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Ron Paul has got it wrong

Posted: May 11, 2014 2:00 a.m.
Updated: May 11, 2014 2:00 a.m.
 

Regarding the Ron Paul column published May 7 entitled “We’re no longer number one”: Sorry, congressman, you swallowed a distortion put out by the World Bank.

The claim that China would soon surpass the U.S. as the world’s largest economy has been soundly debunked by economist Derek Scissors.

The arm of World Bank says China’s GDP adjusted by Purchasing Power Parity (PPP) reached 87 percent of the U.S. in 2011.

They then project this forward, concluding China will pass us this year or the next. Mr. Sessions, the economist, says “this makes no sense.”

PPP relates to internal purchasing power, not economic size. It would be nonsense to claim that because goods and services in a Third World country like Bangladesh are cheaper on average than Australia, that Bangladesh’s economy is much bigger that it appears.

Clearly, that evaluation is flawed. Sessions goes on to suggest that a sound comparison would be to use National Wealth.

Credit Suisse has measured private wealth in many countries. It puts China’s at $22 trillion and ours at $72 trillion; that’s a gap of $50 trillion!

Like many politicians, Ron Paul parroted the World Bank headline but did not really understand it.

Unfortunately, that misleading intro weakened Mr. Paul’s arguments for spending restraint.

 

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