“Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
“There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
“…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
“…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
“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
“Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
“…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
“…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
“…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
“…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
“…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology

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Chart of the Day: U.S. Households at Record Equity Allocation Heading into AI IPOs

Paul Kedrosky Applied Complexity

Date Posted:: May 28, 2026
Is Database:: Database

Equities are now a record share of American households’ financial assets, surpassing the dot-com peak. Paul Kedrosky notes that passive inflows act to “damp ordinary selloffs,” but warns that “once flows reverse, there will be few marginal buyers left.”

Households in the U.S. are at a record equity allocation, higher than in the dot-com or even the Nifty Fifty era. At the same time, market price-earnings multiples are not far from all-time highs, and index concentration is at a record, with fewer than 10 stocks making up almost 40% of the S&P 500's market cap. This has systemic implications: Equity ownership is now structural, not discretionary. Household “diversification” masks concentration. Monster AI IPOs will create forced-buying spirals. Public investors become the exit liquidity for private AI capital. Markets become simultaneously more stable and more fragile.

Takeaways by Macro Roundup^® AI

U.S. household equity allocation has reached record levels, exceeding dot-com and Nifty Fifty peaks, driving structural rather than discretionary market.
Fewer than 10 stocks comprise ~40% of S&P 500 market cap vs. historical norms, creating concentration risk masked by apparent.

America’s Risky Debt: What Markets See That Policymakers Don’t

Hanno Lustig Aspen Economic Strategy Group

Date Posted:: August 21, 2026
Is Database:: Database

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

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

Takeaways by Macro Roundup^® AI

The U.S. Treasury safety premium has compressed to near zero post-2022 and at points reversed, signaling that markets no longer treat Treasurys as unambiguously superior to credit-risk-adjusted corporate equivalents.
At longer maturities, global investors now price dollar-hedged G10 sovereign bonds above U.S. Treasurys, marking a structural erosion of the safe-haven premium that has historically anchored U.S. borrowing costs.

Yen Intervention = US Self-Preservation

Katie Martin Financial Times

Date Posted:: August 4, 2026
Is Database:: Database

To shield Treasuries from selloffs and higher yields, the US prefers its own yen support tools: ESF yen purchases as a signal and the Fed’s rarely used FIMA facility, lending Japan dollars against Treasuries to forestall direct Japanese Treasury sales.

Japan has two traditional routes to push up the battered yen. One is a massive rise in Japanese interest rates, and the other is massive sales of dollars — i.e., of US Treasuries. Neither would be good news for the US. Japanese yields are already seriously elevated by historical standards — 2.8% on the 10-year and 4% on the 30-year. The US is just not in a position to lose a big buyer of Treasuries when its own 10-year yield is tickling 4.7% and the 30-year is well over 5. And it certainly can’t tolerate a big seller of Treasuries, in the form of Japanese authorities selling dollars, hoping to prop up the yen. (Japan’s Treasury holdings already lead the world, at $1tn, or just below 4% of the total outstanding.) Much better to stand behind Japan and hope to scare off the yen sellers. Recent use has been made of the Exchange Rate Stabilization Fund [ESF] to signal that intent. Bessent has also said he will encourage the Fed to bump up Fima, the Fed’s international repo facility, in the coming months. This tool has rarely been wheeled out since it was established during the 2020 Covid shock. Its current $60bn per counterparty, per day limit has been reached just once. The fact that US authorities approved the use of this facility suggests the US side sees potential risk that fx intervention could push up US Treasury yields.

Takeaways by Macro Roundup^® AI

Japan’s $1 trillion in U.S. Treasury holdings—the world’s largest foreign position at ~4% of total outstanding—give the U.S. a direct strategic interest in defending the yen, as Japanese dollar sales would intensify pressure on a 10-year yield already at 4.7%.
U.S. participation in Friday’s joint yen intervention, executed via euros from the Exchange Stabilization Fund, delivers a credible “back off” warning to yen sellers without triggering the Treasury market disruption that direct dollar sales would cause.
Japan’s 10-year yield at 2.8% and 30-year at 4%—elevated by historical standards—redirect domestic capital away from U.S. Treasuries, compounding Washington’s vulnerability at a moment when its 30-year yield exceeds 5%.

If Anyone Needs an Intervention, It's the BOJ

John Authers Bloomberg

Date Posted:: August 3, 2026
Is Database:: Database

The 30-year TIPS yield is at an all-time high – excluding a few days during the 2008 crisis.

Kevin Warsh raised more questions than he answered at his press conference last Wednesday. Non-farm payrolls this week, and interventions from other Fed officials, might clarify things. For now, two points. First, Warsh confused people, but the point of not offering guidance is that the market forms its own view from the data, and the projected course of interest rates at the end of the week was barely changed. Second, something is afoot in long-term yields, which suggests possible damage to the Fed’s credibility. The 30-year TIPS (Treasury Inflation-Protected Security) yield has only ever been higher for a few days at the worst of the 2008 crisis. That’s not good.

