“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
“…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
“…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
“…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
“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
“…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
“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
“…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
“…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute

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Macro Outlook 2024: The Hard Part Is Over

Jan Hatzius, Dominic Wilson, Joseph Briggs, Vickie Chang, Devesh Kodnani, and Giovanni Pierdomenico Goldman Sachs

Date Posted:: November 14, 2023

Jan Hatzius @GoldmanSachs argues the prospect of a recession in the US is not elevated relative to historic patterns.

We continue to see only limited recession risk and reaffirm our 15% US recession probability. We expect several tailwinds to global growth in 2024, including strong real household income growth, a smaller drag from monetary and fiscal tightening, a recovery in manufacturing activity, and an increased willingness of central banks to deliver insurance cuts if growth slows. More disinflation is in store over the next year. Although the normalization in product and labor markets is now well advanced, its full disinflationary effect is still playing out, and core inflation should fall back to 2-2½% by end-2024. The market outlook is complicated by compressed risk premia and markets that are quite well-priced for our central case.

Takeaways by Macro Roundup^® AI

The authors reaffirm a 15% probability of a US recession, seeing only limited recession risk.
Global growth in 2024 is expected to be supported by strong real household income growth, a smaller drag from monetary and fiscal tightening, recovering manufacturing activity, and central banks more willing to deliver insurance cuts if growth slows.
Core inflation is expected to fall to 2–2½% by end-2024 as the disinflationary effect of well-advanced product and labor market normalization continues to play out, while compressed risk premia and markets well-priced for the central case complicate the market outlook.

3% vs. 60%

Torsten Sløk Apollo

Date Posted:: April 8, 2026
Is Database:: Database

Torsten Sløk notes the direct lending market is ~$2T or 3% of household and non-financial debt outstanding. To provide context, he shows that in 2006, on the eve of the crisis, mortgages accounted for ~60% of such debt.

The direct lending market is roughly $2 trillion, or about 3% of total debt outstanding for US households and businesses. By comparison, mortgages accounted for about 60% of total household and corporate debt at the peak of the housing bubble in 2006.

Takeaways by Macro Roundup^® AI

The direct lending market totals roughly $2 trillion, about 3% of total debt outstanding for US households and businesses.
Mortgages accounted for about 60% of total US household and corporate debt at the peak of the housing bubble in 2006, compared with direct lending's roughly 3% share.

Top 10% of Earners Drive a Growing Share of US Consumer Spending

Jonnelle Marte Bloomberg

Date Posted:: September 17, 2025
Is Database:: Database

Mark Zandi finds Americans in the top 10% of the income distribution accounted for 49.2% of consumer spending in Q2, the highest level since 1989.

Consumers in the top 10% of the income distribution accounted for 49.2% of total spending in the second quarter, up from 48.5% in the first quarter, reaching the highest level in data going back to 1989, according to an analysis of Federal Reserve data by Mark Zandi, chief economist for Moody’s Analytics. In contrast, the bottom 80% of the income distribution, or consumers making less than roughly $175,000 a year, have seen their spending merely keep pace with inflation since the pandemic.

Takeaways by Macro Roundup^® AI

The top 10% of US earners accounted for 49.2% of total consumer spending in the second quarter, up from 48.5% in the first quarter and the highest share in data going back to 1989, according to Mark Zandi's analysis of Federal Reserve data.
Consumers in the bottom 80% of the income distribution, making less than roughly $175,000 a year, have seen their spending merely keep pace with inflation since the pandemic, according to Moody's Analytics chief economist Mark Zandi.

Litigation Nation, Engineering Empire

Jonathon Sine Cogitations

Date Posted:: September 2, 2025
Is Database:: Database
Is Important:: Important

Jonathon Sine argues China “is moving beyond its breakneck industrial prime, facing similar dilemmas to those America confronted in the 1960s and 70s.” The ratio of science/engineering to humanities undergraduate majors is 2:1 in both the PRC and US.

