FROM LARRY JOHNSON — Observer R, who was a regular at The Saker, has generously agreed to start posting at sonar21. This is his first article. Enjoy.
Many books, articles, speeches, and documents refer to the Gross Domestic Product (GDP) of various countries to indicate the size of their national economies. Leaving aside whether GDP is a good indicator of national security potential, the statistics themselves are confusing because GDP is measured two different ways. The nominal method was commonly used at first, but the purchasing power parity (ppp) method has become more common. Which method is used makes a great deal of difference in the results. For example:
List of countries by GDP (nominal) 2022
International Monetary Fund (IMF) estimate
United States $25.04 Trillion
China 18.32
Japan 4.30
Germany 4.03
India 3.47
United Kingdom 3.20
France 2.78
Canada 2.20
Russia 2.13
Italy 2.00
List of countries by GDP (purchasing power parity) 2022
International Monetary Fund (IMF) estimate
China $30.07 Trillion
United States 25.04
India 11.67
Japan 6.11
Germany 5.32
Russia 4.65
Indonesia 4.02
Brazil 3.78
United Kingdom 3.78
France 3.69
List of countries by GDP (nominal) 2017
World Bank based on United Nations data
United States $19.49 Trillion
China 12.24
Japan 4.87
Germany 3.69
India 2.65
United Kingdom 2.64
France 2.58
Brazil 2.05
Italy 1.94
Canada 1.65
Russia 1.58
Various countries’ share of the World GDP according to the World Bank (nominal) 2017
United States 24.08%
China 15.12%
Russia 1.95%
These nominal method statistics would seem to point to the reason the United States has often been regarded as the world’s Number 1 economy by a large margin, and Russia thought to be only a gas station in the wilderness. It also helped China to continue claiming to be no higher than Number 2. However, the US Central Intelligence Agency (CIA) also publishes a GDP list. It uses the ppp method and the statistics in the latest edition are identical to those of the IMF ppp in the ranking of the top ten countries, except for a switch of places by France and the United Kingdom. Using the CIA ppp figures, a very rough calculation of the United States’ share of the world economy is currently approximately 15%, a significant decline from its position of having approximately 50% of the world economy following World War II. Based on the CIA figures, the United States faces much larger economies in China and Russia than previously thought. This may possibly help explain why sanctions on China and Russia have not had the expected effect.
In addition, according to the IMF, the Russian economy barely declined in 2022 and is expected to increase in 2023. This result is despite the vast number of sanctions placed on Russia. As for Germany, the IMF numbers indicate it is not doing as well as Russia. The German economy outlook is clouded due to increased energy costs which make various industries uncompetitive and to the interruption in travel and trade with Russia and China. Japan also has a problem with raising its GDP, in that its affiliation with the United States in “The Quad” hinders trade with its closest neighbors, China and Russia. If Germany and Japan are unsuccessful in dealing with issues such as these, it is possible that Russia could move up in the rankings to Number 4 in the world.
References:
International Monetary Fund and World Bank data from Wikipedia, March 4, 2023
The World Factbook, United States Central Intelligence Agency, 2023
Obs R,
Thank you for this cogent and revealing article. I look forward to more of your thoughts and what may influence the way forward.
Here’s an alternative ranking based on the “real” economies. That is the economy of things, ores, manufacturing, food, fossil fuels, electricity production. It deletes services and finances.
https://threadreaderapp.com/thread/1549554660184231936.html
In this accounting, Russia’s real economy is 68% of the US’, and it is 4.6 times as large as Germany’s. It is 35 times as large as the UK’s. China’s real economy is 50% larger than the US’. The BRIC economies taken together are 3.2 times the US’.
This ranking actually makes a great deal of sense. It explains why the European/US sanctions have failed so remarkably.
One might note that services and finances do not create wealth. They merely redistribute what the real economy creates.
IMHO, one of the major reasons why sanctions have failed so miserably is that decision makers are being advised by not only box-checked incompetents but by ethnic baggage-carrying Eastern Europeans who hate Russia and have not kept up with the changes in her economy since Putin took office as president. These people are not the Russia experts which they claim to be but are just bigoted people with an opinion…
Even my Russian friend says “you have to understand…Russia is a third-world country”….well, hot flash for him, Russia was not considered to be a third-world country and who made up those designations, when, and why.
FWIW The “third world” designation was coined originally for Yugoslavia and other countries (mostly poor countries from the global south) in the non-aligned movement of the Cold War. No such thing as a first or second world country (I’m not implying you made such a claim.
Surely the pre-1914 industrial powers were the First World, which grew higgledy-piggledy; the Soviet Union became the Second World because of its rapid centrally-planned industrialisation; and the Third World hoped to develop by drawing on the strengths of both systems.
As Europe de-industrialised and Soviet central planning was no more, the First and Second World labels lapsed, but the Third World label persists because it still encapsulates a shared reality.
It is older than that, from the post WW2 years when the world was trying to readjust after such a massive conflagration.
Basically, it was Old World/Europe, New World/the Americas, and the Third World/the colonies seeking independence and reorganizing into self governing nations.
Over time the first two were forgotten, and third world came to be associated with social problems created by poverty and lack of reliable institutions, although not necessarily because of colonization. A lot like where we are headed at the moment thanks to the maniacs running the show.
Now nations are referred to as first, second, and third based upon economics, social stability, advances in various areas, etc.
“Even my Russian friend says: “You have to understand… Russia is a third world country”
Where does your “Russian friend” live? In Russia?
However, I would not be at all surprised if he lives in Russia – I meet people who do not believe in their country and hate Putin to the point of fanaticism in my daily life. There are relatively few such people, but they are surprisingly capable of poisoning the lives of themselves and those around them. Most often, these are people who are quite wealthy (middle class), and I can’t understand what they lack, except for inflated self-esteem and unreasonable expectations that everyone owes them.
