Poll

1 vote (9.09%)
5 votes (45.45%)
3 votes (27.27%)
2 votes (18.18%)

11 members have voted

pacomartin
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October 8th, 2014 at 8:40:15 PM permalink
China Just Overtook The US As The World's Largest Economy

The headlines scream that it has finally happened. The source is no less than the World Economic Outlook Database (WEO October 2014 Edition) of the International Monetary Fund.

We all knew it would happen, but the WEO April 2014 Edition said it wouldn't happen until 2019.

Read the short article, look at the WEO databse website, vote, and give me your opinion.
beachbumbabs
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October 8th, 2014 at 9:17:48 PM permalink
I think the calculation adjustment for purchasing power is legitimate, but I do think you have to look at both statistics (raw and adjusted, both in the article) to get a true picture of what they're evaluating. So, as you said, it was only a matter of time, the actual point is sort of just a data point, and the trend line is more indicative.

The question is, to me, whether the US has peaked and will go into decline in the next decade or two (vibrancy, innovation, productivity), or whether we will continue to grow, no matter our ranking relative to other countries. They have 4x the people we have to work with and rapidly developing infrastructure and modernization. We seem moribund and trapped in argument and indecision. And yet the innovation is still coming from our population, and the single biggest leak in our national tire is Chinese industrial espionage (according to FBI Dir. last Sunday) stealing those discoveries.

So, we have the tools, but not the will, to match or outpace the growth curve of the past. The Chinese have the will, but not the in-house intellectual tools. Where it goes from here? 64K question.
If the House lost every hand, they wouldn't deal the game.
EvenBob
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October 8th, 2014 at 9:36:31 PM permalink
Averaged together the average Chinese household income
is $3000. In the US it's $50,500. They can buy cheap crap
made with cheap labor, but their quality of life is nowhere
near ours. We have better stuff at garage sales and Goodwill
then they do in their stores. Like the article says, in terms
of raw purchasing power, they are long way from catching us.
"It's not called gambling if the math is on your side."
pacomartin
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October 8th, 2014 at 10:54:57 PM permalink
Quote: beachbumbabs

I think the calculation adjustment for purchasing power is legitimate, but I do think you have to look at both statistics (raw and adjusted, both in the article) to get a true picture of what they're evaluating.



Yes, but we are buying and selling goods in the local currency. So the PPP is what matters in our day to day lives. Take the famous Big Mac Index
In July 2014 in the United States the average price is US$4.7950
In Canada a Big Mac is CAD$5.64=US$5.2512 at the exchange rate of 1.0741CAD/USD
So it is more expensive to get my lunch in Canada (at current exchange rates)

In China the Big Mac is 16.9 Yuan = US$2.7266 at the exchange rate of 6.1983 Yuan/USD
So my purchasing power is much less

Doesn't it make sense to adjust China's $10 trillion GDP by purchasing power?

And EvenBob is correct. China has over 4X the population of the USA, so on a per capita basis the two countries are not even close. But I hope that most people understand that the average Chinese individual has a wealth very different than the average US citizen.
Buzzard
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October 8th, 2014 at 11:06:56 PM permalink
Wasn't Japan to rule the economic world in the 70"s and 80's ? I remember at AT&T we had all this workforce emulate Japanese sucess bullshit. All nicey/nice management/worker relationships. About all the committee's accomplished was free pizza sometime and microwaves put in the break rooms.

I have great confidence in American Business leaders. They will screw the Chinese before this is all over !
Shed not for her the bitter tear Nor give the heart to vain regret Tis but the casket that lies here, The gem that filled it Sparkles yet
Buzzard
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October 8th, 2014 at 11:07:43 PM permalink
" And EvenBob is correct. " A first time for everything !
Shed not for her the bitter tear Nor give the heart to vain regret Tis but the casket that lies here, The gem that filled it Sparkles yet
pacomartin
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October 9th, 2014 at 12:20:16 AM permalink
These twice yearly IMF reports are certainly worth headlines.
The April 2011 report was the first to actually predict a year:
The Age of America ends in 2016: IMF predicts the year China's economy will surpass U.S.

The newspaper is responsible for the hyperbole in the headline (not the IMF).

The April edition said that the GDP of China for 2014 would be 62,784 billion Yuan. The October edition revised the estimate upwards by 2.55% to 64,453 billion Yuan.

However, the IMF radically altered their estimate of the equivalent purchasing power parity in International (i.e. USA) dollars. It increased over 20% pushing China above the USA as the world's biggest economy two years earlier than the previous prediction.

However, next April they may issue a new PPP factor, and China will no longer be ranked #1.
EvenBob
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October 9th, 2014 at 12:42:50 AM permalink
Quote: pacomartin


And EvenBob is correct. China has over 4X the population of the USA, so on a per capita basis the two countries are not even close. But I hope that most people understand that the average Chinese individual has a wealth very different than the average US citizen.



Go into the average 70 year old Chinaman's
attic, basement and garage (he has none of
these, bear with me) and you find nothing
of value. Do that in the US and you will find
treasures galore. Antiques and collectibles
worth more than the average Chinese
household makes in 2 years. That's wealth,
when your junk is worth more than your
competitors annual income.
"It's not called gambling if the math is on your side."
AZDuffman
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October 9th, 2014 at 4:11:15 AM permalink
Quote: beachbumbabs



The question is, to me, whether the US has peaked and will go into decline in the next decade or two (vibrancy, innovation, productivity), or whether we will continue to grow, no matter our ranking relative to other countries. They have 4x the people we have to work with and rapidly developing infrastructure and modernization. We seem moribund and trapped in argument and indecision. And yet the innovation is still coming from our population, and the single biggest leak in our national tire is Chinese industrial espionage (according to FBI Dir. last Sunday) stealing those discoveries.



