“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
“…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 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
“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
“…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
“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
“…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 comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
“A full-throated defense of economic dynamism.” - The Wall Street Journal
“…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 fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
“…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
Analysis of how government borrowing, debt issuance, interest costs, and fiscal sustainability affect growth, inflation, private investment, and financial markets. This archive brings together relevant data, research, and competing interpretations.
AI Summary.A global bond sell-off pushed long-term borrowing costs in the US, Europe and the UK to their highest levels in decades, with the 30-year US Treasury yield reaching 5.73%, its highest since 2002. Investors cited concerns over inflation and high public debt burdens, with French and Italian yields also rising.
Ian Smith, Emily Herbert and Kate DuguidFinancial Times
Date Posted:
The US 10-year Treasury yield fell to 5.29% from 5.36% after strong auction demand. The 30-year yield rose to as high as 5.73%, its highest level since 2002, before settling at 5.66%.
Are inflation and debt worries pushing long-term yields to decades-highs?
Core argument: The 30-year US Treasury yield rose as much as 0.09 percentage points to 5.73%, its highest level since 2002, before easing to 5.66% following a strong 10-year Treasury auction.
A sell-off in US government bonds eased after an auction of 10-year Treasuries drew strong demand in a sign that investors were seeking to lock in the highest yields since the turn of the millennium. US 10-year Treasury yields, a benchmark for borrowing costs in the world’s biggest economy, climbed as high as 5.36% in volatile trading early on Wednesday. But yields fell back sharply after a $39bn auction went smoothly, with the 10-year recently trading at 5.29%. France’s 10-year borrowing costs rose to 4.87%, heading back towards the post-2002 high reached this month, amid persistent worries that the Eurozone’s second-biggest economy was heading for a debt reckoning.
Takeaways by Macro Roundup® AI
The 30-year US Treasury yield rose as much as 0.09 percentage points to 5.73%, its highest level since 2002, before easing to 5.66% following a strong 10-year Treasury auction.
A global bond sell-off pushed long-term borrowing costs in the US, Europe and the UK back to their highest levels in decades, as fears over inflation and high public debt burdens rattled investors.
French and Italian government bond yields each rose more than 0.1 percentage points, extending a series of wild swings in European government debt markets.
Related Articles:
France is the Biggest Loser in the Global Rates Reset— French government borrowing costs now exceed the country's nominal income growth by about 2 percentage points, the most unfavorable gap between borrowing costs and growth in the rich world. By contrast, Spanish and Greek bond yields remain about 2 percentage points below their income growth rates.
Soaring Bond Yields, Gaping Deficits and Towering Debts: What Could Go Wrong?— An analysis of 22 rich countries estimates that if each refinanced its entire debt at current five-year bond yields, Britain would need the largest primary surplus to stabilize its debt-to-GDP ratio, about 1.5%, followed by Italy at 1.4%, France at 1.2% and America at 1%.
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.
AI Summary.France's National Rally party, historically a champion of big-state spending, has pledged to clean up the country's degraded public finances alongside tax cuts it describes as a fully financed "competitiveness shock." The party also proposed lowering the retirement age from 62 to 60 for those who start working young, estimating €15bn–€20bn in pension savings from correcting "unjust or inefficient" measures.
Leila Abboud, Sarah White and Ian SmithFinancial Times
Date Posted:
Marine Le Pen has proposed a referendum that would cap national debt at 60% of GDP and reduce the public deficit by .5pp annually to reach “close to a balanced budget.” At the same time she has also proposed to reduce the retirement age from 62 to 60.
Is a populist party shifting toward fiscal restraint and tax cuts?
Core argument: Marine Le Pen’s Rassemblement National estimates it could save €15bn–€20bn on pensions spending by correcting what it calls “unjust or inefficient measures” in the current system, helping fund its plans.
Long a champion of big-state spending to protect the working class, Le Pen in recent months has swung behind the idea that France needs a major clean-up of its degraded public finances. Her party, Rassemblement National (RN), also pledged tax cuts on Tuesday in what it said would be a fully financed “competitiveness shock” from 2027. Allianz chief economist Ludovic Subran called the proposals “voodoo economics.” “The RN now presents itself as the party of fiscal rectitude, but the route to its targets is unclear. The savings figures are disputed,” he said. Delivering the announced savings would be impossible unless the RN reversed tack to lower the retirement age.
