Tag Archives: GDP

Does Wealth Equate to Quality of Life?

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If you want to see a fascinating chart, take a look at this graphic which charts each country’s GDP per capita with its “social progress,” defined by a cumulative measure of economic opportunity, access to quality healthcare and education, tolerance of minorities and general quality of life.  This is a subjective measure, but if you look at the countries toward the bottom of the chart, you’ll see that the Social Progress Index mostly gets it right.

Continue reading Does Wealth Equate to Quality of Life?

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PragCap: Fallacy of Composition – National Debt Edition

Long time readers of this blog know that Cullen Roche of the PragCap blog is my favorite economics blogger.  If you’re not reading him, you should. In a recent “Three Things I Think I Think” Cullen puts the US National Debt into proper prospective:

Continue reading PragCap: Fallacy of Composition – National Debt Edition

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Shifting Share

If you want to see global economic history in a single colorful graph, check out this one, produced by The Atlantic magazine.  It shows the share of global GDP for various countries since the year 1 AD.

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What you see in the early years might surprise you.  India accounted for almost 40% of global GDP during the height of the Roman Empire, and China accounted for another 30%.  Europe and the U.S. didn’t make up more than 50% of total world economic activity until the mid-1800s, and the rise of the U.S. economy is—visibly—one of the great economic stories of all time.

The shifting economic heft is not hard to explain.  Before the Industrial Revolution, the size of a country’s economy was measured by the size of its population; there wasn’t a lot of leverage due to technology or innovation.  When technology began expanding the impact of some nations’ citizens but not others, there were significant shifts.  Notice that the U.K. was basically invisible on the global economic landscape until the late 1600s, and became significant as the steam engine and manufacturing technology was born in its cities.

That leverage continues.  Today, the U.S. makes up 5% of global population but generates 21% of its GDP.  Japan, Germany, the U.K. and European countries generally are punching above their population weight, although less so than in the middle of the 1900s.  Meanwhile, the Asian countries (minus Japan) account for 60% of the world’s population and just 30% of its GDP.

Will that last?  Probably not.  You can see the same technological leverage starting to work in favor of China, which is on track to enjoy the world’s largest GDP, as it did in the 1700s, while the U.S.’s share of the world’s economy is slowly eroding.

About the Author: Bob Veres has been a commentator, author and consultant in the financial services industry for more than 20 years.  Over his 20-year career in the financial services world, Mr. Veres has worked as editor of Financial Planning magazine; as a contributing editor to the Journal of Financial Planning; as a columnist and editor-at-large of Dow Jones Investment Advisor magazine; and as editor of Morningstar’s advisor web site: MorningstarAdvisor.com.

Mr. Veres has been named one of the most influential people in the financial planning profession by Investment Advisor magazine and Financial Planning magazine, was granted the NAPFA Special Achievement Award by the National Association of Personal Financial Advisors, and most recently the Heart of Financial Planning Distinguished Service Award from the Denver-based Financial Planning Association. 

Source:

The Economic History of the Last 2,000 Years in 1 Little Graph

That headline is a big promise. But here it is: The economic history of the world going back to Year 1 showing the major powers’ share of world GDP, from a research letter written by Michael Cembalest, chairman of market and investment strategy at JP Morgan.

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Money in the (Foreign) Bank

You might have been reading worrisome comments in the financial press that corporate profits have come down from their highs, in part because unemployment is coming down and the labor markets are getting tighter.  None of this is really bad news, or particularly surprising, despite the breathless spin in the financial press and cable financial programs.

But does that mean that Corporate America will be starved for cash?  Hardly.  A recent report by The Economist notes that U.S. non-financial companies—including technology, consumer products, energy and health care firms—are collectively holding $1.73 trillion (with a “t”) in cash.  That’s more than the total gross domestic product of all but 11 countries around the world, and roughly 10% of the total gross domestic product of the American economy.

You might not see that money recycled into the American economy any time soon, however.  Moody’s Investor Services estimates that 64% of the total (roughly $1.1 trillion) is being held overseas.  The Economist reports that many companies are taking advantage of cheap borrowing costs in the U.S. to fund their business operations and expansions, meanwhile avoiding U.S. taxes on the money held abroad.  This does mean, however, that if/when interest rates rise as the economy grows and companies need to expand their operations to take advantage, there will be available cash, and the higher borrowing rates may not have a significant impact on Corporate America’s bottom line.

Sources:

http://www.economist.com/news/economic-and-financial-indicators/21651211-treasure-chests

About the Author: Bob Veres has been a commentator, author and consultant in the financial services industry for more than 20 years.  Over his 20-year career in the financial services world, Mr. Veres has worked as editor of Financial Planning magazine; as a contributing editor to the Journal of Financial Planning; as a columnist and editor-at-large of Dow Jones Investment Advisor magazine; and as editor of Morningstar’s advisor web site: MorningstarAdvisor.com.

Mr. Veres has been named one of the most influential people in the financial planning profession by Investment Advisor magazine and Financial Planning magazine, was granted the NAPFA Special Achievement Award by the National Association of Personal Financial Advisors, and most recently the Heart of Financial Planning Distinguished Service Award from the Denver-based Financial Planning Association. 

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