We are already in decline in many ways. We have pockets of innovation in the form of both production (eg: shale fracking) and services (eg: uber, airbnb) but in most cases there are large forces trying to stop said innovation. Too many believe we can live off already created wealth without creating new wealth.

That being said, the "PPP" thing is flawed. The real flaw comes from calculating "services." Imagine a hotel stay at a near-top level hotel. Tonight a room will be rented in Akron, OH; Pittsburgh, and NYC. On PPP they are all the same, one night in a nice hotel. But the one in Akron takes and creates the least wealth while the one in NYC by a large margin the most. Ah, but it is the same room says the IMF........

A hotel room needs sheets probably once a year. The sheets all come from say China (in reality where matters little) who sells to everyone at a fixed price. So the hotelier in Akron has to use three nights revenue to buy the sheets, the guy in Pittsburgh 2 and the guy in NYC just one.

So take this out to the world stage. On the world market the USA will still have more wealth for trade than China, just like our hotel owners in NYC.

China is still about half the size of the USA and will take decades to really catch up. Dynamic, not static, analysis tools need to be used, which too many people ignore.
All animals are equal, but some are more equal than others
steeldco
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October 9th, 2014 at 4:22:51 AM permalink
Quote: AZDuffman

We are already in decline in many ways. We have pockets of innovation in the form of both production (eg: shale fracking) and services (eg: uber, airbnb) but in most cases there are large forces trying to stop said innovation. Too many believe we can live off already created wealth without creating new wealth.

That being said, the "PPP" thing is flawed. The real flaw comes from calculating "services." Imagine a hotel stay at a near-top level hotel. Tonight a room will be rented in Akron, OH; Pittsburgh, and NYC. On PPP they are all the same, one night in a nice hotel. But the one in Akron takes and creates the least wealth while the one in NYC by a large margin the most. Ah, but it is the same room says the IMF........

A hotel room needs sheets probably once a year. The sheets all come from say China (in reality where matters little) who sells to everyone at a fixed price. So the hotelier in Akron has to use three nights revenue to buy the sheets, the guy in Pittsburgh 2 and the guy in NYC just one.

So take this out to the world stage. On the world market the USA will still have more wealth for trade than China, just like our hotel owners in NYC.

China is still about half the size of the USA and will take decades to really catch up. Dynamic, not static, analysis tools need to be used, which too many people ignore.



You seemingly are not seeing the forest thru the trees. Big picture is that China is growing much more rapidly, will continue to do so, and will surpass the US eventually, irrespective of which metric you want to use. In a decade or two, I will probably be saying the same about India.
DO NOT blindly accept what has been spoken. DO NOT blindly accept what has been written. Think. Assess. Lead. DO NOT blindly follow.
AZDuffman
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October 9th, 2014 at 4:54:37 AM permalink
Quote: steeldco

You seemingly are not seeing the forest thru the trees. Big picture is that China is growing much more rapidly, will continue to do so, and will surpass the US eventually, irrespective of which metric you want to use. In a decade or two, I will probably be saying the same about India.



This is what I said about "dynamic analysis." China cannot continue to grow at the rates that it has, the law of large numbers starts to take hold. Additionally, every "miracle economy" has had some kind of crash to knock it off course for 5-10 years along the way. China has a banking system that makes 2008 look like a walk in the park right now. They have huge but empty cities of buildings. They sell the USA many goods at near cost to keep the factories humming. Sooner or later, and it is happening as we speak, their wages will no longer be rock-bottom and some place will be "China's China."

In the 1970s the USSR was going to take over. In the 1980s it was Japan. Now it is China. Maybe I am just a cynical MAWG, but I have seen and heard it all before and will again before my time ends.
All animals are equal, but some are more equal than others
Sonuvabish
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October 9th, 2014 at 6:24:22 AM permalink
Quote: AZDuffman


Ah, but it is the same room says the IMF........



No, they don't.
Sonuvabish
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October 9th, 2014 at 6:31:39 AM permalink
I'm a bigot.
Dicenor33
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October 9th, 2014 at 6:35:28 AM permalink
China as well as Russia has been free for the past 30 years or so, compared to almost 250 years of free enterprise. Sure there will be some lapses here and there, but the fact remains, it's highly competitive societies, add to it chess players type mentality and the future of the world's economy is pretty much an unpredictable thing.
pacomartin
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October 9th, 2014 at 6:54:26 AM permalink
IMF screwed up the calculation seems to be a popular choice. Let's look at the data:

The April edition said that the GDP of China for 2014 would be 62,784 billion Yuan.
The October edition revised the estimate upwards by 2.55% to 64,453 billion Yuan.

The April edition said that the GDP of USA for 2014 would be $17,528.382 billion.
The October edition revised the estimate downwards by -0.64% to $17,416.253 billion.

The rest of the analysis is how to convert the GDP to the same basis.
Current market exchange rates were 6.261 Yuan/USD in April, and 6.224 Yuan/USD in October.
That would bring the GDP of China to just over $10 trillion in USD.

But Purchasing Power exchange rates were radically changed.
IMF calculated PPP exchage rates were 4.293 Yuan/USD in April, and 3.655 Yuan/USD in October.
It is equivalent to saying that when I convert my dollars to Yuan I have a 46% increase in purchasing power (according to April edition), but that conversion was revised to 70%(according to October edition).

