The changing balance of power in the world economy has seen China replace a faltering United States as the biggest contributor to global growth in an “uncertain and potentially difficult period”, reports the International Monetary Fund.
Unveiling its half-yearly forecasts, the IMF said the world was increasingly dependent on the strong performance of the three leading developing countries – China, India and Russia – at a time when the west was struggling to cope with financial market turmoil. The IMF’s world economic outlook said that growth rates of more than 11% in China, 9% in India and almost 8% in Russia meant the three nations “alone accounted for one half of global growth over the past year”.
“Like a forest that has not seen a fire in many years, a benign financial environment had built up a sizeable ‘underbrush’ of risky loans, relaxed lending standards and high leverage in certain areas. When problems ignited in the US sub-prime mortgage market, the fire ‘jumped’ in somewhat surprising ways to other areas.”
Nice turn of phrase. And permits for housing starts dropped another 10% in the last month.
We can look ahead to the Bush Administration and their 19th Century experts guaranteeing that the catchphrase for the 2008 election will be – once again – “It’s the economy, stupid!”
18. “Well if that’s your point, then you need to go back to basic math.”
Well, your probably right about that. However, I am proud to say that, even with my meager salary, I have zero debt. And can at least balance a checkbook : )
#21 – Mine is below 6 grand, but in my defense there is a car included in that and I’m way ahead of the payments so I’m not spending near as much on interest of the bank would like.
#13 – Those statistics fail to accurately account for the large amount of immigration into the U.S., especially of low-skilled workers. Statistical studies have shown that poverty rates went down when each sample excluded recent immigrants.
#14 – An weak currency is a part of a market correction process that will cause capital inflows to slow therefore making any kind of international borrowing more expensive. And since we all agree that the size of the U.S. deficit is a problem, this process will continue to offer part of the deficit correction cure.
With regards to deficits, consider the following. The government could raise taxes to pay for the increase expenditure or takes out a loan and pay back in increments. If under either circumstance the economy grows at 3% points a year for five years there is still economic growth. You could argue that if the government expenditure constituted 100% of GDP, then there was no real net change, just a reshuffling of resources, however the composition of US GDP does not fit under this circumstance. Another example is that a neighboorhod bank (China) loans a group of developers (U.S. government) money to build of new subdivision. The added value of the new subdivision is part of the economic growth figures, regardless of the loan, there was just an intertemporal substitution effect.
#19 – If you calculate US GDP in the price of wheat, it actually grows, but when compared with the price of light sweet, the growth rate has fallen. The currency is question is not the issue, relative factor prices are, which is why PPP needs to be taken into account and indexed. Just because the value of a selected medium of exchange changes, be it wheat, oil, pig, Euros, pesos, or gold pressed latinum the stock of new goods and services do self-implode to bring down or hold constant the overall growth of goods and services.
When compared with Zimbabwe dollar, the U.S. economy has grown thousands of percentage points. MY GOD!
Most studies will us the % change GDP,PPP (current international $) to estimate growth rates, and the U.S. has had about 5% growth.
#23, chcknhwk03,
#14, With regards to deficits, consider the following. The government could raise taxes to pay for the increase expenditure or takes out a loan and pay back in increments. If under either circumstance the economy grows at 3% points a year for five years there is still economic growth
Aaahhh, say what ??? The government could raise taxes to MEET expenditures, reduce spending to MEET income, or raise money through any of several methods including printing more money, loaning itself the money, issuing bonds, reducing interest rates to stimulate the economy, raise interest rates to curtail inflationary consumer spending, etc, etc, etc. Or try any combination of the above.
Growth of 3% means nothing by itself. If inflation averages 3.5% over those five years, then there has been net negative growth of 2.5%. That means the economy has shrunk. BUT, pulling numbers out of your arse just means there is a lot more crap on them.
#19 – If you calculate US GDP in the price of wheat, it actually grows, but when compared with the price of light sweet, the growth rate has fallen. The currency is question is not the issue, relative factor prices are, which is why PPP needs to be taken into account and indexed.
Bull. GDP is a measure of ALL the goods and services produced, not just some. All commodities fluctuate due to vagaries in their production. The value of the currency is determined by the health of the economy which includes all commodities, not just a few select ones and not just GDP. There is much more to the value of an economy than the worth of a certain sector. PPP is a poor method of comparing different economies simply because of cultural and or regional differences that can’t be compared.
While similar, Canada is a much more resource orientated economy while the US has a stronger service economy. PPP can not compare the two but there is very little difference in the standard of living between the two. It could be done to compare on a micro or individual level, but not macro or national.
Just because the value of a selected medium of exchange changes, be it wheat, oil, pig, Euros, pesos, or gold pressed latinum the stock of new goods and services do self-implode to bring down or hold constant the overall growth of goods and services.
Ok, whatever that means. Honestly, I can’t argue with it. Can’t understand it either. If it self-implodes, it will bring down or hold constant the growth,… It might but then again, it might not. But of course it will unless it won’t. That is the problem with those damn self implosions. I’ll take a good old regular implosion any day.
When compared with Zimbabwe dollar, the U.S. economy has grown thousands of percentage points. MY GOD!
Nope. This shows your High School Sophomore level again. The same problem with your using Purchasing Power Parity exists here. The Zimbabwe Dollar has fallen in value through ultra hyperinflation. In other words, you can’t compare Tubby Toast with Meals Ready to Eat. Fantasy versus a self sustaining reality.
Most studies will us the % change GDP,PPP (current international $) to estimate growth rates, and the U.S. has had about 5% growth.
