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


Friday, August 21, 2026

AI Summary. Two market-based measures suggest the safety premium investors pay to hold US Treasuries has compressed toward zero and at times reversed: the spread between top-rated corporate bonds and Treasuries after stripping out default risk, and the gap between currency-hedged foreign G10 government yields and Treasury yields at the same maturity, where longer-maturity comparisons now favor foreign bonds.

Hanno Lustig Aspen Economic Strategy Group
Date Posted:
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Lustig shows the premium investors pay for Treasurys over substitutes such as AAA corporate debt and G10 sovereign debt has compressed post 2020. “Investors are now indifferent between [Treasurys] and close substitutes.”

Is the safety premium investors pay for Treasuries disappearing?

Core argument: The credit risk-adjusted AAA-Treasury spread, built by using credit default swaps to strip default-risk compensation out of corporate-bond yields, estimates the safety premium investors pay for Treasurys; since 2022 it has compressed toward zero and at points reversed.

The top panel uses the credit risk-adjusted AAA-Treasury spread. We use the CDS to strip the default-risk compensation out of the corporate-bond yield. What remains is a clean estimate of the safety premium that investors pay for Treasurys over otherwise-equivalent corporate exposure. Post-2022, it has compressed toward zero, and at points, has reversed. The bottom panel uses the Treasury Premium, defined as the difference between the synthetic-dollar foreign sovereign yield and the US Treasury yield at the same maturity. The synthetic-dollar foreign yield is constructed by swapping the coupon payments on foreign G10 sovereign bonds into dollars using the foreign-exchange forward market. This eliminates currency risk over the life of the bond, so the resulting dollar cash-flow stream is directly comparable to a US Treasury yield of the same maturity. At longer maturities, global investors now seem to prefer the safety of foreign G10 bonds.

Takeaways by Macro Roundup® AI

  1. The credit risk-adjusted AAA-Treasury spread, built by using credit default swaps to strip default-risk compensation out of corporate-bond yields, estimates the safety premium investors pay for Treasurys; since 2022 it has compressed toward zero and at points reversed.
  2. The Treasury Premium, the gap between synthetic-dollar G10 sovereign yields — foreign sovereign coupons swapped into dollars via the foreign-exchange forward market to eliminate currency risk — and US Treasury yields at the same maturity, suggests global investors now prefer foreign G10 bonds at longer maturities.

Related Articles:

  • The United States Capital Structure — Because Social Security and Medicare benefits are politically untouchable, retirees effectively hold the most senior claim on US government resources while Treasury bondholders hold the riskiest one. On this argument, bondholders absorb adverse fiscal shocks through surprise inflation, financial repression, or both.
  • 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.
  • U.S. Treasury Investors Are Long in AI — The authors find U.S. government debt has a large positive productivity beta, because the tax code makes federal revenue highly sensitive to productivity growth while spending commitments change little, leaving bondholders implicitly long productivity growth. They argue greater market confidence in sustained productivity gains from AI could substantially reprice government debt, lowering nominal yields.

AI Summary. Estimated underlying trend job growth slowed to about 5k, below the estimated 50k breakeven pace, so similar readings would likely reverse part of the unemployment rate's decline from 4.5% to 4.1%. The authors argue that decline reflects lower labor force participation rather than higher employment, with wage growth still weak.

Jan Hatzius Goldman Sachs
Date Posted:

The decline in unemployment has been driven by lower labor force participation, not an increase in employment. Hatzius stresses continued weakness in wage growth as evidence that the labor market is not tightening, and sees no hikes on the horizon.

Does the falling unemployment rate signal a tightening labor market?

Core argument: Underlying trend job growth slowed to an estimated 5k in July as nonfarm payrolls and household employment both fell on the month, below the estimated breakeven pace of 50k.

