The hottest Macroeconomics Substack posts right now

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The invisible hand screws up your regression

Economic Forces • 19 implied HN points • 18 Dec 25
💼 Business Macroeconomics
  1. Because prices link firms, workers, and markets, difference-in-differences estimates pick up relative changes across units (the slope) but miss common, economy-wide level shifts that get absorbed by fixed effects — the “missing intercept.”
  2. Treatment spillovers mean control groups are almost never untouched, so naively scaling a micro DiD coefficient up to an aggregate shock can be very misleading; the true aggregate effect could be much smaller or much larger than the naive calculation.
  3. To learn the aggregate or policy-relevant effect you need economic structure or extra identifying assumptions; techniques like synthetic DiD fix pre-trends but cannot recover common, market-wide shocks without a structural model.

Financial Bubbles: How They Make Us Poorer

QTR’s Fringe Finance • 17 implied HN points • 23 Dec 25
💰 Finance Macroeconomics
  1. When central banks pump money and push down interest rates, cheap credit funds projects that wouldn’t be viable under normal market conditions, creating malinvestment and financial bubbles.
  2. Those bubble activities are unsustainable and tend to collapse when money supply growth or cheap lending falls, causing boom–bust cycles, distorted prices, and economic harm.
  3. The cure is to stop monetary meddling and cut government spending so investment reflects real savings and consumer demand; simple tax swaps won’t fix the problem if overall spending keeps rising.

Time to Revisit: How Does This Assessment Look Fourteen Months Later?

Brad DeLong's Grasping Reality • 192 implied HN points • 10 Feb 25
💰 Finance Macroeconomics
  1. There are two main views on inflation: 'Team Transitory' believes inflation will go away, while 'Team Persistent' thinks it will stick around. The debate is important to understand how to deal with the economy's ups and downs.
  2. The Federal Reserve's actions, like raising interest rates quickly, play a big role in managing inflation. If the Fed hadn't acted as strongly, inflation expectations could have gone out of control.
  3. Past economic cycles were shaped by different factors, like wars and technological changes. Understanding these historical trends can help us navigate today's economy better.

Lawler: More on the “Neutral” Interest Rate (R*)

CalculatedRisk Newsletter • 14 implied HN points • 09 Dec 25
💰 Finance Macroeconomics
  1. Different models produce very different estimates of the neutral interest rate (R*), so there is a wide range of possible values.
  2. No single model clearly stands out as the most accurate, which means model-based estimates are inherently uncertain.
  3. That uncertainty creates a dilemma for policymakers and analysts, who should treat model outputs cautiously and consider multiple estimates and the range of outcomes.

Case-Shiller: National House Price Index Up 1.4% year-over-year in October

CalculatedRisk Newsletter • 9 implied HN points • 30 Dec 25
💰 Finance Macroeconomics
  1. U.S. house prices are only rising modestly: Case‑Shiller’s national index is up about 1.4% year‑over‑year and the FHFA index is up about 1.7%, with small monthly gains after prior declines.
  2. There is strong regional divergence: Midwestern and Northeastern metros (e.g., Chicago +5.8%, New York +5.0%) are leading, while many Sun Belt markets (e.g., Tampa −4.2%, Phoenix −1.5%, Dallas −1.5%, Miami −1.1%) are down.
  3. High mortgage rates are hurting affordability and price momentum—16 of 20 major cities fell month‑to‑month—so national home price gains lag consumer inflation and imply slight declines in real (inflation‑adjusted) home values.
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Question #9 for 2026: What will happen with house prices in 2026?

CalculatedRisk Newsletter • 9 implied HN points • 24 Dec 25
💰 Finance Macroeconomics
  1. National house prices were mostly flat in 2025 with small year‑over‑year gains around 1–2%, so the outlook for 2026 is uncertain.
  2. Short‑term indicators (Case‑Shiller, Freddie Mac, NAR median) show only slight month‑to‑month gains and suggest year‑over‑year changes will likely stay in that small range or edge down in the near term.
  3. Supply and demand are the key drivers and there are big regional differences — areas with high inventory and rising months‑of‑supply could see local price declines even if the national average remains flat.

GDP still wins

Economic Forces • 11 implied HN points • 15 Dec 25
💼 Business Macroeconomics
  1. GDP remains the best single-number summary of economic activity because no alternative captures the full picture of what an economy is doing.
  2. GDP correlates with many outcomes people care about — like lower infant mortality, better education, reduced extreme poverty, and higher self-reported happiness — because it measures the resources available to fund services and infrastructure.
  3. Despite its limitations, a well-measured GDP is practical and informative for policymaking and teaching, so attempts to outright replace it haven’t gained traction.

