Mineral Intelligence finds US raw copper sources could cover 146% of annual demand, versus 40% for China.
  • The World’s Copper Squeeze Is Set to Intensify on AI and Defense Spending, S&P Says — S&P Global projects copper demand will rise 50% to 42m tons by 2040 while production peaks near 33m tons in 2030 as ore quality declines at existing mines and new projects face permitting, financing and construction hurdles. The projected 10m-ton gap assumes recycled copper more than doubles to 10m tons.
  • Capital Is Making a Comeback — Tangible investment in property, factories and equipment fell from 12.5% to 8.5% of private gross domestic product, while intangible investment in intellectual property, software and process knowledge rose from about 11.5% to 16.75%. The author argues demand for tangible capital investment will now have to rise.

AI Summary. Democratic turnout in midterm elections is not among the party's problems, and midterm conditions favor it despite internal disarray. A president with a 38% approval rating, an unpopular Middle East quagmire, spiking gas prices, and an 80-year-old lame-duck incumbent coincide with worldwide voter anger toward whoever holds power.

Nate Silver and Eli McKown-Dawson Silver Bulletin
Date Posted:

Nate Silver’s midterm election model gives the Democrats an ~86% chance of flipping the House and a ~56% chance of flipping the Senate though Silver notes, “I’ll admit to being slightly surprised by that [Senate] number.”

Do favorable midterm conditions outweigh a party's internal disarray?

Core argument: Democrats face many problems, but turning out their voters in midterm elections is not one of them, the piece argues.

The Democratic Party has a whole host of problems; turning out their voters in midterms isn’t one of them. For midterm election purposes, you’d rather have a little internal disarray than have a president with a 38% approval rating on the basis of an unpopular quagmire in the Middle East and understandable voter anxiety about spiking gas prices. Not to mention voter fatigue over an 80-year-old, lame duck president at a time when the incumbency “advantage” has turned into persistent anger all around the world toward the status quo and whoever is in charge of it.

Takeaways by Macro Roundup® AI

  1. Democrats face many problems, but turning out their voters in midterm elections is not one of them, the piece argues.
  2. For midterm purposes, the piece argues, internal disarray is preferable to a president with a 38% approval rating amid an unpopular Middle East quagmire and voter anxiety over spiking gas prices.
  3. Voter fatigue with an 80-year-old lame-duck president coincides with incumbency turning from an advantage into persistent anger worldwide toward the status quo and whoever is in charge, the piece argues.

Related Articles:

  • Is The Vibecession Real — Or Is The Survey Broken? — The Index of Consumer Sentiment is distorted by an oversampling of Democrats and by a shift from telephone to online polling that made responses more negative, with partisan nonresponse and respondents using economic questions to express political views. Adjusting for both leaves sentiment historically low but not at Great Recession lows.
  • America’s Support for Capitalism Has Declined Over Last Decade — Just under half of Americans say capitalism is working very or somewhat well, down from 60% about a decade ago, according to a Wall Street Journal-NORC survey. Only 12% say democracy is working very or extremely well, and 16% say average citizens have considerable influence on politics.
  • Zero-Sum Thinking and the Roots of US Political Differences — The authors construct an index of "zero-sum thinking" — the belief that one group's economic gains come at another's expense across ethnic groups, citizens versus non-citizens, and countries in international trade. Among both moderate and strong Democrats, those in the top quartile of zero-sum thinking voted for Donald Trump at a disproportionately high rate.

Friday, August 14, 2026

AI Summary. OpenAI cut its GPT-5.6 Luna prices by 80% and Anthropic launched Opus 5 at half the price of its Fable 5 model while cancelling a planned Sonnet 5 price increase. Headline token prices are not directly comparable, since more capable models can finish tasks using fewer tokens or attempts.

Jamie John and Clara Murray Financial Times
Date Posted:

Token prices for the leading US AI labs are falling. OpenAI cut the price of its mid-tier GPT-5.6 Luna by 80%, while Anthropic reduced the price of its Opus 5 by 50% relative to its frontier Fable 5 model.

