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!”
Our system based upon individual rights and self government is so 18th century. Maybe we should automatically discount it too for something a little more “modern.”
#1… the First modern democracy was back in the 12th century. Again America lacks in teaching proper history!
So the chinese now are at the forefront of economics. Now let them suffer from the hells of consumerism. I can’t wait to see all the obese, lung cancer ridden, hypertension suffering chinese in ten years!
It will be an even playing field then!
Cursor_
Well, I read the article, and “I Don’t Get It.” What is it that this article assumes I know to make it relevant?
What is it exactly that is being “stabilized?”
Whats the assumed good in “growth.” Whats the assumed bad in “negative growth.?” I can make some vague quasi connection to balance of trade &/or dollar value etc “but” the article itself doesn’t even try.
Isn’t the GOUSA economy 4 or 10 times larger than China with 1/4th the population?
What is the import of this article?
Given that the US economy is much large than China and those other countries, and that it is growing by a few percent a year, I would say that the US growth is more than those other countries.
According to Wikipedia, under George Bush’s Presidency, the US economy has had more growth(3.7 trillion) than the total sizes of the economies of China and India, COMBINED.
#2, Apparently, America lacks even more from idiots who can’t distinguish a smartass quip on an Internet blog, from what one might expect from a history of political systems textbook.
5. How does the missing 3 Trillion from the Pentagon and the devaluation of the dollar factor into that equation?
Everything is just fine. We have the first president in history with an MBA.
Knowledge and skill are on our side, and in only a few more years it will be 2029. Republicans are good money managers they are. They can manage it right out of the economy and into their own pockets.
#3 – This story (http://tinyurl.com/3yv7pu) from the Economist does a better job reviewing the role of China in contributing to world economic growth. The sections “If America Sneezes” & “Running Out of Fuel” are extremely insightful, however I think the labour situation elaborated on in the latter is much more of a potential drag than the author lets on.
#4 – The thing to think about with economic growth models is that BRIC (Brazil, Russia, India, China) are playing “catch-up.” On this graph (http://tinyurl.com/3cowvb) China is simply increasing capital stock (K) and increasing output (Y) leading to dramatic rises in wealth, however as you can see, the amount of Y will decrease over time as there are diminishing marginal return to capital. The U.S. economy’s strength is that due to technological innovation the Y=f(K) line continues to shift up due to more efficient and effective production models are theorized and implemented.
#3 – Using the Solow Model of Economic growth from #4’s response, the UK Guardian article is stating that the large increase in Y will allow global output to continue to remain strong, and therefore the demand for global capital investment will rise helping the U.S. & Euro-area exporters.
#7 – Here’s a strong argument for why the falling dollar long over due (http://tinyurl.com/ytedae):
“Markets must look beyond the slogan that a strong dollar is good for America to recognise that a more competitive dollar will help sustain US growth and is necessary to correct America’s trade deficit. … With appropriate policies, the dollar’s decline will correct the imbalances that threaten the global economy without higher inflation in the US or decreased growth in the rest of the world.”
There’s good money in making bad toys?
“Bush Dollars” becoming WORTHLESS !!! Way to go, Dumbya !!! Tax cut s for the Rich, and Billions Pissed Away on an ILLEGAL WAR !!!
Hell, even CANADIANS are asking us, “How much is that in real money” !!!
The problem with a lot of this growth is that it’s very uneven. I’m not sure how it is in China, but in the U.S., median (not average) income has remained more or less flat. The top 1 to 2 percent of earners have seen huge increases in their incomes, while the buying power of those at the bottom have dwindled. As a nation, we’re more productive, but we are seeing less and less positive effects of those benefits.
10. I fail to see how a weakening dollar, the missing trillions, and another 10 trillion dollars in debts equals to the strong economy proposed by MikeN in post number 5.
“According to Wikipedia, under George Bush’s Presidency, the US economy has had more growth(3.7 trillion) than the total sizes of the economies of China and India, COMBINED.”
Or maybe you werent defending that statement.
#10, a falling dollar doesn’t help with trade deficits in the long term. You’re really just changing the price levels, but in the end it’s still trade in goods. It’s better to keep things at an even keel. A weakening dollar isn’t good for America, and other countries haven’t dropped their currency as much. China has delinked from the dollar, placing their currency in a much better position.
Long term debts are bad, but they have little to do with the current weakening of the dollar. That’s because very little of the debts have to be paid. It is theoretically possible that the US will just decide not to pay out Social Security benefits and the like, which is the source of the tens of trillions in ‘deficit’s. I don’t know what this missing trillions in the Pentagon is about, but it doesn’t reflect in the GDP.
Also, I hadn’t looked up the numbers when I posted 4. The claims are definitely using different methods of calculating, since the US economy is 5 times larger than China. So a 2.2% growth rate is all that’s needed to have more economic growth.
#14
“According to Wikipedia, under George Bush’s Presidency, the US economy has had more growth(3.7 trillion) than the total sizes of the economies of China and India, COMBINED”
But.. Isn’t that the same amount of fiscal denbt your precious President has created since he became president?
16. Yep, that was my point.
Well if that’s your point, then you need to go back to basic math. The new wealth is annual, while the debt is accumulated. That’s OK, winner of the John Bates Clark medal and potential nobel laureate in ecoomics Paul Krugman gets that wrong from time to time when he’s criticizing George Bush.
If you calculate GDP in Euros instead of Dollars, it has declined since 2001. If you calculate DJIA in Euros instead of Dollars, it has declined since 2001. Same for the British Pound.
Bottom line our economic “growth” is mostly due to dollar devaluation than anything else.
By the way the first several hits on google all agree that the total budget deficits since 2000 is at about 2 trillion.
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… 🙂