Over the past year, I find myself beginning to quietly hate people like your “Russian friend”, although there are such people among my close relatives.
That explains all the young, English-speaking, educated Russians on YouTube, spewing their nonsense. Like, Depressed Russian, Natasha’s Adventures, and so on.
Those people are doing what Youtube algorithm wants them to. Videos showing Russia in bad light get recommended to everyone by Youtube, and consequentially get lot of views and money. Those that don’t, get shadowbanned, and even harsher punitive measures if they step out of line too far. Here’s one of Youtubers complaining about that:
https://www.youtube.com/watch?v=L8Pbl0_Xa_k
I’ve recently enjoyed some interesting videos on YouTube by a young woman, Eli from Russia, non-political in content, sort of a travelogue as she travels to places ranging from Vladivostok to St. Petersburg, and shows a lot of the beautiful countryside from her train travels. Very interesting to see her interactions with other young Russians, plus some American and British expats, and in one video she does focus on what life is like since the sanctions began, in Moscow.
Naturally, if you search for her videos, you will also see one from a young woman in Ukraine saying that Eli is a dangerous propagandist, and where she claims that Ukraine, unlike Russia, is a free country, where anyone can be elected president. (Right, if approved by the ruling oligarchs and American apparatchiks like Victoria Nuland.)
Bob, Appreciate the link, very nice. Additionally, the United States can increase their GNP by increasing “G” as in government spending, according to the USA GNP formula. I guess adding 1000’s of woke bureaucrats and having the military bomb trees into toothpicks will make us more productive.
I tend to agree that services and finance only tend to redistribute wealth created in the real economy. But if agents insightful work selling Company A a better building so that they make twice the widgets they made last year with only 1-1/2 times the cost, isn’t that useful? Just curious. No settled opinion. I agree that the services the purple haired, overweight community managerette drinking a sugary latte every hour while selectively cancelling the communications of others at Twitter or Facebook is not productive. That’s a clear example of the dross in the US economy.
Services are important unless something is vertically integrated, but that way leads to monopoly. But probably the type of service is the key. So much of US service is financial service and that’s mostly just extractive.
Value adding services are an important part of an economy. The US tilts heavy towards extractive services.
Bob,
Completely agree with the Winston Smith’s (Threadreaderapp.com) estimates of 68%. With one exception — 68% applies to the entire Russian Economy vs. that of the US, and not just to the manufacturing (physical) part, i.e. including the Services component.
With all due respect for the Observer-R the so-called PPP is an “exchange rate” ratio calculated by WHOM? Correct, the usual “suspects” (aka cheap and extremely biased Western whores): CIA, IMF, WorldBank, etc.
A very simple cursory comparison of prices between US and Russia yields a PPP conversion rate of 11 to 30 – see a few examples below:
1) Apartment Rent: national average prices in the US vs. Russia:
– $1,718 / mo (source: RentCafe.com)
– 25,000 / mo (source: RB.ru)
Effective PPP exchange rate: 25,000/1,718=14.6
2) Bic Mac hamburger:
– $5.15 (source: NYPost.com)
– 135 roubles (source: https://mcdonaldsmenu.ru/burgers/big-mak-47218)
Effective PPP exchange rate: 135/5.15=26.2
3) Electricity (per KWh):
– $0.15 /kwh (source: BLS.gov)
– 3 roubles (source: RBC.ru)
Effective PPP exchange rate: 3/0.15=20.0
4) Haircuts (men+women, average):
– $56 ($43 for men, $69 for women, source: https://youprobablyneedahaircut.com/how-much-does-a-haircut-cost/)
– 600 roubles (550 for men, 650 for women, source: 2GIS.ru)
Effective PPP exchange rate: 600/56=10.7
Based on these 4 examples the PPP ratio between prices in the US vs. Russia are on average 17.9. Russia’s nominal GDP in 2022 was 151.5 trillion roubles. Dividing 151.5 by 17.9 we get $8.5 trillion in PPP GDP. That’s $57,000/capita (with the country’s population of 148 million). US nominal GDP in 2022 was $25.5 trillion. That’s $77,000/capita (with total population of 330 million).
So, on a total basis US GDP is 3x bigger than Russia’s. On a per capita basis US GDP is only 34% bigger than Russia’s (1.34x bigger).
So, NEVER BELIEVE ANYTHING you get from the Western Governments, Mass Media, Social Media, Financial corporations, or any semi-official sources. They are all either extremely biased or outright liars. ALWAYS use critical thinking and common sense (something that does not exist in the West since the 1980s)…
You left out one point. In Russia, the vast majority of the population (practically everyone) has housing in their private property. At the same time, they pay only real estate tax and for housing and communal services + communications and the Internet. This is about 2.5-3 times less than the rent.
GDP, like most every Government measurement, is an end-driven measurement, that is dishonest and misleading.
1. “Owners Imputed Rent” represents 8-10% of GDP. This is an academic trick to increase “output” by claiming a fictitious “rent” that homeowners are paying. Yet they are not paying a “rent” to themselves or anyone else. So it is not cash flowing through the economy, and contributes nothing to the GDP.
2. The ballyhooed “Service” economy, is a diversion from acknowledging that outsourcing of real output from manufacturing, by shipping investment, jobs, value-added, secondary support industries, and wealth generation to Mexico and China. So how do you support a jacked-up war machine without a thriving steel industry and all those manufacturing plants to produce actual products?
3. The cancerous Debt saddled onto the American People is a direct result of pretending to replace the incomes lost from shipping American jobs and the internal profits from all the support industries that kept manufacturing at home.
