Fracturing of the Social Order

The Crucial Issue of the 21st Century
https://www.nytimes.com/2025/07/31/opinion/democratic-republican-parties.html
David Brooks:
According to recent surveys, public trust in institutions is near its historical low. According to a recent Ipsos survey, about two-thirds of Americans agree with the statement, “Society is broken.”
As David Frum pointed out recently in The Atlantic, between 1983 and 2007, the share of Americans who were satisfied with “the way things are going in the U.S.” hit peaks of about 70 percent and was often above 50 percent. Over the 15 years from 2007 to 2022, the number of Americans who were satisfied with the way things were going was frequently down to about 25 percent.
America’s social order has fractured, and that has made all the difference. 

Global Cities in the Twenty-First Century

China and the rise of the new global city
https://www.ft.com/content/6c5d968e-f526-442b-a372-af630cb9fab0
Adam Tooze:
If you visit China today, you will see something that was not on our radar two decades ago: mega cities of giant scale with tens of millions of inhabitants, spectacularly modern technology and infrastructure, deeply connected to the world economy but virtually empty of foreign inhabitants. …
The Sinosphere has its own cultural-linguistic logic. The Chinese language erects huge barriers to in-migration. But, at the same time, command of simplified Mandarin creates a shared culture for at least one-eighth of humanity. That opens the path to mass migration. Beijing may not have many foreign inhabitants but almost 40 per cent of its population has recently arrived from other parts of China.  

US Economy - Separating the Signal from the Noise

Separating the Signal from the Noise: 
The ‘core GDP’ measure, which captures real final sales to private domestic purchasers, offers a useful gauge of underlying demand in the economy. It indicates that the U.S. economy slowed down during the first half of 2025. See chart:
https://fred.stlouisfed.org/graph/?g=1L0aU 

Related:

U.S. Economy Slowed in First Half of 2025 as Tariffs Scrambled Data
https://www.nytimes.com/2025/07/30/business/us-economy-grew-in-second-quarter-as-tariffs-scrambled-data.html
Gross domestic product rebounded in the spring after contracting at the start of the year, but consumer spending remained weak.

The Weirdest GDP Report Ever
https://www.wsj.com/opinion/gdp-report-economy-consumers-donald-trump-tariffs-d9879d98
The economy grew 3%, but mainly because imports collapsed. Alas, investment fell too.
 
Rebound in US economic growth in second quarter masks underlying slowing trend
https://www.reuters.com/world/us/rebound-us-economic-growth-second-quarter-masks-underlying-slowing-trend-2025-07-30 

The Tariffs Kicked In. The Sky Didn’t Fall. Were the Economists Wrong?
https://www.nytimes.com/2025/07/31/opinion/tariffs-economy-inflation-recession.html

Trump's List of Foreign Policy Errors Continue to Grow

Trump’s Missed Opportunities Are Piling Up
https://foreignpolicy.com/2025/07/29/trumps-missed-opportunities-are-piling-up/
The Trump administration had an unprecedented chance to change the United States for the better.
 
What Has Being a ‘True Friend’ to Trump Gotten Modi? Not Much, Indians Say.
https://www.nytimes.com/2025/07/31/world/asia/modi-trump-india-tariffs.html
India’s prime minister has made a big effort to build closer ties using his rapport with the U.S. president, but critics say he is getting little in return.

Has Trump Damaged India-US ties Beyond Repair?

https://youtu.be/zKiRslJSHA4

https://www.wsj.com/world/india/trumps-warm-embrace-of-india-turns-cold-f8d0bbee

Trump Is Pushing India to Submit to China
https://foreignpolicy.com/2025/07/28/india-china-normalization-trump-second-term-geopolitics/
Without clear U.S. support, the cost of resisting Beijing is too high.
 
Why Brazil Might End Up with Higher Tariffs Than Any Other Nation
https://foreignpolicy.com/2025/07/30/brazil-trump-tariffs-lula/
The rift between the Western Hemisphere’s two largest democracies is the strongest evidence yet that Trump is in the business of autocracy promotion. 

No One Is Defying Trump Like Brazil’s President
https://www.nytimes.com/2025/07/30/world/americas/brazil-president-lula-trump-tariffs.html
Faced with threats of 50 percent tariffs and demands to end a criminal case, President Luiz Inácio Lula da Silva said he wouldn’t take orders from President Trump.
 
Brazil’s Brave Stand Against Trump
https://www.project-syndicate.org/commentary/brazil-president-lula-standing-up-to-trump-by-joseph-e-stiglitz-2025-07 

Can India Retain its Talent?

India Is Losing Its Best and Brightest
https://www.wsj.com/opinion/india-is-losing-its-best-and-brightest-tech-china-talent-0b6a781e
Without political and economic reform, the country’s top engineers, doctors and scientists will keep leaving. 

Do Economists Lack Imagination?

Are Economists Architects or Auditors?
https://www.project-syndicate.org/commentary/what-happened-to-big-thinking-in-economics-by-ricardo-hausmann-2025-07
Many of today’s most urgent global challenges, from stagnant growth to climate change, require ambitious, innovative policies. Yet economics has shifted away from creative problem solving toward a narrow approach that is incapable of devising practical solutions to complex, real-world problems.  

Global Trade and Protectionism

Doug Irwin, an economics professor at Dartmouth College, on Trump’s trade war, the myth of protectionism, and what history teaches us about tariffs
https://youtu.be/Mv-UTWwu5UM 

Will Fed Suffer from Fiscal Dominance?

Trump’s Fight with the Fed Won’t End with Rate Cuts
https://www.nytimes.com/2025/07/31/business/trump-fed-interest-rate-cuts.html
President Trump wants the Fed to slash borrowing costs, but the central bank is unlikely to take such aggressive steps even once it begins to lower interest rates. 

