IMF Says China World's Largest Economy, Sort Of

breitbart

By Chriss W. Street 

The International Monetary Fund officially announced that China just surpassed the United States as the world’s largest economy, sort of. China’s victory is only on a “Purchasing Power Parity” (PPP) basis. Although Gross Domestic Product is about 50% higher in the U.S., IMF says the total output of goods and services in China are estimated to now be slightly higher than in the U.S.

Many economists complain that relying on currency exchange rates to calculate Gross Domestic Product (GDP) as the value of all goods and services is misleading in comparing real standards of living in different countries. Goods and services that are not traded across borders, such as medical services, retail, and constructions services, and haircuts—are almost always cheaper in poorer countries because of cheap labor. Using exchange rate driven GDP’s to compare living standards may understate the benefits that citizens in poor nations enjoy from access to cheaper goods and services.

Purchasing Power Parity “conversion factor” is the number of units of a country's currency required to buy the same amount of goods and services in the domestic market as a U.S. dollar would buy in the United States. The IMF’s purchasing power parity estimates--which take into account these differing costs--are considered an alternative by some analysts as a revealing way of computing and comparing standards of living and economic size across boundaries different nations.

According to the World Bank’s “Price level ratio of PPP conversion factor (GDP) to market exchange rate”, China’s PPP factor is weighted at about “0.6”. 

To compare the PPP of China versus the PPP of the United States, the IMF essentially converted the latest annualized GDP estimate in U.S. dollars for China’s third quarter ending September 30. Multiplying the $10.6 trillion estimate by 1.6667 (conversion factor reciprocal) equals Purchasing Power Parity for China of $17.6 trillion.

The United States PPP conversion factor is “1.0," since the U.S. GDP is already calculated in U.S. dollars. The latest annualized GDP estimate in U.S. dollars for United States for the third quarter ending September 30 is $17.4 trillion.

The “conversion factor” for China is an arbitrary number that is set as an estimate of equivalent purchasing power in different nations. China has enjoyed higher GDP growth rates than the United States, but about a third of the difference has been higher inflation. This should tend to narrow the difference in the PPP conversion factor.

If the IMF narrowed the Chinese conversion factor to “0.7”, then the multiplier to convert GDP to PPP would be only 1.4286. Multiplying the latest $10.6 trillion annualized GDP for China by the 1.4286 (conversion factor reciprocal) equals Purchasing Power Parity for China of $15.1 trillion.

For about 2000 years until approximately 1750 AD, China had the largest population and the largest GDP in the world. China kept the banner as the most populous country, but lost in GDP to Britain, who lost it to the United States in 1872. On an individual basis, China is still a poor country with average per capita income of $6,807, versus $53,143 in the U.S. Even the most optimistic analysts do not believe China will pass the U.S. in GDP for almost a decade. 

Many Americans could improve their retirement purchasing power by moving to China. Medical services, retail and constructions services, and haircuts are undoubtedly cheaper. But the numerous quality, safety, and security differences may not be reflected in International Monetary Fund’s estimates Purchasing Power Parity. 

CIA Insider Warns: '25-Year Great Depression is About to Strike America'

By MONEY MORNING STAFF REPORTS

You will want to remember this date April 10, 2015.

According to one of the top minds in the U.S. Intelligence Community, that is when the United States will enter the darkest economic period in our nation's history.

A 25-year Great Depression.

Does This Signal
the End of the Dollar?
An alarming pattern has caused many in the Intelligence Community to secretly prepare for a "worst-case scenario."
Click here to see it....

And alarmingly, he and his colleagues believe the evidence they've uncovered proves this outcome is impossible to avoid.

In an exclusive interview with Money Morning, Jim Rickards, the CIA's Financial Threat and Asymmetric Warfare Advisor, has stepped forward to warn the American people that time is running out to prepare for this $100 trillion meltdown.

"Everybody knows we have a dangerous level of debt. Everybody knows the Fed has recklessly printed trillions of dollars. These are secrets to no one," he said.

"But all signs are now flashing bright red that our chickens are about to come home to roost."

During the discussion, Rickards shared a series of dangerous signals he fears reveals an economy that has reached a super critical state.

One of the signals the CIA is most concerned with is the Misery Index.