4. One hell of a price to pay for the country with the most Billionaires, while the country has been eaten alive.
5. On a comparative output, sans Services and Government, Russia is a powerhouse, near par with the USA
The last table shows China and Russia as double the number for the USA. Do we still want to let the Bolshevick Neocons take us to war with them or do we prefer to trade and compete. Which means less hegemony and more Health, Education and Manufacturing.
A friend of mine just saw a drug he takes jump 60% from one month to the next. I did a very quick online search regarding drug prices around the world and found this.
https://www.americanpharmaceuticalreview.com/Featured-Articles/347177-Comparison-of-Drugs-Prices-US-vs-India-Their-Manufacturing-Costs-and-Opportunities-to-Improve-Affordability/
Your economy is going to look larger if you simply charge significantly more for things. The real test of a countries economy is not how much you charge but how much you manufacture.
Hence PPP.
“Wealthy” countries are going to lose wars to “poorer” counties if they can’t out manufacture the other side. A situation resolved by Douglas Adams.
The Golgafrinchan Ark Fleet Ship B was a way of removing the basically useless citizens from the planet of Golgafrincham. A variety of stories were formed about the doom of the planet, such as blowing up, crashing into the sun or being eaten by a mutant star goat. The ship was filled with all the middlemen of Golgafrincham, such as the telephone sanitisers, account executives, hairdressers, tired TV producers, insurance salesmen, personnel officers, security guards, public relations executives, and management consultants.
The ship was programmed to crash onto its designated planet, Earth. The captain remembers that he was told a good reason for this, but had forgotten it, although the reason was later revealed to be because the Ark Ship B Golgafrinchans were a ‘bunch of useless idiots’.
My apologies in advance to any readers if you are one of the above. Being a reader of Larry’s site clearly absolves you of being a useless idiot!
Thanks for the link. I had surgery overseas and my physician gave me 4 post op drug options, French, German, English and American. All cost around $12 a bottle. I chose the American in case I needed more medicine when I returned to the US so I didn’t have to change drugs.
When I purchased the same brand drug in the US, I had to pay $132 with insurance. I did research and found out tha US drug manufacturers are subsidized the difference between their price overseas and their domestic prices with taxpayers money.
US law prohibits the importation of personal prescription drugs into the US. Congress are paid to serve the stockholders.
Thanks for the link. Great way to think of economies.
Agree Thank you.
Much of the US economy is hollow.
It spends 15-20 of GDP on the healthcare industry; no one else spends more than 7.5%, and most less.
Its’ FIRE (finance, insurance and real estate) sectors add to to close to 20%… I believe that nowhere else is it much over 10%.
It’s corporations all have bloated Human Resources departments, largely because of all the government regulation, much of it on woke issues. If you have ever managed in a large company, you’ll know how unproductive most HR activity is.
Our manufacturing sector is also statistically bloated. US autos that are assembled here are made from 50-80% imported parts. The markup between foreign manufacturing cost and final sales price for companies such as Apple, Nike, and drug companies is part of US GDP.
The US has 12 times per capita the number of lawyers that China does. Lawyers don’t make much.
Apple, a few years back tried to make Macs here in the US from all domestic content. They couldn’t because they couldn’t find an adequate domestic supply of screws and fasteners. We, for the most part, don’t make ’em here. If China just embargoed nuts and bolts, especially with German manufacture half paralyzed, most US manufacture would come to a halt.
Also the enormous sector of construction. The overwhelming majority of hand tools, power tools, and fasteners, nails, screws, plumbing and electrical components and fixtures are imported, mostly from China. Even a substantial percentage of finished wood products, tiles, and flooring materials are imported. On a construction site you are as likely to see Kubota or Hitachi equipment as Caterpillar. If the US sanctioned China the construction industry would be crippled. That would not much affect American workers because almost all construction trade workers are now Latin American immigrants but there would be a knock on effect on the finance and real estate segments of the economy.
All fine except: Kubota and Hitachi are Japanese.
“…you’ll know how unproductive most HR activity is.”
I’d say that it is more often counterproductive rather than merely unproductive.
One company I worked with:- the memo I wrote to senior managers and referred to the environment dept. It basically said the dept should be working for us not as at present working against us. True, but boy oh boy, did that put the cat amoungst the pigeons. Follow up with examples and cost impact resulted in some very red bottoms. Industry cannot afford the enemy within. Politicians take note.
Larry, you really know how to hit my sore spots. And here is one of them. ‘Murican GDP.
How much of that GPD number was Covid vaccines? Just think of the money spent on the shots, the nurses giving the shots, the facilities where they were stored. For a virus with a 99.9% survival rate.
The whole ‘Murican health care system. The education system that is 500% more expensive than anywhere else in the world. Churning out doctors that are incompetent procedure followers for insurance companies that owe a million in student loans when they graduate. That then loot the populace with government accord in league with the insurance companies. And that is all GDP.
Carbon credits. Oh, my. I will not even describe this lest by blood pressure rise. But these fictional book entries to pay off Democratic “Green” campaign contributors are GDP.
The Pentagon. One Trillion this year. And what does it “defend” us from?
The whole “woke” grievance industry of fat white women giving weekly indoctrination and training classes at corporations so they can keep their boondoggle Soviet government subsidies.
Turning corn into ethanol to pay off the farmers. And if you know thermodynamics, you know this is a joke. As well as destroying every motor it touches.
The government the largest single hiring party in the country. With the sole intent of saying “no” to anything productive.
My point is, ‘Murican GDP is bullshit. I would estimate over half of it is not producing anything. And as a matter of fact, that half exists to kill the productive half.
100% correct
Food for thought! Thank you Curt Nichols.
Stalin is supposed to have said, with respect to armies, that ‘quantity has a quality all its own.’
Maybe the reverse (obverse? converse?) is true with respect to a GDP: Quality (that is, actually making stuff that people find useful, as Russia and China do) has a quantity all its own.
