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Since the IMF is measuring in Dollar terms, Britain became the 6th largest economy the day after Brexit, solely as a result of the devaluation of GBP. And appa

by krona 9y ago

Since the IMF is measuring in Dollar terms, Britain became the 6th largest economy the day after Brexit, solely as a result of the devaluation of GBP. And apparently, this is news.

hirsin 9y ago
Does the currency they measure in impact anything? Every currency is correlated - they could measure in Swiss francs or yen and the result would still be the same I assume, otherwise there's arbitrage to be had.
- hardlianotion 9y ago
  Yes. GBP underwent a slippage across the board immediately following the referendum and has not recovered since. Todays news likely to be more about the timing at which these official comparisons are made.
  - SamReidHughes 9y ago
    But we'd still get the same result if we measured in GBP. The ordering is a consequence of measuring with any currency, and choosing to measure GDP.
    - hardlianotion 9y ago
      Yes, I was being careless and only read the question I was interested in.
- rz2k 9y ago
  Generally speaking the ranking between different countries is not affected by which currency is chosen. However, there are small differences and even arbitrage opportunities of going through multiple currencies rather than directly if you can avoid certain transaction costs. For example: usd/gbp * gbp/eur might not exactly equal usd/eur at a given time.
rayiner 9y ago
Worse: France is a more populous country than the UK and has often had a larger GDP. It’s GDP was bigger from 1963-1996, and 2008-2012. Also, the UK’s GDP growth has been about double France’s since 2013. It’s not clear what this article is trying to prove other than that the journalist is innumerate.
- neverminder 9y ago
  > France is a more populous country than the UK France - 67M, UK - 66M.
- phaemon 9y ago
  > and 2008-2012. Also, the UK’s GDP growth has been about double France’s since 2013. So, the UK overtook France in 2013 and since then has had double the GDP growth, resulting in...France now having a larger GDP?
  - Neil44 9y ago
    That’s the point, the poster is saying that it’s the slide in GBP vs the dollar that has caused this turnaround in these figures.
rahimnathwani 9y ago
Yes, no significant change in economic activity has occurred. This points to a difficulty in comparing the size of different economies using only GDP. My haircut here in Beijing contributes less to measured global economic output than a similar-time-effort-and-skill haircut in Croydon.
- KaoruAoiShiho 9y ago
  Pretty significant changes in economic activity has occurred due to brexit or brexit-pending insecurity. Currency markets aren't completely meaningless you know. It's a leading indicator for predicted slowdowns.
  - rahimnathwani 9y ago
    You've missed my main point: the position of an economy in the list is highly dependent on exchange rates. Back to my haircut example: if GBP is now worth 20% less against EUR than it was before, does that mean that the relative value of a haircut in Croydon vs one in Fontainbleu has gone down by 20%. Of course not: their relative value, whatever it was, is unchanged. It's only how we count that value (i.e. how we calculate and compare GDP across countries) that has changed. But that's an artifact of measurement. In this particular case, the difference between #5 on the list and #6 is less than 1%. But that's much smaller than the drop in the value of GBP vs. a trade-weighted basked of currencies. And the UK economy is still growing in GBP terms. So it's clear that the change is more driven by exchange rates than by a change in economic activity (i.e. there aren't fewer goods and services being produced in the UK). This is my main point. BTW - I'm not defending the UK. Just pointing out that GDP is a far from perfect measure of economic output.
    - KaoruAoiShiho 9y ago
      You have a freshman level understanding of exchange rates. Let's start from the beginning with your haircut example. The beijing haircut indeed produces less value on average than the British haircut. To make the example more clear, say you're a surgeon who's performing a life saving operation. If you save the life of Elon Musk vs the life of a homeless methhead, do you create the same amount of value in the world? Even if the job is equivalent effort-skill, you have still contributed to the world more just by saving a higher-value person. I know this is morally reprehensible but we're talking economics here. Scale the example back down to haircuts. So similarly with Britain. Just because the value of all of Britain decreased, so has the value of all the work done in Britain even if the work itself didn't change. As another example, think bitcoin. If you mine for 3 hours and you get 1 satoshi the value of your 3 hours are worth different things if bitcoin was worth $100 vs $8000. In either case you did the same amount of work, the only difference is what foreigners, ie, non-bitcoiners think the value of your work is. That's how it is with GBP. So long as the currency changes are driven by real events, they matter, they matter a lot.

