China’s GDP Kicks Sand in Our GDP’s Face December 4, 2014Posted by geoff in News.
You’ll be pleased to know that as a result of the current administration’s dynamic economic policy, China’s GDP (in dirty commie red in the graph) has surpassed that of the United States.
That’s on a Purchasing Power Parity basis, which accounts for the relative costs of goods and services in each country. Brett Arends of Market Watch, who’s been sounding the klaxon on this, explains the PPP version of GDP this way:
These calculations are based on a well-established and widely used economic measure known as purchasing-power parity (or PPP), which measures the actual output as opposed to fluctuations in exchange rates. So a Starbucks venti Frappucino served in Beijing counts the same as a venti Frappucino served in Minneapolis, regardless of what happens to be going on among foreign-exchange traders.
Yes, when you look at mere international exchange rates, the U.S. economy remains bigger than that of China, allegedly by almost 70%. But such measures, although they are widely followed, are largely meaningless. Does the U.S. economy really shrink if the dollar falls 10% on international currency markets?
I’ll just set back a spell and let the pollyanna pundits chirp away about how the US is not in decline. Meanwhile, as you can see from the graph, we’ll be sliding farther and farther into 2nd place.