Edward Conard

Top Ten New York Times Bestselling Author

  • “…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 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
  • “…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 offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “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 must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Tuesday, September 22, 2026

AI Summary. Negative free cash flow is fine, and desirable, when returns on invested capital exceed the cost of capital. Consensus forecasts imply combined free cash flow at Amazon, Alphabet, Microsoft, Meta, and Oracle swings from over $170bn to about -$265bn before recovering to just over $500bn, with returns on incremental capital staying above the cost of capital.

Michael Mauboussin and Dan Callahan Morgan Stanley
Date Posted:

Mauboussin and Callahan expect the hyperscalers’ combined free cash flow to fall from $170B in 2024 to negative $265B in 2027, before recovering. They argue that this is desirable so long as returns on the firms’ capex exceed their cost of capital of ~8%.

Is negative free cash flow acceptable when returns exceed capital costs?

Core argument: The combined trailing-four-quarter free cash flow of Amazon, Alphabet, Microsoft, Meta Platforms, and Oracle is estimated to fall from more than $170 billion in the first quarter of 2024 to a trough near -$265 billion in the third quarter of 2027, then recover to just over $500 billion in 2030.

[The Present Value of] FCF determines long-term shareholder value. Negative FCF is desirable if returns on investment exceed the cost of capital. Strong demand for GenAI has compelled Amazon, Alphabet, Microsoft, Meta Platforms, and Oracle to accelerate infrastructure spending. The combined trailing-four-quarter FCF for the hyperscalers is estimated to decline from more than $170 billion in Q1 2024 to a trough of about -$265 billion in Q3 2027, then recover to just over $500 billion in 2030. The paths vary substantially. We assessed return on the marginal dollar invested via return on incremental invested capital (ROIIC). Oracle is expected to show the largest improvement and Meta the largest decline from peak to trough. All ROIICs from Q1 2025 on are above the cost of capital — confirming that negative FCF is acceptable provided ROIC remains above the cost of capital.

Takeaways by Macro Roundup® AI

  1. The combined trailing-four-quarter free cash flow of Amazon, Alphabet, Microsoft, Meta Platforms, and Oracle is estimated to fall from more than $170 billion in the first quarter of 2024 to a trough near -$265 billion in the third quarter of 2027, then recover to just over $500 billion in 2030.
  2. Strong demand for generative AI has compelled the hyperscalers to accelerate infrastructure spending, and negative free cash flow is fine, even desirable, provided a company can finance its operations and returns on investment exceed the cost of capital.
  3. Return on incremental invested capital for the hyperscalers is above the cost of capital from the first quarter of 2025 onward, with Oracle expected to show the largest improvement and Meta the largest peak-to-trough decline.

Related Articles:

  • Competition for Capital — Capital spending by the highest-rated corporate borrowers has grown more than 35% year-over-year for ten straight quarters, with artificial-intelligence-related issuers accounting for a quarter of US investment-grade gross supply and 44% of US convertible bond issuance. Higher capital costs and greater capital intensity have pushed dominant capital-spending hyperscalers' forward price-earnings ratios near the market average.
  • 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.

AI Summary. An analysis estimates that at identical debt and primary balance levels, predicted sovereign credit ratings differ widely, with Germany at 11, Ireland at 9, and the Baltic states at 2. Estimated debt tolerance thresholds range from 272% of output for Singapore and 248% for Germany to 161% for the US, 135% for France, and 89% for Italy.

Olivier Blanchard, Daniel Leigh, and Prachi Mishra International Monetary Fund
Date Posted:

The sovereign ratings of advanced economies differ widely across countries after controlling for debt and primary balances. Sovereign ratings put far more weight on debt levels relative to projected primary balances than the authors’ model predicts.

How much does debt tolerance vary across countries at equal debt levels?

Core argument: Illustrative “debt tolerance” levels — the debt ratio above which a country is predicted to lose a rating of 9 with p=50%, given zero forecast primary balances and the 2020 time effect — reach 272% for Singapore and 248% for Germany.

