Archive

Posts Tagged ‘GDP’

Debt Crisis in The Third World

October 16, 2011 4 comments

The West is nearly US$100 trillion in debt and 14% of global population. Emerging Markets and Third World has 80% of global population and gets less than US$10 trillion of funding.

Cartoon by Bendib. Click for larger image.

Cartoon by Bendib. Click for larger image.

The Debt Crisis: An Overview

Modern day international usury is, of course, much more complex than the more primitive relation we have just presented. Total Third World debt amounts to USD2 trillion; annual payments is about USD 200million. The system of debts has evolved into a key aspect of the capitalist economy; a weapon for consolidating the domination of the people’s of the Third World. In many ways, the debt today is a weapon more potent than others devised by colonialism and neo-colonialism.

It is institutionalized to a very high degree, is regulated by a massive bureaucracy of the multilateral finance institutions; and backed up by the military might of the mightiest nations on earth. Worse the burden of paying debts is passed on to society in general as a routinary process. (via South South Summit 1999 Document: The Development and Historical Context of the Debt Crisis).

Pareto’s Economics

The previous post examined the debt situation of the West.

Since the global financial system is a Western captive, humungous debts are arranged, serviced, cancelled, written-off, repaid – without significant discomfort. Gross debt of the West is US$ 100 trillion (State; Corporate and Household); while the States of West are debtor to the extent of US$ 30 trillion; which is nearly 40% of global GDP.

Finally, the debt problem will be managed. Many ways to skin a cat.

But …

US$2 trillion debt that is owed by the developing world will be used to extract maximum benefit – at lowest prices. Raw materials will be bought at below-low prices. Imports will be priced at exorbitantly.

The answer is …

Two-fold. At an individual level, invest and stay invested in gold. At a national level, the developing world must create a multilateral framework for a third currency.


The U.S. Debt Limit

October 16, 2011 4 comments

Write-off the US at your own risk. They have been there and done that. For instance between 1995-2005, the tech boom pulled out the US from a deep slump.

See these cartoons as calls for action. (Debt Crisis ; Cartoon by By Bob Englehart, in The Hartford Courant  -  3/14/2008 12:00:00 AM; source and courtesy - caglecartoons.com). Click for larger image.

See these cartoons as calls for action. (Debt Crisis ; Cartoon by By Bob Englehart, in The Hartford Courant - 3/14/2008 12:00:00 AM; source and courtesy - caglecartoons.com). Click for larger image.

The Senate has signed off. The president’s borrowing power has been floated up to $10 trillion, which beats the AmEx black card. The president’s limit when he came into office in 2001 was $6 trillion. So it’s been hiked an average of $500 billion per year during his eight years of office.

Five Countries with the Highest External Debt, 2006

1. United States $10.0 trillion
2. United Kingdom, $8.3 trillion
3. Germany, $3.9 trillion
4. France, $3.5 trillion
5. Italy, $2.0 trillion
Source: CIA, The World Factbook, as of 9/20/07.

Five Countries with the Highest Current Account Deficits, 2006

1. United States, -$862.3 billion
2. Spain, -$98.6 billion
3. United Kingdom, -$57.7 billion
4. Australia, -$41.6 billion
5. France, -$38.0 billion
Source: CIA, The World Factbook, as of 9/20/07.

(via John Tepper Marlin: The U.S. 10-Trillion-Dollar Debt Limit).

Latest count

Now, an update on this status.

US Government debt has crossed US$14 trillion. That is equal to US GDP. It means that the US govt. alone owes as much money as what the entire USA earns each year (GDP). Corporate debt (150% of GDP) and individual household debt (150% of GDP) is on top of this. Since, finally household pay of all the debts, the US citizen is about 400% of income in debt.

Britain is about 500% in debt. The difference between exports and imports is current account deficit. All these countries are also running a huge current deficit.

What to do

In the medium term, control over oil may give the West the means to sustain the life-style that makes them ‘world-leaders’. No wonder the West is willing to kill millions in Iraq, Afghanistan, Libya. But all this killing is also an expensive affair. This killing of millions in Iraq, Afghanistan, Pakistan, Libya is costing US$ trillions.

After that …

New fools for old wine in old bottles

August 31, 2010 2 comments

Using GDP numbers you can prove a lot of things. Using history, you can disprove the same economics. Duh!

PT Barnum’s maxim

There is a sucker born ever minute – (more on PT Barnum and on this quote.)

A significant number of Indians are fooled by the ‘achievement’ the West – especially those who are ‘educated’ in English. A few days ago, Mint, a business newspaper carried a post by Manas Chakravarty, who was using an old report by Angus Maddison to support absurd conclusions.

Transatlantic Slave Trade (Table Courtesy - http://www.nps.gov/ethnography/aah/aaheritage/histContextsD.htm)

Transatlantic Slave Trade (Table Courtesy - http://www.nps.gov/ethnography/aah/aaheritage/histContextsD.htm)

Writes Manas Chakravarty,

By 1600, the centre of Europe had shifted northwards and the golden age of Holland had begun. Dutch per capita income was $1,381 in 1600, while Britain in Shakespeare’s time had a per capita income of $974.Recall that 1600 was the year the East India Company was founded. In contrast, India’s per capita income continued to be $550, while China’s was $600. Note that even Ireland, one of the poorest of Western Europe’s countries, had a per capita income of $615, higher than India’s and China’s. In short, the per capita GDP numbers mirror the changes in power, prosperity and cultural and scientific achievement.It wasn’t till 1981 that India had a per capita income of $977, beating that of Britain in 1600. And it wasn’t until 1993 that India’s per capita income of $1,399 surpassed what the Dutch had achieved in 1600. Maddison’s calculations show that in 2008, India’s per capita GDP in 1990 dollars, PPP terms was $2,975, slightly more than one-third of the world average of $7,614. We have a long way to go. (via World history by per capita GDP – Columns – livemint.com).

