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Thread: Ukraine 5 years after Maidan,interesting article from the ORF

  1. #61
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    https://news.yandex.ru/story/V_Rade_...b_225.ac10a99c

    Russian WOMEN for sure are dangerous. I just do not recall the name of that redhead that was arrested in the USA. and of course each one a Mata Hari... so, they also have to stay out!
    There is no greater treasure then pleasure....

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    Quote Originally Posted by Ignatius View Post
    GDP is based strictly on geography and Polish migrant workers who send money back to Poland would not be included in Poland's GDP, but rather Poland's GNP. I'm in Warsaw right now and have seen a lot of Russian uber drivers. They are contributing to the Polish GDP. )
    I don't believe this is entirely correct - it depends what happens with the money in Poland, i.e. it's not the transfer that affects Polish GDP, but what the recipient does with it.

    On the expenditure side of GDP: Polish granny receives money from abroad, keeps it in bank - no change. Spends it on domestically produced potatoes, GDP goes up (through consumption account). Spends it to import Danish butter cookies, no change, as it goes out through net imports (Danish GDP goes up).

    On income side: same, except that when the worker buys the local potatoes, it shows up in the farmer's income account.

    A bit simplified but overall it's wrong to say transfers don't affect GDP - although correct to say they don't affect GDP directly.

    So as a more general rule: if transfers are sent predominantly to recipients that spend the money, it will affect GDP (in roughly the same proportion that consumption is made up of domestic goods vs imports).

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    Quote Originally Posted by Benedikt View Post
    https://news.yandex.ru/story/V_Rade_...b_225.ac10a99c

    Russian WOMEN for sure are dangerous.
    For pissing descendants of Polish servants ( https://ru.m.wikipedia.org/wiki/Тете...ич ) - definitely yes.

    Quote Originally Posted by Armoured View Post
    On the expenditure side of GDP: Polish granny receives money from abroad, keeps it in bank - no change.
    Erhmmm... doesn't bank use them to credit its local customers, and this way somehow contribute into GDP (well, if these customers produce additional value)?
    All the world's Kremlin,
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    Quote Originally Posted by FatAndy View Post
    Erhmmm... doesn't bank use them to credit its local customers, and this way somehow contribute into GDP (well, if these customers produce additional value)?
    That's such a good question that I'm going to claim I meant 'banka' like she buried it in the garden. )

    I'm being completely serious - it's completely indeterminate at the starting point, and without making somewhat questionable assumptions.

    But to take a stab at it:
    -the same general rule above, which is that as soon as it causes consumption (spending) or income (something is bought) that wouldn't have otherwise happened, it raises GDP.
    -for the banking case, this more or less depends on whether the bank does more lending (for consumption by its borrowers) than it would have without that money - which is complicated for a bank because it depends what is constraining the bank from lending more.
    -The short answer to this question is that banks are usually not constrained or limited by short-term deposits (it's hard for them to lend this effectively), so for our one granny it probably doesn't have much impact. (Then again, if it's short term deposit, she might spend it two months later - say for christmas presents - so it still goes into GDP).
    -But there's a saying: "quantity has a quality all its own" - a million overseas workers sending money home has a very different impact than a thousand. Here, it would mean that if the bank(s) get a whole lot of deposits, it starts to change their circumstances. Think this way: if all of these transfers keep going into the banking system, even if only for short term deposits, and especially if the flow of those deposits is constant, the banks can start to lend more confidently (they see consistent levels in their aggregate deposit accounts and can predict things). That will tend to increase GDP (all other things being equal).

    Thanks, that was an interesting question to think through.

    But I can simplify a lot: from the info and studies I've seen, transfers for these types of migrant populations working abroad tend to go to people that a) need the money, and b) because they need the money, they spend it. So GDP goes up. It's not a perfect link, but a pretty consistent one - most of the money that isn't spent is saved for not very long periods (like family saves to build a house or buy a car, or saves a few months' transfers to have an emergency budget). Some economist somewhere has probably done a study with 'marginal propensity to spend cross-border transfers' and likely pegged the number at over 90%.

    And yes, in large numbers/consistent flows, it might increase GDP further by working through the banking sector/financial system. It might even be a big impact - but I'd be cautious about claiming that because many countries with large numbers of migrant workers aren't known for the quality of their banking system. There are some really weird exceptions, though - I understand Lebanon may be a weird case, because the Lebanese diaspora is enormous and welathy that send money home/keep connections, but also migrant/refugee communities throughout the Middle East use Lebanese banks. Fewer currency controls than some of the big countries like Egypt, too? - but this is just second hand info I've heard, I don't know (other folk have told me no-one on the planet understands how Lebanon fucntions at all, incl the Lebanese, they just do somehow).