You are totally correct. Bonus is that government workers make way more money than private counterparts. Not efficient and cost twice as much.
Gud enuf fer govermint werk about to hit the fan?
Then again, half (or so) of France’s economy is government workers.
Guess we can all look forward to French-style demonstrations hitting Washington.
GDP, like most every Government measurement, is an end-driven measurement, that is dishonest and misleading.
1. “Owners Imputed Rent” represents 8-10% of GDP. This is an academic trick to increase “output” by claiming a fictitious “rent” that homeowners are paying. Yet they are not paying a “rent” to themselves or anyone else. So it is not cash flowing through the economy, and contributes nothing to the GDP.
2. The ballyhooed “Service” economy, is a diversion from acknowledged the outsourcing of real output from manufacturing, by shipping investment, jobs, value-added, secondary support industries, and wealth generation to Mexico and China. So how do you support a jacked-up war machine without a thriving steel industry and all those manufacturing plants to produce actual products?
3. The cancerous Debt saddled onto the American People is a direct result of pretending to replace the incomes lost from shipping American jobs and the internal profits from manufacturing at home.
4. One hell of a price to pay for the country will the most amount of Billionaires, while the country has eaten itself alive.
GDP is meaningless without comparing it with a country’s debt. The United States stated GDP of approximately 25-trillion when its debt of approximately $30-trillion would be a negative $5-trillion.
This figure does not include the United States liabilities. Add, or subtract actually, another $200-trillion dollars.
Putting this another way. If every asset in the United States were sold off the country would still be $66-trillion dollars in the hole.
GDP is meaningless.
Russia with a GDP of approximately $2.5-trillion dollars has, relatively speaking, no debt. Their GDP is accurate, and they are in much better financial shape than the United States.
Plus, Russia is sitting on vast reserves of oil, natural gas, coal, minerals, and rare earths, in “shameful abundance,” compared with the United States.
dont forget the derivatives market estimated at $700 trillion
https://en.wikipedia.org/wiki/Derivative_(finance)
Uncharted, vacuum-backed, economic territory.
Wikipedia is a deep state website. The real number of derivatives is about $2.4 quadrillion according to Egon Von Greyerz and others. Buckle up. It’s going to get bumpy.
As soon as we started talking about billions, somebody brought up trillions, and now the conversation actually revolves around quadrillions.
On March 8, 1962, Everett Dirksen said: “A billion here, a billion there and pretty soon you’re talking about real money.”
That was 60-years ago. When did we start talking about quadrillions?
What’s next? Because it’s always something next.
Drowned by zeroes. Death by zeroes.
GDP is a highly flawed figure – and I believe – increasingly so
GDP also includes financial trading. Thus, the island of Manhattan ostensibly has a GDP of $635 billion. Higher than most nations! But what does it produce, really? This problem is extended to measurement of the entire US GDP as well.
GDP in the hands of the US MSM and DC planners, has become just another cheap, meaningless propaganda tool
Bingo!
I would add the highly flawed GDP estimates the following question. What percentage of any financial or economic estimate of the US is the borrowed-money-funded US MIC?
Very important points.
I would further note that the G7 countries were over 60% of global GDP in 1991; they are barely over 30% of global GDP today.
This is what matters – not the US’ outsized GDP in 1950 due to WW2 effects on Europe and Japan.
It matters because “The West” no longer dominates the entire world’s economy.
What we are seeing today in Western leaders is behavior based on 1990 era Western economic position in the world – i.e. dominance – when reality is that the West is simply an outsized part of global GDP which in turn is heavily dependent on the rest of the world for energy, food, metals and other minerals.
This change is precisely why Western artillery shell makers – per the Financial Times – cannot make more shells regardless of focus in the short term because they simply don’t have access to the raw materials. And in turn why Russia is outproducing the entire West’s military industry in artillery shells by at least 30 to 1.
One of the biggest deception of US GDP is adding the products of financial services to the GDP.
We add prostitution and drug deals in France…
Prostitution is added in UK too don’t know about drugs.
Is that much or are they desperate to add anything.
Well, they at least work for their wages.
The USA has what I call the “wedge economy,” with 1/3 of the country working hard for their money and 2/3 of the country working hard to take the money away. The amount of bilking and overcharging “structures” in the USA is surreal.
Look, almost 30% of US GDP is HEALTH RELATED…another 30% is FINANCE RELATED..another 30% is GOVT RELATED…that leaves a pitiful 10% for everything else…..Strip out the high costs of healthcare, education, and govt expenditures, what do you really have for an accurate GDP #???? Maybe 15% less as a start???
They add the F.I.RE sector. Finance, Insurance and Real Estate. This is the Rentier Class’ contribution to the GDP. They produce nothing.
A smaller economy cannot successfully sanction a larger one. Duh.
Also if you read all five parts of this carefully it completely supports the authors thesis (besides blowing your mind otherwise).
https://surplusenergyeconomics.wordpress.com/2023/01/26/246-the-surplus-energy-economy-part-1/
The thing that has always bothered me about GDP was the fact that government spending is counted towards “product” as if $900 hammers and $6000 toilet seats contribute to our economic well being.
Government spending is more correctly an overhead cost and should SUBTRACT from GDP because government doesn’t produce anything and doesn’t really provide any useful services, only services [ using a very broad definition of the term] that we are forced to bear at gunpoint.
There was a time in many “western” countries, before privatisation (gifting public industries to oligarchs), that govt. actually produced tangible products (ie electricity).
Now as you stated, govt. overspends on products and adds it to GDP numbers.
For example in Australia federal prostiticians redecorate their office spending more money than the cost of an entire house, spending hundreds of thousands on a staircase, tens of thousands on a bookshelf, etc.
Years ago 5 billion was spent on tree planting (a failed project), a huge boost to that years figures.
