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China Overtook The US As The World's Largest Economy

Tameamea

Tameamea

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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)
Click to expand...

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.
 
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.
 
Tameamea said:
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.
Click to expand...

China has waaaaaaaaaaaaaay bigger problems to deal with than merely some debt.
 
China already owns USA until they sell the US treasury bonds.
 
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.
 
Tameamea said:
China Overtook The US As The World's Largest Economy | Business Insider

I see this as a bad sign for us.
Click to expand...
 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.
Click to expand...



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. :roll:
 
Tameamea said:
I see this as a bad sign for us.
Click to expand...

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...
Click to expand...

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:

IMFWEO102014.jpg


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..
Click to expand...

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/files/45229-UpdatedBudgetProjections_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.
 
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Tameamea said:
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.
Click to expand...

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.
 
Luftwaffe said:
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.
Click to expand...
Click to expand...



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?
 
RabidAlpaca said:
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.
Click to expand...

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.
 
shrubnose said:
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?
Click to expand...

I have always preferred an ascot.
 
RabidAlpaca said:
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.
Click to expand...
Click to expand...
Click to expand...



While ISIS which didn't exist before the G.W. Bush mis-administration invaded Iraq (Which was no threat to the USA at the time.) is well on its way to conquering Iraq and Syria.
 
QUOTE=joG;1063850191]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.[/QUOTE]

Good morning, joG. :2wave:

I believe the de-industrialization of America that started years ago has helped bring us to this point. Back in the 1980s, more than 20 percent of jobs in the US were manufacturing jobs - today only about nine percent are. We have fewer Americans working in manufacturing today than we did in the 1950s, although our population has doubled since then. I read somewhere - can't recall where - that we have lost over 50,000 manufacturing facilities since 2001, and millions of good paying jobs have been lost. The one that really broke my heart was losing Levi, the maker of the jeans that many of us wear, because they were an American icon!

I just don't see how this trend can be reversed, so our middle class is slowly disappearing. People tried to maintain a certain lifestyle by going into increasingly more debt, but it looks like the middle-class is nearly tapped out. As a result, retailers are being forced into closing thousands of stores all over the country. I see it happening in my area with stores in shopping centers locked up, dark and empty, to one totally abandoned shopping mall. This doesn't even include restaurants, florists, beauty salons, pizza shops, and other small businesses, but national chains like Taco Bell, Friendly Ice Cream stores, and McDonalds are also closing some locations. They're still here, but you have to drive further to find one still open.

Then I read that this administration is in the process of negotiating a treaty called the Trans-Pacific Partnership, which is being called "The Nafta of the Pacific," and is going to result in millions more good paying jobs being sent to the other side of the world, where it is legal to pay less than a dollar an hour in wages. How can we compete with that? :thumbdown:
 
polgara said:
QUOTE=joG;1063850191]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.
Click to expand...

Good morning, joG. :2wave:

I believe the de-industrialization of America that started years ago has helped bring us to this point. Back in the 1980s, more than 20 percent of jobs in the US were manufacturing jobs - today only about nine percent are. We have fewer Americans working in manufacturing today than we did in the 1950s, although our population has doubled since then. I read somewhere - can't recall where - that we have lost over 50,000 manufacturing facilities since 2001, and millions of good paying jobs have been lost. The one that really broke my heart was losing Levi, the maker of the jeans that many of us wear, because they were an American icon!

I just don't see how this trend can be reversed, so our middle class is slowly disappearing. People tried to maintain a certain lifestyle by going into increasingly more debt, but it looks like the middle-class is nearly tapped out. As a result, retailers are being forced into closing thousands of stores all over the country. I see it happening in my area with stores in shopping centers locked up, dark and empty, to one totally abandoned shopping mall. This doesn't even include restaurants, florists, beauty salons, pizza shops, and other small businesses, but national chains like Taco Bell, Friendly Ice Cream stores, and McDonalds are also closing some locations. They're still here, but you have to drive further to find one still open.

