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Economics-101

America has fallen

It is quite surprising that main stream media has paid little attention to this fact, but as of December 4th of 2014 the US economy is no longer the largest economy in the world. The title of “World’s Leading Economic Powerhouse” now belongs to China. Not since the presidency of Ulysses S. Grant (1869-1877) over 140 years ago has any other country in the world wore this championship belt. The US now runs second with a GDP of $17.4 trillion to that of China with a GDP of $17.6 trillion. GDP is essentially an economic measure of total production of a country. This changing of the economic guard is even more astounding when you consider that back in the year 2000, the US had a GDP of nearly three times that of China. In a mere 14 years this lead has been completely erased.

With all news of late you must do some critical thinking and research of your own. One major contributing factor to the Chinese economy is the present building of a massive amount of government funded infrastructure. The communist Chinese government is building entire cities in the middle of nowhere. You really need to check this out on YouTube. There are empty cities all over China that have been built within the last few years. These cities that are built to accommodate roughly one million people per city essentially sit empty today. At present, China is building on average 10 of these new cities every year. They are modern ghost towns. It’s really quite eerie. Regardless, this construction is included in China’s economic activity.

Now China is not the only country that massages its GDP numbers, the US is also guilty of doing this. The difference is in the US the government has simply been manufacturing debt. Both are equally as dangerous and misleading, but at least China will have some tangible assets as a result of its spending.

Not to worry though, the US is still the champion when it comes to overall debt. Just a few weeks ago, the US pushed its debt ceiling through the $18 trillion mark, allowing the US to maintain its heavyweight title of the largest debtor nation in the history of the world. China, with almost five times the population of the US, has a national debt of a mere $5 trillion.

Make no mistake; we are living in a period of change. Change is consistent throughout human history. At one point in history it was the Roman Empire that ruled, that changed hands to the British, who then handed the title over to the US. It is now the US’ turn to pass the baton. On a personal note, I have a great deal of trepidation with the fact that a communist government with a deplorable history of human rights is taking control of the helm. That being said, except for the communist label, the same could be said for the previous empires.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.



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About the Author

Derrick Nicholson is a Currency Strategist. He has been in the industry for the past 20 years, and specializes in mitigating currency risk for companies doing business outside of Canada.

Questions and inquiries can be directed to Derrick at [email protected].

 



The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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