No Help Wanted, No Economic Growth
https://www.wsj.com/opinion/no-help-wanted-no-economic-growth-central-banking-cuts-109e4aaf
If Congress doesn’t control the deficit, there is a risk of a fiscal revolt that would force the Fed into a Japanese-style yield curve control. Ten-year Treasury rates above 5% are intolerable for the housing market and the fiscal situation. A future Fed could be forced to call a fiscal emergency and cap the 10-year yield at 5% if the situation were dire.

Related:

Investors beware: Fiscal dominance and financial repression ahead by VIVEKANAND JAYAKUMAR, The Hill - 07/13/25
https://thehill.com/opinion/finance/5397963-fed-keeping-rates-low-trump-administration/

A Reality TV President

Will Dunn:
https://www.newstatesman.com/politics/the-sketch/2025/07/donald-trump-the-king-of-scotland
When someone lives in reality TV, rather than reality itself, they see no line between what can be material and what should not be. 

The key to understanding Trump? It’s not what you think
https://www.theguardian.com/us-news/ng-interactive/2025/jul/27/trump-deals-trade-economy
 Everything the US president does is for money – and in serving his avarice, he’s managed to triumph over the market. 

The Retail Trading Frenzy and Bubble Risks

A fresh retail-trading frenzy is reshaping financial markets
https://www.economist.com/finance-and-economics/2025/07/29/a-fresh-retail-trading-frenzy-is-reshaping-financial-markets
Blame apps and DORKs, not stimmies. 

Reasons for caution amid America’s triumphant market surge
https://www.ft.com/content/a946bccd-2c40-4dc5-a0ef-d77593bdeeb6
With most traditional valuation indicators now flashing amber, investors should be vigilant.

Pathetic Europe

Europe’s Economic Surrender
https://www.project-syndicate.org/commentary/high-cost-of-eu-capitulation-to-trump-tariff-threats-by-alberto-alemanno-2025-07
The European Union’s tariff deal with US President Donald Trump highlights the bloc’s inability to present a united front. By capitulating to Trump’s bullying, the EU has cemented its dependence on the United States and will become a prosperous yet powerless appendage of the American empire.

Europe’s summer of humiliation
https://www.ft.com/content/698517e6-9955-4ae9-9a9f-b91202157571
America knew the EU was weak. The rest of the world knows it now.

 
Europe Signs Up for Its Century of Humiliation
https://jacobin.com/2025/07/europe-dependency-trump-trade-military
 
Europeans, Not Trump, Ended Up Chickening Out
https://www.bloomberg.com/opinion/articles/2025-07-28/trump-s-eu-trade-deal-europeans-ended-up-chickening-out

Can We Still Trust US Economic Data?

US economic data quality a worry, authorities not acting urgently enough, experts say- Reuters poll
https://www.reuters.com/business/us-economic-data-quality-worry-authorities-not-acting-urgently-enough-experts-2025-07-25
 
Conspiracy Theorists Found a New Boogeyman: Payroll Data
https://www.bloomberg.com/opinion/articles/2025-07-30/conspiracy-theorists-found-a-new-boogeyman-payroll-data  
Efforts to improve the accuracy of employment statistics have stoked claims they are being manipulated.
 
Why some fear government data on the U.S. economy is losing integrity
https://www.washingtonpost.com/business/2025/07/03/federal-reserve-economic-benchmarks-data-challenges
Budget strains, survey gaps and political pressure fuel uncertainty over key measures of inflation, jobs and growth.
 
America’s economic data are becoming murkier
https://www.economist.com/united-states/2025/06/29/americas-economic-data-are-becoming-murkier
Choked for funds, the Bureau of Labor Statistics is cutting corners.
 
The US Will Miss Having Reliable Data
https://www.chicagobooth.edu/review/the-us-will-miss-having-reliable-data
Economists warn about the dangers of weakening the government’s statistical agencies.

NASA-ISRO Collaboration

US and India launch historic joint mission that could change the way we see Earth
https://www.cnn.com/2025/07/30/science/nasa-isro-nisar-mission-launch 

Dissent at the Fed

See How Often Fed Governors Have Broken Ranks
https://www.nytimes.com/2025/07/30/business/economy/fed-rate-dissent-powell.html
Two top Fed officials voted against the central bank’s decision to leave rates unchanged, the first dual dissent in more than 30 years.
 
Fed Holds Rates Steady, but Two Officials Back a Cut
https://www.wsj.com/economy/central-banking/fed-holds-rates-steady-but-two-officials-back-a-cut-6fc17c67
Dissents highlight a fraying consensus among policymakers, who are debating the effects that tariffs will have on the economy and inflation. 

Dental Arbitrage

Mexico’s Molar City Could Transform My Smile. Did I Want It To?
https://www.newyorker.com/magazine/2025/08/04/mexicos-molar-city-could-transform-my-smile-did-i-want-it-to
More than a thousand dentists have set up shop in Los Algodones. Their patients are mostly Americans who can’t afford the U.S.’s dental care. 

Are Stock Markets Ignoring US Economic Risks?

How Trump muddles the stock market by Tej Parikh
https://www.ft.com/content/01867873-d328-40d9-85c5-9a5db992354e
That US stock markets are trading at historically rich valuations at a time when import duties are close to their highest in a century (and when rates could remain elevated) is unsettling.
While optimism around AI and tariff resilience are both driving the S&P 500 higher, noise is undoubtedly complicating price discovery. Sooner or later economic reality will catch up. Flooding the zone can delay a reckoning — but it can’t prevent one.
 
