Edward Conard

Top Ten New York Times Bestselling Author

  • “…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 fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “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
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Friday, September 25, 2026

AI Summary. Historically, controlling for valuations, a 1% rise in the share of the market represented by initial public offerings has been associated with roughly a 4% decline in prices. With large artificial-intelligence company listings expected and share issuance exceeding buybacks, equity supply could shift from shrinking about 1% a year to growing near 5%, implying returns roughly 20% below average.

Ben Inker and John Pease GMO
Date Posted:

GMO estimates net US equity supply could increase by ~5% or more of total market capitalization over the next year. Inker and Pease note that in 1999–2000, “IPOs peaked at ~5% of total market cap. It doesn’t take much new supply to overwhelm the market.”

How does rising equity supply from new listings affect stock returns?

Core argument: Controlling for valuations, a 1% increase in the market share of IPOs has historically led to an approximate 4% decrease in prices, a multiplier the author applies to a coming surge in equity supply.

Controlling for valuations, a 1% increase in the market share of IPOs has historically led to an approximate 4% decrease in prices [Exhibit 2 in gallery]. Consider what is happening to equity supply. SpaceX’s non-Elon sales alone exceed 1% of the U.S. stock market’s value. We are likely to see IPOs from both Anthropic and OpenAI—together valued at about 5% of the U.S. stock market’s total investable market cap —over the next 12 months. For the first time in twenty years, with the brief exception of the GFC, we are seeing net dilution in the U.S. stock market (i.e., share issuance exceeding share buybacks), as the hyperscalers continue their capital expenditure spree. In aggregate, we are going from a world where equity supply was shrinking by roughly 1% per annum (with buybacks exceeding primary or secondary issuance) to one in which equity supply will be increasing by close to 5%, if not more. If you believe the 4x multiplier [implied by the regression line in Exhibit 2], this means we should expect returns that are some 20% below average (roughly 6% real) over the next 12–18 months from the headwind of rising equity supply alone.

Takeaways by Macro Roundup® AI

  1. Controlling for valuations, a 1% increase in the market share of IPOs has historically led to an approximate 4% decrease in prices, a multiplier the author applies to a coming surge in equity supply.
  2. U.S. equity supply is shifting from shrinking roughly 1% a year, with buybacks exceeding issuance, to growing close to 5% or more, the first net dilution in twenty years apart from the Global Financial Crisis.
  3. Anthropic and OpenAI, together valued at about 5% of U.S. investable market cap, are likely to go public within 12 months, while SpaceX’s non-Elon sales alone exceed 1% of the U.S. stock market’s value.

Related Articles:

  • Momentum, Rotation and the Value in Growth — After a fifteen-year stretch in which US equities, technology and growth stocks led, equity gains have broadened geographically, with the US the weakest of the major regions. The five largest US stocks now trade at a price-to-earnings ratio only marginally above the other 495, after holding a consistent premium since 2017.
  • SpaceX and OpenAI Are Ending Wall Street’s Era of Stock Scarcity — JPMorgan projects that share sales will add roughly $1.5tn of stock to the US equity market over the next two years even after buybacks, which would be the strongest net equity issuance since at least the late 1990s. Equity has grown cheaper relative to debt as a funding source.
  • 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.

AI Summary. Direct carbon pricing—carbon taxes and emissions trading systems—now covers about 30% of global emissions, with most coverage coming from emissions trading systems in China and the European Union. The EU complements its system with a Carbon Border Adjustment Mechanism that prices carbon on certain high-emitting imports regardless of where they are produced.

Karen Karniol-Tambour, Jeremy Ng and Daniel Hochman Bridgewater Associates
Date Posted:

Bridgewater argues that carbon pricing is increasingly becoming an industrial-policy tool, with measures such as the EU’s CBAM supporting domestic producers by limiting carbon leakage, while carbon prices encourage investment in energy efficiency and industrial upgrading.

How much of global emissions does carbon pricing now cover?

Core argument: Direct carbon pricing, spanning carbon taxes and emissions trading systems, now covers roughly 30% of global emissions, with most of that coverage coming from emissions trading systems in China and the EU.

