News Items, Part Two.

The rest of the stories.

“If I could only open one thing each morning it would be John Ellis’s News Items newsletter.” — Larry Summers, President Emeritus of Harvard University and former Secretary of the Treasury of the United States.

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1. Many Americans are pinching pennies, exhausted by high prices and stubborn inflation. The well-off are spending with abandon. The top 10% of earners—households making about $250,000 a year or more—are splurging on everything from vacations to designer handbags, buoyed by big gains in stocks, real estate and other assets. Those consumers now account for 49.7% of all spending, a record in data going back to 1989, according to an analysis by Moody’s Analytics. Three decades ago, they accounted for about 36%. All this means that economic growth is unusually reliant on rich Americans continuing to shell out. Mark Zandi, chief economist at Moody’s Analytics, estimated that spending by the top 10% alone accounted for almost one-third of gross domestic product. Between September 2023 and September 2024, the high earners increased their spending by 12%. Spending by working-class and middle-class households, meanwhile, dropped over the same period. (Source: wsj.com)

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2. There’s evidence that the demographic of people taking GLP-1 weight-loss drugs overlaps with those who like to spend, a group some analysts have dubbed “over consumers.” Cutting their daily calorie counts in half — or more — is resulting in all sorts of interesting consequences still coming to light. Ozempic, and its GLP-1 cousins Mounjaro, Wegovy and Zepbound, may not be the lightbulb, jet airplane or internet, but their impact is expected to be so significant that Jan Hatzius, chief economist at Goldman Sachs, predicts that if 60 million people take the medications by 2028, GDP would be boosted by 1 percent — or several trillion dollars. Hatzius’s analysis was based primarily on the idea that healthier people mean a healthier workforce and, in turn, lower health-care costs. Read the rest. (Source: washingtonpost.com)

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3. Niall Ferguson:

Economists have long sought in vain a threshold that defines how much debt is too much. My own formulation of Adam Ferguson’s idea focuses our attention on the crucial historical relationship between debt service (interest plus the repayment of principal) and national security (expenditure on defense, including investment in research and development).

The crucial threshold is the point where debt service exceeds defense spending, after which the centripetal forces of the aggregate debt burden tend to pull apart the geopolitical grip of a great power, leaving it vulnerable to military challenge.