Basically, Indians are such rotters! That is what Shri Manasbhai Chakravarty is saying, in simple English.

I know a little English, Shri Manasji!

In the light of day

Any reading of history will show how hollow and risible Manasbhai‘s conclusions are.

One problem with economics is the complete lack of ethics. Economists (like Manasji Chakravarty) cannot be bothered with ‘facts’. For them numbers must do the talking and walking. Some ‘good’ economists like Angus Maddisson can even put up a good strip-tease show with numbers. Admirers can view these ‘assets’ admiringly.

Like Manasji Chakravarty seems to be enjoying Angus Maddison’s strip-tease show.

Poster annoucing sale of slaves in the USA.

Poster annoucing sale of slaves in the USA.

General Julius and the Gauls

Take Italian GDP, of which Bhai Manas has a high opinion.

Sum and substance of the Italian Job? Julius Caesar, (he would be an Italian now), loots the Gauls.

What happens?

Economics (and Shri Manasji Chakravarty) will tell us that Italian GDP goes up. What great history and important economic conclusions can we draw from this loot?

Nothing, except that Romans were good at looting others. Let us forget, for now, that after Roman loot, French GDP goes down.

Cynical economists like Angus Maddisson  could point out that Julius Caesar also massacred hundreds of thousands of Gauls. Loss of lives and wealth will have no effect on GDP as both cancel each other out. Since fewer Gauls now have lesser wealth, per-capita GDP will remain static.

Right, Manasji?

The other thing that the Italians (called Romans then) did well, was kill slaves.

After using them.

Rome, the city alone, had a million slaves. Crassus, (full name Marcus Licinius Crassus) a Roman general, was very good at killing slaves. Crassus was himself, finally, killed at Indian borders – when he made the mistake of thinking that Indians would be easy targets for loot and enslavement.

Crassus, Julius Caesar’s patron-in-chief,  lined Rome’s highway, Via Appia with the bodies of 6,000 slaves. A lesson for revolting slaves. The French, Spanish and the Brits also learned their Roman lessons well, history tells us.

Too well, I say!

Learn your lessons

Soon, it was the turn of the French. The Spanish and the British also. To start the killing.

Increase productivity in Manasbhai’s words.

And time for Native Americans and Australian aborigines to die.

The West (the French, Spanish and the British were very good at this) ‘imported’ at least 10 million, maybe even 20 million slaves, from Africa into West-controlled territories. Economic output of the West goes up! (What else did you expect.).

The output of these slaves is included in Western GDP calculations. But slaves are excluded from census calculation! The lives of African slaves and the deaths of Native Americans are excluded from this economics. But Western GDP goes up. That is what the ‘numbers’ tell.

And good job says, Shri Manasji Chakravarty.

What can I say! Apart from pointing out that Manasji Chakravarty is wasting a lot of wood-pulp.

Most probably from modern Norway.

You can always get slaves! Why bother about people?

You can always get slaves! Why bother about people?

Optical illusion in economics

Norway! My favorite ‘case’ study in modern economics.

Modern Norway does two things very well.

One – they exploit nature very well. Dig up the earth to extract aluminum, cut down forests, and suck oil from the North Sea.

Two – all  Norwegians over-pay each other.

Over-paid taxi-drivers pay huge amounts for a haircut. Over-paid waiters fork out fancy amounts for a car-wash. And so on. Compared to, say Indians, Norwegians are paid some 10-20 times more.

A waiter in Mumbai earns between 125-200 dollars. A Norwegian waiter earns closer to US$1500-2000 per month. Both do the same job and the net economic output should not change. But it does. What Norway does is overstate Norwegian economic output – by over-paying everybody.

Democracy, you see!

This economic ‘trick’ creates a brilliant optical illusion. Of higher wages, profits, turnover, prices – and GDP. Now replace Norway, with any Western economy.

Same story and the plot does not change.

Old wine, old bottle … new fools

This great science of economics has another trick up its sleeve. Norway’s manufacturing out-put is a gargantuan, awesome, jaw-dropping 1 percent of Norway’s annual GDP.

So, Shri Manasji Chakravarty, before you massage numbers and get an ‘erection’ of fancy conclusions, like your ‘guru’ Angus Maddisson does, look behind those numbers.

Take a 2ndlook.

Reinvented narrative

After WWII (1939-1945), using favorable US-dollar  exchange rates, Europe climbed out of rubble and destruction. Recovering from 50 years of bloodshed, faced with the rise of USA and a certain liquidation of their colonial empires, Europe needed to reinvent their history.

One task for this new narrative was to explain the rise of the West. A plausible econo-metric modelling effort from the 1970’s was led by a British economist, Angus Maddison. This model explained away Europe’s economic growth to increased ‘productivity.’

Eyes closed, mouths agape

This study gained some following in India also. India, this analysis estimated, for the last 1000 years, accounted for 50% of the world economy and a world trade share of 25% for much of the 500 years during 1400-1900. The real problem with this study was the trojans that came with this model.

40 years after this report first came out, Indians still cannot use this report critically.


%d bloggers like this: