Ed Conard

The Coming Great Repression?

AI Summary. Higher public debt is historically associated with lower, not higher, government bond returns, as financial repression forces banks to hold low-yield bonds and cheap reserves, suppressing borrowing costs. This mechanism reduced British public debt by ~91% of GDP in 1945–55, dwarfing the contributions from inflation or budget surpluses.

Does financial repression offer governments a hidden path to debt reduction?

Core argument: Financial repression delivered an estimated 90.7 percentage points of GDP in British debt reduction between 1945–55, dwarfing contributions from surprise inflation (20.3 pts) and primary surpluses (3.9 pts).Across countries and over time, higher public debt burdens are associated with lower relative returns on government bonds—the opposite of what standard risk premium models would predict (Figure 1a).

Can currency intervention stop the yen's decline without addressing root causes?

Core argument: Japan’s near-total dependence on energy imports compounds yen weakness, as rising oil prices driven by geopolitical tensions directly erode the country’s terms of trade.Japan’s currency slid as much as 1% Monday to past 159 per dollar, wiping out half the rally triggered by the July 31 US-Japan intervention.

Is earnings growth masking a cash flow problem for tech companies?

Core argument: S&P 500 earnings per share have outpaced free cash flow over a sustained period, a divergence that began with pandemic-era cost cuts and accelerated sharply after ChatGPT’s launch.Questions are mounting over how quickly the capex ploughing into AI will translate into profitability, but tech’s earnings growth is still impressive — it’s just that the cost of that investment is increasingly hard to ignore.

Does premium positioning protect AI leaders from cheaper competitors?

The $965 billion artificial-intelligence juggernaut is staring down a host of fresh challenges that are leading investors to take a more critical look at the company’s business.