Edward Conard

Top Ten New York Times Bestselling Author

  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “…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 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
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Thursday, August 27, 2026

AI Summary. US saving-investment data show that non-financial corporations remain net savers, unlike the early-2000s information technology boom when they flipped to net borrowers and their capital spending accounted for the entire current account deficit. Government dissaving through the budget deficit, not the artificial intelligence buildout, is absorbing national resources.

Robin Brooks Robin Brooks Substack
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Brooks argues, “The AI buildout isn’t why government bond yields are rising,” noting the US non-financial corporate sector was a net saver as of Q1 2026, which suggests government deficit spending is driving up long yields.

Is the AI buildout or the budget deficit absorbing national saving?

Core argument: US non-financial corporates remained net savers in the saving-investment balance data through the first quarter of this year, unlike the AI capex buildout narrative would suggest.

The chart shows quarterly data for the US saving-investment balance going back to 1990. This is an identity that apportions the current account balance into net saving in various sectors of the economy. Households tend to be net savers, as is the financial sector and non-financial corporates. The government tends to be a net borrower. The last time we had a lot of excitement about technological innovation and higher productivity growth was in the “IT bubble” of the early 2000s, which saw non-financial corporates flip from being net savers to borrowers, i.e. the capex buildout at the time was very large and - for a few years - accounted for the entire current account deficit. Nothing like that’s happening now. It’s government dissaving, i.e. the budget deficit, that’s eating up resources, while the non-financial corporate sector stayed a net saver in data through the first quarter of this year.

Takeaways by Macro Roundup® AI

  1. US non-financial corporates remained net savers in the saving-investment balance data through the first quarter of this year, unlike the AI capex buildout narrative would suggest.
  2. Government dissaving, that is the budget deficit, is the sector absorbing resources in the US saving-investment balance, which apportions the current account balance into net saving by sector.
  3. During the early-2000s "IT bubble," US non-financial corporates flipped from net savers to net borrowers, and for a few years that capex buildout accounted for the entire US current account deficit.

Related Articles:

  • AI Is Driving Up Treasury Yields: ‘It Just Touches Everything’ — Investment-grade companies have sold nearly $1.5tn of bonds, up 36% from a year earlier, and some investors have sold US Treasuries to buy higher-yielding corporate debt. Bank of America economists estimate the surge in corporate-debt sales, along with more mortgage-backed securities issuance, pushed 10-year rates up by about 0.3 percentage point.
  • The Other US Capex Question — Business investment outside artificial intelligence has been weak, contributing just 1.54% to total capital expenditure growth. The author argues AI investment is not crowding out other projects, since the spread between return on capital and cost of capital has stayed positive and US nonfinancial corporations' capital spending is below their gross savings.
  • Corporate America Is Minting Money—and Not Just in Tech and Finance — Earnings per share for S&P 500 companies are estimated to grow more than 13% year over year for a sixth straight quarter, with sales growth and improving margins accompanying the gains. Share buybacks are contributing less to earnings growth than in many quarters, with the gap between earnings-per-share and net income growth just under 1 percentage point.

AI Summary. Ten-year real yields equal the average expected overnight rate over the next decade plus a term premium, and fiscal credibility or debt sustainability concerns would show up as a higher term premium. With the term premium and inflation expectations contained, the increase in bond yields reflects higher expected long-term overnight rates.

Stephen Miran Financial Times
Date Posted:

Citing a stable term premium, Miran argues the rise in the 10-year Treasury yield most likely reflects investors “marking up their expectations for long-run economic growth, not becoming concerned over central bank or fiscal credibility.”

Do rising bond yields signal worries about debt sustainability?

Core argument: The term premium on ten-year Treasuries has been stable and sits only a hair lower than at the end of last year, whereas fiscal credibility or debt sustainability concerns would show up as an increased term premium.

Ten-year real yields are equal to the average expected overnight yield over the next ten years, plus a risk premium that investors demand for locking up their money for ten years. This term premium reflects the fact that realised overnight rates might deviate from expected overnight rates. If the market saw fiscal credibility or debt sustainability problems, this would show up in an increased term premium. But the term premium has also been stable and is only a hair lower since the end of last year. With term premium and inflation expectations contained, the recent increase in bond yields is therefore almost entirely due to higher expected overnight rates over the long term.

