Dennis R Redmond
dredmond at SPAMOREGON.UOREGON.EDU
Mon Nov 1 21:09:50 MST 1999
On Sun, 31 Oct 1999, Jose G. Perez wrote:
> First, on the absolute level of per capita GDP (these figures are for
> 1997 in 1997 dollars on a purchasing-power parity basis):
Two points: first, PPPs are unreliable as a measure of GDP. That's because
they're based on consumption power, not productive power; since the US is
soaking up goods from abroad, we look richer by that measure (our current
account deficit means, we're borrowing from abroad to pay for this).
Second, long-term exchange rate trends show the euro/yen currencies rising
vs. the dollar in the course of the 1990s. The euro has dropped a bit
against the dollar, but given huge US trade and current accounts deficits,
this is probably temporary.
> GDP growth rates , population growth (these two from OECD), and the
> resulting per capita growth rates 1990-1998. The figures for population
> growth are for 1996-1997; it is implicitly assumed in the calculation
> that they have held steady for the entire period, which is close enough
> for our purposes.)
I'm not sure where the OECD got these population growth figures; the US
population has grown at close to 1% per annum during the Nineties, from
all the stats I've seen (World Bank, etc.), while EU population growth is
far smaller (Germany experienced negative population growth in 1997,
e.g.). Total per capita growth is indeed about the same between the US and
the EU, leaving aside currency movements, which again favor the EU.
> Japan is a totally different case. It has been in a decade-long stagnation
> following the bursting of the "bubble economy." The elimination of the
> fictitious capital and physical overcapacity generated during the bubble
> has, evidently, not yet been completed.
But per capita Japanese GDP is, at current exchange rates, something like
$40,000 or so, thanks to currency appreciation.
> As to the "import" of capital by the United States, there is another way of
> viewing this. And that is that foreigners invest their capital in the U.S.
> because that is where it gets the best return, even taking into account a
> premium for exchange risks.
Meaning, profit rates are -- temporarily -- higher here. But as Adam Smith
pointed out, interest rates and profit rates are always highest in
countries which are going to ruin. Low profit rates can be offset by
vast flows of fresh liquidity; the central banks of Japan and the EU are
essentially doing just that.
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