The Global Balance Sheet 2026: Imbalance And Divergence

Rebecca Anderson, Jan Mischke, Arvind Govindarajan, Sylvain Johansson, et al. McKinsey

Date Posted:: July 27, 2026
Is Database:: Database
Is Important:: Important

A McKinsey analysis finds global wealth is increasingly composed of “paper wealth,” driven by the rise of US equity values to 2.4x the book value of net corporate assets, and the debt of Chinese corporations, which grew to 80% of their real asset value.

In 2025, global wealth growth was driven to a greater extent by paper wealth, or nominal asset value growth decoupled from the real economy. Only 20% of household wealth growth was based on net new investment (real assets including machinery and equipment, homes and buildings, infrastructure, and intellectual property, less depreciation), compared to 30% on average from 2000 to 2024. Nearly 60% came from asset price growth above and beyond general inflation and negative net worth positions from other sectors. [For example, this includes equity value growth above net assets for corporations as well as government bonds greater than the book value of government assets]. This was a marked increase over the average from 2000 to 2024, when paper gains drove one-third of global wealth growth.

Takeaways by Macro Roundup^® AI

Paper wealth drove ~60% of global household wealth growth in 2025, nearly double the one-third average from 2000–2024, as asset price gains increasingly decoupled from underlying economic activity.
Net new real investment—spanning machinery, buildings, infrastructure, and intellectual property net of depreciation—accounted for only 20% of household wealth growth in 2025, down 10 percentage points from the 2000–2024 average of 30%.

Are US Corporate Profit Margins Too High?

Tan Kai Xian Gavekal

Date Posted:: July 22, 2026
Is Database:: Database
Is Important:: Important

In Q1 2026, US after-tax non-financial margins were estimated at 7.6%, just short of the post-1949 high of 8.2% in Q2 of 2021. Tan Kai Xian argues US corporate profits may not mean revert due to increased automation as the workforce shrinks relative to the economy.

US corporate profit margins remain elevated by historical standards. In the first quarter of 2026, US after-tax non-financial margins were estimated at 7.6%, only just below the post-1949 high of 8.2% reached in the second quarter of 2021. The second-quarter earnings season has also begun strongly, according to FactSet data. Employee remuneration as a share of gross value added for US non-financial corporate businesses declined from 66% in the fourth quarter of 2001 to 56% in the first quarter of 2026. [Will Denyer argued] "When strong demographic growth powers rapid demand growth, companies concentrate on expanding capacity and sales—on growing along with the growing market. That means they tend to focus less on their margins—less on getting the biggest profit they can out of every dollar of revenues. In contrast, when demographic growth is subdued, and hence there is less potential demand growth, companies are not so bent on expanding capacity as fast as they can, and are far more interested in squeezing the maximum possible margin from every dollar of sales."

US 30-Year Yield Raises Alarm in Longest Run Above 5% Since 2007

Michael MacKenzie and Ye Xie Bloomberg

Date Posted:: July 22, 2026
Is Database:: Database
Is Important:: Important

So far this year, the US 30-year has traded beyond 5% for 27 days ~19% of trading days, the most since 2007.

The US 30-year bond yield is trading above 5% for the longest stretch since the dawn of the financial crisis, echoing investor concerns about a growing debt pile and sticky inflation. So far this year, the 30-year has traded beyond 5% for 27 days — or about 19% of all sessions, the most since 2007, according to data compiled by Bloomberg. It traded above that level for 50 days that year.

Equities are now a record share of American households’ financial assets, surpassing the dot-com peak. Paul Kedrosky notes that passive inflows act to “damp ordinary selloffs,” but warns that “once flows reverse, there will be few marginal buyers left.”

Are households repeating the dot-com bubble by chasing concentrated AI stocks?

Takeaways by Macro Roundup® AI

Related Articles:

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

Are global investors losing confidence in US government debt safety?

Takeaways by Macro Roundup® AI

Related Articles:

To shield Treasuries from selloffs and higher yields, the US prefers its own yen support tools: ESF yen purchases as a signal and the Fed’s rarely used FIMA facility, lending Japan dollars against Treasuries to forestall direct Japanese Treasury sales.

Does the U.S. need a stronger yen to protect its debt markets?

Takeaways by Macro Roundup® AI

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The 30-year TIPS yield is at an all-time high – excluding a few days during the 2008 crisis.

Are long-term inflation expectations breaking down despite central bank efforts?

Related Articles:

A McKinsey analysis finds global wealth is increasingly composed of “paper wealth,” driven by the rise of US equity values to 2.4x the book value of net corporate assets, and the debt of Chinese corporations, which grew to 80% of their real asset value.

Is global wealth growth becoming increasingly disconnected from real economic activity?

Takeaways by Macro Roundup® AI

Related Articles:

In Q1 2026, US after-tax non-financial margins were estimated at 7.6%, just short of the post-1949 high of 8.2% in Q2 of 2021. Tan Kai Xian argues US corporate profits may not mean revert due to increased automation as the workforce shrinks relative to the economy.

Related Articles:

So far this year, the US 30-year has traded beyond 5% for 27 days ~19% of trading days, the most since 2007.

Related Articles:

Takeaways by Macro Roundup^® AI

Takeaways by Macro Roundup^® AI

Takeaways by Macro Roundup^® AI

Takeaways by Macro Roundup^® AI