Edward Conard

Top Ten New York Times Bestselling Author

  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…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 comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…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
  • “Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…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 must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Tuesday, September 1, 2026

AI Summary. Interest rates remain low relative to reasonable expectations of inflation and growth, with incomes and spending rising about 7% a year in dollar terms. Absent idle workers, machines, and materials, higher rates can help shift resources toward business equipment and nonresidential construction by discouraging consumer spending and housing or attracting foreign goods and services today.

Matt Klein The Overshoot
Date Posted:

Klein argues that, far from indicating a panic-driven bond sell-off, higher bond yields are a necessary concomitant of persistent 7% growth in nominal income, which in turn reflects continued high inflation and robust real spending.

Do higher interest rates help shift resources toward business investment?

Core argument: Incomes and spending are rising about 7% a year in dollar terms, which the author argues leaves interest rates low relative to reasonable expectations of inflation and growth.

Rates are still low relative to reasonable expectations of inflation and growth. Incomes and spending are currently rising about 7% a year in dollar terms. But unless there are loads of unused workers, machines, and raw materials just lying around, the only way to spend relatively more on essential machinery, equipment, and nonresidential construction is if someone spends relatively less on consumer goods, services, and housing. Higher interest rates can help to the extent that they can discourage those lower-priority activities and/or encourage people in the rest of the world to accept promises of goods and services in the future in exchange for actual goods and services today. In this context, the current level of interest rates looks downright benign.

Takeaways by Macro Roundup® AI

  1. Incomes and spending are rising about 7% a year in dollar terms, which the author argues leaves interest rates low relative to reasonable expectations of inflation and growth.
  2. Absent idle workers, machines, and raw materials, spending relatively more on machinery, equipment, and nonresidential construction requires spending relatively less on consumer goods, services, and housing, according to the author.
  3. Higher interest rates can aid that shift by discouraging lower-priority activities and encouraging people abroad to accept promises of future goods and services in exchange for actual goods and services today, leaving current rates benign in the author's view.

Related Articles:

  • AI, Productivity, and Rates: Part 2 — Inflation-protected U.S. Treasury yields rose from about 3.5% in early 1997 to about 4.5% by 2000, compared with roughly 2.4% on the 10-year and 3% on the 30-year today. The author argues that this 1990s experience helps calibrate expectations if new software technologies produce a comparable acceleration in productivity growth.
  • Don’t Draw The Wrong Conclusion From Treasury Yields — 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.
  • 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 decomposition of the 2.54 percentage-point rise in the 10-year US Treasury yield attributes 1.56 points, nearly two-thirds, to a higher term premium rather than expected future short-term rates. The author argues the premium had earlier turned negative as the Federal Reserve absorbed long-dated Treasury and mortgage-backed issuance, removing interest-rate risk.

Hanno Lustig The Two Cents
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Lustig presents a decomposition that attributes 156bp of the 254bp rise in the 10-year yield since March 2022 to an increase in the term premium, which he associates with the additional duration risk borne by investors as the Fed reduced its balance sheet.

Is the term premium driving most of the yield increase?

Core argument: Of the 2.54 percentage point increase in the 10-year Treasury yield since March 2022, 1.56 points — nearly two-thirds — comes from a higher term premium, according to the author's decomposition.

I plot a decomposition of the increase in the 10-year yield into a term premium component and a future short rate component. According to this measure, a big chunk —1.56 pps (or nearly 2/3 rds)— of the 2.54 pps increase in the 10-year yield since March 2022 is actually due to an increase in the term premium. That premium (the red line in the figure) turned negative around 2015, and [when] it bottomed out in 2020, yields (black line) were trading 135 bps below the path of future short rates (blue line). That’s not entirely surprising: The Fed was absorbing a large share of Treasury issuance at the long end of the yield curve —as well as MBS issuance— effectively removing a great deal of interest rate risk from the market.