Are leading AI developers cutting model prices as Chinese rivals gain ground?

Core argument: OpenAI cut GPT-5.6 Luna pricing from $1 to $0.20 per mn input tokens and from $6 to $1.20 per mn output tokens.

OpenAI cut the price of GPT-5.6 Luna from $1 to $0.20 per mn input tokens and from $6 to $1.20 per mn output tokens. Anthropic launched Opus 5 at $5 per mn input tokens and $25 per mn output tokens — half the price of its Fable 5 model. This week, the company called off a planned rise in prices for its Sonnet 5 model, which had been due to take effect from September. Headline token prices do not provide a straightforward comparison between AI models, however. More capable models can sometimes complete a task using fewer tokens or with fewer attempts, meaning a model that appears more expensive based on the headline price of tokens can ultimately cost less.

Takeaways by Macro Roundup® AI

  1. OpenAI cut GPT-5.6 Luna pricing from $1 to $0.20 per mn input tokens and from $6 to $1.20 per mn output tokens.
  2. Anthropic launched Opus 5 at $5 per mn input tokens and $25 per mn output tokens, half the price of its Fable 5 model, and called off a planned Sonnet 5 price rise due to take effect from September.
  3. Headline token prices do not offer a straightforward comparison across AI models, since more capable models can sometimes complete a task using fewer tokens or fewer attempts and ultimately cost less.

Related Articles:

  • Chart of the Day: Small Models are Closing the Gap to Frontier AI — Achieving 60% on MMLU, a test of academic reasoning, once required a 540bn-parameter model but was reached by a 3.8bn-parameter model two years later, a 142x reduction in parameters. Models small enough to run on phones or sensors shift inference from data centers to devices, weakening the case for paying cloud providers per token.
  • Who’s Afraid of Chinese Models? — Demand for frontier artificial intelligence models exceeds supply because computing capacity is scarce, allowing chip suppliers and their customers to resell compute at high margins. The author argues alarm over Chinese models is overblown, expecting the inference market to grow faster than training costs so labs can thrive at lower prices.
  • The AI Trade Is Losing One of Its Key Signals — An index blending artificial intelligence token prices and usage is ambiguous when it softens, since token prices have fallen more than 90% since 2023 while total spending has roughly doubled over the past year. Allianz Research measures a nearly 46% growth gap between artificial intelligence investment and sales, wider than the 32% divergence during the 2001 telecom bust.

AI Summary. Cash funded 85% of capital spending at Alphabet, Amazon, CoreWeave, Meta, Microsoft, Nebius, and Oracle in 2024, falling to 70% in 2025 and two-thirds in 2026, with 2026 capital spending guidance of $863bn exceeding their combined operating cash flow for the first time. About $282bn is funded by debt, equity, and leases.

Hannah Petrovic, William Gildea and Marija Gavrilov Exponential View
Date Posted:

An Exponential View analysis of capex guidance suggests the 7 largest hyperscalers will spend ~$863B in 2026, exceeding their combined operating cash flow for the first time. Two-thirds of the AI buildout is still funded by cash, down from 85% in 2024.

Are the largest tech firms funding AI capital spending with more debt?

Core argument: The Big Seven — Alphabet, Amazon, CoreWeave, Meta, Microsoft, Nebius, and Oracle — guided to $863 billion of capex for 2026, exceeding their combined operating cash flow for the first time.

In 2024, cash funded 85% of Alphabet, Amazon, CoreWeave, Meta, Microsoft, Nebius, and Oracle's (the Big Seven's) capex; it dropped to 70% in 2025 and is at two-thirds in 2026. Capex guidance of $863 billion for 2026 exceeds the Big Seven’s combined operating cash flow for the first time. Some $282 billion – around a third – is funded by debt, equity, and leases. Current capex reading is great news for anyone buying compute. A third of the buildout is about to come online – and its owners will be looking to earn with it.