Germany has an expected rating of 11, while, at the same level of debt and primary balances, Ireland has a predicted rating of 9, and the Baltic countries have a predicted rating of 2. Even given debt, and the forecast evolution of primary balances over the next five years, investors may question what will happen over a longer horizon. Uncertainty about interest rates and primary balances can vary, and the composition of the investors’ pool can vary. Yet, the differences are striking. Figure 7 shows a “debt tolerance” level - the level of debt above which a country is predicted to lose its rating of 9 with p= 50% (given zero forecast primary balances and the year 2020 time effect). At one end, the highest illustrative debt ratio tolerance levels are for Singapore (272%) and Germany (248%). In the middle are the US (161%), France (135%), and Italy 89%. At the low end are the Baltics, with ratios <0.

Takeaways by Macro Roundup® AI

  1. Illustrative “debt tolerance” levels — the debt ratio above which a country is predicted to lose a rating of 9 with p=50%, given zero forecast primary balances and the 2020 time effect — reach 272% for Singapore and 248% for Germany.
  2. The United States has an illustrative debt tolerance ratio of 161%, compared with 135% for France and 89% for Italy, while the Baltic states’ ratios fall below zero.
  3. At the same levels of debt and primary balances, Germany has an expected rating of 11, Ireland a predicted rating of 9, and the Baltic countries a predicted rating of 2.

Related Articles:

AI Summary. China has spent a record $158.8bn importing more than 1,000 tonnes of gold over an eight-month span, up from $96.5bn for 886 tonnes across the prior full year, with its central bank and local investors buying bullion amid geopolitical tensions and weak returns on domestic assets.

William Sandlund Financial Times
Date Posted:

China has spent $158.8B importing more than 1,000 tonnes of gold in the first 8 months of the year, exceeding the 886 tonnes imported in 2025.

Is China buying record amounts of imported gold?

Core argument: China spent a record $158.8bn importing more than 1,000 tonnes of gold in the first eight months of the year, compared with $96.5bn for 886 tonnes across all of 2025.

China has spent a record sum importing more than 1,000 tonnes of gold this year as the central bank and local investors pour cash into bullion amid rising geopolitical tensions abroad and poor returns on local assets. The world’s second-largest economy spent $158.8bn on gold in the first eight months of the year. That compared with spending of $96.5bn for all of 2025 on 886 tonnes of gold. The jump comes after China reined in gold purchases last year during an intense rally that sent bullion prices soaring from about $2,625 a troy ounce at the start of 2025 to a peak of $5,595 in January. China is also the world’s biggest producer of bullion, with the total for last year standing at 384 tonnes, according to the World Gold Council.

Takeaways by Macro Roundup® AI

  1. China spent a record $158.8bn importing more than 1,000 tonnes of gold in the first eight months of the year, compared with $96.5bn for 886 tonnes across all of 2025.
  2. China’s central bank and local investors are pouring cash into bullion amid rising geopolitical tensions abroad and poor returns on local assets.
  3. The import surge follows China reining in gold purchases last year during a rally that lifted bullion from about $2,625 a troy ounce at the start of 2025 to a peak of $5,595 in January.

Related Articles:

  • De-reservification, Not De-dollarization — Much of the official-sector inflow into the U.S. now comes from investors who are not traditional reserve managers, and those flows remain heavily tilted toward the dollar and toward risk assets rather than Treasuries. The author argues this shift in the global investor base helps explain why Treasuries trade at a discount while the dollar retains a premium.
  • Financial Innovation and the International Monetary System — The dollar accounts for 59% of cross-border payments messaged through SWIFT, far ahead of the euro's 14%, and its share of foreign exchange turnover has risen gradually to about 90% of the 200% total since 2010. Official holdings of U.S. Treasuries have leveled off near $4tn while foreign private holdings rose from $1tn to over $5tn.
  • 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. Selling U.S. stocks does not escape dollar risk if proceeds sit in dollar-denominated bank deposits, money market funds, or bonds, and shifting abroad introduces other risks, including currencies also subject to debasement. The author argues the U.S. advantages that drew heavy institutional allocations — free markets, rule of law, innovation, strong capital markets — largely remain intact.

Howard Marks Oaktree Capital
Date Posted:

Howard Marks warns that, while the fiscal outlook will likely drive dollar depreciation, moving out of US assets introduces other risks. He cautions American investors against abandoning domestic investments at scale.