This led to the conclusion that in PPP terms China's GDP was estimated at $14,625.212 billions in April and $17,632.014 billions in October.
Hence the jump of $3 trillion in PPP (or 20.56%), despite being a correction of only 2.55% in Yuan.

Thus we have the headline!
China is ranked #1.
EvenBob
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October 9th, 2014 at 12:16:53 PM permalink
China and India lack infrastructure. We have an
entire country full of good roads and bridges
and high power electric lines. China and India
do not, and won't have for a long time. A large
% of rural areas in China still have no power.
"It's not called gambling if the math is on your side."
ajemeister
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October 9th, 2014 at 12:26:15 PM permalink
define "good roads and bridges and high power electric lines"

a lot of the infrastructure in America isn't very well maintained.
EvenBob
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October 9th, 2014 at 1:01:16 PM permalink
'While China now has the largest economy in absolute numbers, its per capita income (adjusted for purchasing power) still ranks 90th worldwide, according to the International Monetary Fund. China's economic development is about the same level as the United States was back in the 1920s. And China's gross domestic product (GDP) per person is only about 17 percent of that of the U.S.'

90th? 17%?
"It's not called gambling if the math is on your side."
pacomartin
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October 9th, 2014 at 2:30:33 PM permalink
Quote: EvenBob

'While China now has the largest economy in absolute numbers, its per capita income ...



I see an article with that quote dated March 23, 2012

The last report just issued Oct 2014 indicates 23.6% (up from 17%).

China may not reach the level of GDP as the USA on a per capita basis. It still has 4.3 times the population of the USA and still far exceeds the population of the entire Americas (North and South continent).

It may make sense to compare China with all of the Americas. USA and Canada constitute 35% of the population of the Americas. You may live to see the day that 35% of the population of China has a per capita GDP on par with the USA.
EvenBob
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October 9th, 2014 at 2:48:30 PM permalink
Quote: pacomartin

You may live to see the day that 35% of the population of China has a per capita GDP on par with the USA.



They say when the next big market correction hits,
it will hurt China the most.
"It's not called gambling if the math is on your side."
Canyonero
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October 9th, 2014 at 3:38:34 PM permalink
Quote: pacomartin

China has over 4X the population of the USA, so on a per capita basis the two countries are not even close. But I hope that most people understand that the average Chinese individual has a wealth very different than the average US citizen.



It is two cups of tea:

- You look at the countries as whole, you have your headline: China overtakes US.

- You look at GDP PPP per capita neither US nor China are at the top. China is way down the list while US is doing pretty good if you discount the city states. (Top spot in that case goes to Norway...) However, you then should also look at distribution of wealth. In the US you have to be lucky to benefit from the high average GDP, while even the poorest person in Norway is doing ok.
AZDuffman
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October 10th, 2014 at 3:16:15 AM permalink
Quote: Canyonero

It is two cups of tea:

- You look at the countries as whole, you have your headline: China overtakes US.

- You look at GDP PPP per capita neither US nor China are at the top. China is way down the list while US is doing pretty good if you discount the city states. (Top spot in that case goes to Norway...) However, you then should also look at distribution of wealth. In the US you have to be lucky to benefit from the high average GDP, while even the poorest person in Norway is doing ok.



The average person in the USA benefits exceptionally well from the per capita GDP. The poorest Americans would be considered "rich" in most of the rest of the world. Try it out here! A minimum wage earner in the USA is in the top 8% worldwide!

This minimum wage earner lives with electricity, water (unless they are in Detroit and refuse to pay their bill), probably a cell phone of some sort, and a host of other things that poor people worldwide can only dream about. Half of China still lives in Third World conditions.

Norway gets their GDP from oil exports and is little different than say Kuwait in that they spread such wealth over a fairly small population.

Per Capita is important, but aggregate GDP is what makes a nation strong on the world stage. Japam has had a higher per capita than the USA for decades, but if we went head to head in war they would be crushed. They would not be able to win a space race. The total national wealth is just too low compared to the USA.

In any event, fear not China. We will have a new enemy by 2025 if history is any guide.
All animals are equal, but some are more equal than others
pacomartin
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October 10th, 2014 at 8:08:21 AM permalink
Quote: AZDuffman

In any event, fear not China. We will have a new enemy by 2025 if history is any guide.



I would be reluctant to use the word enemy. I prefer "rivals".

Although I worked for anti-submarine warfare in the Navy. The chief concern in that area used to be Russia, but now it is China. In the triad of the Mutually Assured Destruction policy, the submarine force was always the last leg. You know where the missile silos are built, you can follow the airplanes, but you don't know where the submarines are located until they fire the nuclear missiles.

Russia retired much of their SSBN force since it was too expensive to maintain. At first we feared the Russians would sell their Ballistic submarines to China so we bought them up to help scrap them. But the Chinese are building their own fleet which is far more powerful than the old Russian fleet.
kenarman
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October 10th, 2014 at 9:46:35 AM permalink
I think most of the posters are seriously underestimating how fast the chinese standard of living is increasing. The 2012 figures have only 29% of the urban population earning less than $9,000 per year and 54% earning $9 - $16,000 which puts this group into a solid middle class postion in purchasing power in China. The numbers have increased since then. Over half of the chinese population has been urban since the end of 2011. The urban population reached 700+ million in 2012. 71% of 7M equals 497 million Chinese have a middle class or better standard of living. This is more than the entire population of the US.