Carbon pricing schemes have continued to grow over the last few years. Some form of direct carbon pricing now covers ~30% of global emissions—spanning both carbon taxes and emissions trading systems. Most coverage comes from emissions trading systems in China and the EU, and these schemes are increasingly being adapted to fit their specific industrial policy goals. For example, as a complement to its domestic emissions trading system, the EU has started to implement a Carbon Border Adjustment Mechanism (CBAM), which imposes carbon pricing on certain high-emitting imports regardless of where they are produced. In a world of modern mercantilism, policy makers have increasingly emphasized the need for carbon pricing schemes to support—rather than constrain—industrial competitiveness.

Takeaways by Macro Roundup® AI

  1. Direct carbon pricing, spanning carbon taxes and emissions trading systems, now covers roughly 30% of global emissions, with most of that coverage coming from emissions trading systems in China and the EU.
  2. The EU has begun implementing a Carbon Border Adjustment Mechanism, which imposes carbon pricing on certain high-emitting imports regardless of where they are produced, as a complement to its domestic emissions trading system.
  3. Carbon pricing schemes are increasingly being adapted to fit specific industrial policy goals, with policy makers emphasizing that such schemes should support rather than constrain industrial competitiveness.

Related Articles:

  • We Are All Mercantilists Now — The postwar free-trade system depended on American soft power and broad respect for its rules, and as countries defected to mercantilist policies each defection pushed others to respond in kind. China's economic size and its use of currency management, public procurement, state subsidies and protectionism to build leading industries in electric vehicles, solar power and batteries broke the existing order.
  • Power Politics: Energy Self-Sufficiency in a Modern Mercantilist World — China leads in adding power to the grid, with more than 30,000 miles of ultra-high-voltage transmission lines versus zero in the US and lead times for large transformers of 48 weeks against a US average of 143 weeks. This positions China to accommodate new demand sources such as artificial intelligence.
  • 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.

AI Summary. Federal Reserve officials' assessed risks to their employment and price stability mandates had tended to move together rather than inversely, suggesting common forces were driving both. That pattern has now shifted, with officials more optimistic on growth and employment and less concerned about downside risks than before the pandemic.

Matt Klein The Overshoot
Date Posted:

About half of Fed officials now forecast that at the end of 2028 short rates will be “at least as high as they are now.” The underlying reason, Klein proposes, is not supply shocks but a persistent shift in the perceived balance of risks between inflation and unemployment.

Have central bankers' employment and inflation risk assessments stopped moving together?

Core argument: From mid-2022 until now, Fed officials’ assessments of risks to the employment mandate and the price stability mandate tended to move together, consistent with judging that the forces driving unwelcome inflation also threatened the jobs outlook.

From mid-2022 until now, Fed officials seem to have judged that all of the forces responsible for unwelcome inflation also threatened the outlook for jobs. That would explain why their assessment of the risks to the employment mandate and to the price stability mandate tended to move together [see “Aligned Mandate” in gallery]. If “normal” factors such as consumers’ access to credit or businesses’ appetite to invest were driving things, the perceived risks to the inflation and employment mandates would be uncorrelated, or even move inversely to each other. That shift has finally happened. In fact, Fed officials are now more bullish on growth and employment—and less concerned about downside risks—than they have been since before the pandemic. The latest data on private sector balance sheets, borrowing, and asset purchases can help explain why.

Takeaways by Macro Roundup® AI

  1. From mid-2022 until now, Fed officials’ assessments of risks to the employment mandate and the price stability mandate tended to move together, consistent with judging that the forces driving unwelcome inflation also threatened the jobs outlook.
  2. Fed officials are now more bullish on growth and employment, and less concerned about downside risks, than they have been since before the pandemic.
  3. If normal factors such as consumers’ access to credit or businesses’ appetite to invest were driving the economy, perceived risks to the inflation and employment mandates would be uncorrelated or move inversely, a shift that has now happened.

Related Articles:

  • Just Waiting for Disinflation is Not Enough — About 52% of consumer price index components are rising at least 3% year-over-year, down from 73% at the peak but above the 32% average from 2000 to 2020, and such breadth measures track actual inflation closely. Weighting components by spending shares makes the current episode resemble milder past inflation accelerations rather than the largest ones.
  • The Diesel Shock Is a Core Inflation Shock — 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.
  • Weeks Before the Midterms, Almost Everything Is Getting More Expensive — Wage gains have trailed inflation for five months, and consumer prices are 27% higher than at the start of 2021. The "misery index," the sum of the inflation and unemployment rates, stands at 7.5, up from 6.7 a year earlier.

