Re: Democrats destroying America ...

In article <suOdnalxW6vPhrbbnZ2dnUVZ_qqrnZ2d@xxxxxxxxxxxxxxxxxxxxxxxx>, Bill Todd <billtodd@xxxxxxxxxxxxx> writes:
George Cook wrote:
In article <KsOdnY9oQacn5LTbnZ2dnUVZ_hOdnZ2d@xxxxxxxxxxxxxxxxxxxxxxxx>, Bill Todd <billtodd@xxxxxxxxxxxxx> writes:
....
Your figures
would be radically different by varying amounts per nation if the exchange
rates for the USD had been significantly different during that period,
yet nothing actually would have chanced in regard to each nation's GDP
(actually if the exchange rates changed, then those changes might have
economic impacts on the various GDPs, but those changes would show up
in unpredictable ways in the GDP data (i.e, the distortions would simply
vary)).

Are you suggesting that exchange rates are completely arbitrary? I
realize that they used to be in unusual cases, and even may still be in
a very few, but my impression was that well before the turn of this
century *most* exchange rates came pretty close to reflecting actual
relative currency value (if they didn't, they'd provide awfully easy
ways for large numbers of people to generate large amounts of income,
just playing the significant differences in real value - not just very
short-term ones, either).

Please see my response to JF concerning the renminbi which was held at
the exact same "arbitrary" value based on the USD for the ten years prior
to July 2005 and is now being held to slowly changing "arbitrary" values.
Values which China picked and/or computes using "arbitrary" formulas.
Given that China is the world's second largest economy, I doubt it would
be proper to dismiss it as an unusual case.

Because the renminbi is (currently 'is' to a more limited extent since
2005) traded based on the USD, one question which I would like to know
the answer to is (given the size of both China's GDP (3/4 the size of
the US GDP) and foreign trade) whether renminbi trading distorts the
exchange rate of the USD against all other currencies.

Since you appear to agree that Wikipedia is okay to use, i will do so
here.

See http://en.wikipedia.org/wiki/Category:Fixed_exchange_rate
for the 43 currencies which currently have fixed exchange rates.

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 (I don't have the time now to investigate which exact exchange
rates are used (i.e., the current one, a median or average one for the GDP
time period, or some other method)).

So you *do* believe that it's a valid mechanism for comparing relative
GDPs at a single point in time: that's a start.

Note that I was careful to say "reasonably accurately". The one thing
which requires the word "reasonably" (i.e., it is why I said "reasonably")
is the exchange rate distortions, but at a single point in time these
distortions tend not to be major and when they are, it is easy to footnote
them. So, yes, it's a reasonably valid mechanism for comparing relative
GDPs at a single point in time. Although a comparison to the Yen, for
example, at some points in the last five years probably need footnoted
as indicated by the graph I discuss next.

Please take a look at the USD to Yen exchange rate graph for the
preceeding five years (which has a valuation change range of nearly
30%) at:

http://finance.yahoo.com/currency/convert?from=USD&to=JPY&amt=1&t=5y

Your GDP growth rate calculation method done across the various two,
three and four year periods within that five years would prove what
exactly about the US economy? What would your calculation across the
entire 5 years prove about the US economy? I am going to assume that
any readers of this (other than Bill) are smart enough to figure that
out on their own.

See http://en.wikipedia.org/wiki/Purchasing_power_parity
under the heading "Need for PPP adjustments to GDP":
Using market exchange rates to compare countries' standard of living or
per capita Gross Domestic Product can give a very misleading picture.
The exchange rate only reflects traded goods in contrast to non-traded
ones. Also, currencies are traded for purposes other than trade in goods
and services, e.g., to buy capital assets whose prices vary more than
those of physical goods. Also, different interest rates, speculation,
hedging or interventions by central banks can influence the
foreign-exchange market.

I could go on, but no point in beating a dead horse.


George Cook
.

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