With nonfarm payrolls and household employment down on the month, our estimate of underlying trend job growth slowed further to just 5k in July. Since this is below our estimate of breakeven job growth of 50k, similar numbers in coming months would probably reverse some of the decline in the unemployment rate from 4.5% in December to 4.1% in July. We think this decline deserves less weight than it normally would because it has been driven by lower labor force participation, not higher employment. This is visible not only in the headline employment/population ratio (whose sharp decline is partly driven by changes in the age structure of the population) but to some degree also in a composition-adjusted version that holds the age structure constant over time. The continued weakness in wage growth also argues against the notion that the labor market is tightening.

Takeaways by Macro Roundup® AI

  1. Underlying trend job growth slowed to an estimated 5k in July as nonfarm payrolls and household employment both fell on the month, below the estimated breakeven pace of 50k.
  2. Similar job gains in coming months would probably reverse some of the decline in the unemployment rate from 4.5% in December to 4.1% in July.
  3. The decline in unemployment deserves less weight because lower labor force participation rather than higher employment has driven it, and continued weak wage growth argues against the notion that the labor market is tightening.

Related Articles:

  • Labor Force Participation Is High If You Measure It Right — 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.
  • The Jobless Boom Has Arrived — 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%.
  • 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.

AI Summary. More than 60% of Americans oppose new data centers in their area, up from 49% earlier in the year, according to a University of Pennsylvania poll, and dozens of states and localities have imposed bans or pauses on new projects. Texas halted approvals of roughly 1,800 new data centers worth billions of dollars.

Amrith Ramkumar and Sabrina Rodriguez Wall Street Journal
Date Posted:

A UPenn survey found ~60% of Americans oppose new data centers in their area, up from 49% in March. In Texas, previously supportive governor Greg Abbott halted approval of ~1,800 datacenters in the state.

Is public opposition to new data centers rising sharply?

Core argument: More than 60% of Americans oppose new data centers in their area, up from 49% in March, according to a University of Pennsylvania poll.

In November Greg Abbott declared his state the “epicenter of AI development” while announcing a $40 billion investment by Google. Less than a year later, the Republican said he halted approvals of some 1,800 new data centers worth billions of dollars. More than 60% of Americans now oppose new data centers in their area, up from 49% in March, a University of Pennsylvania poll found. The backlash is a crisis for AI companies, which are facing bans or pauses on new projects in dozens of states and localities. [The bans or pauses] pose a risk to investors heading into the 2028 presidential election, analysts at Evercore ISI said in a note to clients.

Takeaways by Macro Roundup® AI

  1. More than 60% of Americans oppose new data centers in their area, up from 49% in March, according to a University of Pennsylvania poll.
  2. Texas Governor Greg Abbott, who declared his state the "epicenter of AI development" while announcing a $40 billion Google investment, said he halted approvals of some 1,800 new data centers worth billions of dollars.
  3. Evercore ISI analysts told clients that bans or pauses on new data center projects across dozens of states and localities pose a risk to investors heading into the 2028 presidential election.

Related Articles:

  • AI is the Democratic Party’s Next Villain — Mentions of billionaires in Democratic fundraising emails quadrupled to a peak above 20% of all emails sent and have held near 15%, making anti-billionaire messaging a mainstay. Anti-AI populism remains far smaller and is entering Democratic rhetoric not as a jobs or safety issue but as something billionaires are building.
  • This Doommaxxing Has Got to Stop — The author argues that negative narratives, including pessimism about new technology, played an underappreciated role in the economic climate of the Great Depression, alongside more widely studied causes such as sweeping bank failures, a weak initial Federal Reserve response, and a tariff regime that reduced global trade.
  • America’s Data Center Build-Out Is Falling Way Behind Schedule — A JPMorgan analysis found that more than 60% of US data-center capacity planned for completion in 2027 has not yet begun construction, with another 7% delayed. Analysts and power-industry experts say Google's strategy of owning generation—including its $4.75bn purchase of wind and solar developer Intersect—and shifting computing loads to follow power supply could speed its grid connections.