Then I read that this administration is in the process of negotiating a treaty called the Trans-Pacific Partnership, which is being called "The Nafta of the Pacific," and is going to result in millions more good paying jobs being sent to the other side of the world, where it is legal to pay less than a dollar an hour in wages. How can we compete with that? :thumbdown:[/QUOTE]

The US did quite a move towards more lucrative business in the period since the 1960s. I do not have the exact statistics, but the switch into services and similar things like software and finances was financially enormously successful. The problems are that not everyone can do these things and that after the shift the manufacturing is gone and you must rely on imports. That is fine, while it lasts. The average American is much wealthier than citizens in countries like Germany or France not to mention China or Romania. But it seems that we do have to retrench and start to rebuild smokestack industries for a number of reasons. That will be unpleasant, because it means a cut in income for the workers and/or an increase in prices to the consumer. Alternatively we can try to become more competitive by investing more in automation so that one laborer is connected to more capital and is therefore more productive. But why should anybody do that, if they can employ an Indonesian for $ 5 a day?
 
Tameamea said:
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.
Click to expand...

They have four times our population. Why on earth would you expect their economy to stay smaller?
 
polgara said:
QUOTE=joG;1063850191]

Good morning, joG. :2wave:

I believe the de-industrialization of America that started years ago has helped bring us to this point. Back in the 1980s, more than 20 percent of jobs in the US were manufacturing jobs - today only about nine percent are. We have fewer Americans working in manufacturing today than we did in the 1950s, although our population has doubled since then. I read somewhere - can't recall where - that we have lost over 50,000 manufacturing facilities since 2001, and millions of good paying jobs have been lost. The one that really broke my heart was losing Levi, the maker of the jeans that many of us wear, because they were an American icon!
Click to expand...

Manufacturing become more capital intensive and more productive, hence less jobs but greater output. Why is this a bad thing?
 
Khayembii Communique said:
Manufacturing become more capital intensive and more productive, hence less jobs but greater output. Why is this a bad thing?
Click to expand...

Greetings, Khayembii Communique: :2wave:

When those businesses leave our shores, and the people who used to do those jobs are now unemployed, that is a bad thing! To be honest, I really don't give a rat's behind how productive they are in other countries! :thumbdown:
 
RabidAlpaca said:
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.
Click to expand...

Nice post RA, but I don't even feel safer for it!
 
Deleted
 
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polgara said:
QUOTE=joG;1063850191]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.


Hi Polgara, good points and I would add that this trend to which you speak has continued through both democratic and republican administrations for decades and neither of them taking any action. The trade agreements that have been made by both parties have been harmful to manufacturing and of course many other factors.
Click to expand...
 
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China's books are a black box, but they're obviously cooked. They're building pre-fab cities in the middle of nowhere just to boast that they still have 10% growth per year.

The financial system is ridiculous. It looks at growth, but not at sustainable, practical, realistic growth. If China goes and ****s out a town with 40,000 houses in the Gobi Desert the IMF will call it growth but no one will live there.

Not to mention the IMF itself is corrupt as ****.
 
shrubnose said:
That might help to keep your neck warm, I've never really figured out what a tie is supposed to do.
Click to expand...

An ascot does a great job in Spring, Winter and Fall. In The Summer they are too hot. Ties keep you a little warm and make Summer unpleasant. But they are just part of a uniform, lend the grey suit some color or allow the wearer to show he can totally wast $300.
 
Title is a lie.

If you read the article, and the part is also quoted by the OP
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.
Click to expand...

What is purchase power parity?
Purchasing power parity - Wikipedia, the free encyclopedia

The PPP exchange-rate calculation is controversial because of the difficulties of finding comparable baskets of goods to compare purchasing power across countries.[citation needed]

Estimation of purchasing power parity is complicated by the fact that countries do not simply differ in a uniform price level; rather, the difference in food prices may be greater than the difference in housing prices, while also less than the difference in entertainment prices. People in different countries typically consume different baskets of goods. It is necessary to compare the cost of baskets of goods and services using a price index. This is a difficult task because purchasing patterns and even the goods available to purchase differ across countries.
Click to expand...

What does this mean? It means that chinesse can buy more basic goods that are measured by the price index (the price index doesn't measure everything that exists, just certain goods and services) than an american. What does this mean? It means that if an american can afford 3 apples for every 1$, the chinesse can afford 3.1 apples for the equivalent sum of money.

It doesn't measure the wealth of individuals. I mean, the gdp per capita in the USA is way higher than in China. Sure, the gdp per capita has been growing in china quite rapidly over the past 20 years but it's still has a long way to go.
The gdp per capita in the USA is about 53k $. In China it's about 12k $. So even if you scrap 2/3rds of chinesse population to get to the same population as the USA, it's still 36k $ to USA's 53k $.

Now ofc, the problem in the USA is that the middle class isn't growing and in China, it kinda is.
 
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