Trump’s New Trade Order Is Fragile
https://www.wsj.com/economy/trade/trumps-new-trade-order-is-fragile-ef8bb49a
One-sided deals lack the staying power of past negotiations. 

Why Markets May Soon Call America’s Tariff Bluff

https://www.project-syndicate.org/commentary/investors-are-no-longer-buying-trump-tariff-threats-by-pinelopi-koujianou-goldberg-2025-07

Markets' trade deal euphoria ignores tariff reality
https://www.reuters.com/markets/markets-trade-deal-euphoria-ignores-tariff-reality-2025-07-24 

Trump’s Tariffs Are Being Picked Up by Corporate America
https://www.wsj.com/economy/trade/trumps-tariffs-are-being-picked-up-by-corporate-america-0befd9bd
Neither consumers nor foreign countries are assuming much of the tariff burden. At least not yet.

Trump’s Self-Defeating Trade Agenda
https://www.project-syndicate.org/commentary/trump-tariff-war-makes-no-economic-sense-by-anne-o-krueger-2025-07

AI and the Job Market for New College Graduates

AI Is Wrecking an Already Fragile Job Market for College Graduates
https://www.wsj.com/lifestyle/careers/ai-entry-level-jobs-graduates-b224d624
Companies have long leaned on entry-level workers to do grunt work that doubles as on-the-job training. Now ChatGPT and other bots can do many of those chores. 

A New Theory of Monopsony Power

Firms’ Wage-Setting Power: A New Take on Monopsony in the Labor Market
https://www.stlouisfed.org/on-the-economy/2025/jul/firms-wage-setting-power-monopsony-labor-market
 
An Information-Based Theory of Monopsony Power
https://www.dallasfed.org/~/media/documents/research/papers/2025/wp2518.pdf
Abstract: We develop a tractable model of monopsony power based on information frictions in job search. Workers and firms choose probabilistic search strategies, with information costs limiting how precisely they can target matches. Firms post wages strategically, anticipating application behavior and exploiting a first-mover advantage. The model nests both directed and random search as limiting cases and yields a closed-form wage equation that shows the effects on wage-setting power of search frictions, labor market tightness and sorting. Wage markdowns in equilibrium arise not only from limited labor supply elasticity but also from sorting patterns and demand-side frictions. In highly assortative environments, the absence of wage competition allows firms to capture nearly the full surplus, even when labor supply is elastic. Numerical results replicate markdowns of 30-40% and suggest that constrained-efficient wages would be approximately 20% higher. Our framework unifies the analysis of monopsony, sorting and wage posting, and provides a computationally efficient method for evaluating directed search equilibria.

A Temperature Milestone for Tampa

Tampa Clinched Its First 100 Degree Day on Record. Here’s Why That’s So Unusual
https://weather.com/news/weather/news/2025-07-28-tampa-first-100-degree-day-heres-how 

AI and the Size of the Workforce

CEOs Are Shrinking Their Workforces—and They Couldn’t Be Prouder
https://www.wsj.com/lifestyle/careers/layoff-business-strategy-reduce-staff-11796d66
Bosses aren’t just unapologetic about staff cuts. Many are touting shrinking head counts as accomplishments in the AI era. 

Economics PhDs Struggle to Find Jobs

The Bull Market for Economists Is Over. It’s an Ominous Sign for the Economy.
https://www.nytimes.com/2025/07/28/business/economics-jobs-hiring.html
Earning a Ph.D. in economics has long been a reliable path to affluence and prestige. Not anymore. 

Related:
https://vivekjayakumar.blogspot.com/2024/12/oversupply-of-economics-phds.html

Thinking - A Luxury Good?

Thinking Is Becoming a Luxury Good
https://www.nytimes.com/2025/07/28/opinion/smartphones-literacy-inequality-democracy.html
The idea that technology is altering our capacity not just to concentrate but also to read and to reason is catching on. The conversation no one is ready for, though, is how this may be creating yet another form of inequality. 

India's Digital Payments Revolution

What India’s economy can teach the UK
https://www.ft.com/content/dd83061a-ab1a-416c-94ac-77e1b7e7de44
The transformational UPI digital payments network shows how financial infrastructure can make a difference. 

Stock Market Bubble Debate

Five Signs of a Market Bubble Investors Are Tracking
https://www.wsj.com/finance/stocks/five-signs-of-a-market-bubble-investors-are-tracking-ddbea944
Stretched valuations and a surge in speculative trades are raising red flags, even as growth persists.
 
An optimistic take:
The volatility paradox: why markets stay calm despite the noise
https://www.ft.com/content/70305b6c-6e16-4e42-b336-35eebb9802fb
America has quietly become one of the world’s most shock‑resistant economies. 

Debate Surrounding the Impact of Trump Tariffs

Trump’s Tariffs Are Already Stunting World Growth While Markets Shrug
https://www.bloomberg.com/news/features/2025-07-27/how-trump-s-tariffs-are-already-stunting-world-economic-growth
With the president’s new trade deals, US protectionism is slowing investment and rewiring supply chains at the expense of the global economy.
 
What the world got wrong about tariffs
https://www.ft.com/content/bb355162-0973-4cdd-baf3-fe685c63e20a
What the world got wrong, then and now, starts with its mental frameworks. The timeworn mistake of employing simple models, in which a headline-grabbing input A leads in a straight line to outcome B, has been greatly magnified by the global obsession with Trump. He is the only input anyone cares to analyze anymore. But complex economies are rarely shaped by just one factor, not even a shock as big as Trump’s tariffs. 

A Fed Rate Hike Instead of a Rate Cut?

Don’t Rule Out a Rate Hike
https://www.wsj.com/opinion/dont-rule-out-a-rate-hike-the-fed-inflation-9e9a36ff
The Fed might have to raise the target rate to bring down inflation. 