Does selling U.S. stocks let investors escape dollar risk?

Core argument: Selling U.S. stocks for banks, money market funds, or bonds denominated in dollars does not escape the risk under discussion, according to the author.

If you sell your U.S. stocks, where will you put your money? A bank? A money market fund? Bonds? If they’re denominated in dollars, you haven’t escaped the risk under discussion. Moving into non-dollar or non-U.S. assets introduces other risks. Many companies elsewhere in the developed world have poorer growth prospects than leading U.S. companies and less scale (and thus fewer economies of scale). Most institutional investors have been heavily allocated to the U.S. to date, with great success, and the reasons for that – the free-market system, pro-business climate, economic vitality, spirit of innovation and adaptability, technological and managerial expertise, rule of law, moderate regulation, excellent higher education, strong capital markets – largely remain intact. No other country possesses these things to the same extent. Taking money out of the U.S. entails risks that could easily render it unsuccessful, especially if it’s done to avoid a problem whose reckoning may be so far off.

Takeaways by Macro Roundup® AI

  1. Selling U.S. stocks for banks, money market funds, or bonds denominated in dollars does not escape the risk under discussion, according to the author.
  2. Many developed-market companies outside the U.S. have poorer growth prospects and less scale than leading U.S. firms and often operate in more heavily regulated, less business-friendly jurisdictions, while emerging-market growth potential is more uncertain to realize.
  3. The reasons institutional investors have allocated heavily to the U.S. — free markets, pro-business climate, innovation, rule of law, moderate regulation, higher education, and strong capital markets — largely remain intact, in the author’s view.

Related Articles:

  • World’s Unusually High Dollar Exposure Risks Fueling Selloff — Pension funds and insurers in Canada, Denmark, Australia, Taiwan, Japan and Finland hedged just 41% of their foreign-currency exposure, the lowest share since at least 2015. With some of the largest holders of US assets carrying little protection against a weaker dollar, the currency is at risk of steeper declines if sentiment turns.
  • One Hundred Years in the U.S. Stock Markets — Over a century, U.S. publicly traded stocks generated roughly $91tn in shareholder wealth enhancement, with returns strongly positively skewed and dominated by a relatively small number of high-performing firms. Because most possible outcomes fall below the mean in a skewed distribution, the authors argue financial planning should focus on median outcomes or the full distribution.
  • The Global Balance Sheet 2026: Imbalance And Divergence — Only 20% of global household wealth growth came from net new investment in real assets such as machinery, housing, infrastructure and intellectual property, down from a 30% average over the prior quarter century. Nearly 60% came from asset prices rising faster than inflation and negative net worth in other sectors.

AI Summary. China accounted for 40% of global container exports on a three-month rolling average, up 2.5 percentage points in nine months, according to the European Union Chamber of Commerce in China. The chamber's president argues this shows global trade imbalances are growing faster than expected.

Joe Leahy Financial Times
Date Posted:

China’s trade surplus is on track to surpass its 2025 surplus of $1.2T. China accounted for 40% of global container exports on a rolling average over the past 3 months, a 2.5pp increase over the previous 9 months.

Are trade imbalances growing faster than expected as China's export share rises?

Core argument: China accounted for 40% of global container exports on a rolling three-month average, according to Jens Eskelund, president of the European Union Chamber of Commerce in China.

China accounted for 40% of global container exports on a rolling average over the past three months, according to the head of the European business chamber in the country, underscoring how the world’s second-largest economy is relying on trade to power economic growth. That figure also represented a 2.5 percentage point increase in just nine months, suggesting that global trade imbalances were growing more quickly than expected, said Jens Eskelund, president of the European Union Chamber of Commerce in China. “I had thought that it was perhaps only towards 2030 that China would get up close to 40%,” said Eskelund. “That of course also means that the imbalances are growing very, very considerably.”

Takeaways by Macro Roundup® AI

  1. China accounted for 40% of global container exports on a rolling three-month average, according to Jens Eskelund, president of the European Union Chamber of Commerce in China.
  2. China’s share of global container exports rose 2.5 percentage points in nine months, which Eskelund said suggests global trade imbalances are growing more quickly than expected.
  3. Eskelund said he had expected China to approach a 40% share of global container exports only toward 2030, and that the imbalances are growing very considerably.

