Thursday, Sep 30, 2010
Global GDP
Index Mindi: Nominal Global GDP
The welcome return of Flash has brought me out of hibernation. That and his assertion that World Global GDP expanded throughout the recession, as part of a larger point that any especially bad outcomes that we might contemplate are off the agenda. Whilst this introduces some welcome optimism, it does so at the expense of the truth in that Global GDP growth has been shrinking since 2007 and went negative in 2009.
I think even this paints a picture of matters that must be better than actual. For all the talk of growth outwith EU,US and Japan these economies still account for towards 60% of global GDP, and it is difficult to see how these can contract (the US by 6%) and in a global economy there can be growth elsewhere.
Posted by bellwether @ 01:01 PM (726 views) Add Comment
4 Comments
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1. flashman said...
Thanks for the welcome back bellwether. I trust you are well? There are several methods of calculating aggregate world growth. A few of the more simplistic methods indicate that there was a slight contraction. The more sophisticated/accepted methods indicate that there was growth. Any legitimate calculation of world growth has to aggregate GDP growth rates using PPP exchange rates (if they do not do this then they probably amount to little more than back of the envelope calculations). This ‘PPP’method indicates that there was positive growth. There is another slightly less valid method (in my opinion) that uses market exchange rates in the aggregate calculation. Even this calculation yields a positive number (albeit slightly smaller). The chart in your article is useful and interesting for many purposes but it does not contain sufficient data for an equation designed to output a ‘real terms’ aggregate growth figure.
2. easybetman said...
Read another article this morning that talks about consumption growth and GDP and is relevant here.
Ultimately, all we want is better food, better transport, better houses etc and nominal GDP growth is a pretty pointless
measurement. IF we buy houses of lower and lower quality from developers at higher and higher price, nominal GDP
will grow - but that is absolutely madness.
Think standard of living should be measured against what the top 10%, 25%, 50%, 90% people get in real goods and
services as opposed to nominal dollar GDP.
3. bellwether said...
Flash, I suspect GDP is not something that can be measured that accurately, and it is also a measure that tends to be hostage to political forces. One could spend a lifetime arguing the point, we could look at everything from the Baltic Dry to electricity consumption in China and still reach no precise or incontrovertible proof. As per the original point, for my part, I simply do not believe you can see the major portion of the global economy fall into a major recession, the credit system that drives a great deal of trade dry up and almost collase, and yet magically have overall growth.
Talking about hostages I'm sure I am to an extent hostage to my bias but I continue to see a system that is at best a little less precarious as at 2007, with the benefits of globalistation and creditism (if that's a word) having reached natural limits. I cannot discount that the reckoning for this is in front rather than behind us.
4. flashman said...
bellwether. My growth comments are derived from a tightly defined number. I am obviously aware of the many headwinds and tailwinds that exist but I try to avoid 'a lifetime of arguments' by sticking to one tightly defined point at a time. Baltic dry indexes and Chinese electricity consumption have their place but only in a formula that is properly designed for them. I think that most people would agree with you that we are in a slightly less precarious position than we were in 2007. Many people also thought that our situation was so dire in 2007 that we couldn't possibly be in a slightly less precarious position only a couple of years later. Is it possible that these people therefore overestimated the direness of the situation in 2007?