What we’re reading (6/3)
“Dollar’s Correlation With Treasury Yields Breaks Down” (Financial Times). “The close relationship between US government bond yields and the dollar has broken down as investors cool on American assets in response to President Donald Trump’s volatile policymaking. Government borrowing costs and the value of the currency have tended to move in step with each other in recent years, with higher yields typically signalling a strong economy and attracting inflows of foreign capital. But since Trump’s ‘liberation day’ tariffs were announced in early April, the 10-year yield has risen from 4.16 per cent to 4.42 per cent, while the dollar has dropped 4.7 per cent against a basket of currencies. This month, the correlation between the two has fallen to its lowest level in nearly three years.”
“Wall Street Is Sounding The Alarm On U.S. Debt. This Time, It’s Worth Listening.” (Wall Street Journal). “Sounding the alarm about a debt crisis has been great for companies shilling gold coins and fishy financial products but has made smart, sincere people look silly when nothing happened—financial markets’ equivalent of Y2K. So why are several suddenly worried? Because the math is getting daunting with interest on the debt blowing past $1 trillion annually and Washington acting recklessly. Even people who have issued past warnings deserve a second (or third, or fourth) hearing.”
“A.I. Killed The Math Brain” (New York Times). “Computer science has consistently been one of the top majors in the United States for the last decade. But with the ability to task A.I. to code, startups and tech giants alike are hiring fewer and fewer entry-level computer scientists. Reports suggest that at major A.I. companies, the hiring rate for software engineering jobs has fallen over the course of 2024 from a high of about 3,000 per month to near zero. If enrollments in computer science degrees dry up as jobs disappear, the whole pipeline from education to employment could crash. It’s not so surprising that chatbots might threaten technical jobs before writing ones. They are very good at predicting the answers to a lot of standard questions on exams and problem sets. And a lot of quantitative work is done using that very simple kind of code.”
“More Laws, More Growth? Evidence From US States” (Ash, et al., Journal of Political Economy). “This paper analyzes the conditions under which more legislation contributes to economic growth. In the context of US states, we apply natural language processing tools to measure legislative flows for the years 1965–2012. We implement a novel shift-share design for text data, where the instrument for legislation is leave-one-out legal topic flows interacted with pretreatment legal topic shares. We find that at the margin, higher legislative output causes more economic growth. Consistent with more complete laws reducing ex post holdup, we find that the effect is driven by the use of contingent clauses, is largest in sectors with high relationship-specific investments, and is increasing with local economic uncertainty.”
“Fed Loosens The Shackles On Wells Fargo Nearly A Decade After Fake Accounts Scandal” (Yahoo! Finance). “The Federal Reserve is loosening a major restriction on Wells Fargo (WFC) that was put in place following a fake accounts scandal nearly a decade ago, and the fourth-largest US bank will no longer have to operate under a $1.95 trillion asset cap.”