Takeaways by Macro Roundup® AI
Marine Le Pen’s Rassemblement National estimates it could save €15bn–€20bn on pensions spending by correcting what it calls “unjust or inefficient measures” in the current system, helping fund its plans.
Rassemblement National pledged tax cuts as part of what it said would be a fully financed “competitiveness shock” from 2027, alongside lowering the retirement age from 62 to 60 for those who begin working at a young age.
Le Pen, long a champion of big-state spending to protect the working class, has swung behind the idea that France needs a major clean-up of its degraded public finances.
Related Articles:
France is the Biggest Loser in the Global Rates Reset— French government borrowing costs now exceed the country's nominal income growth by about 2 percentage points, the most unfavorable gap between borrowing costs and growth in the rich world. By contrast, Spanish and Greek bond yields remain about 2 percentage points below their income growth rates.
Le Boomer Spread— The gap between French and German 10-year government bond yields exceeded 140 basis points, up from 40–50 basis points, which the author attributes to political choices favoring pensioners over bondholders, including a suspended pension reform leaving the minimum retirement age near 62. French over-65s hold higher average incomes than working-age people.
Soaring Yields Find Europe’s Weak Spot— A rapid rise in long-term US Treasury yields has highlighted vulnerabilities elsewhere, notably France, where risks are elevated. Because France is in the euro zone, any crisis there would extend to the currency area, and European stocks have sold off alongside a weakening euro.
AI Summary.The 10-year US Treasury yield has risen past its 2007 high to its highest level since 2002, with the latest move driven by a US services survey showing services inflation proving intractable. The share of supply managers reporting rising prices climbed to its highest level since the post-pandemic surge.
John AuthersBloomberg
Date Posted:
The US 10-year Treasury yield is at its highest level since 2002. Authers notes: “A move of this magnitude should be a problem for equities. It hasn’t been…. On the face of it, the big tech companies are proving immune to the rising cost of money” likely due to rapidly growing earnings.
Are rising long-term bond yields driven by stubborn services inflation?
Core argument: The 10-year Treasury yield has broken above its 2007 high, the year a bond sell-off triggered the Global Financial Crisis, reaching its highest level since 2002.
The 10-year Treasury yield has now broken through its high from 2007, when a bond sell-off triggered the Global Financial Crisis. It’s now the highest since 2002. The latest impulse upward came from the ISM Services report for the US. Services inflation is proving intractable, and the proportion of supply managers complaining about rising prices climbed to its highest since the post-pandemic surge. With the exception of a few months at the top of the oil price spike in 2008, and in the brief spasm that followed Hurricane Katrina in 2005, the reading is the strongest since the series began in 1997.
Takeaways by Macro Roundup® AI
The 10-year Treasury yield has broken above its 2007 high, the year a bond sell-off triggered the Global Financial Crisis, reaching its highest level since 2002.
The ISM Services report drove the latest upward move in yields, with services inflation proving intractable and the share of supply managers reporting rising prices climbing to its highest since the post-pandemic surge.
Apart from a few months at the peak of the 2008 oil price spike and the brief episode after Hurricane Katrina in 2005, the ISM Services prices reading is the strongest since the series began in 1997.
Related Articles:
Foreign Capital Flows Into US Stocks Hit Record As Appetite For Debt Fades— 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.
US Focus: The Effect Of Soaring Profits— US nominal pre-tax corporate profits in the national accounts grew 23% over the past year, a pace not seen outside post-recession spikes since the mid-2000s. Wider margins were the key driver, as domestic profit growth far exceeded the 8% rise in corporate value added, pushing margins near all-time highs while the labor share hit new lows.
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.French government borrowing costs now exceed the country's nominal income growth by about 2 percentage points, the most unfavorable gap between borrowing costs and growth in the rich world. By contrast, Spanish and Greek bond yields remain about 2 percentage points below their income growth rates.
Matthew KleinThe Overshoot
Date Posted:
The change in a country’s interest rate, Klein argues, should be measured against the change in nominal income growth. By that metric, France has moved from “core Europe” into the periphery – while Italy, Spain and especially Greece have moved in the opposite direction.
Do French borrowing costs now exceed its income growth?
Core argument: France’s borrowing costs exceeded its nominal income growth rate by about 2pp as of 2026Q2, and by roughly 3pp at current yields, the most unfavorable such spread in the rich world.
