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china vs usa fists

A new study (1) suggests China’s economy has grown faster than previously thought, leading some analysts to predict that China could surpass the United States as the world’s biggest economy by the end of the year.

The figures were released Wednesday in a report by the International Comparison Program, which is part of the United Nations.

The ICP evaluates economies based on purchasing power parity, or PPP, which estimates how much money can buy in different countries. Some economists say the method helps more accurately determine a country’s relative economic output, since comparisons are complicated by exchange rates.

A look beyond the headlines

This article will grab a lot of headlines but is very misguided in its overall thesis. If you look at GDP per capita, or any other useful economic analysis a comparison of the United States and China is silly. Moreover, China is sitting on an enormous troika of financial bubbles: real estate, commercial banking and stock market. The United States has natural resources that dwarf anything China can muster and the system that works even when molested by the government to the tune of $1.8 trillion in annual compliance expenses.

We have clean water including the Great Lakes which is the world’s largest bastion of freshwater, we are number one in oil production, number one in coal reserves, number three and gas production, we can be number one in any grain or protein we choose if resources are devoted to that commodity, our universities dwarf anything China has, United States Navy has more active-duty ships than all other blue water navies in the world combined and we could be self-sufficient if we so choose. If we stop trading with China that production can be reconstituted in second-tier DMA’s and in Mexico after a transitional period of approximately 24 months.

The terms of strategic comparisons our energy production, food production, hegemony of armaments, geographic positioning, ability to project military force will not be equaled by China in the next 30 years. The only thing United States has to fear is a corrupt political system that is gradually rotting the country from within.

China has to feed 20% of the world’s population but endowed only with 5% of the world’s arable land and 5% of the world’s water and other natural resources. US on the other hand have to feed a much less humans but endowed with a much greater percentage of arable land, water and natural resources of the world. It would be unthinkable how the US would survive if they have 1.4 billion mouths vying for food and other necessities among themselves. Their pride is so misplaced and laughable.

PPP figures are basically a construct of some economists and are largely irrelevant to any business operation. It’s also very difficult to account for quality differences between countries. Figures reported in the financial press are virtually always for nominal GDP adjusted for inflation like the ones about the US today Eg is Mercedes going to charge PPP prices for the cars it sells in China? We’re now seeing how P & G and Unilever have to raise their prices due to currency depreciation.


References:

(1) Report: China Could Overtake US Economy This Year

This entry was posted on Thursday, May 1st, 2014 at 12:11 am and is filed under All Posts, Eurasia. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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