AI Summary. East Asian economies accumulated large US dollar and euro reserves by building export machines based on undervalued currencies, a strategy one analyst argues has run its course. He contends China should revalue aggressively and return to market-determined prices, since the resulting accounting losses reflect real losses already incurred.

Charles Gave Gavekal
Date Posted:

Charles Gave argues that East Asia’s post-1997 model of undervalued currencies, which has generated >5T in FX reserves, has run its course. His prescription is aggressive China-led revaluation to shift purchasing power toward Asian consumers.

Should China revalue its currency aggressively and let markets set prices?

Core argument: Gave argues that East Asia’s strategy of building export machines on undervalued currencies to accumulate large US dollar and euro reserves has run its course.

To accumulate their huge reserves of US dollars and euros, [East Asia] built formidable export machines based on undervalued currencies. [Gave sees] only one solution: to return to market-determined prices as quickly as possible. As the leading economy in the region, China should bite the bullet and say the time has come to revalue aggressively. Yes, Asia will take accounting losses. But that does not greatly matter; the actual losses have already been taken a long time ago.

Takeaways by Macro Roundup® AI

  1. Gave argues that East Asia’s strategy of building export machines on undervalued currencies to accumulate large US dollar and euro reserves has run its course.
  2. Gave sees a return to market-determined prices as quickly as possible as the only solution, with China, as the region’s leading economy, revaluing aggressively.
  3. Gave contends that the accounting losses Asia would take on revaluation do not greatly matter because the actual losses were taken long ago.

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%.
  • 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.
  • 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.

Monday, September 28, 2026

AI Summary. Foreign investors made a record $942bn in net purchases of US stocks and investment fund shares over 12 months, the highest rolling 12-month total in Treasury data going back to 1985. Foreign demand for US debt securities moved in the opposite direction, falling to a net $188bn in the second quarter from $314bn in the first.

Michael Taffe and George Steer Financial Times
Date Posted:
Is Database:
Database

Foreign investors bought a record net $426B of US equities and fund shares in Q2, up 62% y/y, part of a record $942B in the 12 months through July. Overseas investors bought a net $188B of US debt securities in Q2, down from $314B in Q1.

Are foreign investors shifting from US debt into US stocks?

Core argument: Foreign investors made a record $942bn in net purchases of US equities and investment fund shares in the 12 months to July, the highest rolling 12-month total in Treasury data going back to 1985.

Foreign investors made a record $942bn in net purchases of US equities and investment fund shares in the 12 months to July, accelerating a shift in overseas investment towards American stocks and away from debt. The flows represented the highest rolling 12-month total in Treasury data going back to 1985. Net purchases of US equities and investment fund shares by foreign investors jumped to $426bn in the second quarter, up 62% from the same period in 2025, and surpassing the previous quarterly record of $299bn in 2022, according to the Bureau of Economic Analysis. Foreign demand for US debt moved in the opposite direction. Overseas investors bought a net $188bn of US debt securities in the second quarter, down from $314bn in the first.

Takeaways by Macro Roundup® AI

  1. Foreign investors made a record $942bn in net purchases of US equities and investment fund shares in the 12 months to July, the highest rolling 12-month total in Treasury data going back to 1985.
  2. Net foreign purchases of US equities and investment fund shares reached $426bn in the second quarter, up 62% from the same period in 2025 and above the prior quarterly record of $299bn in 2022, according to the Bureau of Economic Analysis.
  3. Overseas investors bought a net $188bn of US debt securities in the second quarter, down from $314bn in the first.

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.
  • Foreign Investors Prefer US Stocks To Treasuries As Debt Worries Grow — International flows into US stocks averaged 2.8% of US GDP over a year, overtaking flows into US Treasuries at 2% of GDP for the first time this century outside brief episodes during the Covid-19 pandemic and after the global financial crisis, according to Deutsche Bank analysis of US Treasury data.
  • A Catalyst For The AI Bubble Break — Historically, controlling for valuations, a 1% rise in the share of the market represented by initial public offerings has been associated with roughly a 4% decline in prices. With large artificial-intelligence company listings expected and share issuance exceeding buybacks, equity supply could shift from shrinking about 1% a year to growing near 5%, implying returns roughly 20% below average.

