When the World Stops Making Sense
Monday, April 27th, 2009
By Inya Ivkovic, MA for Profit Confidential
— by Inya Ivkovic, MA
There are all kinds of numbers floating out there, serving very little purpose but to disorient us even more. Take, for example, China. Depending on whose team you’re cheering for, China could surpass the U.S. economy in a decade, in two decades, perhaps in three, or never really. But I’m not interested now in figuring out who’s right, but in illustrating how the world in which we operate has become exceedingly confusing, and has even stopped making sense.
Who can forget how, two years ago, many economists argued that the subprime endemic could be contained? We were also led to believe that no economic downturn could touch Asia, while Wall Street could do no wrong. And that brings me to the question: who is coming up with all those numbers and just how reliable are they? After all, many of our decisions depend on those numbers and how we interpret them.
Going back to China, according to some analysts’ calculations, China’s economy has just about reached that of Japan’s. But, then again, how could China have such an amazing GDP growth go largely undetected by the rest of the world until 2005, give or take a quarter, when it allegedly surpassed the Austrian economy? And, in 2007, China claimed it surpassed Germany and became the world’s third largest economy. Considering the dire straits the U.S. economy is in right now, for all we know, China could surpass it as early as next year?
Not to be disrespectful, but China isn’t exactly known for being a champion of full disclosure and transparency. The joke about
monkeys and dart boards doesn’t get played on money managers only. In reality, as we learned from those who dared to lose before us, China is structurally imbalanced and navigating through a multitude of often reality-detached top-down policies is worse than walking through an actual minefield.
In China’s defense, it cannot be easy capturing the economic activity of a population of over 1.3 billion, dispersed at various levels of poverty and prosperity every single day in a year. On the other hand, there is that constant pressure from the government to be the best, to dazzle the world with outstanding numbers, to make the headlines, and, ultimately, to attract traders. This apparent contradiction is why the world doubts China’s economy.
Now, in the spirit of honesty, who knows what goes on with economic data produced from the U.S. either? Considering the size of the U.S. economy, the only factor that could have brought it to its knees was Wall Street, and not oil, as I’ve heard some economists now claim. It was Wall Street that created complex financial products that no one understood or knew what to do with, but upon which so much fictitious wealth was built. Obviously, when assets are incorrectly valuated, so is the economy, be it on a national or an international level.
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Tags: china's economy, chinese economy, Economic growth, U.S. economy
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