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Economic News

| May 22, 2018

Did you see the report last week about a study indicating that China, Russia, and North Korea are overstating their GDP numbers?  Seriously, would they do such a thing?  Is the sky blue?  Actually, it was NASA satellite imagery that Dr. Luis R. Martinez of the University of Chicago used in his analysis.

Speaking of GDP, AEI scholar Mark Perry recently posted his annual updated map of the United States where he compares the GDP of each state to a country: Putting America’s enormous $19.4T economy into perspective by comparing US state GDPs to entire countries.  California’s economy is roughly the size of the UK, the economy of Texas is about the size of Canada, etc., etc.  Whew!  What is particularly striking is that in every case, we produce so much with far fewer workers.

Speaking of GDP again, a global strategist named Mark Grant put out an email recently where he wondered what would happen to Debt to GDP ratios if central bank assets were included.  He determined that our U.S. Debt to GDP ratio of 105.40% would rise to 127.70% if our Federal Reserve balance sheet assets are included.  The EU has a GDP of $12.80 Trillion with a Debt to GDP ratio of 86.70%.  Adding in the ECB assets, their Debt to GDP ratio gets close to ours at 125.60%.  China's $12.60 Trillion economy has a Debt to GDP ratio of a whopping 256.00%; adding their central bank assets runs it up to 310.80%.  Lastly, Japan’s $4.95 Trillion economy has a Debt to DGP ratio of 253.00%; adding BOJ assets increases the ratio to 347.50%!  Talk about leverage!  Question: What happens when deleveraging kicks in?

The U.S. economy continues to expand – we are (late?) in the second longest expansion in U.S. history.  And 14 states have hit record-low jobless rates: 14 US states hit record-low jobless rates as US economy enters 107th month of expansion, second longest in US history.

“Socialism in general has a record of failure so blatant that only an intellectual can ignore or evade it.” – Thomas Sowell

Until next time, cheers!