Electricity Consumption and GDP

One of the Chinese officials recently claimed that Chinese figures of GDP are suspect and he (Chinese official) looks at electricity consumption to arrive at correct GDP figure. I have read claims of relationship between “electricity consumption and GDP” in so many articles that I feel I should say something.

With invention of semiconductor material and energy efficient equipments, comparing electricity consumption will not give you true picture. To some extent, one can compare electricity consumption of other countries to arrive at approximate figures but such approach is full of errors. To take an example; Personnel consumption expenditure could be biggest contributor to GDP of other country as compared to your own country. Decades before, USSR produced fuel-guzzling cars. Therefore, if you had compared fuel consumption to arrive at number of cars on the road, you would have gone wrong. Provided your model takes care of such variables, electricity consumption can still be used as indicator of GDP.

Before I end this post, I will have quick look at Mr. Soros’s argument that capitalism is in danger (as per my knowledge, he claimed years before that Capitalism is under threat). Capitalism is very unlikely to end IMO; we may have something like Socio-capitalism but not socialism. I will have more to say in my future posts.

-Shrihas Pandharkar

© Copyright. No reproduction, please.

DYOR.

Country Stages

These cycles run for decades. Please do not think there are overnight solutions to Sovereign debt problems.

Though above cycles are meant for countries, they are equally applicable to individuals and families.

-Shrihas Pandharkar
© Copyright. No reproduction, please.

DYOR.

Euro Zone in Germany's Interest

Some people think that it is not in Germany’s interest to fund bond purchase of debt-ridden partners. In fact, it is more in interest of Germany than any other country. Germany is shielded by “fallen EURO" due to debt-ridden partners.

Note one-quarter time lag between “EURO FALL” and “German export machine firing”. It does not happen with dollar (at least till now). (Till now) Even if dollar falls, US exports do not go up much. Note also that Germany’s unemployment is at lowest level in last 18 years.

Now, let us say EURO zone falls apart after ten years. By that time, Germany will have exported so much that it will be entitled for windfall (as its reserves will be adjusted by account surplus) and new German currency that will float will quote at 4 dollars per unit (looking at projected surpluses).

Note also that inflation in Germany is at lower level because debt-ridden partners need EUROs, which they get by exporting to Germany.

It needs a mention that if German banks invest in bonds of debt-ridden partners then it may not play out as mentioned above after (if) EUROZONE falls apart .

-Shrihas Pandharkar

© Copyright. No reproduction, please.

DYOR.