Yup, I know just the counter argument for this one. WTF ?!?!?!
Next time you post a link, DON’T put brackets around it. That destroys the hyper link. Of course, if you don’t want people to follow your bull then yes, keep doing it.
Yes, I suspect they are using purchasing power parity or per capita GDP to get the numbers in the article.
As for the corrections, it’s strange you contradicted yourself in your comments. You say the currencies don’t matter since that’s not what’s really being measured in GDP, then you call for devaluations to deal with the trade deficit, etc. Well it is still actual goods being traded, and the fact that one dollar now equals 150 yen instead of 100 just changes the measuring stick. In the long run it won’t matter what your currencies trade at.
As for the Euro’s higher value somehow indicating a dollar decline, all that says is that the Euro has increased in value. Big deal.
Just finshed reading The Economist’s special report on the state of financial markets. Makes for interesting reading…
http://www.economist.com/specialreports/displayStory.cfm?story_id=9972381
#24 – You can estimate a PPP for Candana vs. the U.S. Aside from that you add little to the discussion on how China fuels global growth or how the role of currency fluctuations effect this process.
Oh and “The value of the currency is determined by the health of the economy which includes all commodities, not just a few select ones and not just GDP. ” No the currency’s value estimates relative factor prices.
The currencies value estimates the value of the currency, that is the supply versus the demand.
Lol, it’s the fight of the people who get their knowledge of economics off Wikipedia vs. a guys who at least claims to be in college getting a degree in it.
Who’s right and who’s wrong? Who cares… it’s only the Internets!
Throw all your economic charts and articles in the bin – its all rubbish. This is what got everything screwed up in the first place! Economists are very good at making sure we all need economists…”money lawyers” as I call them.
My prediction: give it another 10 ~ 20 years for the US Banana Republic (ruled by a small, self-elected, wealthy and corrupt clique) to fully take root and don’t worry it will marketed so all of you think it is great. Yaaa Freedom!
Tired of hearing everyday about how bad everything is from China? Don’t worry – India is coming on-line soon and if that wasn’t enough everyone seems to forget about Indonesia, the world’s fourth largest country – they will get in the act as well. (In many respects Indonesia is more together than India…WTF??)
So when the Chinese domestic market starts to kick in just in time for India to make all the stuff who’ll care about what the 300m people in the US are doing – they whine about everything anyway.
See, its not so hard to get your brain around it…its easy as pie once you remove the layers of bullshit.
Russia? What about Russia? Russia is a consumer country not a manufacturer. Its all the high tech that Russia sells to China, India and anyone else who has the cash. Russia gets shit made in China like everyone else.
Oh and before I forget…China is launching its aerospace industry to build jets. Well that was only a matter of time…
Seems China is getting a lot of shit done without having to fuss about with all that election nonsense the US always seems to have yoked around its neck.
Cheers
I got to do something about that wild hair up my ass…
If you measure the national debt in Euros, then under George Bush, the debt as shrunk considerably!
I’m seriously befuddled by those trying to justify that the plummeting dollar is actually a good thing. Sure, maybe it reduces the price of our exports and makes them more competitive– at first glance. But in fact it hurts us much more in other ways, mainly b/c the tanking dollar also makes oil much more expensive (and much less expensive to Europeans using the Euro for example, who aren’t hit nearly as much by the oil rise). The increase in oil prices also factors into manufacturing costs, which more than wipes out any price advantage from the falling dollar.
Plus, imports become a lot more expensive for us and remember, US manufacturing consists of parts made in a half-dozen other countries! All American manufacturing requires these imports– widgets from China, high-quality machine tools and Roentgen scanners from Germany, semi-finished products from El Salvador or the Philippines or Vietnam that are, then, finished in the USA. So the plummeting dollar also makes these more expensive and, in turn, boosts up the price of the manufactured finished product.
It’s a big reason why I’ve been seeing more highly-trained professionals these days, learning a language like German or Dutch– especially German, associated with a Eurozone manufacturing power and tech hub– and simply emigrating. Just this act alone, moving to a Continental European city and actually working *fewer* hours in a week, massively boosts their income due to the Euro’s strength. Especially if they take on entrepreneurial pursuits, and remember, North American corporate taxes are actually *higher* than much of the Eurozone! German especially is surging as a technical language again, for various electronic, basic science and engineering fields, just like 80 years ago and those of us in engineering are having to be on top of it again– much of the best technical literature in the field is again in German papers.
All of these shifts have everything to do with the Euro’s strength and the taking dollar, both as cause and correlation. If you think about it, if you’re a highly-trained engineer, with bitter memories of over $100,000 in college debt going to an American university to get your engineering degree and then being greeted with the wonderful welcome of your job being outsourced and your income plummeting as your field is outsourced to India– with you in the hamster-on-the-wheel role, working ever-longer hours every week for diminishing pay and less job security even as your tuition debts continue to gather interest– you’re already getting fed up.
Then the dollar plummets, your already diminishing real earnings plummet with it and you’re screwed even worse than before. So you see your buddies from college getting German language software, moving to a relatively cheap tech center like Leipzig, Bochum or Karlsruhe in Germany or Austria, getting a salary in Euros while sending their kids to high-quality public schools that are also nearly free, even into professional schools– naturally you’re going to tend in the same direction.
IOW as the US policymakers tend to debase our own currency and depreciate the value of our workers, this naturally tends to push our best and brightest abroad, either to a fast-growing economy like China (for those with roots there in particular), or especially to the Eurozone, with its strong currency alone providing a major boost to one’s earning power. All the better for those starting businesses.
Sorry Ollie, but you’re right.