The problem for France is that its bond yields are surging even as its nominal income growth has slowed relative to the 2017-2019 pace, to the point that, almost uniquely among rich countries, borrowing costs there now substantially exceed growth rates. In fact, the spread between French sovereign borrowing costs and French growth rates is now the most unfavorable anywhere in the rich world. The French economy was not quite growing by 2% a year in euro terms as of 2026Q2, which was even worse than the anemic 3% yearly average nominal growth rate recorded in 2017Q1-2019Q4. As of 2026Q2, France’s cost of borrowing was therefore about 2pp higher than its income growth rate. (At current yields, the penalty is more like 3pp.) By contrast, Spanish and Greek bond yields are still about 2pp lower than their income growth rates.
Takeaways by Macro Roundup® AI
France’s borrowing costs exceeded its nominal income growth rate by about 2pp as of 2026Q2, and by roughly 3pp at current yields, the most unfavorable such spread in the rich world.
French nominal growth was running just under 2% a year in euro terms as of 2026Q2, below the 3% yearly average recorded in 2017Q1–2019Q4, even as French bond yields surged.
Spanish and Greek bond yields remain about 2pp below their nominal income growth rates, in contrast to France’s unfavorable gap.
Related Articles:
Soaring Yields Find Europe’s Weak Spot— A rapid rise in long-term US Treasury yields has highlighted vulnerabilities elsewhere, notably France, where risks are elevated. Because France is in the euro zone, any crisis there would extend to the currency area, and European stocks have sold off alongside a weakening euro.
France Seeks To Rein In Pensions And State Salaries In 2027— France plans to narrow its budget deficit to 5% of GDP by cutting state spending, capping increases to pensions and civil servant salaries, and raising taxes. Deteriorating public finances have left France borrowing at higher interest rates than Italy and Greece, with 10-year bond yields reaching their highest since 2002.
Global Debt Report 2026— Gross central government borrowing across OECD countries rose 7% to a record $17tn, about 23% of GDP, and is projected to reach roughly $18tn, or 24% of GDP. The United States and Japan account for close to 80% of the area's refinancing requirements, with the US share rising from 57% to 70%.
AI Summary.The gap between French and German 10-year government bond yields exceeded 140 basis points, up from 40–50 basis points, which the author attributes to political choices favoring pensioners over bondholders, including a suspended pension reform leaving the minimum retirement age near 62. French over-65s hold higher average incomes than working-age people.
Hanno LustigThe Two Cents
Date Posted:
France has signaled that pensioners are the senior claimants on government revenues. In 2026, private investors must absorb net bond issuance equal to 7.5% of GDP, after years when ECB purchases exceeded issuance.
Why has France's borrowing cost gap with Germany widened?
Core argument: The French OAT-Bund 10-year spread exceeded 140 basis points in mid-2025, up from 40–50 basis points between 2022 and June 2024, which Lustig attributes to political decisions prioritizing pensioners over bondholders.
France’s 10-year spread over Germany has risen above 140bp, from 40–50bp before mid-2024. France has repeatedly signaled that pensioners are senior claimants on government revenues: pension reforms have been weakened or reversed, while governments trying to restrain pension spending have fallen. The minimum retirement age is now 62 years and 9 months, and French over-65s have higher average incomes than the working-age population. Meanwhile, ECB purchases exceeded French net bond issuance in five years from 2015–22, so private investors were net sellers of French bonds; in 2026 they must absorb net issuance equal to 7.5% of GDP. The 10-year (r-g) gap has swung from −3.9pp in October 2020 to +1.9pp. French insurers and pension funds’ share of negotiable government debt has fallen from about 25% in 2014 to under 11%, while nonresidents’ share has risen to 57.5%.
Takeaways by Macro Roundup® AI
The French OAT-Bund 10-year spread exceeded 140 basis points in mid-2025, up from 40–50 basis points between 2022 and June 2024, which Lustig attributes to political decisions prioritizing pensioners over bondholders.
France’s legal minimum retirement age remains frozen at 62 years and 9 months for men — the lowest in the Eurozone except Bulgaria — after Prime Minister Lecornu suspended the 2023 pension reform, and French over-65s hold higher average incomes than the working-age population.
French insurers and pension funds’ share of France’s negotiable state debt fell from about 25% in 2014 to under 11%, non-residents hold 57.5% of OATs, and private investors are projected to absorb 7.5% of GDP in net issuance in 2026.
Related Articles:
Soaring Yields Find Europe’s Weak Spot— A rapid rise in long-term US Treasury yields has highlighted vulnerabilities elsewhere, notably France, where risks are elevated. Because France is in the euro zone, any crisis there would extend to the currency area, and European stocks have sold off alongside a weakening euro.
