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That Was The Week, #38
Editorial
The Chinese economy is the world’s largest measured by Producer Price Parity (PPP). Its lead over the USA is accelerating.
PPP is approximately comparing the buying power of the national GDP, allowing apples to apples comparisons between nations.
Even if we use the constant $ method the findings are clear.
The USA is the largest in absolute dollars. However China is catching up fast. With a rapidly growing middle class and associated purchasing power, China is a growing powerhouse and the USA is an aging, yet still powerful, engine.
In this week’s newsletter we feature an article by CNBC, drawing on data from the US Bureau of Economic Analysis. It shows that the US recorded a $141.92 billion deficit in goods trade with China in the first half of 2020, whilst only recording an $11.74 billion Services trade surplus during that time. In short, non-good trade is a small fraction of the trade in goods. As a service heavy economy, the US is not in good shape.And worse still, the US services surplus is shrinking whilst the goods deficit is growing.
The larger point here is that the USA is heavily integrated at the global level with China. As China continues to grow, US exporters need access to that opportunity. It makes little or no strategic sense for the US to fight with China. This places the Tik Tok (on again, off again) ban in the correct context. Trump is clearly angry that Tik Tok users fooled him into believing a million tickets had been requested for a rally. His revenge is not in the interests of anybody.
So far the democratic opposition to Trump has not weighed in on their view of China. Let’s hope it is more Nixon, embracing of China, than confrontational like Trump.
Talking of politics, Coinbase CEO Brian Armstrong got in trouble this week by attempting to ban his employees from all political activist agenda’s and political discourse while at work. As we can see above, work and politics are closely affiliated. Jack Dorsey and Dick Costolo distanced themselves from the Coinbase CEO’s stance whilst Paul Graham approved. That itself was strange because Armstrong is clearly attempting to “cancel” workplace activism and dicussion, and Graham is on the record supporting opponents of ‘cancel culture’. Free speech, it seems, is not an absolute principle.
Best Keith.
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