AI Summary. Israel is the only affluent democracy where estimated fertility rose over the past generation, from 2.9 births per woman in 1991 to 3 in 2021, driven by a rise in Jewish fertility from about 2.6 in 1995 to 3.1 in 2024. Excluding the Haredi community, fertility among secular, traditional and national-religious Jews averages about 2.5.

Nicholas Eberstadt and Patrick Norrick American Enterprise Institute
Date Posted:

The rise in Israeli Jewish fertility is an exception to the collapse across advanced economies. TFR is 1.9 among secular Jews, 2.1–2.7 among traditional Jews and 3.7 among Dati Jews. Eberstadt suggests mimetics—social imitation—may help explain it.

Is there an affluent democracy where fertility has risen?

Core argument: Israel is the only affluent democracy where estimated total fertility rose over the past generation, edging up from 2.9 in 1991 to 3 in 2021, powered wholly by Jewish fertility rising from about 2.6 in 1995 to 3.1 in 2024.

[Israel is] the lone affluent democracy where national fertility (estimated TFR) actually rose over the past generation (albeit slightly—from 2.9 in 1991 to 3 in 2021). This was powered wholly by a rise in Jewish fertility, from about 2.6 births per woman in 1995 to 3.1 in 2024. In 2022–24 fertility in Israel was over 20% higher for Jews than Muslims. Much has been made of Israel’s extraordinarily prolific Haredi community and its six-plus-children-per-woman estimated TFR. But fertility for the rest of Israeli Jewry is unique for modernity too. For secular, natural-religious and traditional Jews combined, the current average TFR is about 2.5 births per woman. And for secular Israeli Jews, per se, it is almost two births per woman.

Takeaways by Macro Roundup® AI

  1. Israel is the only affluent democracy where estimated total fertility rose over the past generation, edging up from 2.9 in 1991 to 3 in 2021, powered wholly by Jewish fertility rising from about 2.6 in 1995 to 3.1 in 2024.
  2. Israeli Jewish fertility in 2022–24 ran over 20% higher than Israeli Muslim fertility.
  3. Beyond Israel's Haredi community, whose estimated TFR exceeds six children per woman, secular, natural-religious and traditional Jews combined average about 2.5 births per woman, with secular Israeli Jews alone at almost two.

Related Articles:

  • Terra Incognita: The Economics of a Shrinking World — 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.
  • 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 Worldwide Fertility Crash Is Bringing Countries Back to Pre-Industrial Birth Levels — Japan's annual births have fallen to roughly a quarter of their 1947 peak — about 686,000 versus over 2.7m — and are also below the level recorded in 1873, when Japan first began collecting such numbers. Fertility levels around the world are still falling.

Monday, August 24, 2026

AI Summary. Oxford Economics projects US corporate spending on new equipment and facilities will rise 40% in real terms over a roughly five-year span, versus 12% in the euro area, with German business investment nearly stagnant. US output per hour worked rose $14 between 2018 and 2025, compared with $2 in Europe.

Sam Fleming, Amy Borrett and Olaf Storbeck Financial Times
Date Posted:
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Oxford Economics projects US real business investment will rise 40% over 2021–2027, ~3x the euro area’s 12%. US investment growth since 2024 has been largely information processing and software, but high US growth in GDP/hour is not “merely digital.”

Is US business investment growing far faster than Europe's?

Core argument: Oxford Economics projects US corporate spending on new equipment and facilities will rise 40% in real terms between 2021 and the end of next year, versus 12% in the euro area.

Corporate spending on new equipment and facilities in the US is projected to increase 40% in real terms between 2021 and the end of next year, according to forecasts from Oxford Economics. The US surge compared with a real-terms increase of just 12% in the euro area, while German business investment is expected to have all but stagnated over the same period. Europe also faces a large and growing productivity gap with the US. “The United States has recently pulled further ahead of Europe,” Bart van Ark, a professor at the University of Manchester, told policymakers at the ECB Forum in Sintra. GDP per hour worked increased $14 in the US between 2018 and 2025, compared with just $2 in Europe. “The gap is not only a digital sector story,” added van Ark, stressing that the US outperformance extended to other sectors, including wholesale and retail as well as professional services.

