| China's coming on strong while our leaders chase the | | | | estimates China's GDP to be $2.225 trillion. On a |
| terrorists across the globe. Recently much international | | | | purchase power parity basis that figure is $8.859 trillion. |
| press fanfare was generated acknowledging that | | | | In comparison the U.S. shows an economy of $12.49 |
| China had replaced Great Britain as the world's fourth | | | | trillion based on exchange rates and $12.36 trillion |
| largest economy. Nobody argues nowadays that | | | | based on purchase power parity. Based on exchange |
| China has the highest growth rate of industrialized | | | | rates, China is the 4th largest economy in the world. |
| economics posting annual growth rates in excess of | | | | But based on purchase power parity China is clearly |
| 8.5 percent according to The International Monetary | | | | number 2. And the Factbook acknowledges, Measured |
| Fund. The World Bank predicted recently that China's | | | | on a purchasing power parity (PPP) basis, China in |
| economy will grow 10.4 percent this year and 9.3 | | | | 2005 stood as the second-largest economy in the |
| percent in 2007. In contrast, the United States is in the | | | | world after the US.... Noted magazine, The Economist |
| 2 to 3 percent range. What's not been said by our less | | | | reported, By 2020, China will narrowly outstrip the |
| than candid leaders is that China is already the second | | | | United States in GDP. China already exceeds the U.S. |
| largest global economy and has held that spot for | | | | in production of many strategic minerals and metals. |
| sometime and catching the U.S. very quickly. The | | | | And its industrial base is now larger as well. According |
| Chinese economy is already 72 percent the size of | | | | to the Factbook China's industrial output now stands at |
| the U.S. economy. One only need reference the 2006 | | | | 4.19 trillion dollars as compared to 2.52 Trillion for the |
| CIA World Factbook. There it is for the whole world to | | | | United States. Chinese annual industrial growth is 29.5 |
| see. A country's economic output is measured, and | | | | percent but only 3.5 percent here in the U.S. Another |
| compared to other countries, by a standard known as | | | | significant trend worth noting is leadership in world |
| GDP, or Gross Domestic Product, which is measured | | | | trade. A recent Wall Street Journal article written by |
| in two ways, one by international exchanges rates and | | | | Andrew Batson and Shai Oster reports that Egypt's |
| by purchase power parity. Exchange rates are the | | | | trade with the China will exceed that of the United |
| norm used by most private and public international | | | | States by the year 2012. And this trend is evolving with |
| agencies. But more recently experts have suggested | | | | many countries, even in our own hemisphere. |
| that international exchanges rates distort the true | | | | America's eroding industrial base is compromising the |
| picture. Value distortions exist between the currencies | | | | nation's military capabilities. This was recently highlighted |
| of the trading nations, in particular, when currencies are | | | | in the Pentagon's 2005 Quadrennial Defense Review |
| something less than free-floating in the open market. | | | | when it concluded, Sourcing and production is now |
| The Chinese Yuan is mostly a fixed-rate currency | | | | global, with considerable implications for the industrial |
| pegged to the value of the U.S. Dollar. The exchange | | | | base. This same Defense Department study raised |
| value is only changed by Chinese government, a little | | | | alarm bells about China when it concluded, the industrial |
| at a time generally to appease the U.S. Congress. | | | | and economic power wielded by China, and how this |
| Therefore GDP figures between the two nations are | | | | relates to the country's political and military aspirations, |
| distorted. Countries with free trading currencies can | | | | is seen as a cause for concern. But our leaders |
| safely use exchange rates as a measure of | | | | already know this stuff. They just need to level with |
| comparison between their respective GDP's. In the | | | | the American people instead of spoon feeding them |
| absence of free trading, purchase power parity is | | | | statistical manure. Soon we will be Number Two. And |
| used as the standard of comparison. Purchasing | | | | let's not forget the echo of Khrushchev's thundering |
| power parity equalizes the purchasing power of | | | | UN speech 50 years ago declaring the East will |
| different currencies in their home countries for a given | | | | overrun the West. It's happening before are very eyes. |
| basket of goods. This is often used by global | | | | James Silvester is a small biz author and consultant. |
| economists, and our CIA, to compare the economic | | | | He has written 4 best selling entrepreneurial books with |
| output countries. The difference in an exchange rate | | | | a 5th on the way, and has appeared on many radio |
| and purchase power parity analysis of the China GDP | | | | and TV shows including MSNBC. The books have |
| is nothing less than astonishing and should be downright | | | | forewords contributed by the Virginia Governor and a |
| frightening to American leaders. For example, on an | | | | U.S. Senator. |
| exchange rate basis, the CIA World Factbook | | | | |