China becomes top world economy under PPP

   Is China already the world’s biggest economy? It depends on the methodology. If calculated as nominal values, USA is still number one. Just like it was in the entire 20th century. Errr… a little mistake. Some years ago, based on nominal values, number one was… Zimbabwe. Yea, with its hyperinflation, even one banknote of 100 trillion dollars was bigger not only than US economy but even than the entire world economy.

   This joke was included to show what ought to be the methodology. These days Bloomberg published an information that China is about to surpass USA when GDP is calculated in the base of Purchase Power Parity. I.e. when in calculations are compensated the differences coming from price levels. I.e. this calculation shows the real production of goods and services, and not their value measured in someone’s currency.
   Calculated in dollars China is still below USA. But this is due to the higher price-level in USA. In fact American households and businesses are consuming less real goods than Chinese ones. I don’t mean “per capita” but as a whole – in China real production is more than in USA.
   Today the interesting question is whether China will surpass USA in nominal value during the Obama’s second term. Or this will happen in the first term of the next President. Anyway, at the moment, de facto China is the world’s dominating economy power. USA is just 2nd, with India 3rd.
   All this will open series of new fundamental questions like:
   1.Is the democracy really the best system, or better is the limited democracy, that is more efficient and creates better environment for the capitalism?
   2.Is the industry still the main economic factor, and is the “economy of services” a bubble and an illusion?
   3.Is the free trade beneficial for already rich countries, or is just a way of draining wealth towards poorer countries?
   4.Is the money-print real compensation for lacking factories and production?
   It is good to see who is occupying the leading positions. It is a shame for USA to be second, but it is also a shame for Germany or Japan to go behind India. It is also good to see the rise of other powers like Russia. It returns as global political power, and this is based on its becoming stronger economy (7th under PPP).
   Welcome to the multi-pole world. That is the good news. The bad one is the West is crashing. After decades of focusing on all types of liberalism, but destroying the liberalism in domestic economy, and after outsourcing all possible industries in Asia, now the West is one big Zero. Yes it is Zero. An illusion of services, government jobs, social rights and money-print.
   It is a time of rethink. A time of awakening. If it is generally possible and the situation is not always behind the break point…

Dobri B.
April-30th-2014


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