Interesting Observations About India

Dispatches from India by Arjun Ramani
https://arjunramani.com/india-dispatch.html
What I learned covering the world's biggest country for The Economist. 

The Depopulation Panic

Fears that falling birth rates in US could lead to population collapse are based on faulty assumptions
https://theconversation.com/fears-that-falling-birth-rates-in-us-could-lead-to-population-collapse-are-based-on-faulty-assumptions-261031

Population Decline and An Ill-informed Chorus
https://www.thehindu.com/opinion/op-ed/population-decline-and-an-ill-informed-chorus/article69797283.ece

The Depopulation Bomb
https://www.wsj.com/economy/global/the-depopulation-bomb-b8b4fd1e
As global fertility rates drop, two economists make the case for humans.

Without Remedy, Countries with Aging Populations Are Set for Weaker Income Growth, Says OECD
https://www.wsj.com/economy/global/without-remedy-countries-with-aging-populations-are-set-for-weaker-income-growth-says-oecd-7ad9d2e7
The ratio of those who are past working age to those between 20 and 64 will likely jump above 75% in Italy, Japan, Poland, Spain and South Korea. 

Why One of the Causes of Falling Birthrates May Be Prosperity
https://www.nytimes.com/2025/07/24/world/falling-birthrates-economic-growth-pronatalism.html
Economic growth has the unintended side effects of making parenthood more difficult and expensive.

There Is No Demographic Crisis. Only a Crisis of Care
https://www.bloomberg.com/features/2025-jennifer-sciubba-weekend-interview/
The world’s population is expected to start shrinking this century. Political demographer Jennifer Sciubba says that’s no reason to panic. 

The Debate over Falling Fertility
https://www.imf.org/en/Publications/fandd/issues/2025/06/the-debate-over-falling-fertility-david-bloom
A decline in global population later this century may threaten human progress, or it may lead to better lives.
 
Sustaining Growth in an Aging World
https://www.imf.org/en/Publications/fandd/issues/2025/06/sustaining-growth-in-an-aging-world-bertrand-gruss
Older populations need not lead to slumping economic growth and mounting fiscal pressures.
 
The Longevity Dividend
https://www.imf.org/en/Publications/fandd/issues/2025/06/the-longevity-dividend-andrew-scott
Aging populations should be embraced, not feared.

The mysterious statisticians shaping how we think about fertility 
https://www.vox.com/future-perfect/396708/world-us-population-projections-estimates-2050-2100
Experts were wrong about overpopulation before. Could they be wrong about underpopulation now?

My take:

Are we worried about the wrong demographic problem? By Vivekanand Jayakumar
https://thehill.com/opinion/4954154-falling-birth-rates-global-economy/  

Green Transition and Economic Growth

The Drivers and Macroeconomic Impacts of Low-Carbon Innovation: A Cross-Country Exploration
https://www.imf.org/-/media/Files/Publications/WP/2025/English/wpiea2025130-print-pdf.ashx
Abstract
This paper investigates how climate policies affect low-carbon innovation (as measured by patents) and assesses the link between such innovation and economic activity. Climate policies, including international cooperation, spur both specific and overall innovation, with regulations, emissions-trading systems, and expenditure measures such as R&D subsidies and feed-in tariffs being particularly impactful. In turn, low-carbon innovation raises economic activity as much as other types of innovation and past technological revolutions. However, the mechanisms are different: low-carbon innovation increases capital accumulation, while other types of innovation increase total factor productivity (TFP). 

The Case for Eurobonds

Investors See Few Alternatives to U.S. Treasuries. Could Europe Make One?
https://www.nytimes.com/2025/07/26/business/dealbook/investors-see-few-alternatives-to-us-treasuries-could-europe-make-one.html
As President Trump’s chaotic economic policies provoke questions about U.S. stability, a proposal for European countries to issue joint debt has drawn attention.
 
Now is the time for Eurobonds: A specific proposal
https://www.piie.com/blogs/realtime-economics/2025/now-time-eurobonds-specific-proposal
 
Philip R Lane: The monetary agenda at the European Central Bank
https://www.bis.org/review/r250710g.pdf 

Risky Bets

High-Risk Currency Trading Is the New Meme Stock for This Retail Crowd
https://www.bloomberg.com/news/features/2025-07-25/retail-traders-lured-to-currency-markets-by-high-risk-fx-bets
A growing band of mom-and-pop investors are dabbling in FX trading — and their billions in collective wagers are beginning to worry finance veterans. 

MBA Education in the Age of AI

At The Indian School of Business, One Prof Is Using AI & VR To Build Smarter, More Strategic MBAs
https://poetsandquants.com/2025/06/30/at-the-indian-school-of-business-one-prof-is-using-ai-vr-to-build-smarter-more-strategic-mbas/
 
‘WE’RE NOT LEARNING ANYTHING’: Stanford GSB Students Sound the Alarm Over Academics
https://poetsandquants.com/2025/07/23/were-not-learning-anything-stanford-gsb-students-sound-the-alarm-over-academics/ 

Norway's Problem - Too Much Wealth

Can a Country Be Too Rich? Norway Is Finding Out
https://www.bloomberg.com/news/articles/2025-07-25/can-a-country-be-too-rich-norway-is-finding-out-essay
A contentious book argues that endless oil revenue and a sovereign wealth fund are making Norway increasingly bloated, unproductive and unhealthy. 

The Age of Economic Uncertainty

Is America Breaking the Global Economy?
https://www.foreignaffairs.com/united-states/america-breaking-global-economy-uncertainty-world-mohamed-el-erian
What an Age of Economic Uncertainty Will Mean for the World. 