Related Articles:

  • The Global Economy Is Threatened Again by Trade Imbalances — The International Monetary Fund calculates that global current-account deficits plus surpluses reached 3.7% of world gross domestic product, after fluctuating between 1% and 3% until the early 2000s. The US deficit of $1.1tn is the largest single imbalance, and the Fund estimates a budget deficit of 2% of GDP raises the current-account deficit by 0.5% of GDP.
  • The Year of the Trojan Fire Horse: China’s Imbalanced Economy and Unrelenting Mercantilism — About 30% of Chinese industrial companies are unprofitable "zombies" kept alive by subsidies far larger than those elsewhere, rather than exiting amid falling industrial producer prices. Countries with large increases in manufactured imports from China also saw slowdowns in domestic manufacturing, including declining manufacturing shares of output across most of Southeast Asia.
  • Europe Has No Choice But To Intervene On Trade — Manufacturing competitiveness is argued to stem largely from lower labor costs relative to productivity, so policies that raise the household share of income weaken competitiveness while countries that suppress wages gain at trade partners' expense. The author argues Europe must therefore intervene in its external accounts to offset foreign trade intervention rather than cut wages and welfare.

Wednesday, September 23, 2026

AI Summary. Racial disparities in US crime, arrest, and prison admission rates have declined across offence types, driven by reductions among Black Americans. Black-White disparity in drug-offence prison admissions fell from 12x to 2.9x, attributable to a 75% drop in the Black drug admission rate, while declines for violent and property offences were smaller.

Jason Robey and Michael Light Nature Human Behaviour
Date Posted:
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From their respective recent peaks in 2000 and 2006 to 2019, prison admissions for violent crime fell 20% for Whites and 43% for Blacks. Race-specific NIBRS estimates suggest actual violent crime fell 18% and 47%, respectively.

Why are racial gaps in US arrests and imprisonment narrowing?

Core argument: Black–White disparity in drug-offence prison admission rates fell from 12 to 1 in 2000 to 2.9 to 1 in 2019, attributed almost entirely to a 75% drop in the Black prison admission rate for drug offences.

From their respective peaks [2000 for whites, 2006 for blacks], prison admission rates for violent crime fell 20% for Whites and 43% for Blacks. [Because UCR crime totals do not identify offender race, the authors use the National Incident-Based Reporting System (NIBRS), which records offender race as reported by victims, witnesses or police, to allocate national violent-crime totals by race. NIBRS contains about three times as many violent offenders as arrestees. As a check on crimes not reported to police, they use National Crime Victimization Survey victim reports; results are similar.] [Recorded violent crime fell 18% for Whites and 47% for Blacks See Table 2]. For Whites, the decline in prison admissions is primarily a function of a decline in crime and arrests, with case processing dampening the decline. For Blacks, the decline in violent prison admissions is exclusively attributed to a 47% reduction in violent crime, as policing and case processing trends worked against an otherwise larger decline. [Arrests per crime and prison admissions per arrest both rose slightly; See Table 2].

Takeaways by Macro Roundup® AI

  1. Black–White disparity in drug-offence prison admission rates fell from 12 to 1 in 2000 to 2.9 to 1 in 2019, attributed almost entirely to a 75% drop in the Black prison admission rate for drug offences.
  2. Racial disparities in crime, arrest, and prison admission rates have declined across all offence types since about 2000, largely attributable to reductions in crime, arrests, and imprisonment among Blacks.
  3. Declining drug admissions accounted for 53% of the overall drop in Black prison admission rates, while for Whites 62% of the decline came from property offences, with violent (20%) and drug (19%) admissions contributing roughly equally.

