Tomorrow marks the launch of WSJ Economics, our revamped, rebranded economics newsletter. We'll pub 2x a week with an exclusive analysis by me plus a run down of other vital news and analysis from around the web. Sign up here - it's free! wsj.com/preference-center/ne…
James Mackintosh retweeted
The future is always clouded in markets—but even the past isn’t as clear as it seems, writes WSJ’s @jmackin2 on.wsj.com/4hhdMLg
James Mackintosh retweeted
Why is Scott Bessent is playing with the Treasury market? The world is going into a new era of capital need, for data centers, the military and reshoring, writes WSJ’s @jmackin2 on.wsj.com/3SicxDe
James Mackintosh retweeted
Central banks may be accidentally subsidizing government borrowing through their efforts to prevent a repeat of past market blowups, and policymakers are starting to worry, writes WSJ’s @jmackin2 on.wsj.com/4wtrTmg
Damn cheeky when someone uses AI to rewrite my column, posts it on their stack and subscribes me to it.
Latest Streetwise: forever blowing bubbles - but endless mini bubbles don't crash the economy, and (so far) don't even interrupt the bull market
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James Mackintosh retweeted
The huge premium between SK Hynix’s American and South Korean shares is exactly the sort of thing that shouldn’t happen in markets, writes WSJ’s @jmackin2 on.wsj.com/4fuBcvO
James Mackintosh retweeted
From James Mackintosh's WSJ article:
"In the old investment paradigm, government bonds acted as shock absorbers, with prices rising and yields falling when the economy takes a hit.
But in a world where the shocks cause inflation, bond prices fall and yields rise when bad stuff happens. That is particularly true when government debt levels are so high."
#economy #markets @wsj @jmackin2
James Mackintosh retweeted
In AI, money talks. The ability to tap stock market capital is important again, after a quarter of a century of being all but irrelevant, @jmackin2 writes. on.wsj.com/4viJCfZ
James Mackintosh retweeted
We stopped everything to write an answer (link below) to Paul Krugman's two posts of today (one informal, one with a simple model) arguing that Europe is broadly not falling behind the United States.
The change measured by the Draghi report, he argues, is mostly due to growth in the technology industry, which has distorted GDP numbers without actually leading to higher standards of living. We should believe our eyes when we walk around France and walk around Mississippi.
Krugman is wrong. The measures he uses understate European stagnation. This matters enormously. Divergence with the United States is the strongest evidence for reform in Europe.
1. The growth numbers
Krugman compares the United States, France, and Germany at purchasing power parity in current prices. On that measure, France's and Germany's position relative to America has been roughly constant since 2000.
But current price comparisons miss productivity gains in sectors where prices fall. If America produces twice as much software while the price of each unit halves, the value of American software output looks unchanged even though the volume has doubled.
Most economists therefore use constant prices, which fix the base-year PPP level and apply each country's real output growth on top of it. American output growth has concentrated in tech, where prices have fallen tremendously as productivity rises. In terms of the volume of things produced, America has pulled away from Europe.
2. Is it all the tech industry?
Krugman concedes this tech divergence but says it is not welfare-relevant. The American growth lead is an accounting artefact of measuring more iPhones at base-year prices, not a sign that Americans are actually richer, because Europeans buy the same iPhones at the same world prices.
This is not the right way to think about the world today, as an earlier Paul Krugman would have argued.
His model assumes tradable goods, interchangeable workers, marginal-cost pricing, and no profits. Each assumption fails.
Most of what households buy is non-tradable: housing, healthcare, childcare, education. When American tech firms bid workers from haircutting to coding, American haircut wages rise. Germany has no growing tech sector to do the bidding, so German wages stay flat.
Technology is not priced at marginal cost. Apple's margins are around 40 percent. Anthropic's inference margins are at 70 percent. The major platforms enjoy network effects, switching costs, and lock-in that hold prices well above what a competitive market would deliver. A large share of the productivity gains in technology stays as profit.
A lot of the value of American technology dominance shows up in equity, not in wages. Apple, Microsoft, Nvidia, Alphabet, Meta, and Amazon together are worth $21 trillion, more than the entire combined stock market value of all European stock markets. Around 60 percent of US equity is held by American households. The median French or Spanish household holds almost no equity.
The median employee at Meta, a company with almost 80,000 employees, earned $388,000 in 2025.