Dan Wang’s “big idea” [is] “China is an engineering state, building big at breakneck speed, in contrast to the United States’ lawyerly society, blocking everything it can, good and bad.” I re-group US college majors according to Chinese disciplines to allow for rough comparison. Surprisingly, the ratio of science/engineering to humanities/social sciences is 2:1, the same as in China (if one groups management with science/engineering, as I also do for China). As with China today, America’s breakneck building phase was decidedly winding down by the 1960s. Urbanization went from 40% in 1900 to 70% by 1960, and grew much more incrementally over the next 60 years to 85% by 2020. The country simply did not need to continue building dams, expressways, and energy production facilities at breakneck pace. It became much more a matter of maintaining and upgrading (which has not gone well, at least according to the American Society of Civil Engineers’ report card). The American [building/investment slowdown that started after the 1970s] may be more about structural economic shifts than lawyers.

Takeaways by Macro Roundup^® AI

Regrouping US college majors according to Chinese disciplines yields a 2:1 ratio of science/engineering to humanities/social sciences, the same ratio as in China when management is grouped with science/engineering in both.
US urbanization rose from 40% in 1900 to 70% by 1960, then grew more incrementally to 85% by 2020, with America's breakneck building phase winding down by the 1960s.
The US building and investment slowdown that began after the 1970s may owe more to structural economic shifts than to lawyers, qualifying Dan Wang's contrast between China's engineering state and America's lawyerly society.

How America’s AI Boom Is Squeezing The Rest Of The Economy

Economist Staff The Economist

Date Posted:: August 19, 2025
Is Database:: Database
Is Important:: Important

As AI-related investment has risen since 2023, residential and nonresidential investment have declined or flatlined. This may suggest that a relatively rate-insensitive AI buildout is crowding out more interest-sensitive forms of investment.

Something like a sixth of the 2% rise in American real GDP over the past year has come from investments in computer and communications equipment, including chips, and data centres. Add in the grid upgrades to power AI models, plus the intellectual-property value of the software itself, and one estimate puts the boom’s contribution to real GDP growth at 40%. The trouble is that the very sector powering so much of America’s economic growth is squeezing the rest of its output. Housebuilders, for instance, cannot afford to be blithe about higher borrowing costs. Data centres have also constrained the rest of the economy by keeping energy prices high. Average American electricity bills have risen by 7% so far in 2025, at least in part due to the extra strain data centres have put on the grid. Real consumption has flatlined since December. Housebuilding has slumped, as has non-AI business investment.

Takeaways by Macro Roundup^® AI

Roughly a sixth of the 2% rise in American real GDP over the past year came from investment in computer and communications equipment, including chips, and data centres; one estimate puts the AI boom's contribution at 40% once grid upgrades and software intellectual property are included.
Average American electricity bills have risen by 7% so far in 2025, at least in part due to the extra strain data centres have put on the grid.

Is it Over?

Joseph Wang Fed Guy Blog

Date Posted:: August 18, 2025
Is Database:: Database

Following tepid reactions to the release of GTP-5, Joe Wang observes, “It is looking more like companies are spending hundreds of billions on rapidly depreciating GPUs that produce a commoditized product that most clients only modestly benefit from.”

GPT-5 users widely expressed disappointment in the capabilities of the new release, which seemed in some ways a step back. This sentiment is reflected in benchmarks that show a modest improvement in capabilities since the significant improvement in version 4 released two years ago. In addition, the benchmarks suggest a broader convergence in the capabilities of AI models. Commentary suggests this could be due to inherent limitations in the LLM technology and exhaustion of new training data. AI is fascinating technology, but it may not justify the enormous sums spent in its pursuit. It is looking more like companies are spending hundreds of billions on rapidly depreciating GPUs that produce a commoditized product that most clients only modestly benefit from. The entire macro landscape would look very different without the support of the AI boom.