Takeaways by Macro Roundup® AI

  1. Oxford Economics projects US corporate spending on new equipment and facilities will rise 40% in real terms between 2021 and the end of next year, versus 12% in the euro area.
  2. German business investment is expected to have all but stagnated between 2021 and the end of next year, according to Oxford Economics forecasts.
  3. GDP per hour worked rose $14 in the US between 2018 and 2025 compared with $2 in Europe, with Bart van Ark telling the ECB Forum in Sintra that US outperformance extended beyond the digital sector to wholesale and retail and professional services.

Related Articles:

  • The Two Europes — The International Monetary Fund projects Eastern European economies will close much of the gap with US per capita GDP — Poland from 34% to 67%, Romania 27% to 60%, Lithuania 29% to 69% — while Western Europe slips, with France falling from 86% to 71% and Italy from 93% to 68%.
  • Ed Conard Debates Furman On “The Expected Value of Risk Taking” — A debate on U.S. fiscal policy argues that spending increases, rather than the tax increases needed to fund them, slow growth, and that higher taxes would reduce the expected value of America's innovative risk-taking. The argument holds that cutting debt below 100% of GDP is critical.
  • The Future of European Competitiveness – A Competitiveness Strategy for Europe — A European Union competitiveness report attributes the EU's labour productivity growth gap with the US largely to weaker activity in information and communications technology and large-scale digital services; excluding main ICT sectors, EU productivity was broadly at par with the US from 2000-2019. It estimates Europe's investment share must rise about 5 percentage points of GDP.

AI Summary. Comparing US Treasury yields to AAA corporate bonds combined with credit default swap insurance creates a synthetic Treasury, and the resulting spread — the convenience yield investors give up for safety and liquidity — has disappeared, suggesting investors are indifferent between the two on safety and liquidity. The author argues this is bad news for US taxpayers.

Hanno Lustig The Two Cents
Date Posted:
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Lusting agrees with Krugman that low CDS prices on Treasurys argue against default panic, but finds them a weak signal. Constructing synthetic Treasuries from corporates, he finds AAAs nearly as safe and liquid as Treasurys, “bad news for US taxpayers.”

Have investors stopped paying a premium for Treasury safety and liquidity?

Core argument: The convenience yield on U.S. Treasuries — the yield investors forgo for safety and liquidity — has disappeared over the last couple of years, which the author calls bad news for U.S. taxpayers.

A more useful gauge of how safe investors think U.S.Treasurys are is a careful comparison of Treasuries to close substitutes, like AAA corporate bonds. Adding some additional credit insurance for those corporate bonds on CDS markets [to account for corporate default risk], we’ve essentially manufactured a synthetic U.S. Treasury from AAA corporate bonds.. The figure plots the spread over Treasuries. Economists call this the convenience yield, the yield investors are willing to forgo for the safety and liquidity of Treasuries. Over the last couple of years, the convenience yield has completely disappeared. Investors seem to be indifferent between Treasuries and AAA corporates when it comes to safety and liquidity. That’s really bad news for US taxpayers.

Takeaways by Macro Roundup® AI

  1. The convenience yield on U.S. Treasuries — the yield investors forgo for safety and liquidity — has disappeared over the last couple of years, which the author calls bad news for U.S. taxpayers.
  2. Pairing AAA corporate bonds with credit-default-swap protection against corporate default risk manufactures a synthetic U.S. Treasury, and its spread over actual Treasuries measures the convenience yield.
  3. Investors appear indifferent between Treasuries and AAA corporate bonds on safety and liquidity, according to the author's spread comparison.