The world largest on-line sales company is Chinese based Alibaba and is larger than Amazon and Ebay combined and is expected to pass WalMart as the worlds largest retailer in 2016.

I don't want to piss the whole forum off but the rest of the world has caught up and the US is no longer the leading innovator in the world.
Be careful when you follow the masses, the M is sometimes silent.
beachbumbabs
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October 10th, 2014 at 9:50:11 AM permalink
Quote: kenarman

I think most of the posters are seriously underestimating how fast the chinese standard of living is increasing. The 2012 figures have only 29% of the urban population earning less than $9,000 per year and 54% earning $9 - $16,000 which puts this group into a solid middle class postion in purchasing power in China. The numbers have increased since then. Over half of the chinese population has been urban since the end of 2011. The urban population reached 700+ million in 2012. 71% of 7M equals 497 million Chinese have a middle class or better standard of living. This is more than the entire population of the US.

The world largest on-line sales company is Chinese based Alibaba and is larger than Amazon and Ebay combined and is expected to pass WalMart as the worlds largest retailer in 2016.

I don't want to piss the whole forum off but the rest of the world has caught up and the US is no longer the leading innovator in the world.



This. I see what you see, which is what my post was about. I kept it short; this is more of it.
If the House lost every hand, they wouldn't deal the game.
bobsims
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October 10th, 2014 at 9:53:20 AM permalink
US will remain number 1 in debt which will continue to sink the country in too many ways to count.
Are you people enjoying your hope and change?
steeldco
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October 10th, 2014 at 10:04:02 AM permalink
Quote: bobsims

US will remain number 1 in debt which will continue to sink the country in too many ways to count.
Are you people enjoying your hope and change?



Just curious, was the US number 1 in debt in say 1970?
DO NOT blindly accept what has been spoken. DO NOT blindly accept what has been written. Think. Assess. Lead. DO NOT blindly follow.
kenarman
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October 10th, 2014 at 10:32:52 AM permalink
Quote: steeldco

Just curious, was the US number 1 in debt in say 1970?



I didn't bother looking it up but given the size of the economy it is quite likely the US was #1 in debt in 1970. The much more serious part of todays US debt is that in 1970 the debt was largely held domestically, the US debt is now largely held by China and at some point they are going to call the loan. That is when the world order will change signifcantly. The US and the rest of the western world need to be very worried about that day.
Be careful when you follow the masses, the M is sometimes silent.
steeldco
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October 10th, 2014 at 10:43:26 AM permalink
Quote: kenarman

I didn't bother looking it up but given the size of the economy it is quite likely the US was #1 in debt in 1970. The much more serious part of todays US debt is that in 1970 the debt was largely held domestically, the US debt is now largely held by China and at some point they are going to call the loan. That is when the world order will change signifcantly. The US and the rest of the western world need to be very worried about that day.



It was a bit difficult to find, but I see where the US became the No. 1 debtor in the world in 1985. That being the case, what was the poster's point about us being the No. 1 debtor now? Rather misleading to seemingly blame it on recent, or near past, events.
DO NOT blindly accept what has been spoken. DO NOT blindly accept what has been written. Think. Assess. Lead. DO NOT blindly follow.
Canyonero
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October 10th, 2014 at 11:25:21 AM permalink
Quote: AZDuffman



The average person in the USA benefits exceptionally well from the per capita GDP.



You are right, the average person is doing execptionally fine in the US (all of the Western World really).

Quote: AZDuffman

The poorest Americans would be considered "rich" in most of the rest of the world. Try it out here! A minimum wage earner in the USA is in the top 8% worldwide!



It is an important tool to put our lives in perspective worldwide. Something that most people in the US should consider before complaining about how tough their lives are.

I don't really get your minimum wage statistic however, since minimum wage is per hour and doens't take into account the actual access to work. You might not be able to work 2000 hours a year.


Lets look at the Gini coefficient that measures income inequality within a country:

Norway: 25.9% runner up after Denmark with the least income inequality.
USA: 48% way down the list behind Kenya, The Gambia and Congo

Quote: AZDuffman


This minimum wage earner lives with electricity, water (unless they are in Detroit and refuse to pay their bill), probably a cell phone of some sort, and a host of other things that poor people worldwide can only dream about. Half of China still lives in Third World conditions.



Bear in mind that income (and cell phones) is only a small factor in human quality of life. Access to healthcare (and thus life-expectancy) and education is equally important. Pre-Obamacare data suggests that there are five million people in the US (the most vulnerable) that have a standard of living in these respects that is comparable to the average person in LLDCs (least developed countries). For illustration one might say the country of Sierra Leone exists within the US.

Half of the country in China may live in "Third World condtions", but for a country like the the US, 1.5% of the population living in "Third World conditions" IMHO is unacceptable. There is no data on Norway for this btw. The social system there doesn't allow for any person living in society to fall into abject poverty. There might be some person living alone in the snow somewhere dying at 33, but he will never make the statistics.

It is probable that Obamacare will significantly reduce the number of people in abject poverty in the US. (Or has already?)
pacomartin
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October 10th, 2014 at 1:57:31 PM permalink
Quote: steeldco

It was a bit difficult to find, but I see where the US became the No. 1 debtor in the world in 1985. That being the case, what was the poster's point about us being the No. 1 debtor now? Rather misleading to seemingly blame it on recent, or near past, events.