Decades back this unique warning sign was created for determining how close our country was to a social collapse. It simply adds the true inflation rate with the true unemployment rate.

However, the Federal Reserve has repeatedly changed the way the Misery Index has been calculated over the years. Which Rickards believes is now being used to cover up the true scope of the problem.

Keep reading on moneymorning >>

Senator Marco Rubio Proposes New Economic Growth Agenda

SenatorMarcoRubio

El adiós del ‘helicóptero Ben’

Sandro Pozzi

blog.afraidtotrade.com

Ben Bernanke nunca mostró gran pasión por trabajar en la Reserva Federal, o al menos no estuvo tan enamorado del cargo como su predecesor, Alan Greenspan. Es más, se mostró contrario a que la institución se asocie a una única persona. Por eso, a más de tres meses de cumplir su segundo mandato al frente del banco central más poderoso del mundo, se confirma que el 31 de enero de 2014 será su último día.

En ese momento empezará a juzgarle la historia por haber estado al frente del mayor experimento de política monetaria desde que se creó la Reserva Federal. De momento, lo que parece claro, vistas las circunstancias, es que se merece un respiro. El periodo durante el que le tocó dirigir la Fed fue extraordinario en todos los sentidos y eso es algo que no cuestionan ni los más críticos.

Bernanke ya atravesó por alguna dificultad cuando el Senado tuvo que confirmarle para un segundo mandato, porque a un gran número de republicanos y a algunos demócratas les preocupaba la laxitud de su política. Laxitud que llevó a la Fed a dejar los tipos intactos en el 0% desde diciembre de 2008 y a comprar activos de deuda en masa hasta multiplicar por cinco su balance.

El presidente de la Fed, uno de los principales expertos en el estudio de la Gran Depresión, se mostró siempre tranquilo, incluso en los momentos más intensos y complicados de la crisis financiera. Además, estableció una estrecha cooperación y colaboración con el Tesoro de EE UU al salir al rescate del sector financiero tras el colapso de Lehman Brothers, epicentro del seísmo.

La espita de los estímulos sigue abierta. La Fed está comprando deuda pública e hipotecaria a un ritmo de 85.000 millones de dólares al mes. A este ritmo, para cuando deje el cargo acumulará cerca de cuatro billones en su balance. Ese es el legado que deja a su sucesor y también un mercado que se ha acostumbrado a ver como la Reserva Federal le echa una mano cuando lo necesita.

Continuar leyendo en  EL PAÍS >>

O'Reilly: Economic justice

NYT: Real Unemployment at 21.9 Million

breitbart

www.escapetyranny.com

By Wynton Hall

On Friday, President Barack Obama’s Chairman of the Council of Economic Advisers Alan B. Krueger took a victory lap of sorts after the Labor Department’s jobs report showed the U.S. added 165,000 nonfarm payroll jobs in April.

“Today’s employment report provides further evidence that the U.S. economy is continuing to recover,” said Krueger.

But behind Friday’s Labor Department figures lies a stark economic reality: America remains in a downward jobs spiral.

Consider the following: according to the Labor Department, the U.S. added 165,000 jobs in April, but to return to pre-recession employment levels, the U.S. would need to add 208,000 jobs a month over seven years.

The government officially recognizes 11.7 million individuals as being unemployed. But as the New York Times notes, including “those who are underemployed—that is, adding in those workers who are part-time but want to be employed full time, and workers who want to work but are not looking—brings the total up to 21.9 million."

Since President Barack Obama took office, 9.5 million Americans have fallen out of the U.S. workforce.  Today, 89,936,000 people living in the U.S. no longer work.

That means America is trapped in the slowest job market recovery since World War II.

As New York Times economic reporter Binyamin Appelbaum concludes, “the United States economy is not getting any closer to recreating the jobs lost during the recession.”

US Plummets to 18th in New Economic Freedom of the World Rankings

International Liberty

By Dan Mitchell

Wow. I wasn’t surprised to learn that the United States dropped in the new rankings unveiled today in Economic Freedom of the World.

 

But I’m somewhat shocked to learn that we fell from 10th last year all the way down to 18th this year, as can be seen on the chart (click to enlarge).