Takeaways by Macro Roundup® AI

  1. The term premium on ten-year Treasuries has been stable and sits only a hair lower than at the end of last year, whereas fiscal credibility or debt sustainability concerns would show up as an increased term premium.
  2. With term premium and inflation expectations contained, the increase in bond yields is almost entirely attributable to higher expected overnight rates over the long term.
  3. Ten-year real yields equal the average expected overnight yield over the next ten years plus a term premium investors demand for locking up money, reflecting that realised overnight rates might deviate from expectations.

Related Articles:

  • Let the Bond Market Speak — The long-term Treasury yield is the most important price in the world, and markets aggregate information no committee possesses. The author argues the Treasury's larger buyback operations were not justified as liquidity support, since trading was orderly, volatility contained, and there were no failed auctions or forced unwinds indicating dysfunction.
  • What Are US Treasury Markets Really Telling Us? Part I — 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.
  • 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.

AI Summary. A survey finds more than half of young men gamble, with 23% doing so daily, and 43% watch pornography daily or several times a week. 42% say the statement "I am inclined to think that I am a failure" describes them very or somewhat well, a view more common among daily gamblers (66%) and daily pornography viewers (63%).

Joseph Davis, Michael Toscano and Ken Burchfiel Institute For Family Studies
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An ISF survey of 2,000 American men aged 18–29 found 23% reported gambling daily and 27% watch pornography daily. 66% of the men who gambled daily reported feeling like a failure, as well as 63% of the men who watch pornography daily.

Do daily gambling and pornography use correlate with young men's self-perceived failure?

Core argument: More than half of young men surveyed gamble, with 23% gambling daily, 12% more than several times a week, and 21% at least some of the time.

More than half of young men in our survey are now gamblers. Nearly 1 in 4 (23%) report that they gamble daily, plus 12% doing so more than several times a week, and a further 21% at least some of the time. 43% of young men say they watch pornography daily (27%) or several times a week (16%), with another 26% about weekly or less. More than 4 in 10 young men (42%) believe that the statement “all in all, I am inclined to think that I am a failure” describes them “very well” (15%) or “somewhat well” (27%). Those who view pornography (63%) and gamble (66%) every day—along with day trading and playing fantasy sports—are significantly more inclined to see themselves as a failure.

Takeaways by Macro Roundup® AI

  1. More than half of young men surveyed gamble, with 23% gambling daily, 12% more than several times a week, and 21% at least some of the time.
  2. 43% of young men report watching pornography daily (27%) or several times a week (16%), and daily pornography viewers (63%) and daily gamblers (66%) are significantly more inclined to see themselves as failures.

Related Articles:

  • The Case for Prohibiting Vice — A record 62m Americans used marijuana in a single year, 17m of them daily or near daily, while half of American men now hold sports-betting accounts, up from almost zero seven years earlier. The author argues vice and addiction undermine citizens' capacity for free action, justifying state regulation beyond individual-harm criteria.
  • Americans Increasingly See Legal Sports Betting As A Bad Thing For Society and Sports — Survey data show 43% of U.S. adults say legalized sports betting is a bad thing for society, up from 34% three years earlier, and 40% say it is bad for sports, up from 33%. The largest shift came among men under 30, 47% of whom now call it bad for society versus 22% earlier.
  • Life Under Two: Debt, Deficits, and the AI Discontinuity — The United States averaged annual GDP growth above 3% for decades, but 2% or less is now more likely. Over ten years, the author estimates that gap amounts to a $3.36tn larger economy, $3.7tn more tax revenue, and 6m more jobs, shifting public psychology from abundance toward scarcity.

AI Summary. China has developed hypersonic glide vehicles capable of launching air-to-air weapons to threaten high-value aircraft such as command-and-control planes thousands of miles away. A glide vehicle from a DF-17 missile could travel about 1,500 miles, while the DF-27 missile has a maximum range of about 5,000 miles.

Gerry Doyle Bloomberg
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The Chinese military has developed hypersonic glide vehicles that can launch air-to-air weapons, which would allow them to hit high-value targets from thousands of miles away.

Can hypersonic glide vehicles threaten aircraft thousands of miles away?

Core argument: China's DF-27 missile has a maximum range of about 5,000 miles, putting Hawaii within reach, while a hypersonic glide vehicle deployed from a DF-17 could travel about 1,500 miles, just short of the distance from China to Guam.