The trade deficit started rising dramatically in 1983, from about $38 billion in 1982 to a peak of approximately $170 billion in 1987. It sent back down during the Sr. Bush administration, and began rising significantly under Clinton

We had $386 billion in all banknotes of any denomination circulating in 1995 (the year before the big headed c-notes were issued). As of 31 Dec 2013 we had $920 billion in c-notes circulating, but it is probably over a trillion dollars by now (estimated 75% overseas). It's a good deal as long as people accept the paper.
Buzzard
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October 10th, 2014 at 2:20:57 PM permalink
" I don't want to piss the whole forum off " Why not. It's why I post here !
Shed not for her the bitter tear Nor give the heart to vain regret Tis but the casket that lies here, The gem that filled it Sparkles yet
AZDuffman
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October 10th, 2014 at 2:22:40 PM permalink
Quote: Canyonero


I don't really get your minimum wage statistic however, since minimum wage is per hour and doens't take into account the actual access to work. You might not be able to work 2000 hours a year.



It is just a simple way of calculating what should be the lowest earnings a full-time person can make via minimum wage. We always hear left-wing politicians saying how people "work full time but live in poverty" or some similar statement. In actuality almost nobody stays at minimum wage for long anyhow. But to make my point I have to establish a baseline.

Quote:



Lets look at the Gini coefficient that measures income inequality within a country:

Norway: 25.9% runner up after Denmark with the least income inequality.
USA: 48% way down the list behind Kenya, The Gambia and Congo



Why on earth is income inequality important? Tell me which situation is better for you (assume purchasing power is the same):

You make $40,000
The CEO makes $1,000,000

OR

You make $35,000
The CEO makes $300,000

Which is better? Which do you prefer?

Quote:


Half of the country in China may live in "Third World condtions", but for a country like the the US, 1.5% of the population living in "Third World conditions" IMHO is unacceptable. There is no data on Norway for this btw. The social system there doesn't allow for any person living in society to fall into abject poverty. There might be some person living alone in the snow somewhere dying at 33, but he will never make the statistics.

It is probable that Obamacare will significantly reduce the number of people in abject poverty in the US. (Or has already?)



There is always going to be a bottom 1% and they will always live in terrible conditions compared to the rest of the society. Nothing is going to change this. Obamacare will increase, not decrease, poverty as it will make jobs more scarce since the price of employing someone has gone up. In fact, now people have to buy more and more expensive health insurance than they might otherwise have wanted.
All animals are equal, but some are more equal than others
thecesspit
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October 10th, 2014 at 2:28:30 PM permalink
Quote: AZDuffman


You make $40,000
The CEO makes $1,000,000

OR

You make $35,000
The CEO makes $300,000



The latter is a sign of a healthier economy, as wage disparity results in focused wealth, and focused wealth is not as efficient in making decisions in the marketplace.

Of course, individually, everyone prefers the first scenario.

Wage and wealth disparity is a problem in the long term. I don't claim that it needs to be fixed by government intervention. In fact, it may be in some cases government intervention is making the problem far worse. I maybe taking an overly Marxist view of this, in thinking inequality is a driver of revolutionary change.
"Then you can admire the real gambler, who has neither eaten, slept, thought nor lived, he has so smarted under the scourge of his martingale, so suffered on the rack of his desire for a coup at trente-et-quarante" - Honore de Balzac, 1829
kenarman
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October 10th, 2014 at 3:07:31 PM permalink
Quote: Buzzard

" I don't want to piss the whole forum off " Why not. It's why I post here !



Made me laugh Buzz
Be careful when you follow the masses, the M is sometimes silent.
EvenBob
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October 10th, 2014 at 3:08:27 PM permalink
Quote: thecesspit


Wage and wealth disparity is a problem in the long term. .



In Walmart today I saw a very fat girl
of about 20 whining to her mom like a
12 year old. I thought, no way this fat
thing is even worth minimum wage. Some
people are just almost worthless in the
job market, they get what they deserve.
"It's not called gambling if the math is on your side."
kenarman
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October 10th, 2014 at 3:11:40 PM permalink
Quote: thecesspit

The latter is a sign of a healthier economy, as wage disparity results in focused wealth, and focused wealth is not as efficient in making decisions in the marketplace.

Of course, individually, everyone prefers the first scenario.

Wage and wealth disparity is a problem in the long term. I don't claim that it needs to be fixed by government intervention. In fact, it may be in some cases government intervention is making the problem far worse. I maybe taking an overly Marxist view of this, in thinking inequality is a driver of revolutionary change.



Can't understand your first statement on focused wealth cesspit. My first thought is the opposite of your statement, maybe you can elaborate.
Be careful when you follow the masses, the M is sometimes silent.
Canyonero
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October 10th, 2014 at 4:02:13 PM permalink
Quote: AZDuffman





Why on earth is income inequality important? Tell me which situation is better for you (assume purchasing power is the same):

You make $40,000
The CEO makes $1,000,000

OR

You make $35,000
The CEO makes $300,000

Which is better? Which do you prefer?



We were assuming similar strength (GDP PPP per capita -wise) economies here, like Norway and the US. Your example doesn't work in that case, because the more the CEO makes, the less you make. Only if you live a much stronger economy than the country you use for comparison, you might still be better off in a high GDP high income inequality country.

Let's stick to Norway: You get the best of both worlds: High GDP PPP per capita plus low income inequality. Means the bottom 10% put a helluvalot more money into their pocket in Norway compared to the US.


Quote: AZDuffman

There is always going to be a bottom 1% and they will always live in terrible conditions compared to the rest of the society. Nothing is going to change this.



Ever heard of Norway or Switzerland or Sweden or ... I could go on.