Related Articles:

  • What Are Bond Markets Telling Us? — There is little evidence that fears of a Greek-style solvency crisis are driving U.S. interest rates, since long-term "breakeven" inflation expectations have changed little. Prices for credit default swaps, which insure against a U.S. government default, have also moved little.
  • America’s Risky Debt: What Markets See That Policymakers Don’t — Two market-based measures suggest the safety premium investors pay to hold US Treasuries has compressed toward zero and at times reversed: the spread between top-rated corporate bonds and Treasuries after stripping out default risk, and the gap between currency-hedged foreign G10 government yields and Treasury yields at the same maturity, where longer-maturity comparisons now favor foreign bonds.
  • The United States Capital Structure — Because Social Security and Medicare benefits are politically untouchable, retirees effectively hold the most senior claim on US government resources while Treasury bondholders hold the riskiest one. On this argument, bondholders absorb adverse fiscal shocks through surprise inflation, financial repression, or both.

AI Summary. Safe public debt is jointly produced: governments supply the promise while the financial system supplies the market-making and rollover capacity that makes it liquid. The authors argue this creates a limit beyond solvency—past a turning point, further issuance reduces both debt's contribution to demand and the equilibrium safe interest rate.

Ricardo Caballero Massachusetts Institute of Technology
Date Posted:

Even with a solvent fiscal authority that credibly promises to repay, safety and liquidity require market-making, warehousing, and rollover support. A sufficiently large increase in Treasury supply can be contractionary if these constraints bind.

Is there a limit to safe government debt issuance beyond solvency?

Core argument: Safe public debt is jointly produced: the fiscal authority supplies the promise, while the financial system supplies the market-making, warehousing, and rollover capacity that makes the promise liquid and safe.

Safe public debt is jointly produced. The fiscal authority supplies the promise, but the financial system supplies the market-making, warehousing, and rollover capacity that makes the promise liquid and safe. Solvency therefore leaves open a second limit to issuance: the cost of mobilizing that capacity. The safe-debt Laffer curve follows from this cost. At low debt, the wealth created by an additional claim exceeds the fiscal cost of supporting it. As rollover pressure builds, the premium rises and so does the cost of refinancing the stock. The turning point is reached when this stock-wide marginal cost exhausts the finite-horizon wealth effect. Beyond it, further issuance lowers both debt’s contribution to aggregate demand and the equilibrium safe rate, even though the claims remain safe. Maturity changes the form of the exposure. Short debt puts more of the stock through rollover; long debt reduces that flow but magnifies the price response of the claims left outstanding.

Takeaways by Macro Roundup® AI

  1. Safe public debt is jointly produced: the fiscal authority supplies the promise, while the financial system supplies the market-making, warehousing, and rollover capacity that makes the promise liquid and safe.
  2. The safe-debt Laffer curve turns when the stock-wide marginal cost of refinancing, driven by a premium that rises as rollover pressure builds, exhausts the finite-horizon wealth effect of an additional safe claim.
  3. Beyond the turning point, further issuance lowers both debt's contribution to aggregate demand and the equilibrium safe rate even though the claims remain safe, with short debt pushing more of the stock through rollover and long debt magnifying the price response of the claims left outstanding.

Related Articles:

  • America’s Risky Debt: What Markets See That Policymakers Don’t — Two market-based measures suggest the safety premium investors pay to hold US Treasuries has compressed toward zero and at times reversed: the spread between top-rated corporate bonds and Treasuries after stripping out default risk, and the gap between currency-hedged foreign G10 government yields and Treasury yields at the same maturity, where longer-maturity comparisons now favor foreign bonds.
  • The Coming Great Repression? — Across countries and over time, higher public debt burdens are associated with lower relative returns on government bonds, the opposite of standard risk-premium predictions. The authors estimate financial repression—making banks captive bond buyers and loading them with low-return reserves—contributed 90.7 percentage points of GDP to Britain's postwar debt reduction, versus 20.3 from surprise inflation.
  • The United States Capital Structure — Because Social Security and Medicare benefits are politically untouchable, retirees effectively hold the most senior claim on US government resources while Treasury bondholders hold the riskiest one. On this argument, bondholders absorb adverse fiscal shocks through surprise inflation, financial repression, or both.