Takeaways by Macro Roundup® AI

  1. Of the 2.54 percentage point increase in the 10-year Treasury yield since March 2022, 1.56 points — nearly two-thirds — comes from a higher term premium, according to the author's decomposition.
  2. The term premium turned negative around 2015 and bottomed in 2020, when 10-year yields traded 135 basis points below the path of future short rates.
  3. The author attributes the 2020 trough in the term premium to the Fed absorbing a large share of long-end Treasury and MBS issuance, effectively removing interest rate risk from the market.

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.
  • 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. Japan's 10-year government bond yield reached 3%, its highest since 1996, after years near zero. The yield was half that level a year earlier, and the speed of the shift is reverberating through Japan's economy and global financial markets.

John Cheng Bloomberg
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Japan’s 10-year government bond yield rose 6bp to hit 3% for the first time since 1996.

Are Japanese long-term bond yields rising sharply after years near zero?

Core argument: Japan's 10-year government bond yield rose as much as six basis points to touch 3%, its highest level since 1996 and the first time it has reached that level this century.

Japan’s 10-year government bond yield touched 3% for the first time this century, an important milestone for a debt market that is returning to normality after benchmark borrowing costs languished near zero for years. The yield rose as much as six basis points to 3% on Tuesday, the highest since 1996. It was half this level around this time last year, underscoring the speed of the change, which is reverberating through Japan’s economy and global financial markets.

Takeaways by Macro Roundup® AI

  1. Japan's 10-year government bond yield rose as much as six basis points to touch 3%, its highest level since 1996 and the first time it has reached that level this century.
  2. Japan's 10-year government bond yield stood at half its current level a year earlier, underscoring the speed of the shift in the country's benchmark borrowing costs.
  3. Japan's debt market is returning to normality after benchmark borrowing costs languished near zero for years, with the move reverberating through Japan's economy and global financial markets.

Related Articles:

  • Where is the Global Debt Crisis Most Acute? — A proxy for strain at the long end of government bond markets — the gap between the 10-year yield expected in 10 years' time and today's 10-year yield, scored against its own history — shows Japan as an outlier among the G10 economies.
  • 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%.
  • The Carry Trade That Can’t Be Unwound — Japan's consolidated public sector has liabilities of 255% of GDP, with asset purchases having shortened their duration and bank reserves at the Bank of Japan — floating-rate liabilities — worth 75.5% of GDP, down from 90.7%. Its largely unhedged 56%-of-GDP position in foreign securities and 50%-of-GDP equity holdings would take losses if the yen appreciates and real rates climb.

AI Summary. US nominal pre-tax corporate profits in the national accounts grew 23% over the past year, a pace not seen outside post-recession spikes since the mid-2000s. Wider margins were the key driver, as domestic profit growth far exceeded the 8% rise in corporate value added, pushing margins near all-time highs while the labor share hit new lows.

Abiel Reinhart J.P. Morgan
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US corporate profit margins rose ~250bp y/y in Q2 and are approaching an all-time high. Reinhart notes that tech and communications services drove ~58% of recent S&P 500 profit growth, even as the sectors have been “steadily losing employment since late 2022.”

Are wider margins driving surging corporate profits as labor's share falls?

Core argument: Higher margins were the key driver of profit growth, as 23% y/y domestic profit growth far exceeded the 8% rise in corporate value added.

Nominal pre-tax corporate profits in the national income and product accounts (NIPA) were very robust in both 2Q (41% [annual rate]) and over the last year (23%). Excluding post-recession spikes, we haven’t seen a year this strong since the mid-2000s. Higher margins [were] the key driver [of profit growth], as 23% y/y domestic profit growth was far in excess of the 8% increase in corporate value added. Profit margins (pre-tax profits divided by value added) increased close to 250bp over the last year, and are approaching all-time highs, whereas the labor share is hitting new lows.

Takeaways by Macro Roundup® AI

  1. Higher margins were the key driver of profit growth, as 23% y/y domestic profit growth far exceeded the 8% rise in corporate value added.
  2. Profit margins, measured as pre-tax profits divided by value added, increased close to 250bp over the last year and are approaching all-time highs, while the labor share is hitting new lows.