Unfortunately the data on abject poverty in industrialized countries is scarce. But the national poverty line is a good indicator, especially if the countries are similiar in GDP per capita:

US: 15.1% percent below national poverty line (which is an ok value among industrialized countries)
Norway: as I mentioned - no data, estimated around 4%
Switzerland (higher GDP per capita than US so higher poverty line): 6.9%


Yes there will always be very poor people, but good policies can greatly reduce their numbers. You justly mentioned the fact though, that those are small countries. I guess those are just easier to govern than a country of 300 million (a number that is too big for the human brain to comprehend).
pacomartin
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October 10th, 2014 at 4:11:10 PM permalink
Quote: thecesspit

I maybe taking an overly Marxist view of this, in thinking inequality is a driver of revolutionary change.



One often hears that the American Revolution is poorly named, and it should be called the "American War of Independence". The leaders of the war were the American rich and elite who simply wanted to be free of the constraints of the monarchy. It was not about massive social upheaval.

True revolutions are invariably horrific affairs, as the underclass takes out their rage and hatred of the upperclass. Casualties were fairly low in the American war of Independence, while they were devastating in the Mexican war of Independence. The guillotine was invented as a way to reduce the pain of executions as a stop gap measure until the death penalty was eliminated. Instead it became the symbol of the bloody French revolution.

I think you need both inequality and the perception that pathways to changing your status are blocked. The USA may be getting more unequal, but still you have hip-hop stars who live like aristocrats.
EvenBob
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October 10th, 2014 at 4:28:48 PM permalink
Quote: pacomartin

The USA may be getting more unequal, .



I never get the equality argument. Nothing else
in life is equal. Ugly and beautiful, talented
and not, big penises and small, healthy and
sick, on and on. Smart and dumb, why would
dumb people be compensated the same as
the smart. Makes no sense.
"It's not called gambling if the math is on your side."
Canyonero
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October 10th, 2014 at 4:33:54 PM permalink
Quote: pacomartin


I think you need both inequality and the perception that pathways to changing your status are blocked. The USA may be getting more unequal, but still you have hip-hop stars who live like aristocrats.



An interesting thought! So Kim Kardashian keeps the system going. Give people the feeling "she is a useless piece of trash with no talent or skill and she made it big, so I might make it as well. " To stick with Marx: "Opium for the masses..."

The question is, do we want or need a revolution? The answer for most people on this forum has to be - no. So stay tuned for more Keeping up with the Kardashians.

The demographic change in the US might facilitate a peaceful system change, without the need for revolution, a rare occurence. 30 years from now no amount of gerrymandering will save the White minority.
pacomartin
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October 11th, 2014 at 3:40:26 PM permalink
Quote: Canyonero

So Kim Kardashian keeps the system going.



I was thinking more of Oprah Winfrey. She went from the near bottom of the social scale to nearly the top.

There are various measures of income inequality, with the GINI coefficient probably being one of the better known. Countries are ranked in order from most equal to most unequal in income distribution. Surprisingly there are very wealthy countries per capita near both ends.

Personally, I think the salient fact about the countries with the most equal distribution of wealth is that they are also socially homogeneous. But there are exceptions to that rule, as Portugal is not a country known for it's diversity (although immigration in recent decades may be changing that uniformity).

South Korea
Iceland
Switzerland
Norway
Denmark
Slovak Republic
Slovenia
Chile
... ...
United States
Mexico
Israel
Germany
Portugal
Italy


Nigel Holloway wrote a rather famous editorial in Forbes about a decade ago called In Praise of Inequality. He stated "Envy is easier to bear than poverty." Or as my mother used to say "Communism succeeding in institutionalizing the idea of coveting your neighbors goods".

Or to continue the pithy statements, Forbes magazine on creation of it's first billionaires list wrote “We needn’t love our billionaires, but we should be grateful we live in a society that keeps creating new ones.”
EvenBob
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October 11th, 2014 at 4:11:37 PM permalink
Quote: pacomartin

“We needn’t love our billionaires, but we should be grateful we live in a society that keeps creating new ones.”



People who rail against inequality don't seem
to get this. Sean Hannity likes to say not once
in his life did a poor person ever give him a job.
"It's not called gambling if the math is on your side."
kenarman
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October 11th, 2014 at 5:20:38 PM permalink
Quote: Canyonero

Yes there will always be very poor people, but good policies can greatly reduce their numbers. You justly mentioned the fact though, that those are small countries. I guess those are just easier to govern than a country of 300 million (a number that is too big for the human brain to comprehend).



The majority of poor people in America could be much better off is they got off their butts. Why do you think 10's of thousands of people every year risk their lifes to get into the US. Knowing that likely they will get sent home if caught or possibly spend years in almost jail like conditions waiting for refuge claims to be dealt with. These people know how well off they can be in the US. The majority of immigrants aren't the ones living off the government. Give them half a chance and few years and they become relatively successfull. It is those that are born here and think that 'the man' is keeping them down that clog up the bottom.

The fact that there are rich people has nothing to do with whether you are poor or not. Who gives a shit if Bill Gates is worth $50 billion. Other than a few hundred million in personal property/real estate most of his money is in stocks. Take his money and distribute it everyone of the 300 million odd people in the country and what happens. Everyone gets $1400 or so, oh yah now they are no longer poor for a day until they buy a big screen TV with it. Meanwhile someone else buys up the stock of Microsoft and becomes the next target. Or Not. Then Microsoft shuts down and 10's of thousands of good paying job disappear. What a bunch of crap this pay range statistics thing is.
Be careful when you follow the masses, the M is sometimes silent.
pacomartin
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October 11th, 2014 at 5:32:01 PM permalink
I should add to the headline news the per capita numbers for each country from the same IMF database edition.