Related Articles:

  • America’s Incarceration Rate Is About To Fall Off A Cliff — The U.S. imprisonment rate stayed below 120 per 100,000 people from the end of World War II until the mid-1970s, then doubled by 1985 and grew about 8% a year, passing 1m prisoners in 1994 and peaking in 2009 — 18 years after violent crime peaked.
  • Number of Young People Accused of Serious Crimes Surges in New York City — New York City Police Department figures show 4,858 major crimes with a minor accused or arrested in the most recent year, up 37% from 3,543 seven years earlier, with robberies and felony assaults continuing to rise. Police officials attribute the increase to a state law diverting most 16- and 17-year-old defendants from adult courts.
  • How Many Are Criminals — In the United States, between one in four and one in three Black men eventually serve prison time, compared with one in seven Hispanic men and roughly one in fifteen non-Hispanic white men. In Denmark, about 9% of men of Danish origin and 27% of men of non-Western origin have a criminal conviction by age 24.

AI Summary. China's export boom shows signs of cresting, with year-over-year growth leveling off at roughly 24-27% in US dollar terms, and memory chips now the biggest single swing factor for exports. Total export growth is expected to converge toward the recent trend for non-artificial-intelligence products of about 5-7%.

Andrew Batson Gavekal
Date Posted:
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Andrew Batson argues that as the memory-chip price cycle’s impact on Chinese export growth fades, export growth in renminbi terms in 2027 “will most likely converge toward the recent trend for products outside the AI complex, which is around 5–7%.”

Is China's export boom leveling off toward slower growth?

Core argument: China’s export growth has leveled off over the past three months at roughly 24–27% year-on-year in US dollar terms and 18–20% in renminbi terms, a sign the export wave is cresting.

China’s latest extraordinary export wave is showing signs of cresting. The headline YoY growth of exports has leveled off over the past three months, staying around 24-27% in US dollar terms and 18-20% in renminbi terms. The boom in exports of products associated with investment in artificial intelligence is certainly not over, but current super-high growth rates will probably slow in coming months. Memory chips are now the biggest single swing factor for exports, and prices for some products have recently leveled off after their massive surge. While the ebb and flow of memory prices is difficult to forecast, growth of total exports in 2027 will most likely converge toward the recent trend for products outside the AI complex, which is around 5-7%. Semiconductor cycles have limited implications for China’s vast range of other exports, which are still very competitive in global markets.

Takeaways by Macro Roundup® AI

  1. China’s export growth has leveled off over the past three months at roughly 24–27% year-on-year in US dollar terms and 18–20% in renminbi terms, a sign the export wave is cresting.
  2. Memory chips are the biggest single swing factor for China’s exports, with prices for some products leveling off after a massive surge and super-high AI-related growth rates likely to slow in coming months.
  3. Total Chinese export growth in 2027 will most likely converge toward the recent 5–7% trend for products outside the AI complex, which remain very competitive in global markets.

Related Articles:

  • China’s Share Of Global Container Exports Soars To 40% — China accounted for 40% of global container exports on a three-month rolling average, up 2.5 percentage points in nine months, according to the European Union Chamber of Commerce in China. The chamber's president argues this shows global trade imbalances are growing faster than expected.
  • Understanding Global Imbalances — The US, China, Germany, and Japan account for roughly two-thirds of global current account imbalances, with the US deficit at 4% of GDP financed by capital inflows into dollar assets. The average duration of a surplus or deficit spell roughly doubled since the 1980s, building large net foreign asset and liability positions.
  • The Year of the Trojan Fire Horse: China’s Imbalanced Economy and Unrelenting Mercantilism — About 30% of Chinese industrial companies are unprofitable "zombies" kept alive by subsidies far larger than those elsewhere, rather than exiting amid falling industrial producer prices. Countries with large increases in manufactured imports from China also saw slowdowns in domestic manufacturing, including declining manufacturing shares of output across most of Southeast Asia.

AI Summary. An analysis of authors at a leading AI research conference finds China is the largest originating source of elite AI talent, with its share of researchers holding Chinese undergraduate degrees rising 11 percentage points to 57%, while the US share fell to 13%. The US remains a net importer of AI researchers, gaining 2,145 while China lost 1,729.

Damien Ma and Binyi Yang Carnegie Endowment for International Peace
Date Posted:
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Surveying education/employment histories of authors at the Neural Information Processing Systems conference, Ma and Yang infer China educated 57% of elite AI talent as of 2025, versus 13% for the US. Yet the US gained 2,145 researchers y/y while China lost 1,729.

