China surpasses America as the number one economy.

[Mai72]

http://www.marketwatch.com/story/its-official-america-is-now-no-2-2014-12-04

I'm surprised that nobody has started a thread about this yet.

This author thinks this is going to have huge consequences for the US economy. Not now, but in the future.

Make no mistake: This is a geopolitical earthquake with a high reading on the Richter scale. Throughout history, political and military power have always depended on economic power. Britain was the workshop of the world before she ruled the waves. And it was Britain’s relative economic decline that preceded the collapse of her power. And it was a similar story with previous hegemonic powers such as France and Spain.

This will not change anything tomorrow or next week, but it will change almost everything in the longer term. We have lived in a world dominated by the U.S. since at least 1945 and, in many ways, since the late 19th century. And we have lived for 200 years — since the Battle of Waterloo in 1815 — in a world dominated by two reasonably democratic, constitutional countries in Great Britain and the U.S.A. For all their flaws, the two countries have been in the vanguard worldwide in terms of civil liberties, democratic processes and constitutional rights.

 

[Svnla]

http://www.marketwatch.com/story/its-official-america-is-now-no-2-2014-12-04

I'm surprised that nobody has started a thread about this yet.

This author thinks this is going to have huge consequences for the US economy. Not now, but in the future.

Nobody?

http://forums.anandtech.com/showthread.php?t=2411399

Next!!!

 

[fskimospy]

This was posted before and it is wildly inaccurate. They are talking about things not in "real" terms as the article says, but in "purchasing power parity" terms. That is a HUGE difference.

Purchasing power parity basically deals with an internal economy. Ie: a haircut in the US costs $20 and a haircut in China costs $2 for the same haircut. PPP normalizes that. The thing is that lots of things aren't internal only. For example if you want to buy a car, or oil, or anything traded internationally, the fact that your haircut cost $2 at home is meaningless.

So basically China's economy is larger than the US economy in purely internal terms. Anywhere in which countries interact with each other the US economy is vastly larger than China's.

Article is click bait.

 

[theeedude]

We gave it to them on a silver platter. So it must be good for us too, we wouldn't have done it otherwise.

 

[Mai72]

China's and India's population is 4 times the size of America. Also, didn't China have the largest economy at one point in time? Maybe America's power is waning, while China is going to see a resurgence in power?

Check out this Ted Talks: http://www.ted.com/talks/hans_rosling_asia_s_rise_how_and_when?language=en

 

[Mai72]

Look at the Ted Talk video.

It explains a lot.

 

[Thebobo]

China's and India's population is 4 times the size of America. Also, didn't China have the largest economy at one point in time? Maybe America's power is waning, while China is going to see a resurgence in power?

Check out this Ted Talks: http://www.ted.com/talks/hans_rosling_asia_s_rise_how_and_when?language=en

Yea who cares our average penis size is still larger and thats all that matters!

 

[Mai72]

This was posted before and it is wildly inaccurate. They are talking about things not in "real" terms as the article says, but in "purchasing power parity" terms. That is a HUGE difference.

Purchasing power parity basically deals with an internal economy. Ie: a haircut in the US costs $20 and a haircut in China costs $2 for the same haircut. PPP normalizes that. The thing is that lots of things aren't internal only. For example if you want to buy a car, or oil, or anything traded internationally, the fact that your haircut cost $2 at home is meaningless.

So basically China's economy is larger than the US economy in purely internal terms. Anywhere in which countries interact with each other the US economy is vastly larger than China's.

Article is click bait.

Now it is, but what about the future? By the year 2050?

Do you see anything changing?

 

[fskimospy]

Now it is, but what about the future? By the year 2050?

Do you see anything changing?

Sure. It seems very likely that China will eventually surpass us in size, as was mentioned they have about 4x our population. But while that might be the case someday, it's not the case today, at least in most of the ways that matter internationally.

 

[theeedude]

PPP is all that really matters if you have domestic production. If you are Russia and you export commodities and import everything else, then yes, raw dollar value matters. If you are China, you can produce everything at home. If US builds an F22 jet for $300M, and China builds its equivalent for $30M, US is not 10x better economically than China. They both created comparable economic value in real terms.
Even if you account for cost of car and gasoline, you can take a cab in China for 50 cents per mile and it's $5 per mile in the US, a Chinese cabbie is not producing 10x less value than an American cabbie in real terms.

 

[fskimospy]

PPP is all that really matters if you have domestic production. If you are Russia and you export commodities and import everything else, then yes, raw dollar value matters. If you are China, you can produce everything at home. If US builds an F22 jet for $300M, and China builds its equivalent for $30M, US is not 10x better economically than China. They both created comparable economic value in real terms.
Even if you account for cost of car and gasoline, you can take a cab in China for 50 cents per mile and it's $5 per mile in the US, a Chinese cabbie is not producing 10x less value than an American cabbie in real terms.

Does China import oil? Do they import technology? Do they import cars? Raw materials? Engage in financial transactions?

They do all of these things, big time. In fact, your gas example proves my point. Chinese gas prices are broadly similar to US gas prices, but gas comprises a relatively small portion of our income and a relatively huge portion of theirs.