The US Dept of Energy would better serve the country having all its staff do nothing all day but feed $5 bills into a furnace.
If they did, they would spend less money than they do now and actually do a little good, generate some energy at least.
As for now the $billions they piss away is part of GDP.
A reporter from RT two years ago in response to the gas station argument posted that the energy sector was 15% of Russian GDP. In the US it was 9%. He was trying to dispel the myth that Russia’s only source of national wealth was oil and gas. One would think if the so called experts might wonder what the other 85% of Russian GDP was about.
Snacks. Gas stations have lots of snacks.
20 years ago or so I was at a gas station/quikee mart on the Italian autostrada and decided for first time ever (and last), to buy a can of pringles. I had the runs for a full day. That blasted synthetic processing oil they use.
PS: How much of the US economy is the profit margin on China produced goods? I’ll bet they earn at least $1 for every $1 spent, for slapping their brand stickers on. (bit more to it but really, not much).
And for the production of alcohol and vodka for snacks. 🙂
The Federal Reserve is owned by its member banks, I.e. Chase, Wells, GS, and the other bigs.
It creates money out of thin air and then LENDS IT TO THE US government to be paid back with interest by the taxpayers. Sweet gig right? Of course they aren’t going to give that up without a fight.
The whole economy is a scam built on top of a scam so of course GDP measurements are ridiculous.
You are so right! However, I think the input air for the Western Magic Money Machine is hot air rather than thin air.
GDP is based on guesses, because nobody tracks every sale, the accounts of many firms have little bearing on reality, the same goes for government spending. Think of the billions the Pentagram cannot account for.
Then they compare this years guess to last years guess, make it a percentage with a couple of decimal points so the shmucks think its somehow accurate. Then get all the usual banksters, economists, pundits and politicians to talk about it as though it is something real. It is a delusion.
In Russia and China the central banks own the money. In the West, our privatised central banks own the money and the people rent it from them, the rent being inflation.
One great issue of the American Revolution was who owns the money, the people or the banksters. With the creation of the Federal Reserve, the money is now owned and controlled by the banksters. Until we in the West take control of our central banks, we shall remain their serfs, if not quite their slaves.
The french state with 62% of GDP is the biggest in the world, it’s a socialist economy near bankruptcy that doesn’t produce much things apart debt and poverty. Its GDP is a complete lie because it include social govt spending (25% loan) and half the population now depend of it.
The most critical point about GDP measures is the inflation adjustment used. Shadowstats gives a good explanation as to how the US inflation measure has been adjusted over the last few decades to show a lower rate. Gee, our government wouldn’t use an artificially lower inflation rate to both show a stronger economy, and reduce inflation adjustments on entitlements, would they? Yeah, they sure would.
If, as Shadowstats shows, inflation over the last 30-40 years has been running at twice the advertised rate, then the US economy has actually been in zero growth or recession for most of that time (something the middle class has been experiencing), and, China is bigger by now, as shown by the PPP measure.
GDP is an artificial measure made up by economists, with economics being a made up pseudo-science. They mix income and expenses in ways that would land you in jail if you tried using their accounting methods. And then there’s debt. The MMT guys think it doesn’t matter, nor do they think you actually need to make stuff to have an economy. Just keep borrowing and buying stuff made in other countries. Sure, that’s a great strategy.
3 things are behind the current US decline. First, off-shoring manufacturing, creating dependence, second, financializing the economy in such a way as to gut the middle class and concentrate wealth, and third, by using military force to bully countries around the world. Now there’s no self-sufficiency, the debt bubble is bursting, and there’s no friends to help out.
The details are just symptoms of a greater systematic problem.
PPP is obviously the right way to look at things overall – on average.
So on average China products are priced at 60% or the dollar equivalent price in US
Some products in say China will be priced at close to international prices (eg oil which is readily traded internationally)
Others will be priced well below PPP equivalents (eg food and services which are harder to trade easily).
So some Chinese products will be much much lower priced than 60% of US prices.
I’m thinking about artillery systems, the cost of 100k men in uniform, shells, and also 100km of Hi-Speed trainline.
Even PPP vastly understates Chinese leadership over US in these areas. (Much as we have seen in Russian manufacturing being superior in producing shells to the whole US and European industry).
It should have given economists pause a long time ago that when you can buy a lettuce or rent a roof over your head in Mozambique for 1% the dollar price in the US, it is hard to compare economies.
Well do I remember a pundit who stated that the EU economy had not grown at all post 2008, but he had forgotten that the € was worth $1.60 then, but now $1.08. Obviously in the EU they calculate growth in €
Excellent point which cannot be too often illustrated.
That said, we can take this further (as Andrei Martyanov among others have done). Which, if we’re looking at industrial power, and especially defense-industrial power of that sort that Russia is now shocking the West with, we can strip out the massage studios, vulture funds, bloated medical care, pizza chains, advertising, PR, legal, banking, insurance, real estate, royalties and other rents.
On industrial capacity required to make war, and the strategically critical natural and human resources to power that industry, Russia is arguably the most and perhaps world’s only largely autarkic power, & may be ahead of India as the world’s #3 economy. Indeed since the US produces very little that the world cannot do with out (and would be better off without), we might posit that Russia and China are the top TWO most important, and powerful, economies in the world.
The GDP “can fuck me …”. I’m interested in the real economy.
This so-called “service sector” (more than 70% – 75% of GDP in developed industrialized countries) ranges from “Hollywood” or “facebook”, to “E&Y”, to “BlackRock”. (And of course “the state” is in there too).
What is “worked” there doesn’t give a shit, you just have to find an idiot to pay for it.
And of course “lawyer republics” (they are also called “democracies”) make sure, that you often have no other choice.
The “service sector” can be “inflated without limits”, from that no nail comes into the wall.