Does China produce the most elite AI talent while America attracts it?

Core argument: Damien Ma and Binyi Yang find China’s share of elite AI talent, defined by undergraduate degrees earned in China, rose 11 percentage points to 57% in 2025 versus 2022, while the U.S. share fell to 13%.

[Using a methodology based on paper authors from the Neural Information Processing Systems conference (NeurIPS) Damien Ma and Binyi Yang find] China has established a commanding lead as the largest originating source of elite AI talent globally. Compared to 2022, the share of Chinese-origin AI talent, defined as those who received undergraduate degrees in China, increased 11 percentage points to 57% in 2025, while the U.S. share fell to 13%. The United States remains a magnet for global AI talent, particularly Chinese talent. Despite U.S.-China tensions, among AI researchers working in the United States, the 2025 share of those holding undergraduate degrees from China rose by 4 percentage points. When it comes to brain gain vs. brain drain, the United States saw a net gain of +2,145 researchers in 2025 while China registered a net loss of -1,729 researchers.

Takeaways by Macro Roundup® AI

  1. Damien Ma and Binyi Yang find China’s share of elite AI talent, defined by undergraduate degrees earned in China, rose 11 percentage points to 57% in 2025 versus 2022, while the U.S. share fell to 13%.
  2. Among AI researchers working in the United States, the share holding Chinese undergraduate degrees rose 4 percentage points in 2025, despite U.S.-China tensions.
  3. The United States recorded a net gain of 2,145 AI researchers in 2025, while China registered a net loss of 1,729, under Ma and Yang’s methodology based on NeurIPS paper authors.

Related Articles:

  • China Lures Home Its Top AI Talent From Silicon Valley — Elite artificial intelligence researchers have left US firms including Google DeepMind and OpenAI for Chinese companies such as ByteDance, Tencent, and Alibaba. Three China- and San Francisco-based headhunters say they relocated more than 30 US-based researchers to China over 12 months, up from low single digits the prior year.
  • China and the Future Of Science — China graduates about 5x as many medical and biomedical students as the US each year, 7x as many engineers, and nearly double the number of science and engineering PhDs, while one-sixth to one-fifth of US science and engineering graduates are themselves Chinese. One study found returning Chinese scientists lead-author 2.5x more papers than peers who stay in the US.
  • Why Europe Produces Nobel Prize Winners but Not Elon Musks — Europe trains more engineering graduates per capita than China and more STEM PhDs than any region outside the United States, yet the only EU-born companies to reach $100bn market value in the past fifty years, Spotify and BioNTech, listed on US exchanges. Europe captures 6% of global AI startup funding versus 61% for the United States.

AI Summary. Anthropic and OpenAI have each released lower-cost versions of their leading AI models amid a price war with low-cost Chinese rivals. Anthropic says its new Claude Opus 5.5 is roughly 40% cheaper to use than its predecessor, while OpenAI says its new ChatGPT-6 Sol and Luna models are 50% cheaper than their predecessors.

George Hammond Financial Times
Date Posted:

Anthropic’s latest Claude model is ~40% cheaper to use than its precursor, and can perform “most” tasks on par with Fable. OpenAI has released lower-cost versions of ChatGPT-6 known as Sol and Luna, which are ~50% cheaper than their ChatGPT-5.6 predecessors.

Are leading US AI labs cutting model prices as Chinese rivals compete?

Core argument: Anthropic’s Claude Opus 5.5 is roughly 40% cheaper to use than its predecessor and is the first of a new family of models the company says will be more cost-efficient than previous generations.

Anthropic and OpenAI both released cheaper versions of their leading models, as the price war between the two leading US labs and their low-cost Chinese rivals intensifies. The latest Claude model from Anthropic, Opus 5.5, is roughly 40% cheaper to use than its precursor and was the first of a new “family” of models that will be more cost-efficient than previous generations, the company said. OpenAI, meanwhile, released lower-cost versions of ChatGPT-6, known as Sol and Luna, following the release of its most advanced ChatGPT-6 Astra model at the start of the month. It said the models will be 50% cheaper than their predecessors in the ChatGPT-5.6 slate.

