Global trade’s affects upon GDP.

Discussion in 'Economy' started by Supposn, Feb 22, 2012.

  1. Supposn
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    Supposn Senior Member

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    Global trade’s affects upon GDP.

    [Trade surpluses contribute and trade deficits are detrimental to their nations’ GDPs because the benefits of production are earned by the producing nations and are denied to the importing nation].


    The expenditure method is among the simplest and most common method for calculating gross domestic product, (i.e. GDP). Nations’ entire final expenditures for goods and service products are included within their GDP.

    The total value of the nation’s imports are subtracted from the importing nations’ and added to the producing nations’ GDPs.

    The prices of many specific products do not reflect the entire costs of goods and services that supported the production of those specific products.
    Examples:
    Research and development costs that were provided at lesser cost by universities or other non-profit entities;
    infrastructures local governments contribute and better locate to induce enterprises’ relocating into the local governments’ jurisdictions;
    Enterprises may “tilt” their cost accounting to attribute lesser indirect overhead costs and lower prices to their newer less established products.

    All such goods and service products supporting or contributing to production of globally traded products are accounted for within the producing nations’ GDPs but they cannot be statistically identified and are thus not attributed to foreign trade’s affects upon the GDPs.

    Trade surpluses contribute and trade deficits are detrimental to their nations’ GDPs because the benefits of production are earned by the producing nations and are denied to the importing nation.

    To the extent that a nation’s global trades’ prices are understated, their trade surpluses contributions or trade deficits detriments to their GDPs are similarly understated.

    Respectfully, Supposn
     
  2. Supposn
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    Supposn Senior Member

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    Investments do and transfers of wealth do not contribute to GDPs.

    I’m continuously responding to contentions that USA’s imports are paid for in U.S. dollars and thus must fully contribute to our GDP.

    When speaking and writing precisely, economists differentiate `between the words “investment” and “transfers of wealth”. Investments are the purchase or dedication of goods or service products for the eventual purpose of producing additional goods or service products of greater value.

    The purchasing initial public offering, (IPO) stocks is investing; the stock issuing enterprise receives some additional capital due to the purchase. Other stock sales transactions provide no additional capital to the stock issuing enterprises.

    Other than the brokerage fees which are a service product that enables liquidating the seller’s stock holdings, the price of other stock sales transactions are transfers of wealth rather than investments or products.

    Transfers of wealth, (the vast proportion of stock and bond sales, deposits and contributions to bank and other financial accounts are not factored into GDPs; investments are factored into GDPs.

    Vast amounts and proportions of revenues directly derived from importing products into the USA are used for transfers of wealth rather than for investments and as such contributes nothing to USA’s GDP. (They do appear in USA’s capital account).

    Respectfully, Supposn
     
  3. Supposn
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    Supposn Senior Member

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    Exporters’ revenues affects upon the GDPs of the nations they export to.

    If any of such revenues are used to purchase USA products, they contribute to USA’s GDP.

    If those USA products are exported, they are attributed to USA’s foreign trade and reduce USA’s trade deficit.

    If foreign revenues directly derived from importing products into the USA are spent in the USA for USA products remaining within the USA, those revenues should be identified as foreign owned; otherwise USA’s GDP accounts are unable to attribute those foreign revenues as additions to USA’s GDP due to foreign trade.

    Respectfully, Supposn
     
  4. EdwardBaiamonte
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    EdwardBaiamonte VIP Member

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    of course that idiotic since we buy from China in dollars; so if we buy $100 of stuff from them they have to buy $100 of stuff from us and our GDP then stays the same.
     
  5. EdwardBaiamonte
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    EdwardBaiamonte VIP Member

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    why are you concerned with what you cant understand?
     
  6. Supposn
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    Supposn Senior Member

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    Edward Baiamonte, because I suppose you’re a voter. I’m impelled to be concerned as to what you believe to be your understanding.

    Respectfully and concerned, Supposn
     
    Last edited: Feb 22, 2012
  7. Toro
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    Toro Gold Member

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    This thread is incorrect.
     
  8. Supposn
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    Supposn Senior Member

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    Toro, your correction is?
    Respectfully, Supposn
     
  9. Toro
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    You misunderstand the national accounts. GDP is an estimate of national income. The expenditure method is a way to measure GDP.

    If you have two economies that are equally in balance, if one economy begins to accelerate, all else being equal, the faster growing economy will experience a trade deficit. That is an effect, not a cause. The trade deficit is an outcome of the accelerating growth, not detrimental to growth.

    Likewise, if two economies are balanced, and people in one economy decide to invest in the other economy, providing jobs and wealth in the other economy, the other economy will experience a trade deficit. That is a mathematical fact. But again, the trade deficit is an outcome, an effect.

    Both are an accounting function. They are not representative of the underlying economics.
     
    Last edited: Feb 22, 2012
  10. stans
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    stans Member

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    Toro

    Could you go into the detailed mechanics to explain how economy 1, that receives money from economy 2, experiences a trade deficit?

    Thanks
     

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