Takeaways by Macro Roundup® AI

  1. The Big Seven — Alphabet, Amazon, CoreWeave, Meta, Microsoft, Nebius, and Oracle — guided to $863 billion of capex for 2026, exceeding their combined operating cash flow for the first time.
  2. Cash funded 85% of the Big Seven's capex in 2024, falling to 70% in 2025 and two-thirds in 2026, with about $282 billion financed by debt, equity, and leases.
  3. A third of the AI buildout is about to come online with its owners looking to earn from it, which the article casts as good news for buyers of compute.

Related Articles:

  • The State of the AI Economy — An analysis estimates the AI ecosystem generated $110bn in revenue over 12 months excluding double-counting, with the most recent month annualizing to a $175bn run rate. After separating AI-specific capital spending from the roughly $120bn hyperscalers already spent annually and depreciating compute over 6 years, revenues attributable to hyperscalers roughly cover depreciation.
  • The Summer I Turned Pretty — A warning sign in a boom cycle is when companies closest to final demand weaken while capital spending beneficiaries keep thriving, as when telecom operators' shares rolled over while communications equipment stocks kept rising. Semiconductor stock prices and free cash flow are soaring while large cloud providers' shares stagnate and their free cash flow plummets.
  • 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.

AI Summary. Goldman Sachs analysts tallied $1.5tn of lease commitments in the footnotes of large cloud computing companies' regulatory filings, of which $1tn had not yet commenced and so did not appear as conventional liabilities. The analysts noted this treatment can understate leverage and future liquidity needs as those obligations are eventually recognized.

Robin Wigglesworth Financial Times
Date Posted:

As of Q2, the hyperscalers have ~$2.5T lease and purchase commitments that are off balance sheet. GS warns “this treatment can understate leverage and future liquidity needs as these obligations are recognised and contractual payments come due.”

Do cloud companies' off-balance-sheet lease commitments understate their leverage?

Core argument: Goldman Sachs analysts counted $1.5tn of lease commitments in the footnotes of hyperscalers' regulatory filings, of which $1tn had not yet started and therefore did not appear in their accounts as conventional liabilities.

Goldman Sachs analysts scoured through the footnotes of the hyperscalers’ regulatory filings and counted $1.5tn of lease commitments, of which $1tn hadn’t started yet and therefore didn’t appear in their financial accounts as conventional liabilities. As those analysts obliquely noted: "From a credit perspective, this treatment can understate leverage and future liquidity needs as these obligations are eventually recognised and contractual payments come due." [We noted] an interesting titbit from an earlier Morgan Stanley report which also totaled up the purchase commitments of Alphabet, Microsoft, Amazon, Nvidia and Oracle. These are typically contractual obligations to buy chips, compute, electricity to power data centres, and other equipment, and came to nearly $1.5T.

Takeaways by Macro Roundup® AI

  1. Goldman Sachs analysts counted $1.5tn of lease commitments in the footnotes of hyperscalers' regulatory filings, of which $1tn had not yet started and therefore did not appear in their accounts as conventional liabilities.
  2. Goldman Sachs analysts noted that this treatment "can understate leverage and future liquidity needs as these obligations are eventually recognised and contractual payments come due.".
  3. An earlier Morgan Stanley report totaled the purchase commitments of Alphabet, Microsoft, Amazon, Nvidia and Oracle at nearly $1.5tn, typically contractual obligations to buy chips, compute, electricity to power data centres and other equipment.

Related Articles:

  • Big Tech AI Spending Spree Tops $1tn — Google, Amazon, Microsoft and Meta have together spent $1.1tn on capital investment since the start of the artificial intelligence boom in 2023, according to the companies' earnings reports. Executives at several of the firms told analysts the spending would continue to reduce free cash flow in coming quarters.
  • 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.
  • Big Tech Credit Risks Rise Sharply As AI Spending Soars — The cost of insuring debt against default for Oracle, SpaceX, Alphabet, Amazon, Meta, Broadcom, and Nvidia has reached record highs, with Oracle's five-year credit protection quoted at 215 basis points versus 144 earlier in the year. S&P Global Ratings cut Oracle to one notch above junk, citing an uncertain path to profitability amid massive AI investments.