Related Articles:

  • US Corporate Profits Surge To Record As Worker Payouts Wilt — 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.
  • 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 Record Divide Between Corporate Profits and Worker Pay — Labor's share of gross domestic income fell to 51%, the lowest since records began in 1947, while profits' share rose to 12.1%, the highest since 1950. Inflation-adjusted hourly wages are up 3% since the end of 2019, compared with a 50% rise in profits.

AI Summary. Survey data indicate 60% of U.S. adults say the term "working class" describes them well, including half of those with a bachelor's degree and half of upper-income Americans. Identification is highest among blue-collar workers at 77%, versus 61% in other occupations, and ranges from 52% of Asian adults to 62% of White adults.

Steven Shepard, Hannah Hartig, Andy Cerda and Jocelyn Kiley Pew Research Center
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60% of Americans say “working class” describes them “extremely” or “very” well. Republicans are more likely than Democrats to identify as working class – strikingly 61% of Republicans who have a family income of at least $155,600 identify as working class, compared to 38% of such Democrats.

Do most Americans identify as working class across income and education levels?

Core argument: 60% of U.S. adults say the term "working class" describes them well, an identity adopted across income and educational groups, including half of those with a bachelor's degree and half of upper-income Americans.

Most Americans think of themselves as “working class” today: Overall, 60% of U.S. adults say the term describes them well. And the identity is widely adopted by people across all income and educational groups – including half of both Americans who have a bachelor’s degree and those who are upper-income. Those working in blue-collar occupations are particularly likely to identify as working class (77%), [as are] a majority of those working in other occupations (61%). White adults are more likely than Black adults to identify as working class. About six-in-ten White (62%) and Hispanic adults (59%) overall view themselves as working class, as do roughly half of Black (54%) and Asian adults (52%).

Takeaways by Macro Roundup® AI

  1. 60% of U.S. adults say the term "working class" describes them well, an identity adopted across income and educational groups, including half of those with a bachelor's degree and half of upper-income Americans.
  2. Workers in blue-collar occupations identify as working class at a rate of 77%, compared with 61% of those in other occupations.
  3. About 62% of White and 59% of Hispanic adults view themselves as working class, as do roughly 54% of Black and 52% of Asian adults.

Related Articles:

  • 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.
  • Political Representation Gaps and Populism — A study comparing survey responses of citizens and parliamentarians across 27 European countries finds that policymaking reflects voters' economic attitudes well, but the average parliamentarian is about one standard deviation more culturally liberal than the national mean voter. The author finds this cultural gap spans nearly all issues, countries, and established parties, and that right-wing populists fill it.
  • The DSA Sweet Spot: Highly Educated, Downwardly Mobile — US voters most likely to identify as "very liberal" hold postgraduate degrees but household incomes of $30,000–$60,000 a year, an unusual combination given that education and income are typically positively correlated. In the Democratic Socialists of America's most recent member survey, 80% of members aged 25 or older had bachelor's degrees while 45% reported household incomes below $60,000.

AI Summary. Major cloud providers posted annual revenue growth of 37% at Amazon Web Services, 43% at Microsoft Azure and 82% at Google Cloud, with rising revenue backlogs of $514bn and $496bn respectively at Google Cloud and Amazon Web Services. Earnings growth appears highly contingent on continued hyperscaler capital spending and research, which rose from $460bn to $870bn.

Michael Cembalest J.P. Morgan
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Since the start of the data-center buildout, S&P earnings breadth has “eclipsed” that which would be historically implied by the ISM manufacturing survey. Cembalest argues earnings growth “appears highly contingent” on continued hyperscaler spending.

How dependent is earnings growth on hyperscaler capital spending?

Core argument: Q2 annual cloud revenue growth ran 37% at AWS, 43% at Microsoft Azure and 82% at Google Cloud, with Google Cloud's backlog up $52bn to $514bn and AWS's backlog at $496bn, up 36% q/q.