The Chinese military has developed hypersonic glide vehicles that can launch air-to-air weapons, an advancement meant to threaten high-value targets such as command-and-control aircraft thousands of miles away. A hypersonic glide vehicle deployed from a DF-17 missile could travel about 1,500 miles, just short of the distance from China to Guam. The DF-27 missile has a maximum range of about 5,000 miles, putting Hawaii in range.

Takeaways by Macro Roundup® AI

  1. China's DF-27 missile has a maximum range of about 5,000 miles, putting Hawaii within reach, while a hypersonic glide vehicle deployed from a DF-17 could travel about 1,500 miles, just short of the distance from China to Guam.
  2. The Chinese military has developed hypersonic glide vehicles capable of launching air-to-air weapons, an advancement meant to threaten high-value targets such as command-and-control aircraft thousands of miles away.

Related Articles:

  • How Quickly Can the DOD Rebuild and Recast the Munitions Industrial Base? — The US Department of Defense's budget documents indicate low-cost munitions will reach scale before most advanced systems, with multi-year agreements projected to raise PAC-3 MSE interceptor capacity 233% to 2,000 per year, THAAD interceptors 317% to 400, and Precision Strike Missile output fourfold to about 550.
  • Is the Industrial Base on a Wartime Footing? A Progress Report — About 10,000 new firms have entered the US defense market in two years, and nontraditional companies received over $120bn in contract obligations in fiscal 2025, while munitions contract obligations have risen 330% since fiscal 2010. The Defense Department is signing large-scale multiyear munitions agreements and backing a rare earth supply chain outside Chinese control.
  • Trump Invokes Cold War-Era Law to Boost Munitions Production — The U.S. has invoked the Defense Production Act to expand munitions output amid doubts that American weapons makers can meet increased demand. U.S. officials say more than 1,000 long-range Tomahawk missiles and 1,500–2,000 air-defense interceptors have been fired in the war with Iran, and replacing those stockpiles could take up to six years.

AI Summary. The US Navy is testing an air-to-air missile capable of striking targets more than 290 miles away, farther than any other known weapon of its type. Analysts suggest such range may be most valuable for fleet air defense, countering bombers that launch long-range anti-ship cruise missiles.

Gerry Doyle Bloomberg
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The US Navy is testing a new air to air missile that can hit targets at least 290 miles away. A defense analysis suggests the system is likely intended for “fleet air defense, not air to air combat.”

Is a longer-range air-to-air missile most useful for defending ships?

Core argument: The US Navy is testing an air-to-air missile able to hit targets more than 290 miles away, considerably farther than any other known weapon of that type.

The US Navy is testing a new air-to-air missile that can hit targets more than 290 miles away, considerably farther than any other known weapon of that type. Such weapons came into sharp focus last year when Pakistan said it used long-range Chinese-made missiles — with a reported range of about 300 kilometers — to down Indian fighter jets. Although missiles with that range can be used to hit high-value aircraft such as command planes or tankers, they might be more valuable for defending ships, said Peter Layton, a former Royal Australian Air Force officer “I think it’s meant to counter Chinese bombers firing long range anti ship cruise missiles,” Layton said. “Fleet air defense, not air-to-air combat.”

Takeaways by Macro Roundup® AI

  1. The US Navy is testing an air-to-air missile able to hit targets more than 290 miles away, considerably farther than any other known weapon of that type.
  2. Pakistan said it used long-range Chinese-made missiles, with a reported range of about 300 kilometers, to down Indian fighter jets.
  3. Former Royal Australian Air Force officer Peter Layton said he thinks the missile is meant to counter Chinese bombers firing long-range anti-ship cruise missiles, serving fleet air defense rather than air-to-air combat.

Related Articles:

  • Is the Industrial Base on a Wartime Footing? A Progress Report — About 10,000 new firms have entered the US defense market in two years, and nontraditional companies received over $120bn in contract obligations in fiscal 2025, while munitions contract obligations have risen 330% since fiscal 2010. The Defense Department is signing large-scale multiyear munitions agreements and backing a rare earth supply chain outside Chinese control.
  • Defense Spending: Macroeconomic Consequences and Trade-Offs — Peacetime defense spending booms—when the two-year average of defense outlays rises 1pp of GDP—are followed by sizable increases in real GDP, government consumption, investment, and the capital stock, with a short-lived rise in inflation. Imports accelerate while exports are broadly unchanged, widening current account and trade deficits.
  • The Intellectual Spoils of War? Defense RD, Productivity and International Spillovers — The authors estimate that a 10% increase in government-financed R&D, largely defense, is associated with a 4.3% rise in privately funded R&D across OECD countries, indicating "crowding in" rather than "crowding out." They also find international spillovers raise private R&D abroad, though the overall effect on US productivity growth is modest.