AI Summary. The US government sold $25bn of 30-year bonds at a yield of 5.216%, the highest at such a sale since 2001, reflecting investors' demand for compensation to finance a growing deficit. The yield came in slightly above the prevailing market level before the bidding deadline, indicating demand modestly lagged expectations.

Greg Ritchie Bloomberg
Date Posted:

Though a $25B auction of 30-Year Treasurys drew “decent” demand, the yield rose to 5.216% — the highest 30-year yield at auction since August 2001.

Are investors demanding higher yields to finance the growing deficit?

Core argument: The US Treasury sold $25 billion of 30-year bonds at a yield of 5.216%, the highest since 2001, reflecting investors' demand for compensation to finance the nation's growing deficit.

The US government sold 30-year bonds at the highest interest rate in a quarter of a century, a testament to investors’ demand for compensation to finance the nation’s growing deficit. The yield at the $25 billion sale Thursday came in at 5.216%, the most since 2001, even as a drop in oil prices supported US debt in secondary-market trading. The sale was met with decent demand. The yield at Thursday’s 30-year sale was a little above the prevailing level seen in the market before the 1 p.m. bidding deadline in New York—a sign that demand slightly lagged expectations.

Takeaways by Macro Roundup® AI

  1. The US Treasury sold $25 billion of 30-year bonds at a yield of 5.216%, the highest since 2001, reflecting investors' demand for compensation to finance the nation's growing deficit.
  2. The 30-year auction yield came in slightly above the level prevailing in the market before the 1 p.m. New York bidding deadline, a sign that demand slightly lagged expectations.
  3. A drop in oil prices supported US debt in secondary-market trading on the day of the 30-year sale, which was met with decent demand.

Related Articles:

  • If Anyone Needs an Intervention, It’s the BOJ — 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.
  • 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.
  • The Dangerous Brew That’s Rattling Bond Markets — U.S. inflation has remained above the Federal Reserve's 2% target since 2022 while government borrowing runs high and companies borrow heavily to fund AI build-out. Even so, the 30-year Treasury yield reached a 19-year high of 5.18% while the 10-year yield, at 4.67%, sat below its October 2023 level.

AI Summary. The gap between crude oil prices and the prices of refined products has widened by about $35/barrel, because much of the world's refining capacity is either trapped behind the Strait of Hormuz or knocked offline by drone strikes. That refining shortage holds crude prices down, since buyers won't pay high prices for oil they cannot refine.

Paul Krugman Krugman Wonks Out
Date Posted:

Krugman asks why crude is “only” ~$25 above its prewar level. Much of the world’s refining capacity is trapped behind Hormuz or offline, raising the “crack spread” – the premium on refined products like diesel – while depressing the crude oil price.

Does a shortage of refining capacity hold crude oil prices down?

Core argument: The crack spread — the gap between crude prices and the prices of refined products — has risen about $35/barrel since the eve of the war.

The difference between the price of a barrel of crude and the price of the products refined from that barrel — the “crack spread” — has exploded, rising about $35/barrel since the eve of the war. Why has the crack spread widened so much? The main answer is that a lot of the world’s refining capacity is either trapped inside the Strait or offline as a result of Ukraine’s drone campaign. It’s not all about Iran. The shortage of refining capacity has held crude prices down, as buyers won’t pay extremely high prices for crude they can’t refine. Or to put it differently but equivalently, the cutoff of oil shipments through the Strait of Hormuz, in effect, required a large rise in global prices [of petroleum products] to ration demand, but much of that rationing has taken place through a rise in the crack spread rather than a rise in crude oil prices.