AI Summary. An analysis projects that by 2030 a rapid artificial intelligence growth scenario—3.3% annualized GDP growth with a rising capital share of income—could raise US federal revenues by up to $216bn, 3.3% above the Congressional Budget Office baseline. Because capital income receives preferential tax treatment, a falling labor share of income reduces the revenue gain that output growth would otherwise produce.

John Iselin and Ryan Nunn Yale University
Date Posted:

Iselin and Nunn expect AI to increase output growth but to reduce labor’s share of income. “This bias in AI-induced growth reduces the revenue increase one would otherwise expect, given the preferential tax treatment afforded to capital income.”

How much would AI-driven growth raise federal tax revenues?

Core argument: In a rapid AI growth scenario of 3.3% annualized GDP growth with a growing capital share, federal revenues by 2030 could grow by up to $216 billion, a 3.3% increase on top of CBO's 2026 baseline.

The additional output growth that is often expected from AI—a clear positive for the fiscal picture —is not the only potential impact that matters. Another widely expected consequence of AI adoption is a reduction in the labor share of income. This bias in AI-induced growth reduces the revenue increase one would otherwise expect, given the preferential tax treatment afforded to capital income. Further, any labor inequality effects of AI could increase revenues (in the case of increasing inequality) or reduce them (in the case of decreasing inequality). Because these channels are of first-order importance for understanding AI effects on tax revenues, our analysis focuses on their roles. Other channels, not considered here, could also turn out to have meaningful revenue implications. We project that by 2030, in a rapid AI growth scenario (3.3% annualized GDP growth and a growing capital share), federal revenues could grow by up to $216 billion, a 3.3% increase on top of CBO’s 2026 baseline.

Takeaways by Macro Roundup® AI

  1. In a rapid AI growth scenario of 3.3% annualized GDP growth with a growing capital share, federal revenues by 2030 could grow by up to $216 billion, a 3.3% increase on top of CBO's 2026 baseline.
  2. A reduction in the labor share of income from AI adoption would blunt the revenue gains otherwise expected from faster growth, because capital income receives preferential tax treatment.
  3. AI's labor inequality effects could raise revenues if inequality increases or reduce them if inequality decreases, a channel of first-order importance alongside the shift in labor share.

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.
  • Can AI Avert the Impending Federal Budget Crisis? — U.S. GDP per capita, about $87,000, is projected to reach $102,000 by 2035 with 1.8% annual productivity growth, or $110,000 with 2.7% growth. Because the healthcare sector has been slow to adopt AI, health spending is projected to rise from 18.3% of GDP to 21% under slower growth and 21.7% under faster growth.
  • U.S. Treasury Investors Are Long in AI — The authors find U.S. government debt has a large positive productivity beta, because the tax code makes federal revenue highly sensitive to productivity growth while spending commitments change little, leaving bondholders implicitly long productivity growth. They argue greater market confidence in sustained productivity gains from AI could substantially reprice government debt, lowering nominal yields.

AI Summary. Spending on Anthropic's largest and priciest AI model has plateaued at about 11% of total outlay on the company's tools, according to payments data from 70,000 companies, breaking a pattern of corporate users defaulting to the most powerful models. Analysts and investors cite its high price and older models' adequacy.

George Hammond Financial Times
Date Posted:

Ramp data suggest spending on Fable 5, Anthropic’s frontier model, has plateaued at ~11% of observed customers’ outlays on Anthropic’s tools. This is seemingly a behavior change – previously, corporate users defaulted to the most powerful available models.

Are businesses turning away from the priciest AI models toward cheaper ones?

Core argument: Spending on Fable 5, Anthropic's largest and priciest model, has plateaued at about 11% of total outlay on the company's tools more than two months after release, according to Ramp data covering 70,000 companies.

Spending on Fable 5, Anthropic’s largest and priciest model, has plateaued at only about 11% of overall outlay on the company’s tools, more than two months after its release, according to spending data from 70,000 companies collected by payments group Ramp. This breaks a pattern of corporate users defaulting to the most powerful models. Analysts and investors in Anthropic said the change was primarily driven by Fable’s high price and the fact that older models are capable of handling the bulk of business demands.

