Damn, genius shitposter had me fooled for a long time
I don't feel that bad anymore, genius shitposter even manages to fool the think tankies.
Ask anything Thread
- Thread starter Jeff Head
- Start date
I don't feel that bad anymore, genius shitposter even manages to fool the think tankies.
Which is a better measure of GDP? Nominal or PPP? GDP is the total market value of goods and services produced in a country. But everything is cheaper in China, so wouldn't nominal GDP be a deflated measure of China's GDP? China's true GDP is measured when you bring everything produced in China up to the price they would be if they were in a Western country (PPP). So in practical terms China would have by far the largest economy in the world. Is this correct?
It really depends on your intention. For a US company looking at investing overseas - and hoping to earn USD - then nominal, for an idea of what standard of living you can expect in a country on a given USD salary, use PPPpc.
I guess my question is which country produces more goods and services (total value)? All prices being adjusted to the same country, let's say the US in this case. So don't use the Chinese prices for goods produced in China, convert them to the price they would be if they were in the US.
China's nominal GDP will be in Yuan, as that is what 99% of transactions are completed in and presented nominally to the central bank. But that also makes impossible to compare with non Yuan using economies. PPP is an attempt to normalize the conversion of an entire economy's activity into another currency, mainly for comparative purposes, if 2 areas use different currencies.
PPP is needed to normalize calculations of huge currency conversions, because exchange rates do not apply to vast economic sums. Were you to try and convert a billion dollars to yuan, there is not a single entity in China that will give you the conversion at airport exchange rates. They would take a very hefty extra sum. PPP is to try and offset this phenomenon, to get a picture of comparable economic statistics between 2 different currency using countries.
They are in the end the exact same measure.
China is leading in GDP but not by a vast amount. GDP is the least charitable measure for China because it's based a lot on empty back and forth transactions. GDP is (out of non crackpot measures) the one economic measure where US comes the closest to China out of all.
Consider that a private road that costs 50 million $ and brings in 5 millions $ per annum in tolls will in 10 years generate 100 million $ GDP while a 50 million $ public road with no taxes generates just 50 million as a 1 and done deal.
I found the answer to my question. PPP GDP is the total value of all goods and services produced in a country valued at prices prevailing in the USA. This is the TRUE measure of China's GDP. The Chinese government records GDP according the prices in CHINA, which is lower than the West, so the nominal GDP is a deflated figure. In real world terms (setting prices according to the US), China's total production value exceeds the US by 25% (2024 estimate). So in real world terms, China already is the world's biggest economy.
Look at it another way.
Given that China does have the world's biggest economy in terms of actual goods and services, wouldn't it make more sense to use Chinese RMB as the global reference point, instead of the US Dollar?