Takeaways by Macro Roundup® AI

  1. The crack spread — the gap between crude prices and the prices of refined products — has risen about $35/barrel since the eve of the war.
  2. Much of the world's refining capacity is either trapped inside the Strait of Hormuz or offline because of Ukraine's drone campaign, a shortage that holds crude prices down because buyers won't pay extremely high prices for crude they can't refine.
  3. The cutoff of oil shipments through the Strait of Hormuz required a large rise in global petroleum product prices to ration demand, and much of that rationing has occurred through a wider crack spread rather than higher crude prices.

Related Articles:

  • For the Oil Market, the Strait of Hormuz Isn’t Closed — Tanker tracking data identify at least 5m barrels a day of oil still transiting the Strait of Hormuz, and allowing for vessels crossing undetected the true figure could reach 7m–9m. Growing oil spills visible on satellite imagery indicate attacks on tankers alongside efforts to keep the waterway open.
  • How China Became The World’s Great Oil Power — China cut crude oil imports by half, or 5.5m barrels a day, without a corresponding economic slowdown, a decline experts estimate shaved $30 or more off the global Brent benchmark price. This ability to switch oil demand on and off lets the world's largest oil importer move prices much as OPEC does through output control.
  • 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. Global fertility is likely below the replacement level needed to keep population constant in the long run, though population momentum from large cohorts of women now having children means world population will keep growing for roughly another 30 years. Unless trends change, it is projected to peak near 9bn around 2056 and then decline.

Jesús Fernández-Villaverde and Patrick Norrick University of Pennsylvania
Date Posted:
Is Database:
Database
Is Important:
Important

The UN appears to systematically overestimate births; e.g. 33 of 37 countries with high-quality statistics registered fewer births in 2024 than the UN had forecast. Fernández-Villaverde and Norrick infer humanity is below replacement fertility in 2026.

Will world population keep growing even as fertility falls below replacement?

Core argument: As of 2026, humanity is likely to be below replacement fertility, with fewer births than needed to keep population constant in the long run.

In Table A1 we compare the World Population Prospects (WPP) estimates of births in 2022-2023 with the official numbers reported by several countries. [A2 shows the full sample with the deviations.] As of 2026, humanity is likely to be below the replacement fertility level: we are having fewer births than we need to keep population constant in the long run. This astonishing fact does not mean that population has stopped growing. Because of momentum effects (the large cohorts of women born two or three decades ago are having their children now, and their own parents have not died yet), world population will keep growing for another 30 years or so. But unless trends change, it will peak at roughly 9 billion around 2056 and then start falling, first slowly, then fast.

Takeaways by Macro Roundup® AI

  1. As of 2026, humanity is likely to be below replacement fertility, with fewer births than needed to keep population constant in the long run.
  2. World population is set to keep growing for roughly another 30 years because of momentum effects, as large cohorts of women born two or three decades ago have their children while their own parents are still alive.
  3. Unless trends change, world population will peak at roughly 9 billion around 2056 and then start falling, first slowly, then fast.

Related Articles:

  • The Demographic Future of Humanity: Facts and Consequences — The authors estimate the world total fertility rate is around 2.17, below the global replacement rate of roughly 2.21, meaning humanity is already below replacement, with fertility and births falling faster than anticipated. They project middle-income countries' fertility may fall below that of rich countries outside East Asia, with emigration compounding population decline.
  • Depopulation Globally and in the Asia-Pacific: The Shape of Things to Come — Population aging and fertility below replacement levels are connected to a revolution in family structure in which families grow smaller, fewer people marry, and voluntary childlessness becomes common across countries. As a result, families become less able to bear the demands that may be placed on them.
  • The Wealth of Working Nations — Because of population aging, growth in GDP per capita and GDP per working-age adult have diverged across advanced economies; from 1998 to 2019 Japan's accumulated growth per working-age adult was 31.9% versus 29.5% in the US. The authors find a standard neoclassical growth model calibrated to each country's working-age population tracks output per working-age adult in most economies.