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    Quote Originally Posted by Armoured View Post
    That's such a good question that I'm going to claim I meant 'banka' like she buried it in the garden. )
    Храните деньги в банке! А банку - заройте в землю! (с)

    Quote Originally Posted by Armoured View Post
    "quantity has a quality all its own" - a million overseas workers sending money home has a very different impact than a thousand. Here, it would mean that if the bank(s) get a whole lot of deposits, it starts to change their circumstances. Think this way: if all of these transfers keep going into the banking system, even if only for short term deposits, and especially if the flow of those deposits is constant, the banks can start to lend more confidently (they see consistent levels in their aggregate deposit accounts and can predict things). That will tend to increase GDP (all other things being equal).
    That's what I meant. For sure single or even multiple short term deposits won't have much effect on the economy, but massive (ir)regular inputs will do. That's why Poles are worried (a bit ) by Brexit.
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    Quote Originally Posted by Armoured View Post
    I don't believe this is entirely correct - it depends what happens with the money in Poland, i.e. it's not the transfer that affects Polish GDP, but what the recipient does with it.

    On the expenditure side of GDP: Polish granny receives money from abroad, keeps it in bank - no change. Spends it on domestically produced potatoes, GDP goes up (through consumption account). Spends it to import Danish butter cookies, no change, as it goes out through net imports (Danish GDP goes up).

    On income side: same, except that when the worker buys the local potatoes, it shows up in the farmer's income account.

    A bit simplified but overall it's wrong to say transfers don't affect GDP - although correct to say they don't affect GDP directly.

    So as a more general rule: if transfers are sent predominantly to recipients that spend the money, it will affect GDP (in roughly the same proportion that consumption is made up of domestic goods vs imports).
    No, it's correct. Wired money from workers in a foreign country would only be counted at source, ie where they work. GDP is an output measurement of a nation's factors of production. A Russian taxi driver in Warsaw who mails money to his granny in Russia. That labor output belongs to Poland's GDP, not Russia's.

    However, if you use GNP the output belongs to Russia. Americans who work in Moscow - Under GNP their output belongs to the US, not Russia.

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    Quote Originally Posted by TheInterocitor View Post
    I don't know how Wiki calculates GDP, but if the ruble rate is adjusted for the effect of sanctions, then the Russian GDP/capita is higher than Polska.
    No, Poland's GDP per capita is much higher than Russia's. 29% (Poland - 13,811.66 USD. Russia -10,743.10)

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    Quote Originally Posted by Ignatius View Post
    No, Poland's GDP per capita is much higher than Russia's. 29% (Poland - 13,811.66 USD. Russia -10,743.10)
    Well, DUH!

    You did read (NOT) the part about "if the ruble rate is adjusted for the effect of sanctions" ??
    Government is like Fertilizer. A little is good, too much is a pile of crap.

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    Quote Originally Posted by Ignatius View Post
    No, it's correct. Wired money from workers in a foreign country would only be counted at source, ie where they work. GDP is an output measurement of a nation's factors of production. A Russian taxi driver in Warsaw who mails money to his granny in Russia. That labor output belongs to Poland's GDP, not Russia's.
    GDP is what is produced, but it is a mirror system - it is also the sum of all final uses of goods and services (the expenditure approach), shortened to:
    Y = C + I + G + (X − M)

    (Y is GDP, the rest being in order consumption, investment, government spending, and net exports)

    Anything 'produced' has to be used by someone - hence GDP is measured/estimated several different ways, two of which are income and expenditure approach. Intuition is, anything I spend has to be somebody's income - they mirror each other (within the limits of measurement/estimation).

    When the money is spent in the target country, it becomes part of GDP - the mirror is that for Granny to buy local potatoes, those are being produced by someone whose production is part of GDP (if produced locally).

    I think the error in how you're looking at this is the following: yes, the first time the money is earned by production in host country, that is host country's GDP. No argument there.

    But GDP is a flow concept, per period, not a cumulative asset measure. There's no contradiction between Uberman in host country being part of host country GDP in period 1, and then his granny buying potatoes in period 2 in target country with the money he sent her.

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    Quote Originally Posted by Armoured View Post
    GDP is what is produced, but it is a mirror system - it is also the sum of all final uses of goods and services (the expenditure approach), shortened to:
    Y = C + I + G + (X − M)

    (Y is GDP, the rest being in order consumption, investment, government spending, and net exports)

    Anything 'produced' has to be used by someone
    Once more GDP does not include foreign remitted income. Like transfer payments, foreign remitted income is not earned, being neither a wage nor a benefit. It would be netted out of consumption using the expenditure approach or excluded from PDI when using the income approach. You seem to be confusing GDP with GNP.