Last year, the U.S. fell from 7th to 10th, and I though dropping three spots was bad. But falling by eight spots this past year is a stunning decline.

Who would have thought that Scandinavian welfare states such as Denmark and Finland would rank higher than the United States? Or that Ireland, with all its problems, would be above America?

But since I’m not a misery-loves-company guy, I’m happy to see some nations doing well. I’ve previously highlighted the good policies in Hong Kong and Singapore. And I’ve trumpeted the good policies in Switzerland and Australia, as well as Canada, Chile, and Estonia.

So kudos to the leaders in those nations.

 

American politicians, by contrast, deserve scorn. Let’s update the chart I posted when last year’s report was issued.

As you can see, it’s an understatement to say that the United States is heading in the wrong direction. We’re still considerably ahead of interventionist welfare states such as France and Italy, though I’m afraid to think about what the U.S. score will be five years from now.

Here’s what the authors of the report had to say about America’s decline.

The United States, long considered the standard bearer for economic freedom among large industrial nations, has experienced a substantial decline in economic freedom during the past decade. From 1980 to 2000, the United States was generally rated the third freest economy in the world, ranking behind only Hong Kong and Singapore. After increasing steadily during the period from 1980 to 2000, the chainlinked EFW rating of the United States fell from 8.65 in 2000 to 8.21 in 2005 and 7.70 in 2010. The chain-linked ranking of the United States has fallen precipitously from second in 2000 to eighth in 2005 and 19th in 2010 (unadjusted ranking of 18th).

For those interested in why the United States has dropped, the “size of government” score has fallen from 8.65 in 2000 to 7.70 in the latest report. That’s not a surprise since the burden of government spending has exploded during the Bush-Obama years.

But the trade score also dropped significantly over the same period, from 8.78 to 7.65. So the protectionists should be happy, even though the rest of us have less prosperity.

The most dramatic decline, though, was the in the “legal system and property rights” category, where the U.S. plummeted from 9.23 in 2000 down to 7.12 in the new report. We’re not quite Argentina (3.76!), to be sure, but the trend is very troubling.

Bad economic news but it doesn't seem to matter to the folks

Republicans, Democrats draw lines in fiscal cliff fight

Visit NBCNews.com for breaking news, world news, and news about the economy

Fed adds more punch to its pledge of low interest rates

msnbc.com/ By John W. Schoen, Senior Producer

New normal, meet the new Fed.

The Federal Reserve took two major new steps Wednesday to assure businesses and consumers that it intends to keep borrowing costs at record low levels for the foreseeable future – at least three years.

For the first time in its 94-year history, the central bank opened its mind to the public, publishing a collection of charts that break down policymakers’ forecasts on interest rates, inflation and unemployment.  And for the first time ever, it set an explicit target for inflation, 2 percent a year, instead of an implied target.

Both steps are in keeping with Fed Chairman Ben Bernanke’s stated goal of making the Fed’s decisions ever more transparent. Economists welcomed the new moves but said they have their own risks.

The first headline to come out after central bankers ended their two-day meeting Wednesday was the news that policymakers do not expect to raise short-term interest rates until late 2014 at the earliest, rather than mid-2013 as they said a month ago.  Those record-low rates are still needed to help boost an improving but still sluggish economy, the Fed said in the new statement.   More >>

Also take a look of  This >>

Bank of Canada governor says US economy may never fully recover

OTTAWA - Bank of Canada governor Mark Carney says the U.S. economy could take years to recover from its current weak state _ and may never return to its glory days.

"The nature of the U.S. recovery, it's going to take a number of years before they get back to the U.S. that we used to know," Carney told CTV's Question Period.

"In fact, they are not in our opinion ultimately going to get back fully to the U.S. we used to know."

The weakness south of the border is costing the Canadian economy $30 billion annually in lost exports, according to Carney.  More >>

Where did the money go?

ClubOrlov/

[A timely guest post from Gary, with all the anti-Iranian sabre-rattling going on. Spurred on by its political parasitic twin Israel, Washington seems poised to shoot itself right in the wallet. I believe that's called a "beauty shot."]