The large countries are sorted by population. The small countries (under 10 million apiece) and cumulatively under 350 million or less than 5% of the world population are sorted by GDP/capita.

Only small countries have a GDP/capita greater than the USA.

USA's per capita GDP using PPP is 424% of China, but China's population is 429% of the USA. Result is that China has a bigger GDP (PPP) than the USA.

Millions GDP/capita Country Country GDP/capita Millions
1,368 $12,893 China Qatar $144,427 2.24
1,260 $5,777 India Luxembourg $92,507 0.55
319 $54,678 United States Singapore $81,346 5.47
251 $10,157 Indonesia Brunei Darussalam $77,824 0.41
203 $15,153 Brazil Kuwait $70,992 4.00
186 $4,746 Pakistan Norway $65,896 5.15
174 $6,082 Nigeria United Arab Emirates $65,037 9.30
158 $3,385 Bangladesh Switzerland $55,237 8.05
144 $24,764 Russia Hong Kong SAR $55,167 7.26
127 $37,683 Japan Bahrain $51,394 1.20
120 $17,925 Mexico Ireland $46,770 4.81
99 $6,986 Philippines Austria $45,411 8.52
91 $1,533 Ethiopia Sweden $44,695 9.71
91 $5,621 Vietnam Denmark $44,325 5.61
85 $11,073 Egypt Oman $44,062 3.71
81 $44,741 Germany Iceland $42,630 0.32
79 $703 Democratic Republic of the Congo Finland $40,455 5.48
78 $16,463 Islamic Republic of Iran New Zealand $34,975 4.54
77 $19,556 Turkey Israel $33,352 8.04
69 $14,443 Thailand Equatorial Guinea $32,557 0.78
65 $37,744 United Kingdom Malta $31,717 0.42
64 $40,445 France Trinidad and Tobago $31,264 1.35
60 $34,455 Italy Slovenia $29,359 2.06
54 $12,722 South Africa Cyprus $27,986 0.89
51 $4,752 Myanmar Slovak Republic $27,665 5.42
50 $35,485 Korea Lithuania $26,700 2.96
48 $13,459 Colombia Estonia $26,555 1.33
48 $1,941 Tanzania The Bahamas $25,082 0.36
47 $32,975 Spain Seychelles $24,523 0.09
45 $8,240 Ukraine Hungary $24,336 9.86
43 $3,138 Kenya Latvia $23,904 2.03
42 $22,101 Argentina Antigua and Barbuda $22,507 0.09
39 $14,256 Algeria Gabon $21,620 1.59
39 $24,429 Poland Uruguay $20,497 3.40
38 $1,752 Uganda St. Kitts and Nevis $20,459 0.06
36 $13,784 Iraq Croatia $20,392 4.28
35 $44,519 Canada Panama $20,316 3.79
35 $4,522 Sudan Belarus $18,178 9.42
33 $7,666 Morocco Azerbaijan $17,943 9.38
31 $11,989 Peru Mauritius $17,888 1.31
31 $1,972 Afghanistan Lebanon $17,754 4.51
31 $53,935 Saudi Arabia Bulgaria $17,115 7.20
31 $5,564 Uzbekistan Suriname $16,717 0.55
30 $24,521 Malaysia Libya $16,622 6.21
30 $17,917 Venezuela Barbados $16,153 0.28
28 $2,381 Nepal Botswana $15,982 2.10
27 $3,861 Yemen Palau $15,370 0.02
26 $1,123 Mozambique Montenegro $15,219 0.62
26 $4,173 Ghana Costa Rica $14,914 4.78
25 $2,902 C\F4te d'Ivoire Turkmenistan $14,175 5.80
24 $46,631 Australia FYR Macedonia $13,204 2.08
24 $1,429 Madagascar Serbia $12,605 7.20
23 $43,600 Taiwan Province of China Maldives $12,435 0.34
23 $2,982 Cameroon Jordan $11,974 6.69
21 $8,186 Angola Grenada $11,767 0.11
21 $10,355 Sri Lanka St. Lucia $11,141 0.17
20 $19,397 Romania Albania $11,055 2.77
18 $23,165 Chile St. Vincent and the Grenadines $10,904 0.11
18 $781 Malawi Namibia $10,764 2.19
17 $1,726 Burkina Faso Dominica $10,697 0.07
17 $24,144 Kazakhstan Mongolia $10,157 2.93
17 $1,559 Mali Bosnia and Herzegovina $9,808 3.87
17 $1,032 Niger Jamaica $8,673 2.80
17 $47,365 Netherlands Paraguay $8,386 6.90
16 $11,352 Ecuador Fiji $8,235 0.89
16 $7,477 Guatemala Belize $8,148 0.36
15 $3,282 Cambodia El Salvador $8,014 6.35
15 $4,113 Zambia Swaziland $7,844 1.11
15 $2,316 Senegal Georgia $7,666 4.47
13 $2,027 Zimbabwe Bhutan $7,657 0.77
11 $1,343 Guinea Armenia $7,365 3.29
11 $2,047 South Sudan Guyana $6,905 0.80
11 $2,645 Chad Timor-Leste $6,794 1.23
11 $6,222 Bolivia Republic of Congo $6,572 4.27
11 $41,741 Belgium Cabo Verde $6,339 0.52
11 $1,686 Rwanda Samoa $5,186 0.19
11 $25,753 Greece Tonga $5,043 0.10
11 $11,380 Tunisia Lao P.D.R. $4,999 6.90
11 $12,803 Dominican Republic Moldova $4,830 3.56
11 $1,874 Benin Nicaragua $4,797 6.22
11 $28,446 Czech Republic Honduras $4,713 8.26
10 $26,306 Portugal Kyrgyz Republic $3,385 5.70
10 $1,772 Haiti Mauritania $3,379 3.80
Tuvalu $3,281 0.01
Marshall Islands $3,230 0.06
Micronesia $3,203 0.10
S\E3o Tom\E9 and Pr\EDncipe $3,138 0.20
Djibouti $3,043 0.94
Lesotho $2,925 1.91
Tajikistan $2,677 8.30
Vanuatu $2,520 0.27
Papua New Guinea $2,404 7.53
Sierra Leone $2,069 6.23
Solomon Islands $1,819 0.58
The Gambia $1,745 1.93
Comoros $1,674 0.72
Kiribati $1,601 0.11
Togo $1,455 7.00
Guinea-Bissau $1,440 1.74
Eritrea $1,202 6.54
Burundi $912 9.20
Liberia $901 4.19
Central African Republic $608 4.70
Dicenor33
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October 11th, 2014 at 6:51:43 PM permalink
The US has been extremely lucky; no devastating wars, dictators and so on. Things are unfair from the start, it will take a lot of effort to overcome the gap, but if they ever will it will be impossible to beat those people.
pacomartin
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October 11th, 2014 at 9:09:02 PM permalink
Quote: kenarman

