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Thread: China Overtook The US As The World's Largest Economy

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    China Overtook The US As The World's Largest Economy

    China just overtook the US to become the world’s largest economy, according to the International Monetary Fund.

    Chris Giles at the Financial Times flagged up the change. He also alerted us back in April this year that it was all about to happen.

    Basically, the method used by the IMF adjusts for purchasing power parity.

    The simple logic is that prices aren’t the same in each country: A shirt will cost you less in Shanghai than San Francisco, so it’s not entirely reasonable to compare countries without taking this into account. Though a typical person in China earns a lot less than the typical person in the US, simply converting a Chinese salary into dollars underestimates how much purchasing power that individual, and therefore that country, might have. The Economist’s Big Mac Index is a great example of these disparities.

    So the IMF measures both GDP in market exchange terms, and in terms of purchasing power. On the purchasing power basis, China is overtaking the US right about now and becoming the world’s biggest economy.

    We’ve just gone past that cross-over on the chart below, according to the IMF. By the end of 2014, China will make up 16.48% of the world’s purchasing-power adjusted GDP (or $US17.632 trillion), and the US will make up just 16.28% (or $US17.416 trillion)
    China Overtook The US As The World's Largest Economy | Business Insider

    I see this as a bad sign for us. Our inner economy has slowed down; national debt has doubled while one of the creditors is China. If this tendency is the same for the next three-four years, the debt will become so big that the budget might not be able to cover the obligations while no one would be capable of providing bigger credits including Federal Reserve.
    And this puts the whole country’s economy at risk.

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    Re: China Overtook The US As The World's Largest Economy

    Darn.

    Just wait for China's baby boomer generation to mature, it's going to be epic.

    That kid by the way looks stupid, can't dress for ****, learn to tie a tie correctly and properly.
    -----MOS 19D = cavalry scout = best damn MOS there is

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    Re: China Overtook The US As The World's Largest Economy

    Quote Originally Posted by Tameamea View Post
    China Overtook The US As The World's Largest Economy | Business Insider

    I see this as a bad sign for us. Our inner economy has slowed down; national debt has doubled while one of the creditors is China. If this tendency is the same for the next three-four years, the debt will become so big that the budget might not be able to cover the obligations while no one would be capable of providing bigger credits including Federal Reserve.
    And this puts the whole country’s economy at risk.
    China has waaaaaaaaaaaaaay bigger problems to deal with than merely some debt.

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    Re: China Overtook The US As The World's Largest Economy

    China already owns USA until they sell the US treasury bonds.

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    Re: China Overtook The US As The World's Largest Economy

    This is what happens when you focus almost entirely on guns instead of butter.

    Trillions spent on wars while our economy at home tanks. We deserve every bit of this, but think about how much quantifiably safer we all feel.
    Quote Originally Posted by LowDown View Post
    I've got to say that it is shadenfreudalicious to see the rich and famous fucquewads on the coast suffering from the fires.

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    Re: China Overtook The US As The World's Largest Economy

    Quote Originally Posted by Tameamea View Post
    China Overtook The US As The World's Largest Economy | Business Insider

    I see this as a bad sign for us.
    Our inner economy has slowed down; national debt has doubled while one of the creditors is China. If this tendency is the same for the next three-four years, the debt will become so big that the budget might not be able to cover the obligations while no one would be capable of providing bigger credits including Federal Reserve.
    And this puts the whole country’s economy at risk.


    Some people in the USA Choose to see a lot of signs of gloom and doom.

    Those people will be mighty disappointed when what they predict doesn't happen and the USA remains the strongest country on this planet.

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    Re: China Overtook The US As The World's Largest Economy

    Quote Originally Posted by Tameamea View Post
    I see this as a bad sign for us.
    Tamea,

    This is more a footnote than anything. With its enormous population and increasing per capita output, such a development was inevitable. This development, by itself, does not suddenly mean that the U.S. is in a markedly worse position economically or geopolitically.