The comeback of European growth stocks

Klement on Investing • 3 implied HN points • 28 Jan 26
💰 Finance Macroeconomics
  1. European growth stocks are staging a comeback, with renewed investor interest in growth names across the region.
  2. Over shorter horizons of about one year, share prices are far more sensitive to changes in government bond yields than to earnings or valuation shifts.
  3. For near-term investors, movements in bond yields will often drive returns more than earnings improvements or valuation changes, so watching yields matters most.

Russia after the war

Klement on Investing • 4 implied HN points • 14 Jan 26
🌍 World Politics Macroeconomics
  1. Russia still earns a lot from oil and can keep fighting, but oil revenues are sliding and inflation is well above target, putting serious strain on public finances and ordinary people.
  2. Defence spending takes up a huge share of the budget, so when the war ends the country will either face mass job losses as the military-industrial complex is shut down or be tempted to find new conflicts to keep it running.
  3. Private businesses took on lots of loans during the sanctions, so a post-war inflation spike and central-bank rate hikes could trigger widespread loan defaults and a financial crisis.

Why investors are getting the US debasement trade all wrong

Klement on Investing • 1 implied HN point • 16 Feb 26
💰 Finance Macroeconomics
  1. The popular "dollar debasement" trade is overblown and investors are likely overestimating how much trouble the dollar actually faces.
  2. Investors are underestimating the risk to U.S. Treasuries, which may be the more vulnerable asset class right now.
  3. Either the debasement narrative is misplaced or investors are only catching up to trends that began about fifteen years ago, so this isn’t a new surprise and may reflect outdated thinking.

The path to a new sovereign accounting

Gray Mirror • 35 implied HN points • 03 Aug 25
💰 Finance Macroeconomics
  1. Complex financial systems often hide the reality of the economy. When things are complicated, it can be hard to see the true state of finances.
  2. Merging the U.S. Treasury and the Federal Reserve could simplify how the government manages money. This change would make it clearer that they are part of the same system.
  3. The money supply is being diluted to support the economy, not just through jobs. This means our financial stability relies on printing more money, impacting everyone differently.

HOISTED FROM THE ARCHIVES: I Don't Fully Buy Stiglitz's Argument That Our Macro Problems Have Deep Structural Roots. But I Do See Its Coherence

Brad DeLong's Grasping Reality • 7 implied HN points • 09 Dec 25
💰 Finance Macroeconomics
  1. Rapid productivity-driven decline in a large sector can cut incomes, reduce both consumption and investment, and create a persistent aggregate demand shortfall that monetary policy may struggle to fix at the zero lower bound.
  2. Policy options include engineering expected inflation to lower real rates, using government loan or bank guarantees to shift risk and spur investment, or running large-scale public borrowing and spending to restore jobs and restructure the economy; some argue massive public investment is the most reliable route.
  3. Economists split on framing the problem — focusing on the savings-investment flow versus money supply and velocity — and resolving the crisis probably requires combining both perspectives.

Housing Starts Decreased to 1.246 million Annual Rate in October

CalculatedRisk Newsletter • 4 implied HN points • 09 Jan 26
💼 Business Macroeconomics
  1. Total housing starts fell to a 1.246 million annual rate in October, down about 4.6% from September and 7.8% from a year earlier, and were well below expectations.
  2. Single-family starts rose month-to-month to about 874,000 but remain down roughly 7–7.8% year-over-year and 7.0% year-to-date, while multi-family starts fell in October and year-over-year yet are up about 18% year-to-date, showing a split between housing segments.
  3. Building permits were essentially flat at about a 1.412 million annual rate, slipping slightly month-to-month and year-over-year, and housing units under construction remain elevated, keeping a sizable pipeline of supply.

Price Theory and the Price Level

Economic Forces • 6 implied HN points • 11 Dec 25
💰 Finance Macroeconomics
  1. Measuring the price level requires price theory because common price indexes are just approximate constructs and can systematically mis-measure the theoretical concept.
  2. The correct price-level measure is the money cost of a constant-utility bundle, so weights should adjust as consumers substitute and as future/asset prices matter; fixed-weight indexes and the exclusion of asset prices produce substitution bias and other errors.
  3. Those measurement flaws make it harder to test theories of price-level determination and can mislead policymakers, causing noisy empirical results and potential policy mistakes.