Takeaways by Macro Roundup® AI

  1. Spending on Fable 5, Anthropic's largest and priciest model, has plateaued at about 11% of total outlay on the company's tools more than two months after release, according to Ramp data covering 70,000 companies.
  2. Fable 5's limited uptake breaks a pattern in which corporate users default to the most powerful available models.
  3. Analysts and Anthropic investors attribute the shift primarily to Fable's high price and the ability of older models to handle the bulk of business demands.

Related Articles:

  • The AI Price Wars and Their Consequences — Artificial intelligence models are converging in capability and price, making switching easier and margins harder to defend, with US labs cutting prices on lower- and mid-tier offerings while keeping frontier models expensive. An 80% annual price decline requires 400% unit growth just to hold revenue flat, straining firms financing enormous capital spending.
  • OpenAI and Anthropic In Price War as Chinese AI Rivals Gain Ground — 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.
  • 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. The US imposed 50% tariffs on a range of Canadian goods after bilateral talks broke down, and Canada announced one-for-one 50% retaliation. The author argues this continues a descent from an order of cooperation and open markets and will hurt investors.

John Authers Bloomberg
Date Posted:

US-Canada trade talks broke down over the weekend. Canadian Prime Minister Mark Carney announced a forthcoming domestic aid package in an effort to help the Canadian economy manage the fallout from a protracted trade war with the US.

Do matching 50% tariffs between neighbors hurt investors?

Core argument: Washington imposed 50% tariffs on a range of Canadian goods after US-Canada talks broke down, and Canada announced one-for-one retaliation with matching 50% levies.

Last week, US-Canada talks broke down, and Washington levied 50% tariffs on a range of goods. Canadian Prime Minister Mark Carney, elected last year on a platform to resist Donald Trump’s declared aim to make the country the 51st state, responded with a speech announcing truly reciprocal tariffs. There will be one-for-one retaliation with 50% levies. The world is raising its economic drawbridges. That’s profoundly negative, and continues the long descent from an order of cooperation and open markets. In the short term, we’ll see who can take the most pain. There’s no reason to expect a repetition of the Liberation Day swoon, but for investors it will still hurt.

Takeaways by Macro Roundup® AI

  1. Washington imposed 50% tariffs on a range of Canadian goods after US-Canada talks broke down, and Canada announced one-for-one retaliation with matching 50% levies.
  2. Canadian Prime Minister Mark Carney, elected last year on a platform of resisting Donald Trump's declared aim of making Canada the 51st state, announced reciprocal tariffs in a speech.
  3. The escalating tariff exchange continues a long descent from an order of cooperation and open markets, and investors will be hurt even without a repeat of the Liberation Day swoon.

Related Articles:

  • How Canada Is Responding to American Mercantilism — US tariffs as high as 35% on certain goods not compliant with the US-Mexico-Canada trade agreement have coincided with falling Canadian exports, weaker business confidence and investment, a softening labor market, and a contraction in Canadian output. Canada has responded by aiming to double non-US exports within 10 years, expanding fiscal spending and deregulation, and keeping monetary policy loose.
  • Share of Young Canadians Living with Parents Doubled, Study Says — Statistics Canada reports 16.3% of millennials aged 25 to 39 lived with their parents in 2021, compared with 8.2% of baby boomers at the same age in 1991, with the pattern most pronounced in expensive cities. Homeownership among 25-to-39-year-olds was 49.9%, down from about 56% for baby boomers and Gen Xers at that age.
  • Canada’s Population Dips for Second Straight Quarter, Leading to First Annual Fall On Record — Statistics Canada estimates the country's population fell by about 102,436 people, or 0.2%, over the course of a year to 41.47 million, its first annual decline on record, driven by a steep reduction in temporary residents. Deaths exceeded births in the latest quarter, the second consecutive quarterly population drop.