The lesson that the United States desperately needs to learn is that their trillion-dollar-a-year military is nothing more than a gigantic public money sponge that provokes outrage among friends and enemies alike and puts the country in ill repute. It is useless against its enemies, because they know better than to engage it directly. It can never be used to defeat any of the major nuclear powers, because sufficient deterrence against it can be maintained for relatively little money. It can never defuse a popular insurgency, because that takes political and diplomatic finesse, not a compulsion to bomb faraway places. Political and diplomatic finesse cannot be procured, even for a trillion dollars, even in a country that believes in extreme makeovers. As Vladimir Putin put it, “If grandmother had testicles, she’d be a grandfather.”

Reinventing Collapse, 2nd ed., p. 41

Military Keynesianism and America’s Declining Infrastructure

In August 2007, the nation was stunned by the collapse of a major Minneapolis bridge, killing thirteen. The bridge had been rated structurally deficient by the U.S. government as far back as 1990, and it was only one of 72,868 bridges (12.1%) across the country with that rating.  They also rated 89.024 bridges (14.8%) as functionally obsolete. Here closer to my home the eighty year old Champlain Bridge, also known as the Crown Point Bridge, was closed in October 2009 due to extensive corrosion of two structural piers. At least it was condemned before it fell down.  Two years later a replacement bridge has been completed, but not without substantial inconvenience and economic loss to business and workers on both sides of the bridge.  People were forced to take a ferry during reconstruction.  The DOT states the average design life of US bridges is 50 years with an average current age of 43.  The American Society of Civil Engineers estimates that it would take nearly $930 billion to fix the country's failing bridges and roads over the next five years.  With estimated spending of $380.5 billion, they predict a shortfall of $549.5 billion. 

Where did all the money go?  The recently deceased Chalmers Johnson called it "Military Keynesianism".  For those who don't follow arcane economics lingo, Keynes was a British economist who said that in a period of slow or declining economic growth (recession or depression), that government spending was needed to "prime the pump" of the economy.  The US recovery from the Great Depression with help from WWII military spending gave credence to this analysis.  Except now we have permanent Military Keynesianism.

Johnson cites an incredible statistic from the late Seymour Melman, the Columbia University advocate of military conversion, and the "peace dividend".  "By 1990, the value of the weapons, equipment, and factories devoted to the military was 83% of the value of all plants and equipment in American Manufacturing.  From 1947-1990 the combined US military budget amounted to $8.7 trillion...Military industries crowd out the civilian economy (ed-and other government spending like bridges) and lead to severe economic weakness.” Consider that the US military is now spending over $1 trillion per year including all black and related expenses, which is more than the entire rest of the world combined.  The next biggest spender is China at $91.5 billion according to Chinese figures.  Johnson summarizes, “Devotion to military Keynesianism is, in fact, a form of slow economic suicide."  More >>

US Economy - Expense Record: 3.6 trillion$$$$$$

#Recession Road: Declining incomes for Americans

By Jia Lynn Yang and and Erica W. Morrison

The personal income of Americans dropped for the first time in two years in August, according to government figures released Friday, forcing people to dip into their savings to cover their spending.
The drop in earnings is just one more sign that the country’s stalling economy is straining families — and it’s consistent with a generally bleak picture for American workers whose wages have remained stagnant since 2001.
Personal income fell 0.1 percent in August compared with the month before, the first decline since October 2009, the government said. As a result, Americans tapped their reserves, dropping the personal savings rate to its lowest point since December 2009, or 4.5 percent. Meanwhile, spending remained flat, when adjusting for inflation.
The trend is rooted in the country’s nagging unemployment problem, analysts said. No new jobs were created in August, keeping the unemployment rate stuck at 9.1 percent.
Declining incomes for Americans > 

