GDP and lies

When a government moves left, it damages the economy. When it moves left far enough and fast enough, this becomes embarrassing, so it lies about the economy. North Korea, Cuba, and Argentina are infamous examples of this, the Soviet Union used to be an infamous example. Lately the USA has been understating inflation and overstating real GDP growth. How far out of contact with reality have things gone?

CIA World Factbook for USA GDP (purchasing power parity): $15.66 trillion (2012 est.)

CIA World fact book for China: GDP (purchasing power parity): $12.38 trillion (2012 est.)

But it is obvious that in reality Chinese real GDP is about ten or fifteen percent greater than the USA, even though China also has been overstating its growth. Chinese GDP per head is still substantially lower than the USA, but total GDP is higher, in that Chinese in total buy more cars, more computers, more internet, more of just about everything.

Therefore, the US is overstating its real GDP by around twenty five percent, thirty five percent, or so, the cumulative effect of overstating growth by one or two percent every year for many years.

If we suppose that the books have been cooked uniformly since 1980, and that China has been entirely truthful about its growth, then the US has been overstating its growth by around one percent per year.

My gut feeling is that the cooking of the books has been markedly more severe since 2005-2006, that the discrepancy has been much more severe and obvious since then, in which case growth has recently been overstated by several percent, and the US is in economic decline.  This is consistent with the reduction in cars per head, meat per head, and electricity per head.  Americans are simply getting poorer.

Now one might suppose that while the median American is getting poorer, this is compensated by some Americans getting richer, and there is some truth in this.  While the number of cars per head is falling, the number of private jets per head is rising.  However, the large GDP discrepancy suggests absolute decline, that the US, as a whole, simply cannot afford what it used to be able to afford – such as a money losing empire.

13 Responses to “GDP and lies”

  1. spandrell says:

    The Chinese buy more cars but cheaper ones. They also eat more stuff but it’s (even) lower quality. Their internet sucks and most computers do too, they also counterfeit most software.

    That surely counts. PPP is a pretty stupid way of measuring.

    • jim says:

      On the other hand, the nice tourist places are full of Chinese tourists, while the US tourists are apt to be backpackers. Steel is steel, and the Chinese consume more steel. Chinese consume more energy, more electricity. Will you tell me their electricity is inferior quality?

  2. SOBL says:

    Another difference, which will create a further divide between the two nations’ economies, is that the Chinese leadership looks poised to pop a bubble and completely redirect banks to invest elsewhere. The long process of building buildings for the sake of building looks to be ending. Seems the new leadership is scrapping the building expenditure-real estate model and looking to change where the money goes to revamp their economy. America could do this but does not have the political will to do this. Too many votes to buy and too much money to slip to your benefactors while still enjoying the exorbitant privilege of the reserve currency of the world.

  3. spandrell says:

    Steel is steel but its used to make crappy houses people don’t live in.

    Electricity is electricity but most is used by factories to make products for export .

    Nice tourist places are full of tour packages of chinese tourists paid by the local state enterprise. Backpackers can’t get visas. They backpack plenty inside the country.

    • jim says:

      China eats twice as much meat as America. Meat is meat.

      • spandrell says:

        The input costs to produce that meat are an order of magnitude lower than those of America.
        It’s awful meat. It’s impossible to find a decent steak, even in Shanghai for less than 100 dollars.

        PPP is stupid.

    • Dan says:

      The number 13 for the US. The US number is now in 425. But taking inflation into account, only about 200 of them would be billionaires in 1985 (a cutoff of around 2.2 billion).

      So we are looking at a 15x increase. Meanwhile the US pop is maybe 35% larger now than it was then.

      So we are really looking at maybe a 10x increase in the number of billionaires per capita inflation adjusted rather than a 100x increase.

      Still a lot, it’s true.

  4. silver price says:

    China’s official 7.8 percent economic growth for 2012 may have overstated expansion by twice the real rate, and is only now headed for a “legitimate” 8 percent gain, Eaton Corp. Chief Executive Officer Sandy Cutler said.

  5. While GDP and NDP were nearly equal on average until 1980, NDP growth since 1980 has trailed GDP growth by 0.3 percentage points in the last three decades. This gap will increase with the new methodology.

  6. silver price says:

    So what are we to make out of the periodical pronouncements that the economy, as depicted by real GDP, grew by a particular percentage? All we can say is that this percentage has nothing to do with real economic growth and that it most likely mirrors the pace of monetary pumping. We can thus conclude that the GDP framework is an empty abstraction devoid of any link to the real world.

  7. shell says:

    Obama is trashing Reagan and his GDP INSTEAD of taking responsibility or admitting his policies haven’t reached 3 % GDP for the US in the 8 years he’s been president. More of the same “decieve,divert, and divide”lies from the left.

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