And yes, I know, that “services” are not useless per se, especially those of the state, like justice and police etc., are indispensable (well, except for the liberals), and the cultural-industrial and media complex is of course important for general edification …
We have something older from 2016 (unfortunately only in German):
https://norberthaering.de/reform-der-wirtschaftswissenschaft-dossiers/irland-bip/
“Ireland’s absurdly high growth shows how questionable GDP statistics are”
“…
Canadian statistician Erwin Diewert of the University of British Columbia, one of the world’s leading experts on price and output measurement, confirms that the methodological changes of the past two decades have almost invariably depressed inflation and increased measured output. In this regard, the U.S. has always been ahead of the game. For example, it was the first to book military spending and software expenditure as investments, thus boosting its gross domestic product.
…”
Military spending can only rationally be booked as an investment if its purpose is to capture foreign economies and put them to work for it.
It’s fuzzy but I think I remember from school that something like that is called c…co…colonoscopy maybe? Nah, that can’t be… damn, somebody help me out here.
This article provides some motivation as to the sinister goals of the “Western world” i.e. the WEF. (An important disclosure, as revealed in the comments, is this site is very pro-trump):
https://theconservativetreehouse.com/blog/2023/03/19/quiet-part-out-loud-polish-ambassador-warns-if-ukraine-not-successful-nato-will-join-war-against-russia/#more-244507
Back in t he ’30s when the Bureau of Labor Statistics was being set up during the FDR administration, the NBER* loaned Simon Kuznets, their hot-shot young statistician, to lead the founding team. When establishing what was to be included in “Gross National Product,” GDP’s predecessor, he excluded finance and advertising on the grounds these sectors don’t produce anything – they just influence when and where industrial goods will be produced and consumed. Needless to say the poobahs of Wall Street and Madison Avenue were not amused, and they used their influence to get Kuznet’s definition of GNP overruled.
* Contrary to what it’s name connotes, the NBER (National Bureau of Economic Research) is a private, non-profit corporation, not a government agency. It was founded about 1920 and was the first entity to provide quantitative data on the USA economy.
Great piece. It is about time someone debunked the GDP as a means to rank economies. I think it was Michael Hudson who said that GDP was a reflection of the rise and fall of the use of credit and hence only reflected booms and busts of banking use. To assume different economies had these cycles in unison is a further distortion. And then the degree of debt problems in these countries is another factor. When the US outsourced its industrial base, how could it not be reflected in a lower GDP when such a decline now sees a US that is largely incapable of fighting a significant war, when a country like Russia, “as a gas station disguised as a country”, is very capable of such a war and without great impact to the lifestyles of its citizens.
L.
Thomas Jefferson (who died bankrupt) said: “Never spend your money before you have earned it.”
In 1972, when the United States started out-sourcing its economy to China (the price the United States paid so Richard Nixon could have his legacy), we started spending our money before we had earned it.
And now, just 50-years later, look where the country is.
Thanks Larry,
2023 -03- 20
People who cast the GDP don’t decide but -of course- the people who count GDP do. Stalin didn’t say it !!
But then, Stalin did say :
“If any foreign minister begins to defend to the death a ‘Peace Conference’, you can be sure his government has already placed its orders for new battleships and airplanes”
(Joseph Stalin)
The cirque De Soleil that passes for the current banking crisis (ongoing as I type) is not the biggest danger facing the West, as bad as that is.
What will bring the whole house of cards down is the asset management shell game. It will take out the US for a generation and the collateral damage will effect everyone with a finger in the pie (most Countries).
There is no need to worry until you see half billion dollar valued banks being sold for $1 or swapped for free in exchange for written promises of debt.
Then the same with companies that have “solid” assets and value will start.
Airlines, railways, tech, aggro, industry, pension funds etc etc.
They are only worth what some one will pay and if there is no one, it is nothing.
The incredible value that has been given to a projected wealth of an economy and Nation is as thin as the paper they were once written on.
This will most likely start by one of the big player just getting too smart and trying to cash out first or.
Heaven forbid the US allows a hostile foreign power to amass and hold a sizeable amount of these voodoo markers of GDP to be used to tip the fulcrum against the US when the time is right.
As best as I can tell, U.S. Deficit spending is actually ADDED to our GDP … https://www.investopedia.com/articles/investing/051415/how-calculate-gdp-country.asp#:~:text=The%20formula%20for%20GDP%20is,(X%2DM)%20is%20net%20exports.
This seems wrong, countries with govt deficits are penalized for being fiscally prudent.
So yes, let’s brag about our huge $25T economy as the govt sinks in $1T – $2T a year in new debt.
Criminals In Action figures? I wouldn’t trust those.
Hopefully the Saker is well, what an oasis of truth in terminal madness times.
Enjoying pages like the Vineyard and this one for as long as it is possible.
Thank You.
Sorry! This is totally off topic, I know, but I don’t know where to send this.
Drone gun vs drone
https://t.me/z4lpr/475
Another drone video, same source
https://t.me/z4lpr/486
I’m pretty familiar with the DJI drone UI, and as far as I can say, this is definitely not it. Is it Russian perhaps? Mix of English & Russian could be a telltale sign. English is a 2nd language of every programmer in this world. IMHE many of them don’t bother to translate everything into their native language.
While GDP, however it is measured, is a useful way of comparing the relative strengths and weaknesses of countries, it is more interesting to look at the basics of human survival and surpluses and how that impacts a nation’s stability and total war potential. Looking back in history to the West and the Soviet Union: While the Soviet Union could wipe the West out in conventional land warfare, the Soviet Union couldn’t feed it own population. The soviets actually had to purchase food from the West to feed its population.
