- BigLouie
- 10-09-2014, 03:09 PM
It is all a big nothing. When you have 1.3 Billion people that is a lot of purchasing power. Not much anyone could have done. Almost nothing really
- Texas Contrarian
- 10-10-2014, 11:48 AM
Whoa! Let's slow down and and take a look below the surface here, shall we?
Much has been made of the "fact" that China "overtook" the U.S. to become the world's largest economy. But that's only the case if you consider the issue solely with respect to what we refer to as "purchasing power parity" (PPP). Such analyses consider the aggregate purchasing power a nation's citizens have by measuring the domestic costs of a basket of goods and services. Someone with an income of, say, 100K in terms of U.S. dollars, can buy more stuff in China after converting their currency to renmembi than they can in the U.S.
And that's certainly important, especially for the citizens of the subject country.
But I don't consider it an appropriate way of measuring the real "horsepower" of an economy. In my opinion, what a country can produce and consume in the aggregate (both domestically and in global markets) is of vastly greater importance. And in that regard (traditional non-PPP GDP measure), the U.S. economy may be about 50% larger than China's (although it's hard to say, since a lot of the numbers promulgated by Chinese authorities are quite dubious).
Here's an excellent explanation of some of these issues for those interested in further info:
http://blog.mpettis.com/2014/05/do-w...444.1366230725
Note that the Chinese authorities themselves have objections to looking at this on a PPP basis, and the reasons are interesting.
And here's another interesting piece that was widely discussed just a couple of months ago:
http://www.chinausfocus.com/finance-...in-laboratory/
It may very well be the case that China will catch up with us during the next couple of decades even on a non-PPP basis, since their trend growth rate has been very high, while ours has been poor. But people who consider that a virtually certainty suffer from extrapolation bias.
China is at great risk of a massive credit contraction and financial crisis. Look at what happened to Japan. In the late 1980s, a lot of people opined that the Japanese were on track to surpass us.
You saw what happened.
Much has been made of the "fact" that China "overtook" the U.S. to become the world's largest economy. But that's only the case if you consider the issue solely with respect to what we refer to as "purchasing power parity" (PPP). Such analyses consider the aggregate purchasing power a nation's citizens have by measuring the domestic costs of a basket of goods and services. Someone with an income of, say, 100K in terms of U.S. dollars, can buy more stuff in China after converting their currency to renmembi than they can in the U.S.
And that's certainly important, especially for the citizens of the subject country.
But I don't consider it an appropriate way of measuring the real "horsepower" of an economy. In my opinion, what a country can produce and consume in the aggregate (both domestically and in global markets) is of vastly greater importance. And in that regard (traditional non-PPP GDP measure), the U.S. economy may be about 50% larger than China's (although it's hard to say, since a lot of the numbers promulgated by Chinese authorities are quite dubious).
Here's an excellent explanation of some of these issues for those interested in further info:
http://blog.mpettis.com/2014/05/do-w...444.1366230725
Note that the Chinese authorities themselves have objections to looking at this on a PPP basis, and the reasons are interesting.
And here's another interesting piece that was widely discussed just a couple of months ago:
http://www.chinausfocus.com/finance-...in-laboratory/
It may very well be the case that China will catch up with us during the next couple of decades even on a non-PPP basis, since their trend growth rate has been very high, while ours has been poor. But people who consider that a virtually certainty suffer from extrapolation bias.
China is at great risk of a massive credit contraction and financial crisis. Look at what happened to Japan. In the late 1980s, a lot of people opined that the Japanese were on track to surpass us.
You saw what happened.
- Submodo
- 10-10-2014, 01:26 PM
So now China should start doing the fighting and funding the fight against the terrorists, and the US taxpayer can sit back and watch.
Right?
Right?