How John Smith starts his day

John Smith started the day early having set his alarm clock (MADE IN JAPAN ) for 6 am .. While his coffeepot (MADE IN CHINA) was perking, he shaved with his electric razor (MADE IN HONG KONG) He put on a dress shirt (MADE IN SRI LANKA), designer jeans (MADE IN SINGAPORE) and tennis shoes (MADE IN KOREA) After cooking his breakfast in his new electric skillet (MADE IN INDIA) he sat down with his calculator (MADE IN MEXICO) to see how much he could spend today.    After setting his watch (MADE IN TAIWAN ) to the radio (MADE IN INDIA ) he got in his car (MADE IN GERMANY ) filled it with GAS (from Saudi Arabia ) and continued his search for a good paying AMERICAN JOB. At the end of yet another discouraging and fruitless day checking his Computer ( made in MALAYSIA ), John decided to relax for a while. He put on his sandals (MADE IN BRAZIL ), poured himself a glass of wine (MADE IN FRANCE ) and turned on his TV (MADE IN INDONESIA ), and then wondered why he can't find a good paying job in AMERICA. AND NOW HE'S HOPING HE CAN GET HELP FROM A PRESIDENT MADE IN KENYA You gotta keep this one circulating!

China tells U.S. "good old days" of borrowing are over

NEW YORK/SHANGHAI (Reuters) - China bluntly criticized the United States on Saturday one day after the superpower's credit rating was downgraded, saying the "good old days" of borrowing were over.
Standard & Poor's cut the U.S. long-term credit rating from top-tier AAA by a notch to AA-plus on Friday over concerns about the nation's budget deficits and climbing debt burden.
China -- the United States' biggest creditor -- said Washington only had itself to blame for its plight and called for a new stable global reserve currency.
"The U.S. government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone," China's official Xinhua news agency said in a commentary.
After a week which saw $2.5 trillion wiped off global markets, the move deepened investors' concerns of an impending recession in the United States and over the euro zone crisis.
Read more >

ORSZAG: This Economy Is MUCH Weaker Than It Appears

Ricky Kreitner

In a column for Bloomberg, former White House budget man Peter Orszag argues that nobody has even yet begun to understand how frail the American economy is, and how long it will take to get back on solid footing.
Orszag notes that official government economic predictions—from the Congressional Budget Office (CBO), for instance, which he headed until 2008—tend to crunch numbers based on the letter of the law, rather than on likely real-world scenarios. Thus, "official" economic forecasts are often overly optimistic, and fail to adequately describe the "hard slog" ahead.
More accurate forecasts show an economy unlikely to improve anytime soon—which is really to be expected following a massive financial collapse, Orszag argues:

"If an extended period of slow growth is more likely than the official projections suggest, we’re in for a much nastier mix of high unemployment in the near term and large budget gaps over the medium term. This is only more evidence that the right policy response is a combination of more aggressive action to bolster the job market now and much more deficit reduction enacted now to take effect in a few years. On both strategies, we should be as bold as we can."

#Krugman - No, We Can’t? Or Won’t?

The New York Times/ Paul Krugman

If you were shocked by Friday’s job report, if you thought we were doing well and were taken aback by the bad news, you haven’t been paying attention. The fact is, the United States economy has been stuck in a rut for a year and a half.