AI Summary. The author argues that a slowdown in artificial-intelligence capital spending would remove a stimulus that has been masking weakness, colliding with overcapacity, falling prices, refinancing needs and weaker labor income. On this view the main risk is deflationary, transmitting through investment, employment, consumption, credit, housing and asset prices at once.

Paul Kedrosky Applied Complexity
Date Posted:

Kedrosky argues that the “inevitable transition” from the current inflationary AI-buildout regime to a new regime in which AI-driven productivity gains exert deflationary pressure is “where the real macro risk lies.”

Would an AI spending slowdown create deflationary rather than inflationary risk?

Core argument: The author argues the dangerous phase arrives when the AI capex boom slows, removing stimulus just as overcapacity, falling prices, refinancing needs and weaker labor income hit together, with a refinancing wall waiting in 2028.

If AI investment has been masking underlying weakness, a slowdown removes the stimulus just as overcapacity, falling prices, refinancing needs and weaker labor income hit together. A refinancing wall sits waiting in 2028. Failure is over-determined. This moment sits at the intersection of the four forces that have produced the most consequential boom-bust cycles in Western economic history: loose credit, government policy, technology, and real estate. There are, as a result, myriad catalysts, each with a low probability of happening, but which collectively guarantee collapse. That is why the principal risk is deflationary rather than inflationary. An AI bust could transmit through capex, employment, consumption, credit, housing, and asset prices simultaneously.

Takeaways by Macro Roundup® AI

  1. The author argues the dangerous phase arrives when the AI capex boom slows, removing stimulus just as overcapacity, falling prices, refinancing needs and weaker labor income hit together, with a refinancing wall waiting in 2028.
  2. The principal risk from an AI bust is deflationary rather than inflationary, according to the author, because it could transmit simultaneously through capex, employment, consumption, credit, housing, and asset prices.
  3. The author places this moment at the intersection of loose credit, government policy, technology, and real estate — the four forces behind the most consequential boom-bust cycles in Western economic history — and sees a plausible decade of Japan-style balance recession with fiscal stimulus constrained by massive deficits.

Related Articles:

  • Financing the AI Buildout — The authors estimate roughly 57 gigawatts of operating US data center capacity against a planned development pipeline of about 509 gigawatts, which is not a completion forecast since projects may be delayed, scaled back, or abandoned. Their central scenario has 182.8 gigawatts of added capacity becoming operational through 2032, 117.2 gigawatts completed later, and 226.9 gigawatts never completed.
  • A Catalyst For The AI Bubble Break — Historically, controlling for valuations, a 1% rise in the share of the market represented by initial public offerings has been associated with roughly a 4% decline in prices. With large artificial-intelligence company listings expected and share issuance exceeding buybacks, equity supply could shift from shrinking about 1% a year to growing near 5%, implying returns roughly 20% below 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.

AI Summary. An analysis estimates that for US data center owners to break even on AI investments, the sector would need about $3.725tn in annual compute revenue by 2032 — roughly 9.2% of projected 2032 GDP. The estimate assumes 183 GW of US capacity completed, a $9.61tn capital base, a 10% discount rate, and a 50% operating cash flow margin.

Hanno Lustig The Two Cents
Date Posted:
Is Database:
Database

The US AI-buildout is projected to average ~3.6% of GDP over 2025–32. Lustig notes data-center operators will need ~$3.725T in annual compute revenue by 2032, 9.2% of projected GDP, to earn a 10% unlevered return on the buildout.

How much annual revenue must AI data centers generate to break even?

Core argument: Stijn’s baseline estimate holds that data center owners would need $3.725 trillion of annual revenue by 2032 — roughly 9.2% of projected 2032 GDP — to break even on AI investment at a 10% discount rate.

What do you have to believe about future revenue in order for all data center owners to to break even on their AI investment? Using a 10% discount rate, Stijn’s baseline number is 3.725 trillion of annual revenue by 2032, which would amount to roughly 9.2% of projected 2032 GDP. This number is the top line earned from selling compute in aggregate by whoever operates the 182.7 GW of US capacity completed by 2032.2. The assumptions behind that number: 183 GW of U.S. data-center capacity completed between 2025 and 2032. $8.54 trillion of construction cost, grossed up to a $9.61 trillion capital base to account for the return on capital tied up during construction. A 10% discount rate. A 6-year life for IT equipment (68% of cost) and a 20-year life for everything else (32%). A 50% operating cash flow margin.