The Q2 earnings season was positive for hyperscaler annual revenue growth: AWS 37%, Microsoft Azure 43% and Google Cloud 82%. Rising revenue backlogs reinforce evidence of AI monetization: Google Cloud’s backlog increased $52B to $514B, and the AWS backlog rose to $496B, up 36% q/q. Earnings growth is also more broad-based than it was in 2024-2025 when AI was the primary driver. Earnings growth appears highly contingent on continued hyperscaler capital spending and R&D which rose from $460B in 2024 to $870B over the last 12 months. The share of S&P 500 companies with positive expected earnings growth is normally well-predicted by the ISM manufacturing survey. But since the AI capital spending boom began, earnings breadth has eclipsed the improvement in manufacturing surveys; this suggests a powerful trickle-down effect from hyperscalers to other sectors.

Takeaways by Macro Roundup® AI

  1. Q2 annual cloud revenue growth ran 37% at AWS, 43% at Microsoft Azure and 82% at Google Cloud, with Google Cloud's backlog up $52bn to $514bn and AWS's backlog at $496bn, up 36% q/q.
  2. Hyperscaler capital spending and R&D rose from $460bn in 2024 to $870bn over the last 12 months, and earnings growth appears highly contingent on that spending continuing.
  3. The share of S&P 500 companies with positive expected earnings growth has eclipsed the improvement in the ISM manufacturing surveys that normally predict it, suggesting a trickle-down effect from hyperscalers to other sectors.

Related Articles:

  • AI Set to be Largest CapEx Cycle Ever … and Soon Majority Externally Financed — Hyperscaler and data-center investment is tracking toward $1.5tn annually by 2030, which in real terms would exceed the 2005-06 housing boom, the 1990s fiber peak, and the 1882 railroad peak combined. External debt and equity are projected to fund close to 90% of the buildout, making it dependent on credit markets.
  • 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 Buyers of AI Are Still Waiting for the Payoff — Companies in the S&P 500 outside the technology sector are spending heavily on artificial intelligence without showing gains in profit margins, with health care margins halved since 2015, consumer staples near 6%, and consumer discretionary near 8%. So far the artificial intelligence capital spending boom appears in sellers' margins rather than buyers'.

Wednesday, September 2, 2026

AI Summary. Across surveyed countries, intended fertility and the ideal number of children both declined, while children came to be seen more as a constraint on parental freedom and less as a source of status. Gender roles grew less traditional and housework more equally shared, yet the belief that a fulfilled life requires children weakened most of all attitudes measured.

Raquel Fernández, Inés Berniell and Milagros Onofri National Bureau of Economic Research
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Fernández et al. cast doubt on Goldin’s hypothesis that men’s limited willingness to share domestic responsibilities is central to fertility decline, pointing instead to the erosion of the belief that children are necessary for a fulfilling life.

Are shifting attitudes about children behind falling fertility intentions?

Core argument: Intended fertility fell in every Generations and Gender Survey country, from 28% to 21% on average, while the ideal number of children fell in 17 of 22 International Social Survey Programme countries, from 2.42 to 2.31.

Figure 1 documents how fertility outcomes and attitudes changed over the decade. Intended fertility fell in every GGS country, from 28 to 21% on average (Figure 1a). The ideal number of children fell in 17 of the 22 ISSP countries, from 2.42 to 2.31 on average (Figure 1b). [Children] became more likely to be seen as constraining parental freedom and less likely to be seen as conferring status (Figure 1c). Gender roles became less traditional, and the division of household work became more equal [Figures 1i]. Despite this greater sharing of chores and care, work–family conflict rose sharply. The decade saw changes that might have been expected to make the burden of children lighter, at least for women. Simultaneously, however, children became less attractive and, above all, less necessary: the belief that a fulfilled life requires children lost more ground than any attitude we measure [Table 2, Part II, Panel B].

Takeaways by Macro Roundup® AI

  1. Intended fertility fell in every Generations and Gender Survey country, from 28% to 21% on average, while the ideal number of children fell in 17 of 22 International Social Survey Programme countries, from 2.42 to 2.31.
  2. Children became more likely to be seen as constraining parental freedom and less likely to be seen as conferring status, and the belief that a fulfilled life requires children lost more ground than any other attitude measured.
  3. Gender roles became less traditional and household work was divided more equally, yet work–family conflict rose sharply.

