(The opinions expressed here are those of the author, a

columnist for Reuters.)

By Mike Dolan

LONDON, July 1 (Reuters) - In a week of reflection on both a

mad first half of 2026 and the 250th anniversary of the U.S.,

the political and economic news flow has remained relentless,

even if it has lately been drowned out by an AI investment

frenzy that has shifted this year from the big spenders to the

chipmakers supplying the key components.

Today's column takes a different format: a weekly dip into a

few other issues - some related and some not - that caught our

eye over the past week and didn't necessarily make the front

pages.

1) YOUTH BOON OR BURDEN?

America's big anniversary had many investment houses

dwelling on just what made the world's biggest economy what it

is today.

Drawing on Gordon Wood's 2009 book "Empire of Liberty,"

which chroniclesthe early Republic, Morgan Stanley ( MS ) strategist

Andrew Sheets argued this week that chaotic, volatile beginnings

became an economic catalyst, thanks to the new country's unusual

openness, adaptability and capacity for renewal after repeated

crises.

One data point stood out: in 1810, about 70% of Americans

were under 25. Life expectancy was far lower and the population

a fraction of today's, but the figure captures extraordinary

youth and vigour - and raises the question of which emerging or

frontier economies today have a similar demographic profile.

Sub-Saharan African countries such as Uganda, Niger, Mali,

Somalia and Burundi come close, with roughly 70% of their

populations under 25 at last count. Even though emigration

rather than immigration is the dominant pressure in these

countries, and life expectancy is lower than world averages,

could sheer youth spell brighter economic futures?

Many economists are sceptical, arguing that today's world is

very different from the labour-intensive economies of the early

19th century, and that a youth dividend may not be what it once

was.

A Centre for Economic Policy Research paper co-authored by

Nobel laureate Daron Acemoglu found that lower birth rates in

recent decades have been associated with higher GDP growth per

working-age adult across countries and stronger wage growth

across U.S. commuting zones - with no negative impact on

aggregate GDP or earnings.

The authors argue this reflects a technological and

innovative response to scarcer young labour. Countries and

regions with lower birth rates, they add, show more

labour-saving patents and growing high-tech activity; it is the

decline in younger populations, rather than overall population

size, that appears to be the driver.

Brave new world indeed - and another hat-tip to the market

obsession of the moment.

2) ADVICE ON WHAT?

Much of the focus on new Federal Reserve Chair Kevin Warsh

has been on how he will react to market expectations that the

next move in Fed interest rates is up. But Warsh himself is

likely concentrating on the five "task forces" he set up last

month to examine the central bank's workings and the broader

conduct of monetary policy.

In that regard, one story that may have passed many people

by was a Wall Street Journal piece saying Warsh had tapped

veteran Fed staff economists Daniel Covitz and Eric Engstrom as

key advisers. Naturally, everyone wants to know what they think

and what they've been working on.

Maybe a guidance-skeptic like Warsh was drawn to Engstrom's

work on the pitfalls of the Fed's quarterly economic and rate

projections. Notably, the pair's most recent joint paper,

published in February, dissected elevated Treasury forward rates

and concluded that the outsize jump in long-dated rates was

rooted more in fiscal concerns than in inflation or worries

about Fed credibility.

Curiously, the Fed site says Covitz's current research

topics include "Asset Bubbles" and "Stability of Short-term

Credit Markets" - timely subjects for a central bank eyeing an

AI frenzy in parts of the financial world. Engstrom's listed

work on "Stock-Bond Comovement" and "Corporate Profits and

Entrepreneurship," meanwhile, speaks to just how much this

year's big themes may shape policy thinking.

3) BROKEN CYCLE?

It's easy to get dazzled by the eye-popping gains in the

stock prices of the big AI beneficiaries - most obviously this

year, chip firms and computing equipment makers. But what looks

like a buoyant midyear for top-line stock market indexes masks

the angst over AI's potential losers, mainly the

software-as-a-service sector.

One way to see that, according to a recent note from

Carlyle's Matthew Savino, is in rising borrowing premia for

these firms in the leveraged loan market. Software spreads of

close to 800 basis points are almost twice the broader index.

They jumped nearly 300 bps early in the year and have not come

back since.

Two points stick out, according to Savino. First, looming

maturity walls mean some $50 billion of syndicated software

loans come due in both 2028 and 2029, and these will need to be

addressed from the second half of this year through 2027. Some

85% of that debt is rated B-minus or lower, and such debt

maturing in 2028-29 has a weighted average price of about 79

cents on the dollar, with more than half trading below 90.

That companies and creditors need to thrash these debts out

is clear. But that leads to the second point: most workouts to

roll or extend debt involve higher spreads, pay-in-kind coupons

or other sweeteners to keep borrowers whole. These generally

assume a cyclical recovery over time.

The problem is that, for some firms, AI disruption may be

existential, complicating traditionally flexible debt

relationships and increasing anxiety for those worst affected.

"In the context of secular distress and high uncertainty

about terminal value, time can be the enemy if the pace of

financial degradation in the underlying business is high,"

Savino concluded. "It's about to get interesting."

(The opinions expressed here are those of Mike Dolan, a

columnist for Reuters.)

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