Re: Democrats destroying America ...

In article <PrSdndag3KzHOrbbnZ2dnUVZ_j2dnZ2d@xxxxxxxxxxxxxxxxxxxxxxxx>, Bill Todd <billtodd@xxxxxxxxxxxxx> writes:

Sorry for the quick second post, but I forgot a question I had for Bill.

What happens to your numbers if a couple years from now the exchange
rates change significantly in favor of the USD. What will the numbers
using your method look like then? Will they have any more meaning than
your current numbers have? Will the tooth fairy have magically changed
the economic conditions in the various countries relative to each other?


George Cook

Rather than just wait for you to respond with more
predictably-irrelevant bluster that completely evades the point about
the importance of exchange rates in the GDP comparison that *you*
requested, I'm going to spell out the issue in terms that even you
should be unable to misinterpret:

George Cook wrote:

...

Your normalizing concept is only valid for a single static point in time
such as when all countrys produce their annual GDP figure. The figures
can then be reasonably accurately converted to USD at the USD exchange
rates

That's once.

...

The USD is great for comparing the relative sizes of GDPs

That's twice - should be enough to take you at your rather clear word,
n'est-ce pas? But just in case...

...

Perhaps your understanding of GDP needs work. Wikipedia says:

The GDP of a country is defined as the market value of all final goods
and services produced within a country in a given period of time. It is
also considered the sum of value added at every stage of production of
all final goods and services produced within a country in a given period
of time.

Your quote from WP above yet again emphasizes that GDP is a computed
*market value*, and thus subject to comparisons between countries that
*necessarily* must take exchange rates into account (since those rates
*define* relative value between the applicable currencies). The fact
that the IMF tables provide exactly such a mechanism for comparison
therefore does not strike one as a remarkable coincidence.

So:

In 2001, France's GDP was 1498 billion in then-current Euros, or 1341
billion in then-current dollars at the then-current exchange rate. The
U.S. GDP was 10128 billion in then-current dollars. As you state twice
above and then support with a quote from WP, and as the IMF at least
seems to suggest by virtue of including this mechanism in their reports,
converting to dollars gives us the appropriate way to compare the sizes
of the two GDPs, and in 2001 this comparison yields the conclusion that
the U.S. GDP was about 7.55x the size of France's GDP.

In 2007, the IMF figures list France's GDP as 1846 billion in
then-current Euros, or 2401 billion in then-current dollars at the
then-current exchange rate. The U.S. GDP is listed as 13770 billion in
then-current dollars. Again, as you state twice above and then support
with a quote from WP, and as the IMF at least seems to suggest by virtue
of including this mechanism in their reports, converting to dollars
gives us the appropriate way to compare the sizes of the two GDPs, and
in 2007 this comparison yields the conclusion that the U.S. GDP was only
about 5.74x the size of France's GDP.

Thus using the method of comparison that you have very clearly endorsed,
France's GDP grew significantly (by over 30%) relative to the U.S.'s GDP
over this 6-year period, regardless of what the growth of the two GDPs
looked like from *purely internal* viewpoints (which may be an
appropriate yardstick when considering purely internal matters but which
clearly do *not* adequately describe trans-national comparisons of the
kind you challenged me to make).

If you wish to challenge these computations, please be *very specific*
about what you find wrong with them, and why. In deliberating whether
or how to go about that, you might find this additional material from WP
useful:

[quote - my comments in brackets]

Cross-border comparison

The level of GDP in different countries may be compared by converting
their value in national currency according to either

* current currency exchange rate: GDP calculated by exchange rates
prevailing on international currency markets

* purchasing power parity exchange rate: GDP calculated by
purchasing power parity (PPP) of each currency relative to a selected
standard (usually the United States dollar).

The relative ranking of countries may differ dramatically between the
two approaches. [no ***]

* The current exchange rate method converts the value of goods and
services using global currency exchange rates. This can offer better
indications of a country's international purchasing power and relative
economic strength. [my impression is that 'relative economic strength'
is exactly what you challenged me to compare; if not, please explain why
it is not relevant] For instance, if 10% of GDP is being spent on buying
hi-tech foreign arms, the number of weapons purchased is entirely
governed by current exchange rates, since arms are a traded product
bought on the international market (there is no meaningful 'local' price
distinct from the international price for high technology goods).

* The purchasing power parity method accounts for the relative
effective domestic purchasing power of the average producer or consumer
within an economy. This can be a better indicator of the living
standards of less-developed countries because it compensates for the
weakness of local currencies in world markets. [indeed. unfortunately,
your earlier comments make it quite clear that you do *not* consider the
standard of living to be very relevant to the health of the economy, so
the PPP metric seems far less relevant to the comparison that you
challenged me to make] The PPP method of GDP conversion is most relevant
to non-traded goods and services.

There is a clear pattern of the purchasing power parity method
decreasing the disparity in GDP between high and low income (GDP)
countries, as compared to the current exchange rate method. This finding
is called the Penn effect.

[/quote]

The 'Penn effect' itself makes interesting reading: it suggests that
the U.S. may be becoming a low-income, third-world country when compared
with healthier economies like the EU - which is consistent with my
observations about the trends in the standard of living of the bottom
half of our population.

- bill
.

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