Questioning the Hegemonic Stability Theory

Pharaohs, Maharajas, and the Making of a Multipolar World
https://foreignpolicy.com/2025/07/25/multipolar-world-pharaohs-maharajas-us-primacy/
Examples from non-Western history offer more-promising precedents for the end of U.S. hegemony. 

Related:

The Right Way to Wield America’s Economic Power
https://www.foreignaffairs.com/north-america/right-way-wield-americas-economic-power
Without Statecraft, Even the Most Powerful Tools Will Be Self-Defeating.

Price Setting in the Tariff Era

Behind a Maine Coffee Company’s Decision to Raise Prices
https://www.nytimes.com/2025/07/25/business/trump-tariffs-rock-city-coffee.html
Like many companies, Rock City Coffee resisted increasing prices as President Trump’s trade war drove its costs up. Then it ran out of options. 

The Return of Irrational Exuberance and Asset Bubbles

The Latest Meme Craze Is Flashing a Warning to Wall Street
https://www.wsj.com/finance/stocks/stocks-head-for-a-meme-reversion-c67ddd2d
Hectic trading in Krispy Kreme and OpenDoor signals the return of reckless overconfidence.
 
Wall Street ‘euphoria’ sparks bubble warnings
https://www.ft.com/content/2450c892-3b9e-431e-a352-1d01df269617
Analysts point to signs of market froth as bitcoin soars and ‘meme stocks’ re-emerge.
 
The Hottest Business Strategy This Summer Is Buying Crypto
https://www.wsj.com/finance/currencies/crypto-treasury-e7ae573c
Small companies are raising billions of dollars to buy bitcoin and other, more obscure cryptocurrencies. What could possibly go wrong?
 
Of Meme Stocks and Main Street
https://www.wsj.com/opinion/meme-stocks-markets-main-street-investing-trump-tariffs-economy-business-56dff4e4
Wall Street is doing great, but small business not so much. 

Resource Misallocation at the Global Level

The World Has Too Much Steel, but No One Wants to Stop Making It
https://www.nytimes.com/2025/07/25/business/steel-overcapacity-china.html
A global plunge in prices, led by increased production from China, and U.S. tariffs threaten steel manufacturing, which has long been a symbol of national might. 

Why Minorities Have Shifted to the Political Right

Obama Won Record Numbers of Nonwhite Voters. This Is How the Democrats Lost Them.
https://www.nytimes.com/interactive/2025/07/24/opinion/minority-voters-trump-right.html
One in five voters who cast a ballot for Donald Trump in 2024 was a person of color. Why? 

Europe Faces Threats on Multiple Fronts

Europe faces an economic war on two fronts
https://www.telegraph.co.uk/business/2025/07/25/europe-economic-war-two-fronts-china-greater-danger/ 

Government Finances in Advanced Economies Resemble a Ponzi Scheme

The debt supercycle has reached its final leg
https://www.reuters.com/commentary/breakingviews/debt-supercycle-has-reached-its-final-leg-2025-07-25
Edward Chancellor:
As the cycle nears its end, a country is typically beset by chronic fiscal deficits. Low domestic savings and current account deficits render it dependent on foreign lenders. As lenders become wary, the average maturity of the public debt shortens. The central bank finds it impossible to set interest rates at the level which balances the needs of both creditors and borrowers. Once interest rates rise, governments’ debt servicing costs become increasingly onerous. Government finances come to resemble a Ponzi scheme, with new debt being issued to service old borrowing. That pretty much describes the situation which several advanced economies, including Britain, France and the United States, find themselves in today.
 
Inflation risks are taking Britain towards the debt-crisis cliff edge
https://www.telegraph.co.uk/business/2025/07/20/inflation-risks-are-taking-britain-towards-the-debt-crisis/
As interest payments pile up, our public finances resemble a Ponzi scheme. 

The bond market maths does not add up for governments
https://www.ft.com/content/22090918-f767-4496-ab9a-d9e92ec6cece
Higher yields look probable, forcing countries to pay more to fund their ever-growing deficits.

The Fed and the Dollar

The Fed Needs to Tread Carefully with This Strange Dollar
https://www.bloomberg.com/opinion/articles/2025-07-24/the-fed-needs-to-tread-carefully-with-this-strange-dollar
The currency’s uncharacteristic behavior is another reason for Powell to ignore Trump and stay cautious on rate cuts. 

The More Trump Pressures the Fed, the Less Likely He Gets Lower Rates
https://www.wsj.com/economy/central-banking/trump-fed-pressure-rate-cuts-8e91185f
If the president thinks the Fed is hard to deal with, wait until he tries to negotiate with the bond market.

Economics and Foreign Policy

What economics can teach foreign-policy types
https://www.economist.com/finance-and-economics/2025/07/24/what-economics-can-teach-foreign-policy-types
Hegemons should care about even puny countries. 

AI's Potential

What if AI made the world’s economic growth explode?
https://www.economist.com/briefing/2025/07/24/what-if-ai-made-the-worlds-economic-growth-explode
Markets for goods, services and financial assets, as well as labor, would be upended.
 
Related: https://www.economist.com/leaders/2025/07/24/the-economics-of-superintelligence 

Netscape IPO casts a shadow from 1995 over AI boom
https://www.reuters.com/commentary/breakingviews/netscape-ipo-casts-shadow-1995-over-ai-boom-2025-07-24

Meme Stocks 2.0

The Stock Market’s Most Unserious Season Is Back and Dorkier Than Before
https://www.nytimes.com/2025/07/24/business/opendoor-krispy-kreme-meme-stocks.html
A new generation of meme stocks are soaring and falling again. 