by krona 9y ago

Since the IMF is measuring in Dollar terms, Britain became the 6th largest economy the day after Brexit, solely as a result of the devaluation of GBP. And apparently, this is news.

hirsin 9y ago

Does the currency they measure in impact anything? Every currency is correlated - they could measure in Swiss francs or yen and the result would still be the same I assume, otherwise there's arbitrage to be had.

hardlianotion 9y ago
Yes. GBP underwent a slippage across the board immediately following the referendum and has not recovered since. Todays news likely to be more about the timing at which these official comparisons are made.
- SamReidHughes 9y ago
  But we'd still get the same result if we measured in GBP. The ordering is a consequence of measuring with any currency, and choosing to measure GDP.
  - hardlianotion 9y ago
    Yes, I was being careless and only read the question I was interested in.
rz2k 9y ago
Generally speaking the ranking between different countries is not affected by which currency is chosen. However, there are small differences and even arbitrage opportunities of going through multiple currencies rather than directly if you can avoid certain transaction costs. For example: usd/gbp * gbp/eur might not exactly equal usd/eur at a given time.

rayiner 9y ago

Worse: France is a more populous country than the UK and has often had a larger GDP. It’s GDP was bigger from 1963-1996, and 2008-2012. Also, the UK’s GDP growth has been about double France’s since 2013. It’s not clear what this article is trying to prove other than that the journalist is innumerate.

neverminder 9y ago
> France is a more populous country than the UK France - 67M, UK - 66M.
phaemon 9y ago
> and 2008-2012. Also, the UK’s GDP growth has been about double France’s since 2013. So, the UK overtook France in 2013 and since then has had double the GDP growth, resulting in...France now having a larger GDP?
- Neil44 9y ago
  That’s the point, the poster is saying that it’s the slide in GBP vs the dollar that has caused this turnaround in these figures.

rahimnathwani 9y ago

Yes, no significant change in economic activity has occurred. This points to a difficulty in comparing the size of different economies using only GDP. My haircut here in Beijing contributes less to measured global economic output than a similar-time-effort-and-skill haircut in Croydon.

KaoruAoiShiho 9y ago
Pretty significant changes in economic activity has occurred due to brexit or brexit-pending insecurity. Currency markets aren't completely meaningless you know. It's a leading indicator for predicted slowdowns.
- rahimnathwani 9y ago
  You've missed my main point: the position of an economy in the list is highly dependent on exchange rates. Back to my haircut example: if GBP is now worth 20% less against EUR than it was before, does that mean that the relative value of a haircut in Croydon vs one in Fontainbleu has gone down by 20%. Of course not: their relative value, whatever it was, is unchanged. It's only how we count that value (i.e. how we calculate and compare GDP across countries) that has changed. But that's an artifact of measurement. In this particular case, the difference between #5 on the list and #6 is less than 1%. But that's much smaller than the drop in the value of GBP vs. a trade-weighted basked of currencies. And the UK economy is still growing in GBP terms. So it's clear that the change is more driven by exchange rates than by a change in economic activity (i.e. there aren't fewer goods and services being produced in the UK). This is my main point. BTW - I'm not defending the UK. Just pointing out that GDP is a far from perfect measure of economic output.
  - KaoruAoiShiho 9y ago
    You have a freshman level understanding of exchange rates. Let's start from the beginning with your haircut example. The beijing haircut indeed produces less value on average than the British haircut. To make the example more clear, say you're a surgeon who's performing a life saving operation. If you save the life of Elon Musk vs the life of a homeless methhead, do you create the same amount of value in the world? Even if the job is equivalent effort-skill, you have still contributed to the world more just by saving a higher-value person. I know this is morally reprehensible but we're talking economics here. Scale the example back down to haircuts. So similarly with Britain. Just because the value of all of Britain decreased, so has the value of all the work done in Britain even if the work itself didn't change. As another example, think bitcoin. If you mine for 3 hours and you get 1 satoshi the value of your 3 hours are worth different things if bitcoin was worth $100 vs $8000. In either case you did the same amount of work, the only difference is what foreigners, ie, non-bitcoiners think the value of your work is. That's how it is with GBP. So long as the currency changes are driven by real events, they matter, they matter a lot.