Richard Perle completely loses it

GDP at official exchange rate vs a standard currency such as the US dollar, obviously. That’s how GDP is usually measured in comparison tables.

I mean, you did notice that according to that funny PPP table, India had a higher GDP than Germany or France, and China had nearly half the GDP of the USA, right? You think an evaluation method that gives such bizarre results is in any way useful?

GDP at PPP can be amazingly high for the poorest country, as long as they have lots of extremely cheap basic necessities, which can be produced for instance by very low standards of quality or government intervention. That doesn’t mean the country is wealthy in any realistic sense.[/quote]

But that’s not the way purchasing power parity works. The only reason the poor countries of India & China are on that list is that they have nearly a billion people apiece. Yes, there’s still issues with somewhat incomparable purchasing sets across countries, but China (assuming they’re not exaggerating their numbers even more than I think) really does have that total income; a billion people making $2000 a piece is the same national income as a hundred million people making $20,000 a piece. That doesn’t mean they can marshall as much in the way of resources for a military, or influence, but that’s because their “cash left over per capita after necessities” is small.

For various technical reasons, exchange rates aren’t superior.

Here’s a pretty good summary. Most interestingly:

Other market participants - Notice that in the PPP equilibrium stories, it is the behavior of profit-seeking importers and exporters that forces the exchange rate to adjust to the PPP level. These activities would be recorded on the current account of a country’s balance of payments. Thus, it is reasonable to say that the PPP theory is based on current account transactions. This contrasts with the interest rate parity theory in which the behavior of investors seeking the highest rates of return on investments motivates adjustments in the exchange rate. Since investors are trading assets, these transactions would appear on a country’s capital account of its balance of payments. Thus, the interest rate parity theory is based on capital account transactions.

It is estimated that there are approximately $1 trillion dollars worth of currency exchanged every day on international Forex markets. That’s one-eighth US GDP, which is the value of production in the US in an entire year! Plus, the $1 trillion estimate is made by counting only one side of each currency trade. Thus, that’s an enormous amount of trade. If one considers the total amount of world trade each year and then divide by 365, one can get the average amount of goods and services traded daily. This number is less than $100 billion dollars. This means that the amount of daily currency transactions is more than ten times the amount of daily trade. This fact would seem to suggest that the primary effect on the daily exchange rate must be caused by the actions of investors rather than importers and exporters. Thus, the participation of other traders in the foreign exchange market, who are motivated by other concerns, may lead the exchange rate to a value that is not consistent with PPP.

The question is, what do you want to use your GDP number for? Yes, exchange rates are distorted by the financial markets, and so is GDP based on exchange rates, but does it matter? Sure, it does matter if you want to assess living standards because the amount of rice Li Sixpack can buy in Beijing doesn’t usually depend on exchange rates.

But you were introducing this chart to indicate that France was pretty important based on its economy. That’s problematic because the basket of consumer goods that the average French paycheck can buy is barely related to the international importance of the country. The important thing here is the amount of foreign goods and services that the French and their government can buy, and the amount of purchasing power they can bestow on the residents of other nations as aid or credits.

Those amounts are reflected by GDP based on exchange rates, not by GDP based on PPP, because they involve money transfer into non-EU regions where French economic influence competes with the economic influence of other nations. (Within the same currency region, e.g. within the EU, it shouldn’t matter which GDP measure you take because intra-region trade will eventually take care of price differences.)

Apparently nobody here is familiar with the tactic of “Good Cop, Bad Cop.”

I wish you all luck in your first police interrogation.

Richard Perle is the foaming-at-the-mouth detective who has to be physically restrained from going over the table by Colin Powell, who starts talking “sensibly” and brings the French into line.

I think you forgot the part where France is not a criminal. As of yet, having a different opinion of world affairs than America is not a criminal offense. Treating an “ally” as one would treat a criminal does not exactly promote goodwill.

France is not a criminal.

France is an uncooperative witness.

Oh, I didn’t know the police were allowed to threaten to beat witnesses.

But you were introducing this chart to indicate that France was pretty important based on its economy.

If it’ll make you feel better, here’s an exchange-rate based chart where France is number 5.

That’s problematic because the basket of consumer goods that the average French paycheck can buy is barely related to the international importance of the country. The important thing here is the amount of foreign goods and services that the French and their government can buy, and the amount of purchasing power they can bestow on the residents of other nations as aid or credits.

So when the dollar doubled in strength against the Japanese yen in the 1980s, the US suddenly became 100% more powerful compared to Japan?

Apparently nobody here is familiar with the tactic of “Good Cop, Bad Cop.”

Now that’s the way to run international diplomacy! The adults are back in charge!

You’ve obviously never been a witness. ;)

I’ve gone undercover in an Amish community, but not in any official capacity. Does that count?

No, banging a milkmade doesn’t count.

France’s relevance has nothing to do with their agreement or lack of agreement. It has to do with the fact that they are militarily and economically not that important anymore. The fact that they keep trying to throw their weight around makes it more and more apparent that they’re irrelevant.

Totally, the last desperate gasp of a former world power. One of these days they’ll just thow in the towell like Italy and Spain and start living the good life. Nothing but food, wine, women and afternoon naps. Frankly, I wish I’d live long enough to see the US reach that point. But I figure we’ve got a few hundred years of consternation ahead of us.

Ah, the funny.