Best of Economic Forces: 2025 Edition

Economic Forces • 4 implied HN points • 26 Dec 25
💰 Finance Macroeconomics
  1. Tariffs and trade policy were a major theme, with historical context and ongoing policy developments analyzed and questioned.
  2. Core economic ideas like price theory and GDP measurement were emphasized and defended against political distortion.
  3. Readers favored a mix of clear, accessible pieces: explanations of academic news, practical teaching advice, and policy deep-dives on topics like land taxes and dollar dominance.

US tariffs and the demand for stablecoins

Klement on Investing • 2 implied HN points • 15 Jan 26
🔮 Crypto Macroeconomics
  1. US tariffs tend to reduce global demand for dollars because they shrink the trade deficit and lower the capital account surplus.
  2. A new regulatory framework for dollar-pegged stablecoins makes it easier and safer for investors to hold dollar exposure, which can boost demand for dollar-denominated stablecoins.
  3. In countries hit by high tariffs that also have capital controls, people can’t buy dollars through banks so they rush into dollar stablecoins, driving up stablecoin demand and prices, while countries without capital controls see little change in stablecoin demand.

SVB and bank capital, revisited

Without Warning • 39 implied HN points • 31 Aug 23
💰 Finance Macroeconomics
  1. Financial crises are often triggered by events in ad hoc filings like 8Ks, not the usual 10Ks.
  2. Analysis should consider how markets assess crises in real-time, not just post-facto Excel analysis.
  3. The 2023 bank crisis started when Silicon Valley Bank suggested its business was less viable in an 8K filing.

It’s Fed Day; who cares?

Klement on Investing • 1 implied HN point • 28 Jan 26
💰 Finance Macroeconomics
  1. A Fed rate decision may have limited impact right now because the chair is a lame duck and shifting US policy (like tariffs) makes the inflation outlook uncertain.
  2. When policy uncertainty is high, companies generally revise their inflation expectations faster and more strongly in response to rate hikes or cuts.
  3. Firms and traders who closely follow central-bank signals tend to anticipate moves and therefore adjust their inflation expectations far less, especially during periods of high uncertainty.

Lessons for today’s investors from the UK in the 1970s

Klement on Investing • 3 implied HN points • 10 Dec 25
💰 Finance Macroeconomics
  1. Cost-push shocks like big commodity price jumps can become long-lasting inflation when governments boost wages and spending while central banks keep rates too low.
  2. Large fiscal deficits or tax cuts can create a short-term growth 'sugar rush' but risk reigniting inflation later if monetary policy is pressured to stay easy.
  3. Fiscal and monetary coordination is crucial: when fiscal policy is expansionary the central bank must act to anchor inflation expectations or inflation will remain elevated.

Former econ official says "trillions" to come, but be patient

Pekingnology • 56 implied HN points • 10 Oct 24
💰 Finance Macroeconomics
  1. A big economic plan is coming from China, but people need to be patient and not expect immediate results. Changes will happen over time.
  2. The government's strategy involves much more than just money; it includes a variety of policies to support different areas of the economy. This means they are looking at the bigger picture.
  3. Not every policy will show clear numbers right away. Some are about creating a better business environment and building for the future, which might take longer to see the effects.

GDP per capita or lying with statistics for advanced practitioners

Klement on Investing • 3 implied HN points • 20 Nov 25
💰 Finance Macroeconomics
  1. GDP per capita is a poor proxy for living standards and doesn’t tell you how well people actually live, so blunt comparisons (like Europe vs a US state) are misleading.
  2. Which exchange rates or base years you use (current dollars, constant dollars) can swing GDP comparisons a lot, letting statistics be used to support very different narratives.
  3. GDP per capita adjusted for PPP better reflects what people can buy with their income and usually narrows gaps with the US, but it’s more complex and rarely used in media headlines.

It’s budget day in the UK

Klement on Investing • 2 implied HN points • 26 Nov 25
💰 Finance Macroeconomics
  1. Changes in tax rates usually don’t alter long‑run economic growth and have little effect on equity market returns, so don’t buy or sell stocks just because taxes go up or down.
  2. Fiscal multipliers vary a lot: the OBR uses a tax multiplier of about 0.33 in year one, a capital investment multiplier of about 1.0, a regular (RDEL) multiplier of 0.34, and a welfare (AME) multiplier of about 0.6.
  3. What the government spends tax revenues on matters more than the tax increase itself — funding capital investment boosts GDP substantially, funding routine public services does little for growth, and cutting welfare to invest only yields a small net gain.