    Quote Originally Posted by TheInterocitor View Post
    Well, DUH!

    You did read (NOT) the part about "if the ruble rate is adjusted for the effect of sanctions" ??
    There is no such thing as a "ruble adjusted GDP." Ruble depreciation is but an input variable to the trade balance (x - m) and its appearance alters GDP at that point, rather than as a conversion variable to dollar output.

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    Quote Originally Posted by Ignatius View Post
    Once more GDP does not include foreign remitted income. Like transfer payments, foreign remitted income is not earned, being neither a wage nor a benefit. It would be netted out of consumption using the expenditure approach or excluded from PDI when using the income approach. You seem to be confusing GDP with GNP.
    You are missing the point. I've explained differently. Foreign remitted income is not part of GDP, agreed, at the time it is transferred.

    It becomes part of GDP when it is spent locally.

    This second point is key, because in actual fact, most remittances are spent fairly quickly.

    It's not netted out of expenditure when spent, and the income in the pocket of local producers is real at that point.

    Otherwise GDP would never, ever be affected by foreign transfers, which is an obvious nonsense.

    But yes, at the time it's transferred and before anything is done with it, it does not enter into GDP calcs.

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    Quote Originally Posted by Armoured View Post
    You are missing the point. I've explained differently. Foreign remitted income is not part of GDP, agreed, at the time it is transferred.

    It becomes part of GDP when it is spent locally.

    This second point is key, because in actual fact, most remittances are spent fairly quickly.

    It's not netted out of expenditure when spent, and the income in the pocket of local producers is real at that point.

    Otherwise GDP would never, ever be affected by foreign transfers, which is an obvious nonsense.

    But yes, at the time it's transferred and before anything is done with it, it does not enter into GDP calcs.
    So basically it is one big Ponzi scheme, Pavel earns money in the UK (UK GDP) sends it to Olga in Poland, next month Olga buys a new German washing machine (Polish GDP increase) money goes to Germany, Fritz then buys lots of Russian gas to make more washing machines (rise in German GDP), Russian take more gas out of the ground (rise in Russian GDP), Russian oligarch then buys a property in London for his child at school (rise in UK GDP), estate agent employs Polish builder Pavel to paint apartment ..........................................

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  18. #73
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    Quote Originally Posted by Alan65 View Post
    So basically it is one big Ponzi scheme, Pavel earns money in the UK (UK GDP) sends it to Olga in Poland, next month Olga buys a new German washing machine (Polish GDP increase) money goes to Germany, Fritz then buys lots of Russian gas to make more washing machines (rise in German GDP), Russian take more gas out of the ground (rise in Russian GDP), Russian oligarch then buys a property in London for his child at school (rise in UK GDP), estate agent employs Polish builder Pavel to paint apartment ..........................................
    )) yep, the economy is circular.

    You'll notice I was very careful to say that GDP is increased only to extent granny buys something totally local. If she buys the German washing machine (leaving aside that it was probably assembled in Czechia or Russia), Polish GDP goes up but is decreased by the import (so it nets to no change), and on and on. But if she just eats danish butter cookies ordered over amazon, no change to gdp, even if she's better (?) fed.

    Hopefully granny starts a washing-up business and makes money from that (whereas if she does it just for her grandkids, that does nothing to GDP, even if everyone is better off and happier).

    GDP is weird - it's not a perfect measure. If she buys local toxic waste and pours it on her yard, GDP goes up; if she buys German toxic waste it stays the same (but Germany's GDP increases...). Go figure.

    If you take, say, Tajikistan or some mythical country where everything is imported - no change to GDP, even if kids are fed better and grow up healthy. (Future GDP goes up to extent they are more productive, but that's in the future, so whatever...)

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    Quote Originally Posted by Armoured View Post
    You are missing the point. I've explained differently. Foreign remitted income is not part of GDP, agreed, at the time it is transferred.

    It becomes part of GDP when it is spent locally.
    Uh no. This is beyond comical. Income earned abroad in Country A and repatriated to Country B can never ever count towards Country B's GDP as either income or as consumption. Not sure who taught you this - certainly not me - but this is 100% wrong, but sure whatever.

    From a decent source (thebalance.com).


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    Quote Originally Posted by Ignatius View Post
    Uh no. This is beyond comical. Income earned abroad in Country A and repatriated to Country B can never ever count towards Country B's GDP as either income or as consumption. Not sure who taught you this - certainly not me - but this is 100% wrong, but sure whatever.
    What happens after this? you're only looking at one period. At some point, something happens with the money.

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