Friday, August 28, 2026

AI Summary. US pre-tax corporate profits reached an annualised $4.8tn, or 18% of national income, the highest share since the aftermath of World War II, according to Bureau of Economic Analysis data. Employees' share from wages and benefits fell to 60%, the lowest since the 1950s, with the decline gaining pace in recent years.

Myles McCormick Financial Times
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Corporate profits have risen to 18% of national income, their highest share since 1947, while labor’s share has fallen to 60%, a low not seen since the 1950s. The decline in labor’s share has accelerated over the past year.

Are corporate profits taking a record share of national income from workers?

Core argument: US pre-tax corporate profits reached an annualised $4.8tn in the second quarter, or 18% of national income, the highest share since the aftermath of the second world war, according to Bureau of Economic Analysis data.

Pre-tax earnings hit an annualised $4.8tn in the second quarter, or 18% of national income, according to Bureau of Economic Analysis data, the highest share since the aftermath of the second world war. Employees’ share from wages and benefits fell to 60%, the lowest level since the 1950s. “Regardless of what measure you look at, workers, in terms of employee compensation, have been receiving an increasingly small share of national income over time,” said Abiel Reinhart, an economist at JPMorgan. The decline in labour’s share of income has gained pace in the past five years and especially over the past 12 months.

Takeaways by Macro Roundup® AI

  1. US pre-tax corporate profits reached an annualised $4.8tn in the second quarter, or 18% of national income, the highest share since the aftermath of the second world war, according to Bureau of Economic Analysis data.
  2. Employees' share of national income from wages and benefits fell to 60%, the lowest level since the 1950s, with the decline gaining pace over the past five years and especially the past 12 months.
  3. Abiel Reinhart, an economist at JPMorgan, said that regardless of the measure used, workers have been receiving an increasingly small share of national income over time.

Related Articles:

  • The Post‑COVID Decline in the Labor Share — The share of US national income paid to workers fell 1.6 percentage points below its pre-pandemic level, reaching a post-war low. The authors find this decline stems mainly from changes within industries rather than shifts in activity across sectors, following cyclical patterns seen in earlier recessions.
  • 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.
  • Why the Labor Share Keeps Falling: Taxes! — The measured corporate labor share fell from 63% in 1978 to 58% in 2017, but the authors estimate that tax-driven reclassification of wages as S corporation profit and the shift of high-labor-share firms into partnerships account for about 1.6 percentage points, roughly a third of the decline.

AI Summary. US productivity has grown about 2.2% annually since mid-2022, faster than its 2010s pace, though the timing points to pandemic-era increases in labor market churn and business formation rather than artificial intelligence as the initial cause. A sustained 1.5%-to-2.2% acceleration would be substantial but not unprecedented.

Chad Syverson Economic Innovation Group
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Syverson is skeptical that AI initiated the rise in productivity growth that began in 2023. The acceleration began while AI investment was small, and pandemic-era labor market churn and business dynamism match the acceleration’s start.

Is artificial intelligence behind the recent pickup in productivity growth?

Core argument: Productivity has grown about 2.2% annually since mid-2022, a faster trajectory than the 2010s, though the timing leans against AI being the sole initial cause of the acceleration.

Productivity from mid-2022 on has maintained a faster-than-2010s trajectory involving annual growth of about 2.2%. Could this acceleration be due to AI? Perhaps. The timing leans against AI being the sole initial cause. Additionally, there were well-documented increases in economic dynamism (labor market churn and business formation) during the pandemic emergence whose timing matches the acceleration’s start. Regardless of AI’s current effect, the longer the aggregate productivity acceleration continues, the more plausible it is that AI is an important driver. As for the magnitude, a sustained increase from 1.5 to 2.2% annual productivity growth would be substantial (after a decade, GDP per capita would be 7% higher than otherwise), but hardly unprecedented. The 1995–2004 productivity boom saw annual productivity growth of nearly 3% per year, and other past general-purpose-technology-related productivity boosts saw labor productivity growth in excess of 2.5% for a decade or longer.