Takeaways by Macro Roundup® AI

  1. Stijn’s baseline estimate holds that data center owners would need $3.725 trillion of annual revenue by 2032 — roughly 9.2% of projected 2032 GDP — to break even on AI investment at a 10% discount rate.
  2. The break-even calculation assumes 183 GW of U.S. data-center capacity completed between 2025 and 2032 at $8.54 trillion of construction cost, grossed up to a $9.61 trillion capital base for return on capital tied up during construction.
  3. The estimate assumes a 6-year life for IT equipment, which accounts for 68% of cost, a 20-year life for the remaining 32%, and a 50% operating cash flow margin.

Related Articles:

  • Financing the AI Buildout — The authors estimate roughly 57 gigawatts of operating US data center capacity against a planned development pipeline of about 509 gigawatts, which is not a completion forecast since projects may be delayed, scaled back, or abandoned. Their central scenario has 182.8 gigawatts of added capacity becoming operational through 2032, 117.2 gigawatts completed later, and 226.9 gigawatts never completed.
  • A Catalyst For The AI Bubble Break — Historically, controlling for valuations, a 1% rise in the share of the market represented by initial public offerings has been associated with roughly a 4% decline in prices. With large artificial-intelligence company listings expected and share issuance exceeding buybacks, equity supply could shift from shrinking about 1% a year to growing near 5%, implying returns roughly 20% below average.
  • Rear Window — 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.

AI Summary. Because investors can buy bonds across borders, an investment boom in one country such as the United States can draw in loanable funds from abroad and push up interest rates in other nations. The linkage is not one-for-one, since investors also weigh expected exchange-rate changes and the resulting capital gains or losses.

Paul Krugman Krugman Wonks Out
Date Posted:

The nominal 10-year Treasury yield is ~ where it was during the mid-2000s housing boom, but below its level during the late-1990s and early-2000s technology boom. Krugman asks, “If we’re now looking at an even bigger investment boom, why wouldn’t we expect to see interest rates at least that high?”

Does an investment boom in one country raise interest rates abroad?

Core argument: Because investors can buy bonds across borders, an investment boom in the United States draws loanable funds from other nations and pushes their interest rates up as well.

Investors can buy bonds across borders, so an investment boom in the United States can draw in loanable funds from other nations and drive up their interest rates. The international linkage between interest rates isn’t always one-for-one. That’s mainly because investors deciding which nation’s bonds to buy don’t just look at interest rates -- they also take into account expected changes in exchange rates. For example, there was a sharp rise in U.S. interest rates in the early 1980s that was only partially matched by a rise in German rates. The reason was that this was also a period of an extremely strong dollar, which many investors believed (correctly) would prove temporary. So German investors buying U.S. bonds had to set the high interest rates they could earn against the capital losses they were likely to experience when the dollar came back to earth.

Takeaways by Macro Roundup® AI

  1. Because investors can buy bonds across borders, an investment boom in the United States draws loanable funds from other nations and pushes their interest rates up as well.
  2. The international linkage between interest rates is not always one-for-one, mainly because investors choosing among nations’ bonds weigh expected exchange rate changes alongside interest rates.
  3. The sharp rise in U.S. interest rates in the early 1980s was only partially matched by German rates, as German investors buying U.S. bonds set high yields against likely capital losses when the strong dollar fell back.

Related Articles:

  • Financing the AI Buildout — The authors estimate roughly 57 gigawatts of operating US data center capacity against a planned development pipeline of about 509 gigawatts, which is not a completion forecast since projects may be delayed, scaled back, or abandoned. Their central scenario has 182.8 gigawatts of added capacity becoming operational through 2032, 117.2 gigawatts completed later, and 226.9 gigawatts never completed.
  • 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.

AI Summary. China has extended travel restrictions on top artificial intelligence and chip talent to their spouses and children, who must now obtain government approval before going abroad even for short trips. The requirement broadens existing curbs on the movement of influential technology entrepreneurs, researchers and executives.