The Soviets just had more troops and more tanks, so their total war potential was higher than the West’s, so in the event of total war the Soviets would have won. The Soviets did not use this advantage, and instead opted for a long term Cold War standoff. But the Soviets did not have the stability to survive a long term Cold War standoff because the Soviets simply did not have a surplus in food production. By not going to total war, the Soviets therefor lost.
Compare this to the situation with Russia now. While Russia does not enjoy the manpower advantage, it still has the advantage in numbers of effective conventional weapon systems, industrial production, energy, but Russia now has food as well. This is thanks chiefly to new hybrid species of wheat, suited to badlands production, the development of which was started during Soviet times. So right now Russia has the weapons, industry and energy with which to take on and defeat the West, as well as food production and hence the stability to stay in the game for a very long time.
Currently it is Russia which has the time on its side, and the West which is just getting weaker with time, so the West fighting a war now means the West will lose, and the West not fighting a war now means the West loses as well. Russia’s real strength right now, as compared to the Soviet Unon, is all due to the most basic of the basics, food. Yet its only energy and metal production which hogs the limelight in GDP figures, not the all important basic food production component. One ignores agricultural economics at one’s peril.
well with american under total attack; the real gdp is declining at an alarming rate.
the general here lays it out.
https://republicbroadcasting.org/news/special-reports-gen-mcinerney-banking-collapse-vaxx-deaths-train-wrecks-its-all-coordinated/
regards,
ralph
The Saker is excellent! Mr. Pepe Escobar is very interesting and knowledgeable.
Observer R, thank you for your first contribution. Could you write also about foreign debt, I’m sure everyone will be very interested in East and West comparisons.
Mr Johnson thanks also to you, surpassing your own high standards again, ‘Son of the New World Evolution’.
China has roughly 1,2 billion citizens which it has to support. Those people also are the base for China’s economy which we all know manufactures a lot for the entire world … but we are being told that the US still is the biggest economy? Yeah, right.
The US was, in fact, once a economic superpower. Today they are the main force behind all rigged financial markets they have been manipulating for their own interest with the help of the very well known “too big to fail” US-banks to defraud the other participating parties.
GDP can be measured three ways, it’s either an aggregate output of the country, or its total expenditure or its total income, usually it’s the third measure the total income of all physical and legal subjects because it’s easier to collect and easy to comprehend.
I live in Japan. The circumstances here with Japan’s leadership in submission to the US as their gopher in the Pacific is disgusting. The average Japanese is paying a huge price for this submission.
The current leadership in Japan do not have the courage or the ability to break free from “The Quad.”
According to Prof. Richard Werner in his book Princess of the Yen, Japan’s central bank originated QE.
The Japanese themselves are slaves to this economic system that is completely industrialized and tightly controlled by the eight major trading houses.
The circumstances are Japan is a tax regime. The taxes extracted from the Japanese are increasing constantly with an already 10 percent VAT tax in place.
There is an estimated $360 billion in cash sitting inside the homes of older Japanese who don’t trust the major banks. That money is frozen and is not circulating in society. Younger Japanese people have no access to money to start new businesses and if they do rent takes a huge chunk out of any money that can be made from the business. Those who were fortunate enough after WWII who had land given to their families have been living off rent since the end of WWII.
There are an estimated 8 million empty houses in Japan with a rapidly shrinking population. Most of these houses are falling apart. It costs on average $20,000 to remove these houses. Then you have to deal with taxes on property. As soon as you build a new structure the taxes go up enormously.
During the Covid countermeasure lockdowns suicides shot through the roof. Children in this country are locked into a primitive Prussian-style education system where the only way to get into a company is through rigorous testing. And the only way to pass the tests is to go to a juku (cram school) that are owned and run by big companies that are harvesting youth.
Japan is not a healthy society. There are deep structural problems below the surface. The Japanese do not have the creativity or spontaneity to correct. And Japan’s leaders are not capable of changing direction. The US directed Japan to economically sanction Russia and is now forcing Japan to restructure its military and arm themselves with US-manufactured weapons to “fight China.”
Japan’s politicians are the highest paid politicians of any country in the world. Life time employment with huge pensions. Local politicians when “voted” into office do very little in the way of benefiting anyone in the community they allegedly campaigned to assist once in office. The only reason they run for office is to obtain a coveted salary. From the tax-paying community.
The politicians, local all the way up to the national level bureaucracies have no idea what it is like to exchange time for money in this economy and have no respect for individual Japanese time and energy it takes to pay all these taxes. You suddenly one day get an official looking envelope in the mail at 65 years-old from the local city hall and you find out you are now required to pay an additional tax of roughly $80 a month for as an “elderly tax.” After 15 years of paying that tax every month it comes out to around $16,000. Where is the benefit? Multiply that by 10,000 people in the community paying that tax. It is an enormous amount of money and nobody inquires as to where that money is or what it is specifically being used for. Then in addition, you not only pay a 10 percent flat tax on your income (it increases incrementally based on your income), you are required to pay a local municipal tax. Then there are property taxes, a yearly car tax, 10 percent VAT tax including on real estate sales, and on and on the tax regime goes…
In Japan there is no creativity and clear thinking how to change anything for the benefit of communities and society. The rules are so strict the only response you get when you suggest that perhaps the rules should be changed is, “The rules can’t be changed because these are the rules.” It is horribly frustrating.
Can you tell us more about how there is a difference between people living in the country and in the city?
How does it look e.g. Funding for families who want to have children, etc., etc..
Through you I learned a bit about the fascinating country of Japan and I want more.
Thanks for the little insight Japan.
Since I live on the outer fringe of Tokyo I have no experience living in the country. I know there are quite a few foreigners who have some how managed to secure property such as land to farm. I am not certain on their status or how they are obtaining their incomes.
There are differences I am certain between living in the city and the country here. In the city you are pressed into basically servitude to feed the tax regime. Young people buy new homes not as an investment but as a purchase. The average life of a home is about 40 years and because of construction materials and especially with children the place is trashed and either requires expensive remodeling or torn down. The land is more valuable than the home itself after 40 years or so.
