Like it or not Euros, we're the best country in the world

[el freako]

Originally posted by TheStinger
I thought purchasing power parity resulted in countries such as India having larger economies than Germany.

I may be wrong though.

That is correct - remember that there are over 12 Indians for every German so even if they are poor then numbers make up for it.

PPPs are a far better way of comparing incomes across countries than exchange rates.
Think about it if the pound goes up against the dollar by 10% are we really 10% richer?
Only if we spend all our money in the USA.
And I'm sure you notice how cheap things seem to be if you go to greece or turkey.

The ranking of the top 10 world economies using the World Bank's estimates of PPP's are:

1. United States: $9.91trn
2. China: $5.69trn
3. Japan: $3.44trn
4. India: $2.55trn
5. Germany: $2.11trn
6. France: $1.48trn
7. Britian: $1.46trn
8. Italy: $1.41trn
9. Brazil: $1.34trn
10. Russia: $1.30trn

(the EU-15 combined is $9.23trn)

[TheStinger]

Well yes, but if it came down who could produce a shed load of quality manufactured goods or finance a massive rise in gvovernmnet borrowing i would put my money on Gemany over India any day.

I am aware of what an exchange rate is, it is a just that.
However as that is the way the world values things in international trade then i would submit it is an appropriate way of valuing an economies output.

[el freako]

Originally posted by TheStinger
Well yes, but if it came down who could produce a shed load of quality manufactured goods or finance a massive rise in gvovernmnet borrowing i would put my money on Gemany over India any day.

True, but that has little bearing on the size of the economy - more on how it is run and the relative wealth of the populace.
Which is why you should look at lots of different indicators rather than just GDP.

Originally posted by TheStinger
However as that is the way the world values things in international trade then i would submit it is an appropriate way of valuing an economies output.

Are you aware that the vast majority of goods and services in an economy are not internationally traded (show me the international trade in Hairdressing, Construction or Government Services for example).

In the US, EU and Japan exports amount to only 10% to 15% of GDP - even here in the UK they are less than 30%.

Exchange rates don't even reflect export prices any more - only around 2% to 3% of the money flowing around the foreign exchange markets is ever used for international trade, most of it is capital flows.

[TheStinger]

I take your points about GDP being crude, it is, but with purchasing power parity if i undersatnd it correctly, an economy that produced just low tech goods and doesn't have a well developed finance system can be described as larger than a modern post industrial economy which doesn't IMO make sense

[el freako]

Of course it makes sense,

How about an example:

Say a large company makes ball bearings - they employ 5,000 workers and each one of them makes £1,000 profit a year for the firm.
Compare that to a small Software company that has only 50 people, however they each make £20,000 in profit a year for their firm.
Which firm is the most modern and high-tech? the software firm.
But the ball-bearing firm still makes 10 times the profits of the software firm - if they were both Plc's the ball bearing firm would probably be worth 3-7 times as much as the software firm (it would be unlikely to be worth 10 times as much because of the better growth prospects for the software firm).


To see how useless exchange rates are just look at a series of GDP converted using exchange rates over time.

In 1995 (when the US dollar was low and european currencies high) the Euro Zone had 96% of the US's GDP when converted using PPP's - but by 2000 that had collapsed to 62%.
Now that would imply that during 1995-2000 the Eurozone's economy shrank by an enourmous 22% - however it actually grew by 13%, that huge 45% difference shows just how unreliable exchange rates are.
Using PPP's the decline was much more realistic (from 80% of the US in 1995 to 76% in 2000)

[TheStinger]

Originally posted by el freako
Of course it makes sense,

How about an example:

Say a large company makes ball bearings - they employ 5,000 workers and each one of them makes £1,000 profit a year for the firm.
Compare that to a small Software company that has only 50 people, however they each make £20,000 in profit a year for their firm.
Which firm is has the most profits?, well the ball-bearing firm (£10m a year compared to only £1m for the software firm) - if they were both Plc's the ball bearing firm would probably be worth 3-7 times as much as the software firm.