    Our inner economy has slowed down; national debt has doubled...
    Long-term growth in the U.S. has slowed due to a combination of factors, including broad developments such as the aging of the population (China will confront this in coming years and the headwind will be stronger than what the U.S. faces). The U.S. currently faces some significant secular stagnation (lower potential growth due to a combination of slow population growth, declining labor market participation, changes in labor market skills vis-a-vis the rest of the world, slowing innovation, etc.). Arguably of particular concern is the slowing of innovation, as that trend would have large long-term implications even if all other variables are held constant.

    Nevertheless, many sectors in the U.S. economy remain highly competitive and the economy as a whole is still very competitive. It's short-term outlook is very favorable among countries with advanced economies. From the IMF's latest World Economic Outlook:



    If this tendency is the same for the next three-four years, the debt will become so big that the budget might not be able to cover the obligations..
    Thanks in large part to a combination of the cyclical rebound in the nation's economy and "Fiscal Cliff" tax deal changes enacted in late 2012, U.S. budget deficits have been declining in absolute terms and relative to GDP. In the medium-term and beyond, structural imbalances associated with the nation's mandatory spending programs will likely begin to reverse that trend barring policy changes, slowing secular economic growth (unless innovation and productivity can pick up), etc. Nevertheless, at this point in time, the U.S. will very likely not face debt crisis anytime during the next five years in which it would have difficulty meeting its interest payments and/or rolling over its debt as it becomes due. Any such crisis during that timeframe would almost certainly be of the self-inflicted kind e.g., Congressional failure to raise the nation's debt ceiling.

    The latest CBO deficit projections 2014-2024 can be found at: http://www.cbo.gov/sites/default/fil...jections_2.pdf

    Needless to say, the farther out one goes in the timeframe, the greater the likely forecasting error will be given the increased uncertainty associated with longer time horizons.

    Finally, the U.S. is not in a position where only absolute decline is available. The U.S. still has broad strategic flexibility and has many opportunities for a bright future.
    Last edited by donsutherland1; 10-10-14 at 10:54 AM.

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    Re: China Overtook The US As The World's Largest Economy

    Quote Originally Posted by Tameamea View Post
    China Overtook The US As The World's Largest Economy | Business Insider

    I see this as a bad sign for us. Our inner economy has slowed down; national debt has doubled while one of the creditors is China. If this tendency is the same for the next three-four years, the debt will become so big that the budget might not be able to cover the obligations while no one would be capable of providing bigger credits including Federal Reserve.
    And this puts the whole country’s economy at risk.
    Funny. I had thought it had happened a while ago in PPP terms. Anyway, the implications are the same that we analyzed in the 1990s as soon to come. Now we are there. The shift in wealth may still not be dangerous, but it will become so over the next 15 years. At the same time India and a number of other transition economies will have caught up and we will all be competing head on in varying alliances and coalitions, 20 countries with atom bombs and 30 with chemical and biological killers. Boy, will that be ever interesting.

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    Re: China Overtook The US As The World's Largest Economy

    Quote Originally Posted by Luftwaffe View Post
    Darn.

    Just wait for China's baby boomer generation to mature, it's going to be epic.

    That kid by the way looks stupid, can't dress for ****,
    learn to tie a tie correctly and properly.


    I totally agree, if you can't tie a tie properly don't wrap one around your neck. What do you really need it for?

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    Re: China Overtook The US As The World's Largest Economy

    Quote Originally Posted by RabidAlpaca View Post
    This is what happens when you focus almost entirely on guns instead of butter.

    Trillions spent on wars while our economy at home tanks. We deserve every bit of this, but think about how much quantifiably safer we all feel.
    I think the problem is much worse than economic. What is going to be bad is the political and military competition. But that was analysed in the 1990s and we expected the problems to ripen somewhere between now and 15 years from now. That is what is happening.

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