France Seeks To Rein In Pensions And State Salaries In 2027— France plans to narrow its budget deficit to 5% of GDP by cutting state spending, capping increases to pensions and civil servant salaries, and raising taxes. Deteriorating public finances have left France borrowing at higher interest rates than Italy and Greece, with 10-year bond yields reaching their highest since 2002.
Global Debt Report 2026— Gross central government borrowing across OECD countries rose 7% to a record $17tn, about 23% of GDP, and is projected to reach roughly $18tn, or 24% of GDP. The United States and Japan account for close to 80% of the area's refinancing requirements, with the US share rising from 57% to 70%.
AI Summary.A rapid rise in long-term US Treasury yields has highlighted vulnerabilities elsewhere, notably France, where risks are elevated. Because France is in the euro zone, any crisis there would extend to the currency area, and European stocks have sold off alongside a weakening euro.
John AuthersBloomberg
Date Posted:
The spread between 10-year French OATs and German Bunds is pricing a second eurozone sovereign-debt crisis. Authers suggests that the recent surge in US long-term yields has “shone a light” on France’s fiscal weakness, raising its salience to investors.
Do rising US long-term yields expose vulnerabilities in Europe?
Core argument: The speed of the rise in US long-term Treasury yields has raised the risk of dislocations elsewhere, with France a point of elevated vulnerability that would extend to the rest of the euro zone.
The speed of [the upward move in US long yields] brought the risk of dislocations elsewhere, like in France. Much as a surprising hawkish shift from the Fed under Alan Greenspan in 1994 revealed underlying weaknesses in the Mexican financial system that led to the Tequila Crisis, so this Treasury scare has shone a light on where the world’s greatest vulnerabilities are to be found. As France is part of the euro zone, any crisis must naturally extend to the rest of the currency area, at a time when most of its members are moving in a nationalist direction and likely reluctant to help. That is beginning to have an impact on stocks. The main European bourses sold off even as US equities rallied on Thursday. In combination with a weakening euro, the continent’s stocks have now given up almost all their gains since Trump took office.
Takeaways by Macro Roundup® AI
The speed of the rise in US long-term Treasury yields has raised the risk of dislocations elsewhere, with France a point of elevated vulnerability that would extend to the rest of the euro zone.
The Treasury scare echoes the Fed’s surprising hawkish shift under Alan Greenspan in 1994, which revealed weaknesses in Mexico’s financial system and led to the Tequila Crisis.
Europe’s main bourses sold off even as US equities rallied, and combined with a weakening euro, the continent’s stocks have given up almost all their gains since Trump took office.
Related Articles:
France Seeks To Rein In Pensions And State Salaries In 2027— France plans to narrow its budget deficit to 5% of GDP by cutting state spending, capping increases to pensions and civil servant salaries, and raising taxes. Deteriorating public finances have left France borrowing at higher interest rates than Italy and Greece, with 10-year bond yields reaching their highest since 2002.
Soaring Bond Yields, Gaping Deficits and Towering Debts: What Could Go Wrong?— An analysis of 22 rich countries estimates that if each refinanced its entire debt at current five-year bond yields, Britain would need the largest primary surplus to stabilize its debt-to-GDP ratio, about 1.5%, followed by Italy at 1.4%, France at 1.2% and America at 1%.
Global Debt Report 2026— Gross central government borrowing across OECD countries rose 7% to a record $17tn, about 23% of GDP, and is projected to reach roughly $18tn, or 24% of GDP. The United States and Japan account for close to 80% of the area's refinancing requirements, with the US share rising from 57% to 70%.
AI Summary.France plans to narrow its budget deficit to 5% of GDP by cutting state spending, capping increases to pensions and civil servant salaries, and raising taxes. Deteriorating public finances have left France borrowing at higher interest rates than Italy and Greece, with 10-year bond yields reaching their highest since 2002.
Leila Abboud and Ian SmithFinancial Times
Date Posted:
The French government has proposed €43B in spending cuts and tax increases for 2027, in an effort to reduce the deficit to 5% of GDP from a projected 5.4% in 2026.
Can capping pensions and public salaries shrink a widening budget deficit?
Core argument: France’s government under Prime Minister Sébastien Lecornu aims to narrow the deficit to 5% of GDP next year by cutting state spending, capping increases to pensions and civil servant salaries, and raising taxes.
