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Old 07-31-2018, 08:40 AM
 
857 posts, read 642,065 times
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Quote:
Originally Posted by mysticaltyger View Post
Yes, GDP growth is always stated in inflation adjusted terms.

Its adjusted for monetary inflation but not population growth. If population grows by 3%, inflation is 1% and nominal GDP growth is 2% then GDP growth is reported as 1%. Real per capita GDP would have declined by 2% but no recession would ever be declared.
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Old 07-31-2018, 03:00 PM
 
863 posts, read 173,672 times
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Nigeria has 2%+ growth but can't keep the electricity from blacking out.

Breath-taking!!!!

Spain at almost 3% growth this year but highest Youth Underemployment in Southern Europe. 2nd Only to Maybe Greece.

GDP was never directly correlated with PPP to the T but now it's seriously just a joke. It literally means nothing on the ground floor outside of academia I guess.
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Old 07-31-2018, 04:17 PM
 
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Nominal GDP matters but real GDP really matters. Adjust all the #'s for inflation on a standardized metric (good luck) and recast the deck. Our GDP is fine but look at our current account deficit. We are financing our growth through leverage which is very dangerous in the long-run. Then compare that to China's economy relative to their surplus and a net creditor to the US. You then start to see the big picture and stop beating your chest about a false #.
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Old 08-01-2018, 10:30 AM
 
863 posts, read 173,672 times
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Quote:
Originally Posted by SWFL_Native View Post
Nominal GDP matters but real GDP really matters. Adjust all the #'s for inflation on a standardized metric (good luck) and recast the deck. Our GDP is fine but look at our current account deficit. We are financing our growth through leverage which is very dangerous in the long-run. Then compare that to China's economy relative to their surplus and a net creditor to the US. You then start to see the big picture and stop beating your chest about a false #.
Unfortunately it's a lot more complicated than that. Real GDP or not there are hundreds of economic issues with China including but not limited to:

- Incoming demographic implosion due to unbalanced gender selection as well as one child rule which culturally is persisting despite the law and fines ending a long time ago. Aging demographic.

- Leading into aging demographic - Terrible healthcare system. Compounding upon this - Widespread pollution leading into sky rocketing cancer rates. There is a joke that eventually became true. A london company made money sending Fresh canned Irish air to wealthy Chinese.

- Creditor status means nothing particularly when most of your investment is in the form of U.S. federal reserve notes. The reality is that China is doing this to prop up their own lack of domestic consumption. Both countries are imbalanced and co-dependent. One cannot survive without the other. If the debtor dies the creditor loses their money and they also die. Almost like a parasitic symbiotic relationship. Except in one respect or another both are feeding off each other's inadequacies. Chinese have low wages and are failing to produce high quality durable goods and services. They are diversified but only in relation to commodities and cheap labor expertise replicating things and following instructions. If they cannot innovate their GDP growth means nothing because the PPP remains at the bottom of the barrel.

I don't have an end-to-end view on things because I am not a former Fed Reserve chairman. I am not an economist but will articulate as best as I can. Feel free to correct me if I am wrong on the general premise (and not the technical aspects please) But the reality is:

1) Hypothetically China calls the U.S. to pay down the debt. Many things can happen. First off most of the debt is owed by the U.S. people so ok Taxes increase to pay down the debt. Taxes increase which cripples U.S. consumption which then cripples the Chinese economy and everyone outside of Beijing and Shanghai starves to death. Because as I mentioned above the Chinese economy is still heavily reliant on U.S. consumption of cheap mass produced goods provided by low skilled Chinese labor.

2) Since Chinese buy Federal notes and the U.S. owes debt in federal notes - If the U.S. gets downgraded the currency value goes down which means technically the value of the debt goes down. We are not paying them in RMB. Probably not in their best interest to do this.

3) The playing field is not level. The Chinese economy is still not 100% capitalistic and open. If China had to shut down Shadow banking, reign in Guang Xi and other off the books practices it's value would drop significantly (it is currently still over-valued). We call their bluff and the debt becomes irrelevant because the creditor was lending with fake money backed by over-valued currency and services to begin with.

4) Playing off of #2 - Let's say that ask us to pay in RMB. Well They would be shooting themselves in the foot because #3 would reset the RMB to it's true value and we would only pay pennies on the dollar.

The point is - Is that this is all a dog and pony show and nobody can make any big moves without cutting off their nose to spite their face.

Keep in mind the hypothetical surplus also has already been eaten up by rising healthcare expenditures, reconciled losses on unused real estate (and the biggest real estate bubble in China hasn't even burst yet) the incoming costs of adjusting to pollution control protocols in heavy industry among several other issues the PRC has yet to address in order to become a "True" member of the Global economy.

China is surviving off speculative investors, professional gamblers. The house of cards will come down if they make the wrong move and everyone is going to get buried.
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