Private Equity: A Cautionary Tale from Britain

How private equity ruined Britain
https://www.spectator.co.uk/article/how-private-equity-ruined-britain/ 

LDCs Hit by US Tariffs

They made America's clothing. Now they are getting punished for it.
https://www.bbc.com/news/articles/cy9xw5vrvevo
Apparel hubs like Cambodia and Sri Lanka are heavily dependent on the US as an export market.
 
The risk to poor countries’ exports from the whims of the rich
https://www.ft.com/content/88701f7d-9cc1-42db-a2f5-70b597be9df2
Donald Trump’s tariff threat to Lesotho shows the danger of relying on preferential trade access. 

Mankiw on US Fiscal Future

2025, 17th Annual Feldstein Lecture, N. Gregory Mankiw, "The Fiscal Future"
https://www.nber.org/research/videos/2025-17th-annual-feldstein-lecture-n-gregory-mankiw-fiscal-future 

Related:

Investors beware: Fiscal dominance and financial repression ahead by VIVEKANAND JAYAKUMAR, The Hill - 07/13/25
https://thehill.com/opinion/finance/5397963-fed-keeping-rates-low-trump-administration/

My take from 2023:
Fitch’s downgrade of US debt wasn’t a mistake — it was long overdue 
https://thehill.com/opinion/finance/4138215-fitchs-downgrade-wasnt-a-mistake-it-was-long-overdue/ 
America’s long-term fiscal sustainability challenge
https://thehill.com/opinion/finance/3965613-americas-long-term-fiscal-sustainability-challenge/ 

Cryptos versus CBDCs

Bitcoin In Your 401(k)? That's Not a Risk I Would Take
https://www.bloomberg.com/opinion/articles/2025-07-23/bitcoin-in-your-401k-crypto-won-t-crash-and-burn-but
Ungated version:
https://www.fa-mag.com/news/bitcoin-in-your-401-k---that-s-not-a-risk-i-would-take-83395.html
 
Has Brazil Invented the Future of Money?
https://paulkrugman.substack.com/p/has-brazil-invented-the-future-of 

Pix: Brazil’s Successful Instant Payment System
https://www.elibrary.imf.org/view/journals/002/2023/289/article-A004-en.xml

Rethinking the Politics of Money
https://www.project-syndicate.org/commentary/central-banks-serve-finance-not-broader-public-by-katharina-pistor-2025-07

Does Economics Need Competition of Ideas?

How economics teaching became the Aeroflot of ideas
https://www.ft.com/content/9aabb4a9-d896-4b4c-a40a-1c4477a47a29
The discipline is failing students by ignoring the biggest social, political and ecological challenges facing the world today. 

Germany's Big Fiscal Gamble

Germany’s spending gamble | FT Film
https://youtu.be/J9k4D8cQEcU
Can Germany’s debt brake reform kickstart its economic engine? 

The New Tariff Normal

Trump’s New Trade Standard Takes Shape With 15% Tariff Deal
https://www.wsj.com/economy/trade/trump-trade-deal-15-percent-tariffs-16aeb256
 
The Price of Winning the Trade War
https://www.wsj.com/opinion/japan-trade-deal-donald-trump-tariffs-shigeru-ishiba-70f60e60
The Japan deal is a relief, but only because the alternative is worse.
 
Trump’s Tariffs Are the Highest in a Century. But After His Threats, They Seem Like a Relief.
https://www.nytimes.com/2025/07/23/business/economy/trump-tariffs-japan.html
The president imposed tariffs on Japan, one of America’s closest allies, that would have been alarming just months ago. And markets went up.

About That Japan Deal
https://paulkrugman.substack.com/p/about-that-japan-deal

 
Related:
https://www.nytimes.com/2025/07/23/business/economy/japan-fund-trump-tariffs-trade.html 

Executive Overreach

The Lunacy of Lawfare Against the Fed
https://www.wsj.com/opinion/jerome-powell-anna-paulina-luna-lawfare-federal-reserve-donald-trump-be289db7
Criminalizing a spat over interest rates is an Argentina-level mistake.
 
Trump is ruling America like a petty, vindictive mob boss
https://www.telegraph.co.uk/us/comment/2025/07/22/trump-is-ruling-america-like-petty-vindictive-mob-boss/ 

Columbia University economist Suresh Naidu:
https://www.nytimes.com/2025/07/23/opinion/trump-columbia-deal-professor.html
In economic history, we teach the 1688 creation of parliamentary supremacy as a solution to what economists call “commitment problems.” In the absence of a third party sufficiently strong to make sure all sides stick to their promises, the powerful can renege on the powerless. The powerless, seeing this, wisely choose to not contract with the powerful. Absolutist rulers are victims of their own lack of restraints; a sovereign who is too powerful cannot get inexpensive credit, because nothing stops the ruler from defaulting on any bond. President Trump, by smashing checks on his authority, has wound up undermining his own ability to make credible deals, including the one just reached with Columbia University

Emerging Markets - Justly Rewarded

Emerging market borrowing premium over US falls to nearly lowest since 2007
https://www.ft.com/content/c9392546-a1f9-4129-ac7c-d34301a640af
Yields for investment-grade EM borrowers fall relative to developed markets amid concerns over traditional havens.
 
Related:
https://economic-research.bnpparibas.com/pdf/en-US/Emerging-economies-longer-vulnerable-US-monetary-policy-once-were-7/15/2025,51751 

UK's Foreign Policy Mess

The great Afghan cover-up
https://www.newstatesman.com/politics/2025/07/the-great-afghan-cover-up
This data breach is a humiliation of the British state – and its pretensions to intervene abroad. 

