4 ms·

Size is denominated in terms of some measure. You don’t eat dollars, and you can’t build a house out of one. GDP has doubled, but so have US prices. Does that m

Size is denominated in terms of some measure. You don’t eat dollars, and you can’t build a house out of one. GDP has doubled, but so have US prices. Does that mean the economy is actually stronger? Using PPP simply chooses to denominate GDP in terms of things other that fiat currency.

FredPret 3y ago
PPP is usually meant to compare economies and control for differences in cost of living, not comparing time periods. Inflation is when you compare the same economy in two time periods. Furthermore, economic growth is measured in "real" dollars, aka, excludig inflation. If US prices doubled as you say, then their economy is therefore now four times as large in the new, inflated dollars. None of this has anything to do with fiat currency. The same would be true if you measured in kg's of gold, but you'd have to account for the gold-cost of living ratio instead of fiat dollar inflation.
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- conjecTech 3y ago
  Inflation isn't a scalar value, and all of this complexity is just trying to account for that. This thread is about whether an increase in effective income from prices going down is the same as your notional income going up while prices stay the same. My point is they're not, but feel very similar in most cases. I used an example with inflation rather than deflation since people understand that more intuitively.
- yorwba 3y ago
  Economic growth is best measured excluding inflation, but the chart in the tweet uses "current prices" aka the 2008 values are in 2008-dollars and the 2023 values are in 2023-dollars, including all the inflation that happened in between. (I've seen actual economists get confused by this meaning of "current", mislabeling a "current dollars" chart from 2019 as being in 2019-dollars, even though it wasn't inflation-adjusted at all.) Using the World Bank's figures in 2015-dollars https://data.worldbank.org/indicator/NY.GDP.MKTP.KD?locations=US-EU https://data.worldbank.org/indicator/NY.GDP.MKTP.KD?location... GDP 2008 US: 16.38T EU: 13.19T US/EU: 1.24 GDP 2022 US: 20.95T EU: 15.21T US/EU: 1.38 (2023 not yet available) Ratio of ratios: 1.11, so the US has increased its lead by about 11%, which is not nothing, but also less dramatic than it looks to me in the "current prices" chart.
  - hef19898 3y ago
    Especially when accounting for negative GDP growth in the EU in 2012 and 2013, and the huge hit the EU took in 2020. 11% isn't nothing, but the both economies grew, one a bit more than the other, and that is hardly the end of the world one could be made believe by looking at the chart nased on current USD. Sometimes lying with numbers is way, way to easy...
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nonethewiser 3y ago
You have not clarified whatsoever and at this point it doesnt seem like you want to or even know.

FredPret 3y ago

PPP is usually meant to compare economies and control for differences in cost of living, not comparing time periods. Inflation is when you compare the same economy in two time periods. Furthermore, economic growth is measured in "real" dollars, aka, excludig inflation. If US prices doubled as you say, then their economy is therefore now four times as large in the new, inflated dollars. None of this has anything to do with fiat currency. The same would be true if you measured in kg's of gold, but you'd have to account for the gold-cost of living ratio instead of fiat dollar inflation.

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conjecTech 3y ago
Inflation isn't a scalar value, and all of this complexity is just trying to account for that. This thread is about whether an increase in effective income from prices going down is the same as your notional income going up while prices stay the same. My point is they're not, but feel very similar in most cases. I used an example with inflation rather than deflation since people understand that more intuitively.
yorwba 3y ago
Economic growth is best measured excluding inflation, but the chart in the tweet uses "current prices" aka the 2008 values are in 2008-dollars and the 2023 values are in 2023-dollars, including all the inflation that happened in between. (I've seen actual economists get confused by this meaning of "current", mislabeling a "current dollars" chart from 2019 as being in 2019-dollars, even though it wasn't inflation-adjusted at all.) Using the World Bank's figures in 2015-dollars https://data.worldbank.org/indicator/NY.GDP.MKTP.KD?locations=US-EU https://data.worldbank.org/indicator/NY.GDP.MKTP.KD?location... GDP 2008 US: 16.38T EU: 13.19T US/EU: 1.24 GDP 2022 US: 20.95T EU: 15.21T US/EU: 1.38 (2023 not yet available) Ratio of ratios: 1.11, so the US has increased its lead by about 11%, which is not nothing, but also less dramatic than it looks to me in the "current prices" chart.
- hef19898 3y ago
  Especially when accounting for negative GDP growth in the EU in 2012 and 2013, and the huge hit the EU took in 2020. 11% isn't nothing, but the both economies grew, one a bit more than the other, and that is hardly the end of the world one could be made believe by looking at the chart nased on current USD. Sometimes lying with numbers is way, way to easy...
- deleted 3y ago
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nonethewiser 3y ago

You have not clarified whatsoever and at this point it doesnt seem like you want to or even know.