This advantage is not going to go away. Krugman's own 1991 paper, cited in his Nobel prize, showed that comparative advantage in modern industries is produced by increasing returns to scale, specialized labor markets, supplier networks and the agglomeration of suppliers, workers, and ideas in particular places. Once an industry concentrates somewhere, the concentration is self-reinforcing. Europe is being pushed away from the next round of technology industries (AI!).
3. What about inequality?
Another retort is that GDP per capita hides substantial inequality, and so even if America is rich on average, this is mostly due to the super wealthy.
But despite the US's high pre-tax income inequality, it also achieves higher median incomes than Europe, in part because of such a high base, and in part because it actually redistributes more than many European countries.
The cleanest comparison is median equivalised disposable household income: income after cash taxes and transfers, adjusted for household size and purchasing power. According to the OECD's 2021 numbers, the median American earns 30 percent more than the median Dutchman, about 31 percent more than the median German, and about 52 percent more than the median Frenchman.
4. What about hours worked?
Krugman points out that while American GDP per person is higher, most of this is because Americans work more. For this divergence to be an hours worked story, Americans must work more relative to Europeans now than they did in 2000.
The opposite has happened. Birinci, Karabarbounis, and See in a 2026 NBER paper show that about half of the American-European hours gap that existed in the 1990s has reversed by the end of the 2010s. Americans work fewer hours per person than they did in 2000, while most Europeans work more.
5. Is America not a bad place to live?
Walk around Alabama and France: surely the former cannot be substantially richer than the latter?
American cities often have poorer centres and richer suburbs or exurbs. European cities preserve richer and more attractive historic cores. A visit to a city as a tourist in America compared with a city in France will leave one having seen different spots on the income distribution. Americans in Europe go to the nicest and richest European cities.
Rather than a walking around test, do a driving around test. Go to the periphery of any modern American city and see a level of new-built material wealth that is extremely uncommon in Europe, with thousands of enormous four- or five-bedroom homes. In the South, in places like Nashville and Austin, drive around the downtowns to see hundreds of luxury apartment buildings springing from the ground. This construction boom is replicated virtually nowhere in Europe today.
The other question is generational. Housing often costs more in Europe than in the United States, despite the quality of the housing stock generally being much better. Europe has nice city cores but these are inaccessible to young Europeans.
Consider the salaries available to entry-level workers. The starting pay for a London police officer is $57,000. In Washington, DC, $75,000. The entry-level Deloitte consultant job in Madrid pays around €28,000, roughly $33,000 per year. In Charlotte, the entry-level Deloitte job pays $63,000.
There are many things to dislike about life in America. But relative to 25 years ago, the gap in material wealth has shifted dramatically in America's favor.
siliconcontinent.com/p/europ…
Are memory stocks in a bubble? There’s rarely been such a combination of signals to literally and figuratively take some chips off the table. More signs of investor silliness from @Spencerjakab wsj.com/finance/stocks/dont-…
Latest Streetwise
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James Mackintosh retweeted
Streetwise: The investment question now is whether signs of worry are a reason to buy the dip, or a reason to get out quick, writes @jmackin2 on.wsj.com/4bbNXZU
James Mackintosh retweeted
More money for defense spending likely will mean more political interference and bad news for margins, WSJ’s @jmackin2 writes on.wsj.com/4lcjK1B
James Mackintosh retweeted
Hassett: “The Fed’s independence extends to its research. It and it alone must decide what research to conduct to further its mission. The authors of this study are all excellent economists. We differ strongly on this particular paper. But I did not mean to impugn their excellent reputations and regret my choice of words.”
Kevin Hassett Regrets and Retracts His Call to Discipline Fed Researchers , by @Kotlikoff open.substack.com/pub/larryk…
James Mackintosh retweeted
Streetwise: There are three ways to treat such a strange market: Ignore it, trade it or panic, says @jmackin2 on.wsj.com/4aF3AsS
James Mackintosh retweeted
Streetwise: This is a great time for companies to borrow. It isn’t obviously a great time to lend to them, says @jmackin2. on.wsj.com/3MDWNaL
James Mackintosh retweeted
Replying to @EmmaMAshford
Imagine if the EU had issued a paper saying that its strategic priority is the breakup of the United States into 50 separate states, and we will support the “healthy” ones in the south and the east, because Europeans believe that America has lost its civilizational values. Not hostile to America, just to the United States.









