Monday, May 2, 2011

Creating growth

I read this somewhere, (to effect): If two people scratch each other's backs and pay each other $10, $20 of GDP is created. If 100 people repeat this act, $1000 of value is created. but nothing really happened to the economy.
I create a corollary now: If a country builds a bridge for $1000 but reports inflation through a combination of food prices, housing prices and manufacturing or services' prices, real GDP growth is going to be massive. If that bridge is useless, the GDP is not going to capture it. However, stealthily, monetary inflation will eat into a country's savings and investment rationale.
We ought to question China's actual real and useful growth.

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