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Originally Posted by Shawn
Offices from countries with a century of transparent market economics, yes.
But no one goes to Ipsos and says, "Hey, can you give us a market risk assessment of this massive capital project we're thinking about financing in the Netherlands? We're just not sold on Dutch geopolitical stability or market transparency." They ask for these when thinking about investing in emerging markets where offices are decidedly not transparent.
The IMF "officially" respects numbers submitted by Beijing, but in private company, individuals working for the IMF encourage investors to "do their own diligence." I've personally been part of such conversations.
2 minutes of glancing at the SERPs for "How reliable is China's GDP official data" should tell you how often this question gets asked. Just remember: at literally every level of reporting, local Party officials are highly incentivized* to "correct the data" so it tells the story its supposed to tell. That's how mixed command economies work. The US Fed discounts official GDP numbers from Beijing. This is precisely because the Chinese NBS offers no transparency on their data-gathering process and statistical procedures. None at all.
* negatively incentivized that is: report the "correct" numbers or lose your job/go to jail
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I imagine they can pay much more detailed reports and don't even bother that much about GDP, but they're after more specific details about the economy.
However, people are here making comparisons between the US and other countries based on the official numbers publicly released, not on those private reports. IMF just compiles and put the PDF on their website.
Quote:
Originally Posted by Shawn
As for using GDP per capita to compare the wealth of individuals from different countries, it's a flawed logic - but more so because it deals with means instead of medians, and medians far more accurately capture what we're trying to compare here.
PPP has its own flaws: the weightings are assumed, universal, and means-based. Spending habits vary from country to country, both in terms of which staples are purchased and at what ratios. People in Country A spend relatively more on car fuel and less on rice than people in Country B as a percentage of their overall spending, but PPP weightings assume universal spending ratios. And we're dealing with averages (means) again, not medians. PPP also doesn't account for taxes, fees, unofficial costs (bribes, etc.), it's just looking at the pricing of staple goods and trying to find equilibrium between two currencies.
Which introduces more flaws you've got to keep in mind: sometimes currencies trade temporarily at artificially high or low rates due to policy choices, not true market demand. The yen is artificially weak now because until two weeks ago, the BoJ kept central rates negative - the only OECD market to do this, making Japan wildly out of step with the rest of the world's major economies. This was done to drive inflation (something we actually need in Japan and hadn't experienced in close to 30 years), as opposed to curbing inflation like US monetary policy has been concurrently trying to do. It doesn't matter that Japan's underlying economic health is now better than it's been in two decades, with record wage increases and a booming stock market: which fiat are you gonna plow into, one with negative rates or one paying out 5.5+%?
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That's precisely the point I was making: it's impossible to assume anything about people's income or wealth based on GDP and worse, GDP converted from the local currency to USD.
GDP measure only what a country produces in a given year. It's a country-country comparison on that only. It's not about people's income or comparing people's consuming habits from very different countries.
About Japan, Japanese are much wealthier now, live longer, work less, have access to way more goods and services than they had in the early 1990's, when the "Imperial Palace worthed more than the California GDP" (another nonsensical comparison people did at time). The Imperial Palace doesn't cost US$ 4 trillion today and that means nothing to people. In fact, it's way better: Tokyo is very affordable and normal people can actually live there.