The High Court’s war on truth
https://www.spectator.co.uk/article/the-high-courts-war-on-truth/
This is important because – sorry to state the obvious – laws and regulations are drafted in words. Government can only function if language functions. MPs vote on bills written in words that must mean roughly the same thing to every other MP. Citizens are told what laws to follow in words as well. Yet if judges may subsequently interpret legal text like Humpty-Dumpty, there are no laws. The whole set-up falls apart. We’re ruled by arbitrary court decrees, which are not bound by the Oxford Desk Dictionary or any other staid reference book insisting that words mean something in particular.

Who Pays for Trump Tariffs?

US Companies, Consumers Are Paying for Trump's Tariffs, Not Foreign Firms
https://www.bloomberg.com/news/articles/2025-07-22/us-companies-and-consumers-are-paying-for-trump-s-tariffs 

The US Can Survive Tariffs. That Doesn’t Mean They’re Worth It.
https://www.bloomberg.com/opinion/articles/2025-07-23/trump-tariffs-us-can-survive-them-that-doesn-t-make-then-good
Slower growth and persistent underperformance won’t kill the economy, but they don’t amount to a win.

China's Problem - Too Much Competition

China’s Problem with Competition: There’s Too Much of It
https://www.nytimes.com/2025/07/22/business/china-involution-competition-deflation.html
The Chinese government is taking steps to rein in what it calls “involution,” or excessive competition that is hurting local companies and fueling the country’s deflationary spiral. 

Asset Price Puzzles

Why Are Stocks Up? Nobody Knows
https://www.wsj.com/finance/stocks/why-are-stocks-up-nobody-knows-e40e5f42
A torrent of bad news hasn’t been enough to sink the market.
 
A Mystery in the High-Yield Muni Market: What Are the Riskiest Bonds Worth?
https://www.wsj.com/finance/investing/a-mystery-in-the-high-yield-muni-market-what-are-the-riskiest-bonds-worth-22b00e47 

Can AI Run the Economy?

AI Can’t Replace Free Markets
https://www.wsj.com/opinion/algorithms-cant-replace-free-markets-artificial-intelligence-dd3b428f
Algorithms process data from the past while economic decisions are dynamic and forward-looking. 

Economic Impact of the Trump Trade War

The Economic Implications of Tariff Increases
https://www.frbsf.org/wp-content/uploads/el2025-17.pdf
Trade policy in the United States has been in flux in recent months. A theoretical analysis of recent increases in U.S. tariffs, including potential retaliatory tariffs by other countries, suggests a resulting drop in overall U.S. employment, although manufacturing employment increases. Results also indicate a decline in overall real income for the United States of around 0.4%, although this number masks important variation across U.S. states.
 
Transshipment is the new dirty word of trade
https://www.reuters.com/commentary/breakingviews/transshipment-is-new-dirty-word-trade-2025-07-21 

The Global Economy Is Powering Through a Historic Increase in Tariffs

https://www.wsj.com/economy/trade/global-economy-tariffs-trade-growth-b2c1824a

Trade, production, growth and other global economic vitals are proving resilient almost four months after President Trump’s ‘Liberation Day’ tariffs.

China Reduces Oil Dependence

How China Curbed Its Oil Addiction—and Blunted a U.S. Pressure Point
https://www.wsj.com/world/china/china-oil-demand-lower-b5ae15ed
The Chinese government is boosting domestic production and the EV industry in the name of national security. There are 14 million chargers nationwide. 

Central Banking in the Age of Fiscal Populism

‘Fiscal populism’ is coming for central banks
https://www.ft.com/content/237226e8-78e5-4326-a701-cc8b1dede1de
When monetary policy is set to meet government budgetary needs, these institutions become piggy banks.

What the Federal Reserve Can Do to Help Itself

https://www.wsj.com/opinion/what-the-federal-reserve-can-do-to-help-itself-2f286619
The central bank should focus on its dual mandate and not try to solve all the economy’s problems.

An Independent Fed Is Sacrosanct

https://www.wsj.com/opinion/an-independent-fed-is-sacrosanct-cd008065

 
Trump's Fed attacks puncture veneer of central bank independence
https://www.reuters.com/markets/europe/trumps-fed-attacks-puncture-veneer-central-bank-independence-2025-07-21 

Related:

https://www.telegraph.co.uk/business/2025/07/20/trump-every-right-berate-technocrats/

My take:

Investors beware: Fiscal dominance and financial repression ahead by VIVEKANAND JAYAKUMAR, The Hill - 07/13/25
https://thehill.com/opinion/finance/5397963-fed-keeping-rates-low-trump-administration/

AI at Indian GCCs

Multinationals turn to India’s back offices for AI engineers
https://www.ft.com/content/a46ee948-07c0-4083-9610-1d85d7e15cc7
McDonald’s, Bupa and others set up ‘global capability centres’ to perform core big-data tasks. 

The Rise of Stablecoins/Cryptos and Financial Stability Concerns

Currency Dominance in the Digital Age
https://www.project-syndicate.org/commentary/digital-assets-mean-technological-infrastructure-will-determine-monetary-power-by-helene-rey-2025-07

The coming crypto crisis
https://www.ft.com/content/efc848c0-0990-4623-98ed-1176e97f04cb
Advocates talk about cryptocurrencies such as bitcoin as a hedge against traditional markets, but in fact, bitcoin is a “high beta” investment, meaning that it is highly correlated to the stock market. That means that both gains and losses relative to the S&P are amplified. Anything over a beta of one indicates a higher volatility than the market. A recent Fidelity report found bitcoin’s rolling 3-year beta to the S&P was 2.6. 

Stablecoins: the next big financial crisis waiting to happen
https://www.telegraph.co.uk/business/2025/07/27/are-stablecoins-the-next-big-financial-crisis-waiting-to-ha/
Loosening the regulations governing digital currencies involves Wild West trade-offs.