Takeaways by Macro Roundup® AI

  1. Anthropic’s Claude Opus 5.5 is roughly 40% cheaper to use than its predecessor and is the first of a new family of models the company says will be more cost-efficient than previous generations.
  2. OpenAI released lower-cost versions of ChatGPT-6, Sol and Luna, which it says will be 50% cheaper than their predecessors in the ChatGPT-5.6 slate, following its most advanced ChatGPT-6 Astra model.
  3. The cheaper releases from Anthropic and OpenAI come as the price war between the two leading US labs and their low-cost Chinese rivals intensifies.

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.
  • 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.
  • Anthropic’s Best AI Model Struggles To Attract Users As Cheaper Tools Thrive — 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.

AI Summary. US Treasury yields climbed to their highest levels in about two decades, with the five-year note yield rising above 5%, leaving only the two- and three-year maturities below that level. The 10-year rate rose almost 17 basis points to 5.13%, while the 30-year traded near 5.4%.

Greg Ritchie and Elizabeth Stanton Bloomberg
Date Posted:

The US 10-year Treasury yield jumped 17bps to 5.13%, its highest level since 2007. A 5-year Treasury auction drew weak demand, pushing the 5-year yield above 5% for the first time since 2007.

Are Treasury yields climbing to their highest levels in two decades?

Core argument: The US 10-year Treasury yield rose almost 17 basis points to 5.13%, its highest since 2007.

Auction results pushed the yield on five-year US notes above 5% for the first time since 2007, leaving the two- and three-year maturities the only coupon-bearing tenors below that milestone level. The benchmark 10-year rate rose almost 17 basis points to 5.13%, the highest since 2007. The 30-year yield traded at about 5.4%, the highest since 2007, and within about 4 basis points of the highest level since 2004.

Takeaways by Macro Roundup® AI

  1. The US 10-year Treasury yield rose almost 17 basis points to 5.13%, its highest since 2007.
  2. Auction results pushed the five-year US note yield above 5% for the first time since 2007, leaving only the two- and three-year maturities below that level among coupon-bearing tenors.
  3. The 30-year US yield traded at about 5.4%, the highest since 2007 and within roughly 4 basis points of its highest level since 2004.

Related Articles:

  • 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.
  • 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.
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AI Summary. The US Gulf Coast diesel crack spread cleared $100 per barrel for the first time on record, against a normal range of $15 to $30. Because diesel is an intermediate input embedded in the delivered cost of nearly every physical good, the author argues the increase migrates with a lag into core goods and services inflation.

Torsten Sløk Apollo
Date Posted:

Slok notes that, unlike gasoline, “diesel is an intermediate input embedded in the delivered cost of nearly every physical good.” Diesel crack spreads thus pass through into core inflation, which “the Fed cannot ignore.”

Does a record diesel refining margin feed into core inflation?

Core argument: The US Gulf Coast diesel crack spread cleared $100/bbl in August for the first time on record, against a normal range of $15–$30.

The US Gulf Coast diesel crack spread cleared $100/bbl for the first time on record in August against a normal range of $15 to $30. Unlike a gasoline spike, which lands on consumers as a one-time tax on discretionary spending, diesel is an intermediate input embedded in the delivered cost of nearly every physical good, from freight and rail to agriculture and construction. That means the rise in diesel prices does not stay in the energy line of the CPI but migrates with a lag into core goods and services, which is exactly the kind of pass-through the Fed cannot dismiss as transitory. The bottom line is that diesel margins are now setting the long end of the curve because diesel crack spreads are an important driver of future core inflation.

Takeaways by Macro Roundup® AI

  1. The US Gulf Coast diesel crack spread cleared $100/bbl in August for the first time on record, against a normal range of $15–$30.
  2. Diesel is an intermediate input embedded in the delivered cost of nearly every physical good, spanning freight, rail, agriculture, and construction, unlike a gasoline spike that lands on consumers as a one-time tax on discretionary spending.
  3. Rising diesel prices migrate with a lag out of the CPI energy line into core goods and services, a pass-through the Fed cannot dismiss as transitory, making diesel crack spreads an important driver of future core inflation.

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