What If We Run Inflation Hot: Harris Kupperman

QTR’s Fringe Finance • 20 implied HN points • 02 Jan 25
💰 Finance Macroeconomics
  1. Inflation may rise faster than expected, which could surprise many investors. People are not prepared for high growth in the economy right now.
  2. The recent economic changes have benefited many workers and industries that were struggling for a long time. This includes wage increases in sectors that needed them.
  3. Questions are being raised about whether efforts to control inflation are really aimed at the overall economy or at a specific group of people in the rural areas.

6. Dancing between the physical and digital; big tech and macroeconomics

Insight Axis • 19 implied HN points • 03 Nov 22
🕹 Technology Macroeconomics
  1. Digital innovation is faster and more flexible than physical innovation, making digital iteration more efficient.
  2. Translating between the physical and digital worlds is essential, requiring 'on-ramps' for data input and 'off-ramps' for implementation.
  3. Information processing is crucial, with 'ramps' serving as gatekeepers between physical and digital realms in big tech and macroeconomics.

Interview: QTR's Take On The Election Results, Macroeconomics & More

QTR’s Fringe Finance • 19 implied HN points • 10 Nov 24
💰 Finance Macroeconomics
  1. Mainstream media and universities often promote ideas that don't reflect real-world logic. It's important to think critically about what we're being told.
  2. Identity politics can distract from true merit and qualifications in leadership. Focusing on skills and experience is more beneficial for progress.
  3. I prefer to get news from independent sources. This helps me find a wider range of viewpoints and avoid echo chambers.

Europe's second 'China shock' is blessing in disguise

Klement on Investing • 1 implied HN point • 09 Dec 25
💰 Finance Macroeconomics
  1. Cheap Chinese exports are once again putting heavy competitive pressure on European manufacturers, repeating a shock similar to two decades ago.
  2. The flood of lower-priced imports is pushing down consumer prices and easing inflationary pressures across Europe.
  3. That disinflation gives the European Central Bank more leeway to cut interest rates in 2026, potentially easing financial conditions and supporting growth.

Corporate investment after rate cuts

Klement on Investing • 1 implied HN point • 09 Dec 25
💰 Finance Macroeconomics
  1. A one percentage-point cut in policy rates typically raises corporate investment by about 7% over the following two years, though the average masks big differences across firms.
  2. Firms that build long-lived assets (real estate, utilities, healthcare) react much more to rate cuts than companies with short-lived assets like tech and media.
  3. Many companies still won’t invest after rate cuts because of weak opportunities, labour shortages, or a need for cash, so monetary policy works slowly and depends on business confidence — which governments and media can help amplify or undermine.

Fed may generate sugar rush in 2026

Klement on Investing • 1 implied HN point • 25 Nov 25
💰 Finance Macroeconomics
  1. The Fed could cut interest rates much more aggressively in 2026 than markets currently expect, partly because of political pressure to ease quickly.
  2. The central bank’s stance has swung from dovish to hawkish and back again, which has left investors unsure about the future path of policy.
  3. If big cuts happen, they could trigger a short-lived "sugar rush" — a rapid but temporary boost to growth and markets in 2026.

Is macroeconomics a mature science?

Klement on Investing • 3 implied HN points • 03 Jul 25
💰 Finance Macroeconomics
  1. Macroeconomics has established theoretical frameworks that guide research and models, but these may not always be the best fit for real-world behavior.
  2. The predictive power of macroeconomic models is limited, making them less useful for investors but potentially helpful in forecasting broad economic trends.
  3. While there is some agreement on methodologies, many practitioners do not keep up with new findings, and integration between different fields is not as strong as it could be.

Inflation is Bad, Actually

Economic Forces • 7 implied HN points • 30 Jan 25
💰 Finance Macroeconomics
  1. Some people think inflation is good because it helps prevent deflation, but this argument is weak. Deflation can be harmful mainly when caused by poor policies, not just by falling prices.
  2. Inflation is often compared to a hidden tax because it decreases the value of money. Unlike regular taxes, people might not realize their purchasing power is being reduced until they feel the effects.
  3. Overall, inflation can create confusion and make economic decisions harder. It undermines the value of money as a reference point, leading to more mistakes and inefficiencies in both personal and business finances.