Takeaways by Macro Roundup^® AI

GPT-5 users widely expressed disappointment with the release, which seemed in some ways a step back, and benchmarks show only modest capability gains since the significant improvement delivered by version 4 two years earlier.
Benchmarks suggest a broader convergence in AI model capabilities, with commentary attributing this to inherent limitations of large language model technology and exhaustion of new training data.
Companies appear to be spending hundreds of billions on rapidly depreciating GPUs producing a commoditized product that most clients only modestly benefit from, and the entire macro landscape would look very different without the support of the AI boom.

US Households and Firms Are in Great Shape

Torsten Sløk Apollo

Date Posted:: March 31, 2025
Is Database:: Database

Torsten Sløk notes that US household and banking sector debt has fallen to its lowest level in decades as a % of GDP, while corporate leverage has moved sideways. “The bottom line is that the private sector in the US is in incredibly good shape.”

Household sector leverage and banking sector leverage have declined significantly since 2008. Over the same period, federal government leverage has increased significantly, and corporate leverage has moved sideways. The bottom line is that the private sector in the US is in incredibly good shape.

Takeaways by Macro Roundup^® AI

US household sector leverage and banking sector leverage have both declined significantly since 2008, leaving the US private sector in what the author characterizes as incredibly good shape.
US federal government leverage has increased significantly since 2008, moving in the opposite direction from the deleveraging in the household and banking sectors.
US corporate leverage has moved sideways since 2008, neither declining like household and banking leverage nor rising like federal government leverage.

Jan Hatzius @GoldmanSachs argues the prospect of a recession in the US is not elevated relative to historic patterns.

Will growth tailwinds keep recession risk low as inflation falls?

Takeaways by Macro Roundup® AI

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Torsten Sløk notes the direct lending market is ~$2T or 3% of household and non-financial debt outstanding. To provide context, he shows that in 2006, on the eve of the crisis, mortgages accounted for ~60% of such debt.

Is direct lending too small to threaten the financial system?

Takeaways by Macro Roundup® AI

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Mark Zandi finds Americans in the top 10% of the income distribution accounted for 49.2% of consumer spending in Q2, the highest level since 1989.

Are top earners accounting for a record share of consumer spending?

Takeaways by Macro Roundup® AI

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Jonathon Sine argues China “is moving beyond its breakneck industrial prime, facing similar dilemmas to those America confronted in the 1960s and 70s.” The ratio of science/engineering to humanities undergraduate majors is 2:1 in both the PRC and US.

Does America's building slowdown reflect structural shifts rather than lawyerly culture?

Takeaways by Macro Roundup® AI

Related Articles:

As AI-related investment has risen since 2023, residential and nonresidential investment have declined or flatlined. This may suggest that a relatively rate-insensitive AI buildout is crowding out more interest-sensitive forms of investment.

Is the AI investment boom crowding out the rest of the economy?

Takeaways by Macro Roundup® AI

Related Articles:

Following tepid reactions to the release of GTP-5, Joe Wang observes, “It is looking more like companies are spending hundreds of billions on rapidly depreciating GPUs that produce a commoditized product that most clients only modestly benefit from.”

Are AI capability gains slowing enough to question hardware spending?

Takeaways by Macro Roundup® AI

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​​Torsten Sløk notes that US household and banking sector debt has fallen to its lowest level in decades as a % of GDP, while corporate leverage has moved sideways. “The bottom line is that the private sector in the US is in incredibly good shape.”

Is the US private sector in strong financial shape?

Takeaways by Macro Roundup® AI

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Takeaways by Macro Roundup^® AI

Takeaways by Macro Roundup^® AI

Takeaways by Macro Roundup^® AI

Takeaways by Macro Roundup^® AI

Takeaways by Macro Roundup^® AI

Takeaways by Macro Roundup^® AI

Torsten Sløk notes that US household and banking sector debt has fallen to its lowest level in decades as a % of GDP, while corporate leverage has moved sideways. “The bottom line is that the private sector in the US is in incredibly good shape.”

Takeaways by Macro Roundup^® AI