Related Articles:

  • The Rise of Female Autonomy and the Decline of Fertility: The Role of Mismatch — Across 22 countries, the gap between women's and men's daily hours of housework and caregiving is strongly correlated with lower total fertility rates. Countries that modernized rapidly show larger gender gaps in home work and lower fertility than those with more continuous economic growth since 1920.
  • Babies and the Macroeconomy — Fertility rates have fallen in nearly every country, but timing differed: some developed nations fell below the 2.1 replacement level as early as the 1970s, while others dropped to "lowest low" levels below 1.3. The author argues nations with rapid, discontinuous growth saw sharper declines as women's expectations outpaced tradition-bound men's willingness to share family time.
  • 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.

AI Summary. Yields on the longest-dated US government bonds returned to levels seen just before the Treasury Department expanded a bond buyback program aimed at halting their rise, with the 30-year yield at 5.27%. The 10-year yield, a benchmark for borrowing costs across loan types, stands at roughly 4.8%.

Greg Ritchie, Cameron Fozi, and Sydney Maki Bloomberg
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The US 10-year yield hit 4.8%, 10bp higher than its level prior to Treasury’s recent buybacks, and the 30-year yield rose to 5.27%, its pre-buyback level.

Have Treasury bond buybacks failed to hold down long-term yields?

Core argument: The 30-year Treasury yield reached 5.27% on Tuesday, the level seen moments before Scott Bessent announced an expanded buyback program on August 19, erasing the decline that followed.

The yields on the longest-dated US government bonds shot back to levels seen just before Scott Bessent shocked markets last month by expanding a buyback program in an effort to halt the rise. The gambit worked briefly, until the selloff that’s been sweeping through global markets pushed the government’s borrowing costs up again. By Tuesday, that drove 30-year Treasury yields to 5.27%, the level seen moments before Bessent announced the move on August 19. The 10-year yield — a crucial benchmark for the cost of all types of loans — is more than 10 basis points higher than it was then, at roughly 4.8%.

Takeaways by Macro Roundup® AI

  1. The 30-year Treasury yield reached 5.27% on Tuesday, the level seen moments before Scott Bessent announced an expanded buyback program on August 19, erasing the decline that followed.
  2. The 10-year Treasury yield, a benchmark for the cost of all types of loans, stands at roughly 4.8%, more than 10 basis points above its level just before Bessent's August 19 buyback expansion.
  3. Bessent's buyback expansion briefly halted the rise in long-dated US government borrowing costs until a selloff sweeping global markets pushed yields back up.

Related Articles:

  • Rising Bond Yields Are Good, Actually — Interest rates remain low relative to reasonable expectations of inflation and growth, with incomes and spending rising about 7% a year in dollar terms. Absent idle workers, machines, and materials, higher rates can help shift resources toward business equipment and nonresidential construction by discouraging consumer spending and housing or attracting foreign goods and services today.
  • Bessent Bounce Starts to Emerge in Long Bond Market Metrics — US Treasuries have outperformed equivalent-maturity interest-rate swaps, narrowing the 30-year swap spread to its tightest level in months and compressing the 10-year gap to around 38 basis points, a gauge of investors' willingness to hold government bonds. Pimco argues that buybacks may technically lower long-end yields, but structural US budget deficits requiring heavy Treasury issuance are not changing.
  • 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. The New York Federal Reserve's measure of the extra yield investors demand for holding 10-year US government debt has moved sideways over the past year and sits below the comparable measures for Japan and Germany, indicating no deterioration in how markets price US fiscal sustainability or Federal Reserve credibility.

Torsten Sløk Apollo
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Citing the sideways movement in a FRBNY measure of the US 10-year term premium over the past year, Sløk suggests that the US fiscal situation is generating less investor concern than that of Germany and Japan, and may be focusing more on FFR hikes.

Are bond markets showing no deterioration in US fiscal credibility?

Core argument: The New York Fed's measure of the US 10-year term premium has moved sideways over the past 12 months, showing no deterioration on this measure in how the market prices US fiscal sustainability or Fed credibility.