The fact that there are rich people has nothing to do with whether you are poor or not. Who gives a shit if Bill Gates is worth $50 billion. Other than a few hundred million in personal property/real estate most of his money is in stocks. Take his money and distribute it everyone of the 300 million odd people in the country and what happens. Everyone gets $1400 or so, oh yah now they are no longer poor for a day until they buy a big screen TV with it. Meanwhile someone else buys up the stock of Microsoft and becomes the next target. Or Not. Then Microsoft shuts down and 10's of thousands of good paying job disappear. What a bunch of crap this pay range statistics thing is.



I tend to agree with you about Bill Gates, but I am not sure if it is universally true in all societies. We all know that Bill Gates and Carlos Helu are neck and neck for the world's richest man. It doesn't help that Bill Gate is giving away about $28 billion so far. As of today Carlos is ahead by a tiny percentage.

$79.9 Billion Carlos Slim Helu & family
$79.6 Billion Bill Gates

US$17,416 is the GDP of the USA economy in billions of US dollars
MX$17,156 is the GDP of the Mexico economy in billions of pesos

So Bill Gates and Carlos Slim are worth the same in dollars, but the economy in Mexico is roughly 13 times smaller in Mexico (i.e. the exchange rate between pesos and dollars). In this case we don't care about the PPP rate which is 8 pesos to the dollar.

Although Carlos Slim's family produces report after report saying that their family's wealth does not affect the average person's opportunities in Mexico, it is hard to imagine how one person can control so much of the wealth of a country without creating imbalances.

To give you an idea how big Carlos Slim's net worth is in Mexico, the banknotes and coins issued by the Mexican government are worth 883 billion pesos or about $68 billion dollars . So Carlos Slim net worth of $79.9 Billion is over a trillion pesos. Carlos's family is actually worth more than all the Mexican money combined.
socks
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October 11th, 2014 at 10:55:02 PM permalink
Quote: pacomartin

Personally, I think the salient fact about the countries with the most equal distribution of wealth is that they are also socially homogeneous. But there are exceptions to that rule, as Portugal is not a country known for it's diversity (although immigration in recent decades may be changing that uniformity).
...
Nigel Holloway wrote a rather famous editorial in Forbes about a decade ago called In Praise of Inequality. He stated "Envy is easier to bear than poverty." Or as my mother used to say "Communism succeeding in institutionalizing the idea of coveting your neighbors goods".


Interesting comments together in the same post. Maybe there's something worse than poverty? And it's not the people at the bottom who get screwed when things are unequal (and the good times of growth stops)?
Buzzard
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October 11th, 2014 at 11:05:03 PM permalink
His cramped bedroom is "the size of a Manhattan hotel room.

Now I really despise him !
Shed not for her the bitter tear Nor give the heart to vain regret Tis but the casket that lies here, The gem that filled it Sparkles yet
pacomartin
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October 11th, 2014 at 11:46:35 PM permalink
Quote: socks

Interesting comments together in the same post. Maybe there's something worse than poverty? And it's not the people at the bottom who get screwed when things are unequal (and the good times of growth stops)?



I am not necessarily defending income inequality, I am merely pointing out that many people don't think it is an issue, and that there are much worse things.

It's been over 50 years since Kurt Vonnegut created the story of Harrison Bergeron who lives in a world that strives for equality. But the only way they can do it is to handicap people so they are all reduced to the lowest common denominator.


In 1957 Ayn Rand asked the question "Who is John Galt?" where she attacks a culture that she believes embraces mediocrity in the name of egalitarianism, which is the end result of socialistic idealism.

That said, I cannot imagine a society where one man is worth a trillion pesos, and the entire nation's currency is less than 900 billion pesos. While many people in the USA use a product that results in money going into the personal coffers of Bill Gates, it is almost every person in Mexico that feeds the fortune of Carlos Slim. Sooner or later you will go into a store owned by him, or use a telecom product that is owned by him.
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