To see how useless exchange rates are just look at a series of GDP converted using exchange rates over time.

For example Britian's GDP when converted into dollars soared during the recession of 1979-81 (beacuse the pound rose sharply - partly causing the recession) but then collapsed during the period of rapid growth in 1983-85 (because the pound fell nearly to parity against the dollar).
If you measured Britian's GDP in dollars then it would look like there was a boom in the late 1970's-early 1980's and a huge slump in the mid-1980's - which is exactly the opposite of what happened.

Its a while since i did economics(about 10 years) but i can see htrough a daft example when i see one. Your example would also apply for GDP.

My example, Germany could borrow (at great cost no doubt) 10% of its PPP measure of worth tomorrow. India could not.

[el freako]

Originally posted by TheStinger


Its a while since i did economics(about 10 years) but i can see htrough a daft example when i see one. Your example would also apply for GDP.

My example, Germany could borrow (at great cost no doubt) 10% of its PPP measure of worth tomorrow. India could not.

Your reasoning is rather confused here.

Your claim seems to be that because a country cannot borrow as much as another then it's output has to be lower.
These are two different indicators that are only loosely linked - however much people's 'gut feeling' that they should be.

All GDP measues is total output - you seem to believe that it should also show how strong a countries financial system is and how productive the workforce is - that's like looking at your car's speedometer and complaining that it can't be correct becuase it does'nt tell you what the time is.

You seem to think that 1bn Indians couldn't possibly produce the output of 80m Germans - all the average indian need do is produce a tenth of the average german.

Please explain to me then why the US economy is so much larger relative to Europe even though the gap in our incomes is at the lowest since the 1850's (hint: they have added a lot more people producing relatively lower value goods).

[johncmcleod]

I didn't mean to sound like bragging-I actually thought it was more really of an argument, because some Euros were saying that they laughed when people said it. And that "Breathtaking arrogance" It's funny to hear that from a Brit because they were very arrogant back in the early 1900's, but they had a reasonable excuse, at that time they were the most powerful and most influential. Remember that they were convinced they'd win WW1 in a couple of weeks. And just some food for thought:

"It aint braggin' if it's true."

[Adalbertus]

The first time that I saw a troll thread being jacked by a serious discussion. Good work!

[Dauphin]

Originally posted by johncmcleod
And just some food for thought:

"It aint braggin' if it's true."

Err.. no. Braggin requires it to be true.

If it "ain't true" its delusional arrogance.

[Lemmy]

Originally posted by johncmcleod
I actually thought it was more really of an argument, because some Euros were saying that they laughed when people said it.

I was actually laughing because of your arguments, i mean you come with things like industrial might and military power and diplomatic influence, and you're right, the US is unsurpassed when it comes to those things. But how do those things directly make your life better?
I live in the Netherlands, our military sucks, and i doubt anyone would seriously listen to what we have to say internationally. But still, i doubt that my life has been any worse then yours because of that.
This isn't Civ, this is real life, and power and influence aren't the only things that matter. If you really want to say that you live in the best country in the world, then show some examples of how your life in the US is better then life in the EU for example.
Do you have more freedom? Can you do so much more things then other people in other countries can?
Or perhaps you have a better future ahaed of you then your EU equivelants? Why then?

[Velociryx]

Lemmy....just some observations:

1) military might makes it possible to project your nation's power and protect your interests. This becomes important, especially as you start to get more creature comforts (see below).

2) industrial might enables your country to either a) make creature comforts to make your life better or b) sell/trade the stuff made in order to acquire creature comforts to make your life better. More industrial might = more creature comforts, so yes....there IS a direct coralation there.