The New York Fed’s measure of the US 10-year term premium has moved sideways over the past 12 months. On this measure, there has been no deterioration over the past year in how the market prices US fiscal sustainability or Fed credibility. The US term premium currently sits below the term premiums of Japan and Germany. This suggests that the market is less worried about the US fiscal situation compared with the fiscal situation in Germany and Japan. Put differently, the Fed went into 2026 expecting several cuts, and now the FOMC is leaning toward hiking. With this backdrop, it is not surprising that long rates are higher.

Takeaways by Macro Roundup® AI

  1. The New York Fed's measure of the US 10-year term premium has moved sideways over the past 12 months, showing no deterioration on this measure in how the market prices US fiscal sustainability or Fed credibility.
  2. The US term premium sits below the term premiums of Japan and Germany, suggesting the market is less worried about the US fiscal situation than about Germany's and Japan's.
  3. The Fed entered 2026 expecting several cuts and the FOMC is now leaning toward hiking, a backdrop against which higher long rates are unsurprising.

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.
  • Don’t Draw The Wrong Conclusion From Treasury Yields — 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.
  • What Are U.S. Treasury Markets Really Telling Us? Part II — A decomposition of the 2.54 percentage-point rise in the 10-year US Treasury yield attributes 1.56 points, nearly two-thirds, to a higher term premium rather than expected future short-term rates. The author argues the premium had earlier turned negative as the Federal Reserve absorbed long-dated Treasury and mortgage-backed issuance, removing interest-rate risk.

AI Summary. The average American worker earns enough to buy 10,215 Big Macs a year, the most of any country, followed by Switzerland and Australia. On an hourly basis, Switzerland leads at seven Big Macs per hour, ahead of America's six and Australia's five, reflecting longer American working hours.

Economist Staff The Economist
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The Economist’s venerable Big Mac Index is indicative of significantly higher after-tax, PPP-adjusted wages for American workers than for their French and German counterparts.

Which country's workers can buy the most Big Macs?

Core argument: The average American worker earns enough to buy 10,215 Big Macs a year, topping the McWages rankings, with Switzerland second and Australia third.

On an annual basis, America continues to top our McWages rankings. The average American worker earns enough to buy 10,215 Big Macs a year; Switzerland and Australia are in second and third place, respectively. But American working hours are supersized, too. On an hourly basis, Switzerland comes out on top: the average worker there earns the equivalent of seven Big Macs an hour, compared with America’s six. Australia ranks third, at five burgers for every hour worked.

Takeaways by Macro Roundup® AI

  1. The average American worker earns enough to buy 10,215 Big Macs a year, topping the McWages rankings, with Switzerland second and Australia third.
  2. On an hourly basis Switzerland leads, with the average worker earning the equivalent of seven Big Macs an hour, compared with six in the United States and five in Australia.
  3. American working hours are longer, which shifts the United States from first place on annual McWages to second on an hourly basis.

Related Articles:

  • The Big Mac Index At 40 — The Big Mac index, which compares burger prices across countries converted into dollars, shows currency misalignments in either direction at their widest since the mid-1990s, with American inflation, an undervalued Chinese yuan, and a falling yen cited as contributors. Big Mac prices also reflect domestic supply and demand for nontradeable goods.
  • Why Do Americans No Longer Work So Much More Than Non-Americans? — About half of the 1990s gap between American and European hours worked had reversed by the end of the 2010s. The authors estimate US hours per person declined after the 2000s because of rising benefits for the non-employed—especially health benefits like Medicaid—while non-US hours rose with higher wages and lower work costs.
  • 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.

AI Summary. An analysis of more than 31,000 global venture capital deals finds 62% lost money and over half lost 50–100% of invested capital, though the distribution of returns has much fatter tails than buyouts or public equities. Venture funds averaged a public market equivalent ratio of about 1.4, indicating returns above public markets.

Michael Mauboussin and Dan Callahan Morgan Stanley
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Btw the mid-90s and 2018, 62% of global venture capital investments lost money, and more than half of the deals lost 50–100% of invested capital. Yet US VC returned ~40% higher mean wealth btw 1984 and 2020 than a parallel investment path in the S&P 500.