Takeaways by Macro Roundup® AI

  1. Productivity has grown about 2.2% annually since mid-2022, a faster trajectory than the 2010s, though the timing leans against AI being the sole initial cause of the acceleration.
  2. Documented pandemic-era increases in economic dynamism, including labor market churn and business formation, match the timing of the productivity acceleration's start.
  3. A sustained rise from 1.5% to 2.2% annual productivity growth would leave GDP per capita 7% higher after a decade, yet falls short of the 1995–2004 boom's nearly 3% annual pace.

Related Articles:

  • AI and Productivity — The recent pickup in US labor productivity appears driven by higher utilization of existing capital—running factories, server racks, and hotel rooms harder—rather than by firm-level efficiency gains from AI. Adoption remains too thin and the cross-sectional evidence too weak to conclude that AI-driven productivity gains are already widespread.
  • Google’s AI & Economy ATLAS v1.0: Mapping Gemini Usage in the Economy — Google's ATLAS data show workplace AI use spans over 68% of occupations representing above 88% of US employment, but depth is shallow: AI is used for only 21% of tasks in the median occupation with any use, mostly collaborative rather than automating. Over 86% of conversational AI interactions occur outside work.
  • Writing Code vs. Shipping Code: Productivity Effects Across Generations of AI Coding Tools — The authors estimate that AI coding tools raise developers' task-level productivity by about 40% with autocomplete, 140% including synchronous agents, and 180% with asynchronous agents, with larger effects for less active developers. Gains attenuate up the production chain: synchronous agents raise lines of code 741% and pull requests 65% but releases only 20%.

AI Summary. For three decades the 10-year Treasury yield fell almost entirely on the handful of days around Federal Reserve meetings; since 2022 it has risen roughly 4 percentage points with almost none of that on Fed days. Rate moves were largely priced in advance, with inflation and jobs surprises, Treasury supply and a rising term premium driving the increase.

Torsten Sløk Apollo
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Between 1989 and 2022, nearly all moves in the 10-year yield came on FOMC days. Its cumulative 400bp rise since August 2022 was due to inter-meeting increases. Fed moves were predictable from data releases, which likely also carried news about the long end.

Does the Fed still drive long-term interest rates?

Core argument: The 10-year Treasury yield has risen roughly four percentage points since 2022, but almost none of that increase occurred on Federal Reserve meeting days, breaking a 30-year pattern in which the yield fell almost entirely around FOMC meetings.

For 30 years, the 10-year Treasury yield fell almost entirely on the handful of days around Fed meetings, and did essentially nothing the rest of the time. That stopped in 2022 after the Fed began to raise interest rates. The 10-year has since risen roughly four percentage points, but almost none of that came on Fed days. The reason is that each hike was largely priced by the time the Committee met, so the FOMC announcement and press conference carried little news for the long end, and the move higher instead came from higher-than-expected CPI prints, stronger payrolls, increasing Treasury supply and a rising term premium, none of which sit on the FOMC calendar.

Takeaways by Macro Roundup® AI

  1. The 10-year Treasury yield has risen roughly four percentage points since 2022, but almost none of that increase occurred on Federal Reserve meeting days, breaking a 30-year pattern in which the yield fell almost entirely around FOMC meetings.
  2. Each Fed hike was largely priced by the time the Committee met, leaving the FOMC announcement and press conference with little news for the long end.
  3. Higher-than-expected CPI prints, stronger payrolls, increasing Treasury supply and a rising term premium drove the 10-year yield higher, none of which sit on the FOMC calendar.

Related Articles:

  • The Fed and the Secular Decline in Interest Rates — The authors find that the long-run decline in US Treasury yields since 1980 is fully accounted for by movements in a narrow window around Federal Reserve policy meetings, while yield changes outside that window prove transitory. They suggest the Federal Reserve conveys information to markets about the long-run level of interest rates.
  • What Are US Treasury Markets Really Telling Us? Part I — 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.
  • 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.

AI Summary. Goods prices have fallen in China since the pandemic while rising in developed markets, driving the inflation-adjusted yuan exchange rate sharply lower and increasing China's competitiveness. Goldman Sachs economists estimate China's price discount versus foreign peers at 32% in electric vehicles, 38% in refrigerators and 53% in shoes.

Greg Ip Wall Street Journal
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A GS analysis shows that Chinese manufacturers’ costs are 32% lower than those of their competitors, reflecting an artificially depressed yuan and price increases abroad due to supply chain disruptions and fiscal stimulus.

Have falling Chinese goods prices made the yuan undervalued?

