Economics and International Affairs Blog

Thursday, July 9, 2026

AI has taken over the stock market. The bond market is next
https://www.economist.com/finance-and-economics/2026/07/07/ai-has-taken-over-the-stock-market-the-bond-market-is-next
Judging credit risk of the AI boom is difficult.

Postmodern Economics
https://www.project-syndicate.org/commentary/david-hockney-lessons-for-economics-by-angus-armstrong-2026-07

Should the Bank of Japan Raise Interest Rates?
https://www.project-syndicate.org/commentary/bessent-is-right-to-recommend-higher-interest-rates-in-japan-by-koichi-hamada-2026-07
At the beginning of 2013, when "Abenomics" was rolled out in Japan, the yen was significantly overvalued, and looser monetary policy was badly needed. Today, the opposite is true, indicating that interest-rate hikes may well be the right prescription for Japan.

Why the Last Battle of the American Revolution Was Fought in India
https://www.newyorker.com/news/global-notes/why-the-last-battle-of-the-american-revolution-was-fought-in-india
The conflicts that took place elsewhere in the world have receded.

‘Hysteria’ Grips San Francisco’s Housing Market as A.I. Wealth Pours In
https://www.nytimes.com/2026/07/08/technology/san-francisco-home-sales-openai-anthropic-ipo.html
Even before OpenAI and Anthropic go public, they are distorting home sales in the San Francisco Bay Area, as people race to buy and sellers ask for stock instead of cash.

How Vulnerable Are US Financial Markets?
https://www.project-syndicate.org/commentary/hidden-dangers-behind-debt-fueled-ai-driven-us-stock-market-rally-by-dambisa-moyo-2026-07
Fueled by more than $1 trillion in borrowed money and rising leverage across the financial system, US stock markets may have entered bubble territory. Two developments could trigger a sharp correction: higher interest rates and a loss of confidence in the handful of tech giants driving the AI boom.

MY TAKE: The AI bubble could be worse than the dot-com bust by Vivekanand Jayakumar, The Hill - 06/16/26

Europe’s economy is a mess. Its stock markets are a steal.
https://www.economist.com/finance-and-economics/2026/07/07/europes-economy-is-a-mess-its-stock-markets-are-a-steal

China could be the US tech hedge
https://www.ft.com/content/0306bdaf-4465-4c3c-94e2-44f2c53373e2
Diversification is not about finding a market without risk — it is about finding a market whose risks are different.

Baby Busts and Growth Booms: Demographic Change and the Macroeconomy
https://www.nber.org/papers/w35401

An ageing society might not cost too much
https://www.economist.com/finance-and-economics/2026/07/09/an-ageing-society-might-not-cost-too-much
A dystopian vision of the future may not come to pass.