Do most venture deals lose money while funds outperform public markets?

Core argument: Across more than 31,000 global venture capital deals from the mid-1990s to 2018, 62% lost money and over half of all deals lost 50–100% of invested capital, measured as multiples of invested capital.

Exhibit 8 shows in excess of 31,000 observations of returns, measured as multiples of invested capital at the beginning of the period, for global venture capital deals. These results are from the mid-1990s to 2018. 62% lost money and more than one-half of all deals lost 50 to 100% of invested capital. The offset is that the tails are much fatter than those for buyouts or public equities. Public market equivalent (PME) is generally reflected as a ratio between private equity and public market returns. A ratio above 1 reveals relative outperformance and below 1 means underperformance. Here’s an example of how PME works. Say a fund drew $200 million from its investors in January 2021 and paid out $470 million in December 2025. An investor could have invested the $200 million in the S&P 500, which returned $392 million over the same period. The PME would be 1.2 ($470/$392). For venture funds, the average over [1984-2020] was about 1.4.

Takeaways by Macro Roundup® AI

  1. Across more than 31,000 global venture capital deals from the mid-1990s to 2018, 62% lost money and over half of all deals lost 50–100% of invested capital, measured as multiples of invested capital.
  2. Venture capital return distributions have much fatter tails than those of buyouts or public equities, offsetting the majority of deals that lose money.
  3. Public market equivalent, the ratio of private equity returns to public market returns, averaged about 1.4 for venture funds from 1984 to 2020, with a ratio above 1 reflecting relative outperformance.

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AI Summary. The eurozone is the world's third-largest economy and second-largest source of demand but lacks the political cohesion to wield that power, given fragmented policymaking institutions and divergent member-state interests. If the US shrinks its trade deficit while China resists cutting its surpluses, Europe could absorb larger deficits by default, risking deindustrialization, rising debt, and weaker growth.

Michael Pettis Foreign Affairs
Date Posted:

Pettis suggests that if the US reduces its trade deficit while China maintains huge surpluses, a politically fragmented Europe will likely end up absorbing larger deficits, driving reduced competitiveness, deindustrialization, and weaker growth.

Will Europe absorb larger trade deficits if the US shrinks its own?

Core argument: The eurozone ranks as the world's third-largest economy and second-largest source of demand, yet its fragmented policymaking institutions and divergent member-state interests likely deny it the political ability to exercise that economic power.

The eurozone is the world’s third-largest economy and its second-largest source of demand, it has economic power at its disposal, but [likely not] the political ability to exercise this power, given its fragmented policymaking institutions and the often divergent interests of its member states. If the United States is able to reduce its trade deficit and expand its share of global manufacturing while China resists an equivalent contraction in its surpluses, a politically divided Europe could be forced to take on larger deficits almost by default. The costs could include deindustrialization, rising debt, and weaker growth. This process may have begun already.

Takeaways by Macro Roundup® AI

  1. The eurozone ranks as the world's third-largest economy and second-largest source of demand, yet its fragmented policymaking institutions and divergent member-state interests likely deny it the political ability to exercise that economic power.
  2. If the United States reduces its trade deficit and expands its share of global manufacturing while China resists an equivalent contraction in its surpluses, a politically divided Europe could be forced into larger deficits almost by default.
  3. The costs to Europe of absorbing larger deficits could include deindustrialization, rising debt, and weaker growth, a process that may have begun already.

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  • Imbalances Are Back On The Global Agenda — China's current account surplus remains about the same size relative to the world economy as it was in 2008, while net US liabilities reached 24% of global output in 2024 versus 6% in 2008, with government borrowing now the domestic counterpart of US external deficits. Such imbalances drive protectionist sentiment and have preceded financial crises.
  • Trade Intervention for Freer Trade — The authors argue the United States should counter surplus countries' trade policies either by restricting their goods exports through tariffs or by restricting their capital inflows through taxes, volume limits, reserve requirements, transaction approvals, or investor eligibility rules. They contend capital controls are a more targeted alternative to uniform tariffs, which impose equal costs on more and less mercantilist countries.