I spent a summer in Nicaragua a few years back and was struck by this. Their cab prices were about the same as ours despite everything else being way cheaper. It was because gas was a ruinously expensive luxury for them. Welcome to the world of PPP economics in globally traded goods.

 

[fskimospy]

In fact, gas is cheaper in the US than in China as far as I can tell.

http://www.statista.com/statistics/221368/gas-prices-around-the-world/

 

[Sheep221]

I'm surprised that nobody has started a thread about this yet.

That has happened decades ago bro. Nothing new here.

 

[theeedude]

Does China import oil? Do they import technology? Do they import cars? Raw materials? Engage in financial transactions?

They do all of these things, big time. In fact, your gas example proves my point. Chinese gas prices are broadly similar to US gas prices, but gas comprises a relatively small portion of our income and a relatively huge portion of theirs.

I spent a summer in Nicaragua a few years back and was struck by this. Their cab prices were about the same as ours despite everything else being way cheaper. It was because gas was a ruinously expensive luxury for them. Welcome to the world of PPP economics in globally traded goods.

Have you taken a cab in China? After accounting for oil price, car price, and driver's wages, it's still way cheaper than the US.

 

[Mai72]

Have you taken a cab in China? After accounting for oil price, car price, and driver's wages, it's still way cheaper than the US.

I took a 2 hour taxi ride in Thailand. Cost was $20 USD

I took a 15 minute taxi ride in New Jersey. Cost was $28 USD

 

[fskimospy]

Have you taken a cab in China? After accounting for oil price, car price, and driver's wages, it's still way cheaper than the US.

I've taken cabs in countries all over the world, although not China.

Regardless, gas there is ruinously expensive for the average person. That's a great example as to how an equal PPP economy equals terrible conditions for average people.

Equal PPP is equal so long as you don't care about any internationally traded goods. I bet you do.

 

[fskimospy]

I took a 2 hour taxi ride in Thailand. Cost was $20 USD

I took a 15 minute taxi ride in New Jersey. Cost was $28 USD

You rented a Tuk tuk for two hours that was basically a glorified motorcycle that was polluting the shit out of the air and running on horse piss. The very reason those tuk tuks exist is because gas is so expensive that a real cab is uneconomical.

 

[Zaap]

I took a 2 hour taxi ride in Thailand. Cost was $20 USD

I took a 15 minute taxi ride in New Jersey. Cost was $28 USD

I drank the water in Thailand. Nearly died.

I drank the water in New Jersey...



You know what, nevermind.

 

[Mai72]

You rented a Tuk tuk for two hours that was basically a glorified motorcycle that was polluting the shit out of the air and running on horse piss. The very reason those tuk tuks exist is because gas is so expensive that a real cab is uneconomical.

Regular taxi. No seat belts in the back and the driver was a bit reckless.

Are you crazy, I would never drive in a tuk tuk for 2 hours. I was in one for 15 minutes and I thought I was going to die.

:'(

 

[brycejones]

Regular taxi. No seat belts in the back and the driver was a bit reckless.

Are you crazy, I would never drive in a tuk tuk for 2 hours. I was in one for 15 minutes and I thought I was going to die.

:'(

Tuk Tuk's are awesome, its like a Disney World ride in the real world.

 

[OverVolt]

This was posted before and it is wildly inaccurate. They are talking about things not in "real" terms as the article says, but in "purchasing power parity" terms. That is a HUGE difference.

Purchasing power parity basically deals with an internal economy. Ie: a haircut in the US costs $20 and a haircut in China costs $2 for the same haircut. PPP normalizes that. The thing is that lots of things aren't internal only. For example if you want to buy a car, or oil, or anything traded internationally, the fact that your haircut cost $2 at home is meaningless.

So basically China's economy is larger than the US economy in purely internal terms. Anywhere in which countries interact with each other the US economy is vastly larger than China's.

Article is click bait.

Agreed but I still like the article. International trade isn't all its cracked up to be!

 

[alcoholbob]

eskimospy is correct that it doesn't matter in the near future due to oil being denominated in dollars and with over 90% of industrial production tied to oil. As long as OPEC continue to honor the 1973 Aramco deal and back the US dollar in exchange for military protection. I guess the question is how effective will Russia's flailing be around the world trying to establish a BRICs energy alliance that can significantly surpass OPEC.

Currently China will be behind the US for the forseeable future in absolute terms as world economic activity relies on oil, which must be purchased with Fed paper. The dollar is the lynchpin.

 

[Jaskalas]

In order to be "caught up" to us, wouldn't China need to be 4x our size due to 4x the population?

 

[compuwiz1]

China should be borrowing money from us, not the other way around. China should be buying products from us, not the other way around. We, via, our politicians have given it all away. Everyone knows that most of the crap you buy at Wal*mart is made in China. Some once grand American made products now say made in china on the box. How does this somehow help us, as some will argue?

China could sink this country at will, just by pulling the plug on our credit.

 

[rommelrommel]

But they won't, because it's virtually a mexican standoff. If either side tries to screw the other they can't avoid screwing themselves.