Core argument: Goldman Sachs economists Kamakshya Trivedi and Hui Shan find China's price discount versus foreign peers is 32% in electric vehicles, 38% in refrigerators and 53% in shoes, gaps that in theory should not persist if the yuan were fairly valued.

Goldman Sachs economists Kamakshya Trivedi and Hui Shan show goods prices have fallen in China since the pandemic while rising in developed markets because of stimulus and supply-chain disruptions. This means the inflation-adjusted yuan exchange rate has plummeted. This has increased China’s competitiveness. Goldman compared costs experienced by manufacturers in China, such as New Balance in shoes and Tesla in electric vehicles, with their costs elsewhere, and prices of Chinese companies, such as appliance manufacturer Haier, to foreign peers such as Siemens. China’s price discount is 32% in electric vehicles, 38% in refrigerators and 53% in shoes. In theory, such gaps should not persist if the yuan is fairly valued.

Takeaways by Macro Roundup® AI

  1. Goldman Sachs economists Kamakshya Trivedi and Hui Shan find China's price discount versus foreign peers is 32% in electric vehicles, 38% in refrigerators and 53% in shoes, gaps that in theory should not persist if the yuan were fairly valued.
  2. Goods prices have fallen in China since the pandemic while rising in developed markets on stimulus and supply-chain disruptions, sending the inflation-adjusted yuan exchange rate sharply lower and increasing China's competitiveness, according to Goldman Sachs.
  3. Goldman Sachs compared manufacturer costs in China with costs elsewhere for firms including New Balance in shoes and Tesla in electric vehicles, and prices of Chinese companies such as Haier against foreign peers such as Siemens.

Related Articles:

  • The World Should Not Ignore China’s Undervalued Currency — 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%.
  • 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.
  • 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.

AI Summary. Goldman Sachs estimates Persian Gulf crude and oil product exports have recovered to about 15–16m barrels a day, roughly two-thirds of pre-war levels and above a trough of 5–6m barrels a day, limiting the Iran war's impact on global crude prices. Transits through the Strait of Hormuz are likely close to US officials' estimates of 8–10m barrels a day.

Yongchang Chin Bloomberg
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A GS analysis finds oil exports from the Gulf have risen to 15–16mm bpd, ~ 2/3 of pre-war levels; 8–10mm bpd – about half of pre-war levels – transit through Hormuz.

Have Gulf oil exports recovered enough to limit crude price impact?

Core argument: Persian Gulf crude and oil product exports have recovered to 15–16 million barrels a day, about two-thirds of pre-war levels, limiting the Iran war's impact on global crude prices, according to Goldman Sachs.

Oil exports from the Persian Gulf have recovered to around two-thirds of pre-war levels, limiting the Iran war’s impact on global crude prices, according to Goldman Sachs. Total exports of crude and oil products from the region have risen to 15 million to 16 million barrels a day, helped by higher crossings through the Strait of Hormuz, Goldman analysts including Daan Struyven and Yulia Zhestkova Grigsby said in a note. That’s still 7 to 8 million barrels below pre-conflict levels, but well above a trough of 5 million to 6 million barrels a day in March. Oil transits through the Strait of Hormuz alone are likely close to US officials’ 8 million to 10 million barrel a day estimates, the analysts said.

Takeaways by Macro Roundup® AI

  1. Persian Gulf crude and oil product exports have recovered to 15–16 million barrels a day, about two-thirds of pre-war levels, limiting the Iran war's impact on global crude prices, according to Goldman Sachs.
  2. Gulf exports remain 7–8 million barrels a day below pre-conflict levels but well above a trough of 5–6 million barrels a day in March, Goldman analysts including Daan Struyven and Yulia Zhestkova Grigsby said.
  3. Oil transits through the Strait of Hormuz are likely close to US officials' estimates of 8–10 million barrels a day, with higher crossings helping lift regional exports, the Goldman analysts said.

Related Articles:

  • Soaring Diesel Prices Rip Across The US Economy — US diesel pump prices reached $5.47 a gallon, approaching a nominal record of $5.82 ($6.64 adjusted for inflation), after rising 8% in a month as wars in the Middle East and Europe constrain production and global supplies. The gap between diesel and crude oil prices has hit a record high.
  • 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.
  • Choking Iran’s Economy Is the Least Bad Way to End the War — Iran's economy is on track for its largest annual contraction since the mid-1980s, with inflation above 50% — the highest in nearly 70 years of records — and food and other necessities costing double a year earlier. Its currency has fallen to a record low of about 1.85m rials per dollar on the black market.