Bloomberg Staff Bloomberg
Date Posted:

Beijing has expanded overseas travel restrictions for top AI professionals to include their families. While not an outright ban, foreign travel will now require state approval.

Is China extending travel approval requirements to tech talent's families?

Core argument: China now requires spouses and children of certain AI and chip executives whose work is deemed paramount to state security to obtain Beijing’s approval before traveling abroad, even for short trips, according to people familiar with the matter.

Government agencies have recently begun to share the wider restrictions with affected people, which include prominent startup founders as well as the heads of strategically important companies in AI-related fields. Direct relatives such as spouses and children of certain AI and chip executives, whose work is considered paramount to state security, are now required to obtain approval from Beijing before going abroad even for short trips. That marks a broadening of existing curbs on the freedom of movement of China’s most influential tech talent. While not an outright ban on travel, the new requirement is likely to exert a further chilling effect on a tech sector already facing unprecedented curbs. China has restricted foreign travel for top AI professionals in private firms such as Alibaba and DeepSeek since earlier this year.

Takeaways by Macro Roundup® AI

  1. China now requires spouses and children of certain AI and chip executives whose work is deemed paramount to state security to obtain Beijing’s approval before traveling abroad, even for short trips, according to people familiar with the matter.
  2. The restrictions extend to prominent startup founders and heads of strategically important companies in AI-related fields, broadening existing curbs on the movement of China’s entrepreneurs, researchers and executives.
  3. China has restricted foreign travel for top AI professionals at private firms such as Alibaba and DeepSeek since earlier this year, and the new family requirement is likely to exert a further chilling effect on the tech sector.

Related Articles:

  • Who’s Ahead in the Global AI Talent Race? — 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.
  • China Tightens Control Of Overseas Travel In Sweeping New Law — China has imposed new legal controls on overseas travel that formalise restrictions on mid-to-senior civil servants, Communist Party cadres, state-owned enterprise employees, and private citizens working in sensitive areas, as part of efforts to protect state secrets, advanced technology, and highly skilled workers. Violators face steep fines and exit bans ranging from three months to indefinite.
  • The Future, Made In China — China's economy runs on parallel tracks: a property crash, a booming high-tech manufacturing sector, and university graduates trained for traditional white-collar jobs entering a labor market geared toward advanced manufacturing. Researchers at Stanford and Harvard found a swing from optimism to pessimism, with about 28% of citizens expecting living standards to improve.

AI Summary. China faces three options as external demand weakens: shift a larger share of national income to households so consumption absorbs more output, keep relying on investment despite weak returns, or let production and growth slow. The first requires substantial changes in income distribution and saving incentives; the second risks more debt and excess capacity; the third implies higher unemployment.

Michael Pettis China Financial Markets
Date Posted:

“Beijing cannot choose whether China will adjust; one way or another, it will.” Pettis warns Zhongnanhai against postponing rebalancing with another round of debt-financed investment “despite increasingly weak returns.”

What choices does China face as external demand weakens?

Core argument: China faces three options: shift a larger share of national income to households so consumption absorbs more output, keep relying on investment despite weak returns, or allow production and growth to slow.

What it can choose is how painful that adjustment will be. If weaker external demand is met by encouraging more borrowing and domestic investment, regardless of whether that investment is economically justified, China risks postponing the inevitable. China therefore faces the same basic choice Japan confronted, but with deeper imbalances and less accommodating global conditions. It can shift a larger share of national income toward households and allow consumption to absorb more of what the economy produces; or it can continue relying on investment, despite increasingly weak returns; or it can allow production and growth to slow. The first choice requires a substantial change in the domestic distribution of income and the incentives to save. The second risks still more debt and excess capacity and, ultimately, a more painful adjustment. The third implies higher unemployment and weaker growth.

Takeaways by Macro Roundup® AI

  1. China faces three options: shift a larger share of national income to households so consumption absorbs more output, keep relying on investment despite weak returns, or allow production and growth to slow.
  2. China confronts the same basic choice Japan faced, but with deeper imbalances and less accommodating global conditions, and can choose only how painful the adjustment will be.
  3. Meeting weaker external demand with more borrowing and domestic investment, regardless of whether it is economically justified, risks further debt and excess capacity and a more painful adjustment, while slower growth implies higher unemployment.

Related Articles:

  • 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.
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