Yet a destructive passivity has overtaken our discourse. Turn on your TV and you’ll see some self-satisfied pundit declaring that nothing much can be done about the economy’s short-run problems (reminder: this “short run” is now in its fourth year), that we should focus on the long run instead.
This gets things exactly wrong. The truth is that creating jobs in a depressed economy is something government could and should be doing. Yes, there are huge political obstacles to action — notably, the fact that the House is controlled by a party that benefits from the economy’s weakness. But political gridlock should not be conflated with economic reality.
Our failure to create jobs is a choice, not a necessity — a choice rationalized by an ever-shifting set of excuses.
Excuse No. 1: Just around the corner, there’s a rainbow in the sky.
Remember “green shoots”? Remember the “summer of recovery”? Policy makers keep declaring that the economy is on the mend — and Lucy keeps snatching the football away. Yet these delusions of recovery have been an excuse for doing nothing as the jobs crisis festers.
Excuse No. 2: Fear the bond market.
Two years ago The Wall Street Journal declared that interest rates on United States debt would soon soar unless Washington stopped trying to fight the economic slump. Ever since, warnings about the imminent attack of the “bond vigilantes” have been used to attack any spending on job creation.
But basic economics said that rates would stay low as long as the economy was depressed — and basic economics was right. The interest rate on 10-year bonds was 3.7 percent when The Wall Street Journal issued that warning; at the end of last week it was 3.03 percent.
How have the usual suspects responded? By inventing their own reality. Last week, Representative Paul Ryan, the man behind the G.O.P. plan to dismantle Medicare, declared that we must slash government spending to “take pressure off the interest rates” — the same pressure, I suppose, that has pushed those rates to near-record lows.
Excuse No. 3: It’s the workers’ fault.
Unemployment soared during the financial crisis and its aftermath. So it seems bizarre to argue that the real problem lies with the workers — that the millions of Americans who were working four years ago but aren’t working now somehow lack the skills the economy needs.
Yet that’s what you hear from many pundits these days: high unemployment is “structural,” they say, and requires long-term solutions (which means, in practice, doing nothing).
Well, if there really was a mismatch between the workers we have and the workers we need, workers who do have the right skills, and are therefore able to find jobs, should be getting big wage increases. They aren’t. In fact, average wages actually fell last month.
Excuse No. 4: We tried to stimulate the economy, and it didn’t work.
Everybody knows that President Obama tried to stimulate the economy with a huge increase in government spending, and that it didn’t work. But what everyone knows is wrong.
Think about it: Where are the big public works projects? Where are the armies of government workers? There are actually half a million fewer government employees now than there were when Mr. Obama took office.
So what happened to the stimulus? Much of it consisted of tax cuts, not spending. Most of the rest consisted either of aid to distressed families or aid to hard-pressed state and local governments. This aid may have mitigated the slump, but it wasn’t the kind of job-creation program we could and should have had. This isn’t 20-20 hindsight: some of us warned from the beginning that tax cuts would be ineffective and that the proposed spending was woefully inadequate. And so it proved.
It’s also worth noting that in another area where government could make a big difference — help for troubled homeowners — almost nothing has been done. The Obama administration’s program of mortgage relief has gone nowhere: of $46 billion allotted to help families stay in their homes, less than $2 billion has actually been spent.
So let’s summarize: The economy isn’t fixing itself. Nor are there real obstacles to government action: both the bond vigilantes and structural unemployment exist only in the imaginations of pundits. And if stimulus seems to have failed, it’s because it was never actually tried.
Listening to what supposedly serious people say about the economy, you’d think the problem was “no, we can’t.” But the reality is “no, we won’t.” And every pundit who reinforces that destructive passivity is part of the problem.

The Truth About Who's Responsible For The Explosion In Government Spending

Henry Blodget

Mention anything about the US's huge debt, deficit, and debt-ceiling problem, and fans of both political teams will immediately begin shouting at each other.
Republicans howl that the whole problem is the fault of President Obama, who exploded federal government spending the moment he took office.
Democrats, meanwhile, blame massive increase in federal government spending during the Bush years and the triumphant assertions by Republicans during those years that "deficits don't matter."
So, what's the truth?
They're both right. (And wrong. And, on the Republican side, hypocritical.)
Federal government spending has risen under President Obama, mostly because of the $800 billion stimulus designed to offset the massive recession he inherited from President Bush. But the increase in federal spending under Obama is dwarfed by the colossal increase under President Bush.
Don't believe it?
Let's go to the chart.
Here's Federal Expenditures from 2000-2011 (quarterly figures, annualized), from the St. Louis Fed:

Image: St. Louis Fed

As you can see, from 2000 to 2008, under President Bush, Federal spending rose by $1.3 trillion, from $1.9 trillion a year to $3.2 trillion a year.
From 2009 to 2011, meanwhile, under President Obama, federal spending has risen by $600 billion, from $3.2 trillion a year to $3.8 trillion a year.  It has also now begun to decline.
In other words, federal government spending under President Bush increased 2X as much as it has under President Obama.
So, who's responsible for the explosion in federal spending?

Read more: http://www.businessinsider.com/government-spending-2011-7?utm_source=Triggermail&utm_medium=email&utm_term=Business%20Insider%20Select&utm_campaign=BI_Select_071111#ixzz1RpjgAtK0

Economic Armageddon and You

Submitted by Trevor on July 1, 2011 – 6:34 pm EST

Wondering about the American economy? This animated video explains inflation, stagflation, recession and more, all in 5 minutes.

UPDATE: Due to popular demand, I have released a revised version of this video that doesn't have the "armageddon" title, and does not mention corporate taxes. Enjoy!