392 posts on "Liberty Street Economics"
June 30, 2026
Liquidity Fades as Treasuries Age
More than $30 trillion U.S. Treasury debt is outstanding. Less than 4 percent of this amount, which is associated with the most recently issued Treasuries, called on-the-run securities, accounts for 65 percent of average daily trading volume. The remaining portion of the amount outstanding is accounted for by seasoned issues that have been replaced by newer benchmarks, which are referred to as off-the-run securities. In this post, we review the key results in our paper that uses transaction-level Treasury TRACE data to study how trading activity and liquidity evolve as securities move from on-the-run to off-the-run. We show three main patterns. First, off-the-run notes and bonds rely much more on dealer-to-customer intermediation than benchmark securities. Second, trading activity falls sharply and transaction costs increase as securities age. Third, securities that are cheapest to deliver into Treasury futures are an important exception: they trade more actively than other off-the-run bonds of similar age.
June 26, 2026
How Resilient Were Emerging Market Economies Through the 2022‑23 U.S. Monetary Tightening Cycle?
The cross-border spillover effects of shifts in U.S. monetary policy have long been a focus of academics and policymakers alike. A common finding in the literature is that changes in the stance of U.S. monetary policy have sizable effects on economic activity and financial markets in emerging market economies (EMEs). In this post, we analyze one specific aspect of these spillovers: how EMEs fared through the U.S. monetary policy tightening cycle of 2022-23 relative to the predictions of a model, which was calibrated to capture empirically relevant features of these economies based on historical data. We find that more vulnerable EMEs fared better in both financial market and growth outcomes than would be expected from our model, while the relatively less vulnerable fared a bit better than the model predictions for financial outcomes but substantially worse for growth outcomes.
June 24, 2026
The Post‑COVID Decline in the Labor Share
The labor share of income in the U.S. is currently at its lowest-ever level in the post-war period. The labor share measures the fraction of economic output paid to workers as wages and salaries. As such, it is a useful benchmark for wage growth: when the labor share falls, it means that productivity, prices, or both are growing faster than wages. After much-studied drops in the 2000s, the labor share fell sharply again after the COVID pandemic. In this post, we compare the dynamics of the labor share post-COVID to earlier periods to understand whether the recent decline represents the continuation of a trend or a new and distinct phenomenon. We find that both the cyclicality of the labor share and the contribution of reallocation to the labor share post-COVID are similar to earlier periods.
June 23, 2026
Synthetic Stablecoins and Financial Stability
On October 10, 2025, the announcement of a potential additional 100 percent tariff on Chinese goods drove risk-off moves across equities, Treasuries, credit spreads, and digital assets. Digital asset prices fell sharply, trading volumes surged, and liquidity vanished from key exchanges. In this post, we show how the price shock in digital assets was transmitted and amplified through a class of instruments called synthetic stablecoins—crypto assets whose structural design turned an external shock into a self-reinforcing deleveraging spiral within the crypto ecosystem.
May 27, 2026
Food Insecurity and Consumer Pessimism
Current discussions regarding a bifurcated U.S. economy highlight the increasing economic divide between lower- and higher-income Americans in spending and earnings growth and wealth accumulation. While many households are doing fine and economic activity overall has been expanding at a solid pace, large segments of the population are facing high levels of economic insecurity and financial strain, and consumer sentiment on the whole has dropped to low levels. In this post, we use newly collected data from the Survey of Consumer Expectations (SCE) to update our 2020 analysis of disproportionate financial hardship experienced during the early pandemic and to investigate recent changes in food insecurity and broader economic strains. We then examine how food insecurity relates to the increase in consumer pessimism. We find a remarkable increase in food insecurity, particularly among lower-educated and lower-income households and households with young children. We document a contemporaneous increase in pessimism among the same groups, along with a sharp decline in job-finding expectations.
May 20, 2026
AI’s Macroeconomic Challenges and Promises
In the third quarter of 2025, America’s largest tech firms for the first time spent more on capital investment than they earned from operations. The implication is that AI, a technology with the potential to make the economy more productive, is, for now, absorbing resources faster than it is generating returns. This post discusses how the tension between AI’s long-run promise and its short-run costs affects the outlooks for inflation, real activity, and financial stability.
Posted at 7:00 am in Artificial Intelligence (AI), Inflation, Macroeconomics, Monetary Policy | Permalink
May 19, 2026
The Global Credit Cycle in Corporate Bond Returns
The global corporate nonfinancial bond market is both a large investment asset class and a vital source of funding for nonfinancial firms. With $19 trillion outstanding at the end of 2024, a broad portfolio of corporate bonds would be expected to be well diversified. Yet, in 37 percent of months between 1998 and 2024, more than 80 percent of bonds in the ICE Global Bond Indices—a portfolio with over 10,000 constituents spanning diverse industries, credit ratings, and regions—moved in the same direction, suggesting a large degree of synchronization. In this post, we introduce the global credit factor, which proxies for the global price of risk in international corporate bond markets. The global credit factor creates a global credit cycle in bond risk premia and generates predictable comovement in bond prices.
May 18, 2026
Honey, Who Shrunk the U.S. Income Surplus?
Foreign holdings of U.S. financial assets are immense, with official estimates putting their current market value at $69 trillion. U.S. holdings of foreign assets are also impressive but much smaller, at $41 trillion. The shortfall in U.S. foreign assets relative to foreign liabilities has been mounting for decades. Yet U.S. investment income receipts—in profits, dividends, and interest—comfortably exceeded income payments until recently. We show that the fading of the net investment income surplus stems from the upward shift in interest rates in the aftermath of the pandemic along with the continued net sales of U.S. assets to foreign investors.
May 11, 2026
Will Mounting Supply Chain Strains Hamstring the AI Investment Boom?
The conflict in the Middle East has precipitated a global supply shock—the third in six years following the pandemic in 2020 and Russia’s invasion of Ukraine in 2022. The current shock raises the specter of spillovers to the U.S. through both prices and physical shortages of goods. A critical conduit for spillovers through these channels is via Asian supply chains, especially from middle- to lower-middle income countries in southeast Asia, which are key suppliers for goods needed for the AI infrastructure build-out in the U.S. These countries are also heavily reliant on Middle East energy imports. This post examines key factors related to these Asian supply chain vulnerabilities.
Posted at 7:00 am in Artificial Intelligence (AI), International Economics, Supply Chain | Permalink
May 6, 2026
Same Shock, Different Roads? A K‑Shaped Pattern at the Pump
In March 2026, energy prices surged to a four-year high, driven by the Iranian closure of the Strait of Hormuz amid the ongoing conflict in the Middle East. In this Liberty Street Economics post, we use the new consumer spending module of the Economic Heterogeneity Indicators to analyze recent changes in nominal and real gas consumption across different income groups. We find that households had very different experiences with gasoline spending: in March, high-income households increased nominal spending the most and kept real consumption essentially unchanged, while low-income households decreased real consumption of gasoline but still saw sharply increased nominal spending because of the rise in gas prices. Therefore, with the sharp increases in gasoline prices in March, a K-shaped pattern in gasoline consumption emerged—showing faster consumption growth for high-income households relative to low-income households. These gasoline consumption patterns qualitatively match those following the increase in energy prices at the beginning of the Russia-Ukraine war in spring 2022, even though the gap in consumption trends during the current episode is quantitatively larger.
RSS Feed
Follow Liberty Street Economics