Links (1)

Bretton Goods • 31 implied HN points • 12 Feb 23
🔬 Science Macroeconomics
  1. Understand how neural networks work with an interesting explanation from Olah et. al
  2. Learn about the history of scientific research and patronage from the rich
  3. Gain insights on modern macroeconomics and what it gets wrong

Macroeconomics with Price Theoretic Foundations

Economic Forces • 5 implied HN points • 16 Jan 25
💰 Finance Macroeconomics
  1. Understanding finance is really important for macroeconomics. It helps us figure out how markets work and how different factors impact the economy.
  2. The no-arbitrage principle in finance shows that prices should adjust quickly to eliminate profit opportunities. This means that if something is cheaper in one place, it won't stay that way for long.
  3. We can analyze macroeconomic theories using tools from price theory. This allows us to test predictions and better understand how things like interest rates and asset prices relate to the economy.

A watershed moment for bond yields

Klement on Investing • 3 implied HN points • 15 Jan 25
💰 Finance Macroeconomics
  1. Long-term bond yields are rising again after decades of decline. This shift suggests that investors are now expecting a risk premium for holding government bonds.
  2. Several factors influence bond yields, including government deficits, demographic changes, and the balance of supply and demand for safe investments. These can push yields higher or lower.
  3. The trends observed in bond markets could change how governments finance their debts in the future. It's a developing situation that could impact financial markets.

Why Armen Alchian is the GOAT 🐐

Economic Forces • 6 implied HN points • 26 Oct 23
💼 Business Macroeconomics
  1. Armen Alchian brought original and important ideas in economics like focusing on property rights, incentives, and information.
  2. Alchian excelled at both economic theory and empirical work, showing expertise in using data and bridging theory with measurement.
  3. Despite being known for microeconomics, Alchian made significant contributions to macroeconomics, especially in areas like transaction costs and macro unemployment.

Default and Bankruptcy: Black, white and shades of grey

Musings on Markets • 0 implied HN points • 14 Jul 11
💰 Finance Macroeconomics
  1. Default is not just about missing a payment; it can also involve lenders accepting losses to help borrowers avoid a formal default. This can include restructuring loans or adjusting payment terms.
  2. Lenders may prefer implicit default over explicit default because it allows them to avoid recognizing their mistakes in assessing credit risk. It makes the situation less transparent and allows them to delay acknowledging losses.
  3. For borrowers, sometimes it might be better to face explicit default and make necessary changes rather than stay in a cycle of implicit default, which can lead to worse problems down the line.

January 2016 Data Update 2: Interest Rates, Exchange Rates and Currencies

Musings on Markets • 0 implied HN points • 08 Jan 16
💰 Finance Macroeconomics
  1. Interest rates and exchange rates are key players in finance because they affect investment returns and company earnings. Trying to predict changes in these rates can lead to mistakes.
  2. There is no one-size-fits-all risk-free rate; it varies by currency and country. To find a risk-free rate, you need to account for local factors like government bond rates and default risks.
  3. When dealing with different currencies, it's important to stay consistent in your valuations. This helps make sure that changes in inflation and risk are accounted for fairly across different currencies.

Decoding Expectations

inexactscience • 0 implied HN points • 20 Mar 23
💰 Finance Macroeconomics
  1. Expectations are key to economic models because they shape how people behave and react to changes in the economy. For example, if people expect prices to rise, they may ask for higher wages.
  2. There is confusion about whether expectations tend to overreact or underreact to information. Evidence shows that expectations can do both—people might overreact to recent events but underreact to larger economic trends.
  3. Bias in expectations is often studied, but noise—random fluctuations and errors—is just as important and can affect forecasts significantly. Understanding both can help improve how we predict economic outcomes.

Macro Thinker: Lawrence Summers on Trump and The Fed

The Octavian Report • 0 implied HN points • 23 Dec 25
💰 Finance Macroeconomics
  1. The Fed is tightening too much too quickly; policymakers should allow a mild overshoot of the 2% inflation target and seriously consider new frameworks like a higher inflation target or nominal GDP targeting.
  2. The biggest macro risk is a coming recession when monetary policy may have little room to cut rates and fiscal authorities might be unwilling to act, so governments and central banks should prepare now.
  3. Crises often require government-led spending and borrowing to restore confidence, and at the same time waning trust in experts and growing speech intolerance on campuses threaten open debate and sound policymaking.