Japan might be a “fascinating place” looking at it from the outside but if you live in Japan for as long as I have and being Japanese”, it presents an entirely different perspective and circumstances. If you don’t speak any Japanese at all and are visiting for the first time to Japan, the Japanese are very gracious and go out of their way to help you. As soon as you open your mouth and speak Japanese you are “Japanese” and attitudes quickly change.
In a recent conversation in Japanese I had with the president of a small company, I mentioned in small talk it was snowing in Tokyo. He told me, “Good, because the hearts of Japanese living in Tokyo are dark.” He is Japanese. He lives in Sendai north of Tokyo.
I am sure there are foreigners who have better experiences here and have a different outlook but I am comparing Japan now to the Japan I knew 40 years ago. They are world’s apart.
That was very insightful and since Japan has always fascinated me, very interesting. Thank you sir!
You are welcome.
It would be interesting to see GDP and GDP PPP values of economies without service sectors.
Of course, even that would not be appropriate as the measure of economy since if you for example just assemble car in the West but parts are made in CHN, you are basically washing money and profits, claiming the lion’s share of it in the West, while in reality you only have an assembly hall and nothing else.
The geopolitical and financial and economic events of recent years have led to significant fragmentation and separation of global cash flows.
During the 2008 crisis, the world was very connected, which led to the fact that the problems in the US and European financial markets spread around the world, especially affecting emerging markets.
Any instability in world markets led to the fact that the national currency of developing countries, stocks and bonds went to the bottom due to high integration into the global capital market, low capacity and liquidity of national markets.
The degree of integration was very high. The capital market, in essence, was available only in Western markets (dollars, euros, pounds, yen, francs, etc.).
Funding was mainly in dollars and euros, and at all levels (business lending, placement of bonds of national issuers), direct and portfolio investments.
For 15 years the world has changed, and the role of national markets is growing, as well as funding in national currencies.
Here is a curious moment: the banking crisis in the US and Europe in 2023 has a very weak impact on emerging markets, and the shares of banks in China, Russia and Turkey even rose over the month (in dollar terms, taking into account changes in the national exchange rate)!
According to our own calculations, on February 20, the capitalization of all world banks available for open trading was a little more than $10 trillion, and now $9.1 trillion is the strongest drop since March 2020, where the US is minus 17%, the UK and Japan are minus 12%, France is minus 16% , Italy minus 14%, Switzerland minus 19%.
At the same time, China plus 2%! Russia plus 21% due to the growth of Sberbank and VTB in recent days, Turkey plus 5%. Other emerging markets are strong: India, Saudi Arabia, UAE and South Africa are down 5%, and Indonesia, Malaysia, Vietnam and Thailand are down 4%. Brazil and Mexico stand out negatively with 8-9% losses, but twice as good as developed markets.
In 2008-2015, this was unimaginable, when emerging markets usually fell more than developed ones. The world is changing.
https://t.me/spydell_finance/3010
From a complete novice in economics here: find the median incomes of Russia and the US, adjust the number based on exchange rates and general living costs. From there, we can gauge just how much “richer” the average person in the US is compared to his/her Russian counterpart by calculating the ratio number.
Nice presentation. Real economy of actual things and adding value are the serious economic drivers. The US used to do that but we financialized everything. All that money moving around gets accounted for in nominal GDP. But at the end of the day it’s counting the casino as a productive economic activity.
Theoretically finance is supposed to serve industry but that hasn’t been the case in the US since the mid/late 1970’s. Made worse in the 90’s. Theoretically finance could be made to serve industry and the real economy (which would benefit the average person) but it won’t happen without a wholesale change in political leadership.
3/4 of US GDP is complete bullshit – between medical mafia (21%) and Finance/insurance (42%) you’re not left with much actual production. And I dont even include lawyers and and other pure leeches. I bet both Russia and China can replace hardware in real time in any war while we’ll run out. Assuming we don’t run out of men first – no one wants to die for these neocon neolibs leading us. Only here for free sex changes or GI bill, and still can’t get enough recruits, wait until dying starts.
The concept of GDP as it applies to armaments seemed to me to be a conundrum, for example:
1. build a bomb with borrowed / printed money
2. include the cost of aircraft or whatever support you think relevant to “dropping the bomb”
3. the explosion expends a vast quantity of embodied energy and labour it took to make and deliver
4. it’s hard to discern any effective ROI and leaves the debt remaining
But what are the figures for *manufacturing* and *primary production*?
Those are the metrics that determine the “national security potential” of a nation.
After all, it doesn’t matter how many divisions of lawyers, bankers, real estate agents and arbitrage stockmarket wizards the USA can count on its balance sheet, not a one of them adds anything to the national security of America.
If you remove the FIRE component of the US economy – the non-productive bits of money-shuffling that always seems to go up the social ladder and never back down again – then what’s actually left?
A Military Industrial Complex that seems to be everywhere but – alas – can’t seem to make enough bullets and bombs when it really counts?
Yeah, sure, that. And…. what else?
Would the USA still be even in second place if you concentrate just on those parts of the economy that actually, you know, makes things rather than spinning money out of thin air?
I know, its a repeat, but to comparing military spending its sure handy:
US-made FGM-148 Javelin ATGM, 240K USD for export, in 2019:
https://en.wikipedia.org/wiki/FGM-148_Javelin
Russian 9M133 Kornet, 26K USD for export, also in 2019:
https://en.wikipedia.org/wiki/9M133_Kornet
Add to this, that any profit from JAvelins goes to Raytheon, while Russia manufactures her missiles in the (at least partially) STATE-OWNED Rostec corporation (Profits go to the State Treasury)