The government of Prime Minister Sébastien Lecornu said it aimed to narrow the deficit to 5% of GDP next year by slashing state spending, capping increases to pensions and civil servant salaries, while raising taxes. The French deficit is on track to rise to 5.4% of GDP this year, after a deterioration in its public finances that has led to France borrowing at higher interest rates than Italy and Greece. France’s 10-year bond yields reached as high as 4.96% on Thursday, their highest point since 2002, as a global bond rout was exacerbated by investor concerns over the country’s fragile public finances. But they later fell back to 4.93% in choppy trading.
Takeaways by Macro Roundup® AI
France’s government under Prime Minister Sébastien Lecornu aims to narrow the deficit to 5% of GDP next year by cutting state spending, capping increases to pensions and civil servant salaries, and raising taxes.
The French deficit is on track to rise to 5.4% of GDP this year, following a deterioration in public finances that has left France borrowing at higher interest rates than Italy and Greece.
French 10-year bond yields reached 4.96%, their highest since 2002, as a global bond rout was exacerbated by investor concerns over France’s fragile public finances, before falling back to 4.93%.
Related Articles:
The Bond Market Reckoning Has Only Begun— The gap between French and German 10-year government bond yields has widened at a pace matched only during the euro zone sovereign debt crisis. France and the UK have less room than the US to close deficits with tax increases, as tax revenues equal 43.9% of GDP in France and 35.3% in the UK versus 25.2% in the US.
Soaring Bond Yields, Gaping Deficits and Towering Debts: What Could Go Wrong?— An analysis of 22 rich countries estimates that if each refinanced its entire debt at current five-year bond yields, Britain would need the largest primary surplus to stabilize its debt-to-GDP ratio, about 1.5%, followed by Italy at 1.4%, France at 1.2% and America at 1%.
Global Debt Report 2026— Gross central government borrowing across OECD countries rose 7% to a record $17tn, about 23% of GDP, and is projected to reach roughly $18tn, or 24% of GDP. The United States and Japan account for close to 80% of the area's refinancing requirements, with the US share rising from 57% to 70%.
AI Summary.The 10-year US Treasury yield briefly touched 5.34%, its highest level since 2002, amid a monthslong selloff in global government debt. The 30-year US bond rate also reached a 24-year high.
Ye Xie, Alice Gledhill, and Victor SwezeyBloomberg
Date Posted:
The US 10-year Treasury yield hit 5.34%, its highest since 2002, before retreating as investors bought Treasuries amid stress in European bond markets.
Are long-term Treasury yields reaching their highest levels in decades?
Core argument: The 10-year US Treasury yield briefly traded at 5.34% on Thursday, rising above its 2007 peak to its highest level since 2002.
The US benchmark yield touched its highest level since 2002, the latest milestone in a monthslong selloff in global sovereign debt. The yield on the 10-year Treasury note briefly rose above its 2007 peak to trade at 5.34% on Thursday. US Treasuries [then] rebounded from a bruising global bond selloff as pressure in European markets fueled demand for haven assets, pulling 10-year yields down from a 24-year high. In Europe, the spread between Italy and Germany’s two-year yields almost doubled to 55 basis points on Thursday, the biggest daily jump since 2020 on a closing basis. The equivalent gap for France rose as much as 22 basis points, the most since 2012.
Takeaways by Macro Roundup® AI
The 10-year US Treasury yield briefly traded at 5.34% on Thursday, rising above its 2007 peak to its highest level since 2002.
The 10-year Treasury yield’s rise marks the latest milestone in a monthslong selloff in global sovereign debt.
The yield on 30-year US bonds reached a 24-year high.
Related Articles:
Booms, Bombs and Bonds: Interest Rates, Part I— 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.
Don’t Draw The Wrong Conclusion From Treasury Yields— Ten-year real yields equal the average expected overnight rate over the next decade plus a term premium, and fiscal credibility or debt sustainability concerns would show up as a higher term premium. With the term premium and inflation expectations contained, the increase in bond yields reflects higher expected long-term overnight rates.
America’s Risky Debt: What Markets See That Policymakers Don’t— Two market-based measures suggest the safety premium investors pay to hold US Treasuries has compressed toward zero and at times reversed: the spread between top-rated corporate bonds and Treasuries after stripping out default risk, and the gap between currency-hedged foreign G10 government yields and Treasury yields at the same maturity, where longer-maturity comparisons now favor foreign bonds.