Can Markets Trust Stablecoins?
https://www.wsj.com/opinion/can-markets-trust-stablecoins-finance-investing-economy-policy-c03e0f1d
The Genius Act brings more order to crypto, but the new currency it enables dresses old risks in new tech.

Why Banks Are on High Alert About Stablecoins
https://www.wsj.com/finance/currencies/why-banks-are-on-high-alert-about-stablecoins-2f308aa0
Banks fear the tokens could siphon deposits they use to fund loans to companies and consumers. 

The rise and risks of stablecoins
https://www.ft.com/content/b3063d9a-d161-4dda-96bb-ea0dfaa2488d
US law bringing the asset into the mainstream has dangers for financial stability.

Crypto’s big bang will revolutionize finance
https://www.economist.com/finance-and-economics/2025/07/23/cryptos-big-bang-will-revolutionise-finance
The more useful stablecoins and tokens prove to be, the greater the risk.

Stablecoins Fall Short as Cornerstone of Monetary System, Central Banks Say

https://www.wsj.com/economy/central-banking/stablecoins-fall-short-as-cornerstone-of-monetary-system-central-banks-say-e0b33e70
Loss of monetary sovereignty and capital flight are major concerns, particularly for emerging markets.

Uncle Sam’s stablecoin passion has shaky rationale
https://www.reuters.com/commentary/breakingviews/global-markets-breakingviews-2025-06-19/

Why Passing the Stablecoin GENIUS Act Might Not Be So Smart
https://www.newyorker.com/news/the-financial-page/why-passing-the-stablecoin-genius-act-might-not-be-so-smart
Critics say enacting the pro-crypto legislation will make the financial system less safe and less stable—and further enrich Donald Trump.

The Genius Act Will Bring Economic Chaos
https://www.nytimes.com/2025/06/17/opinion/genius-act-stablecoin-crypto.html

How Stablecoins Can Be Destabilizing
https://www.wsj.com/finance/banking/how-stablecoins-can-be-destabilizing-c14a98b0
Banks will retain lots of deposits, but they might become bigger and less reliable. 

Stablecoin Legislation Will Juice Demand for Treasurys—to a Point
https://www.wsj.com/finance/stablecoin-legislation-will-juice-demand-for-treasurysto-a-point-3724fad7
Issuers of digital currencies need Treasury bills for their reserves, but analysts say the consequences are uncertain.

Opportunity Cost

The Economics of DIY
https://www.wsj.com/opinion/the-economics-of-diy-and-opportunity-cost-for-americans-f6fbf17d
Should you hire someone to mow your lawn or clean your house? It’s a question of opportunity cost. 

Trump versus Powell

Trump’s Withering Criticism of Powell Puts Fed Decisions Under Microscope
https://www.nytimes.com/2025/07/18/business/trump-fed-interest-rates-powell.html
The central bank is poised to hold interest rates steady this month, but there could be a path to cut as early as September.

The ‘Fed Mahal’ Is an Act of Central-Bank Self-Sabotage
https://www.wsj.com/opinion/the-fed-mahal-is-an-act-of-central-bank-self-sabotage-powell-trump-143e945f
Any bureaucracy will build itself a palace if given the chance. This one is a threat to its independence.

The Global Risks That Come with the Loss of an Independent Fed
https://www.wsj.com/economy/central-banking/federal-reserve-independence-financial-markets-df8fdebc
It isn’t just the U.S. Other countries have also come to expect an independent U.S. central bank.

Trump Wants Lower Rates. Firing Powell Could Push Them Higher.
https://www.nytimes.com/2025/07/17/business/trump-powell-federal-reserve-higher-rates.html
Investors, not the Fed, control the interest rates that matter most to businesses and consumers. They might demand higher returns if the central bank’s independence comes into question.

Why Political Pressure on Central Banks Is So Toxic for Investors
https://www.wsj.com/economy/central-banking/trump-central-bank-political-pressure-powell-investors-9798c6a8
Politicians often want lower rates; central banks seek stable prices. 

President Trump Reshapes Global Trade

Forget TACO. Trump Is Winning His Trade War.
https://www.wsj.com/economy/trade/forget-taco-trump-is-winning-his-trade-war-8af6f777
The president wants tariffs, the higher the better. Whether that is achieved unilaterally or via deals is secondary. 

It’s No Bluff: The Tariff Rate Is Soaring Under Trump
https://www.nytimes.com/2025/07/14/us/politics/trump-tariffs.html
The president has earned a reputation for bluffing on tariffs. But he has steadily and dramatically raised U.S. tariffs, transforming global trade.

 

The Economy Has Been Resilient. The New Round of Tariffs May Hit Harder.

https://www.nytimes.com/2025/07/14/us/politics/tariff-threats-us-economy.html
The economy’s resilience so far to President Trump’s global trade war risks emboldening him and unleashing the sort of economic devastation that economists have long feared.

Trump Bets Constantly Shifting Tariff Strategy Can Remake Global Trade
https://www.wsj.com/politics/policy/trump-tariffs-trade-policy-negotiations-0e4dbbe3
President wants to keep other countries guessing, but his strategy faces risks.
 
Households will pay an average of $2,400 more for goods this year, thanks to Trump’s policies.
https://www.theatlantic.com/economy/archive/2025/07/trump-tariffs-trade-war-ongoing/683476/ 

Treasurys versus Gilts

British debt is a screaming buy
https://www.telegraph.co.uk/business/2025/07/16/british-debt-is-a-screaming-buy/
Mispriced, overlooked and poised for a major reappraisal – UK gilts are a global bargain.