3) without military and/or diplomatic weight, you exist at the mercy of those with more guns than butter. you therefore, exist in a perilous state. It is fortunate that the Netherlands are surrounded by democratically minded states who have no interest in gross territorial acquisition. How long do you suppose the Netherlands would exist as an independent nation if, say, it were tucked between Iran and Iraq? You would quickly either arm yourselves, seek a close alliance with someone much bigger than either of these two (sorta like Kuwait did with the US), or you would be an appendage to one or the other of them. Those would be your possible futures.

-=Vel=-

[Lemmy]

1) military might makes it possible to project your nation's power and protect your interests. This becomes important, especially as you start to get more creature comforts (see below).

Military brings also higher costs, potentionally weakening your economy, when you project your power to often, it has a chance to backfire, and create enemies, which in turn may force you to project more power on other countries.

2) industrial might enables your country to either a) make creature comforts to make your life better or b) sell/trade the stuff made in order to acquire creature comforts to make your life better. More industrial might = more creature comforts, so yes....there IS a direct coralation there.

So the industrial might of the Soviet Union made the soviet population live in wealth? It all depends on the government and the market model being used. More industrial might also means more working hours, the US has a 6-day workweek, at least so i have been told. In the Netherlands we have a 5 day workweek, leaving more free time for other things.
Yes, it enables you to make more creature comforts, doesn't mean they are actually made.

3) without military and/or diplomatic weight, you exist at the mercy of those with more guns than butter. you therefore, exist in a perilous state. It is fortunate that the Netherlands are surrounded by democratically minded states who have no interest in gross territorial acquisition. How long do you suppose the Netherlands would exist as an independent nation if, say, it were tucked between Iran and Iraq? You would quickly either arm yourselves, seek a close alliance with someone much bigger than either of these two (sorta like Kuwait did with the US), or you would be an appendage to one or the other of them. Those would be your possible futures.

Would that be the Iraq and Iran that formed due to US actions, or an Iran and Iraq that would have formed without any actions .

[Velociryx]

Military might, Lem, should be viewed as Insurance. If you never need it, that's great! If you need it tho, and don't have it....kiss your country g'bye.

True, like insurance, you should never carry more than you need, but make the mistake of not having enough, all it takes is one crisis to crumble everything you've worked so hard for.

As to industrial might....of course my example was oversimplified....merely to point out to you tho, that yes, there IS a coralation between industrial might and creature comforts. Your initial post made it seem as tho the two have nothing to do with each other. I don't think that's what you meant, which is why I resorted to the simple example.

Iraq/Iran....either...neither. Pick two bullies bigger than the Netherlands. If your nation was stuck between them, those would be your choices. Sad but true, my friend....we hunting apes that call ourselves homo sapiens are not so advanced that the barrel of a gun does not dictate peace. More often than not, it certainly does.

-=Vel=-

[Adalbertus]

As to industrial might....of course my example was oversimplified....merely to point out to you tho, that yes, there IS a coralation between industrial might and creature comforts. Your initial post made it seem as tho the two have nothing to do with each other. I don't think that's what you meant, which is why I resorted to the simple example.

There are two things about industrial might: One is the "gross" thing, which you need when you have an economic fight against another nation. The other is about creating comfort for the population, which relates roughly to GNP per capita. And here, the EU and the USA are approximately on par, and the Netherlands probably better than the USA.

Iraq/Iran....either...neither. Pick two bullies bigger than the Netherlands. If your nation was stuck between them, those would be your choices. Sad but true, my friend....we hunting apes that call ourselves homo sapiens are not so advanced that the barrel of a gun does not dictate peace. More often than not, it certainly does.

I can name you these bullies: Germany and France. And the most interesting thing: The Netherlands became independent from Germany only in 1648 (mainly due to the influence of France after Germany was laid in ruins by a joint effort of France and Sweden), at the height of their economic might. After that, the Netherlands declined more than increased in power, and for their size they are still quite powerful. They had Germany and France running over them, and still survived. It's not because of their big army, but because they managed to use one side for their purposes. Good diplomacy.