22-01-2004, 02:42
I've been watching (and joining in with) the whole issue of GDP calculation, ERMs, etc. for a while now.
The problems seem to be:
A) There is no universally accepted standard means of calculating GDP/budget
B) There is no universally agreed ERM
Many people get around A by using the GDP Calculator, but it seems that there are just as many people who think it's totally out of line with economic theory, generating OTT values.
Most people seem to consider USD the standard and go by that.
The problem with using the GDP Calculator, it seems to me, is that it does generate wildly inflationary values ... but other methods I have tried (including Nik's method) appear to generate even more generous budgets.
The problem with using the USD as the standard is that it doesn't take into account economic differences. Yeah, sure, a smaller nation will have a smaller budget, but this completely ignores the fact that there are plenty of large nations in the World with completely imploded economies and entirely valueless currencies (the former USSR) ... and others that have small populations, yet massive financial clout (Switzerland) ... So, nation-size doesn't seem, to me at least, a reasonable way of assessing the value of nation's currency.
Also, when nations randomly assert that X units of their currency are worth Y USD, why should anyone take their word for it? ... Who says? ... I very much doubt that in a world even remotely approaching our own a nation can realistically expect to set the value of it's own currency ... it will depend upon how in demand that currency is ... i.e. how much worth it really has to potential investors, traders, etc.
So, I've devised two alternative solutions to the above-mentioned problems:
The first is a GDP calculator.
It's based upon Greenhome's method ... which is, itself, based upon real-world values and, in my opinion, therefore, probably the best starting point.
It takes into account the loss in budget revenue due to the retired, the under-age and the military ... calculating a budget based upon the working-population in addition to the national GDP based upon an average GDP per member of the total population
Your budget figures may be lower than you'd like, but I don't think they're too draconian - with a 'good' economy, a population of 56million and a tax-rate of 37%, I still generated an annual budget of nearly 73billion after expenditure on the military, youth and the elderly/retired was taken into account.
The second is an ERM calculator, invoice calculator and bid calculator.
It starts from the same economic basis as Greenhome and calculates the relative values of two currencies based upon the difference in economy between the two nations.
Plug in the two nation's economy types and their currency names and it will calculate:
1) The relative exchange rate (backwards and forwards) between the two currencies.
2) The cost (in both supplier's and consumer's currencies) of a number of units at a given unit cost ... which could also be units of currency (so it's a currency converter for random sums of money AND an invoice calculator)
3) The number of units available from a supplier for a given sum of the purchaser's currency, determined by unit cost in the supplier's currency (so you can decide to spend X amount of your own currency, rather than overspend)
Again, it's not too draconian (the greatest difference is 1:88, which is considerably less than some real-world examples, such as the Italian Lira)
Since the relationships between economies are scaled, the relative differences between two pairs of nations is maintained ... two nations three economy types apart at the top end of the scale, will have pretty much the same exhange ratio as two nations three economy types apart at the bottom end of the scale.
Furthermore, as it can be taken that all nation's budgets are in their own currencies and all currencies are relative, it will iron out the discrepancies we so often see now, where a nation with a weak economy can still afford to purchase ridiculous amounts of goods from other nations with much stronger economies ... Right now, because all the trading is done in USD, the weaker nation can still generate a high GDP/budget with a high population and high tax rate ... but with the ERM I am proposing, the weaker nation's currency will not be as valuable and so they will not be able to afford quite so much ... unless they go to a cheaper supplier, of course, such as a nation with a weaker economy than their own.
I feel that this will allow for much more realistic trading between nations ... Moreover, the possibility of realistic currency trading arises too, since it becomes worthwhile to buy a strong currency and hang on to it (rather than converting it to USD) to offset the loss in value of a nation's own currency as their economy takes a downturn ... Your own currency may only be worth half of what it was last year, but the Swiss Francs you bought back then (at 2:1) have retained their value, giving you four times the buying power in your own terms.
As I don't have hosting facilities myself, I see three options with regard to 'publishing' my solutions:
1) post the code here for people to copy and paste into their own html docs ... clumsy, to say the least, and not very appealing.
2) I'll list a specially created email account and mail the docs to people upon request ... unreliable and prone to delay
3) Someone else hosts them.
If there's enough demand, I'll furnish the html docs I've created by one of the three methods outlined above.
Let me know
The problems seem to be:
A) There is no universally accepted standard means of calculating GDP/budget
B) There is no universally agreed ERM
Many people get around A by using the GDP Calculator, but it seems that there are just as many people who think it's totally out of line with economic theory, generating OTT values.
Most people seem to consider USD the standard and go by that.
The problem with using the GDP Calculator, it seems to me, is that it does generate wildly inflationary values ... but other methods I have tried (including Nik's method) appear to generate even more generous budgets.
The problem with using the USD as the standard is that it doesn't take into account economic differences. Yeah, sure, a smaller nation will have a smaller budget, but this completely ignores the fact that there are plenty of large nations in the World with completely imploded economies and entirely valueless currencies (the former USSR) ... and others that have small populations, yet massive financial clout (Switzerland) ... So, nation-size doesn't seem, to me at least, a reasonable way of assessing the value of nation's currency.
Also, when nations randomly assert that X units of their currency are worth Y USD, why should anyone take their word for it? ... Who says? ... I very much doubt that in a world even remotely approaching our own a nation can realistically expect to set the value of it's own currency ... it will depend upon how in demand that currency is ... i.e. how much worth it really has to potential investors, traders, etc.
So, I've devised two alternative solutions to the above-mentioned problems:
The first is a GDP calculator.
It's based upon Greenhome's method ... which is, itself, based upon real-world values and, in my opinion, therefore, probably the best starting point.
It takes into account the loss in budget revenue due to the retired, the under-age and the military ... calculating a budget based upon the working-population in addition to the national GDP based upon an average GDP per member of the total population
Your budget figures may be lower than you'd like, but I don't think they're too draconian - with a 'good' economy, a population of 56million and a tax-rate of 37%, I still generated an annual budget of nearly 73billion after expenditure on the military, youth and the elderly/retired was taken into account.
The second is an ERM calculator, invoice calculator and bid calculator.
It starts from the same economic basis as Greenhome and calculates the relative values of two currencies based upon the difference in economy between the two nations.
Plug in the two nation's economy types and their currency names and it will calculate:
1) The relative exchange rate (backwards and forwards) between the two currencies.
2) The cost (in both supplier's and consumer's currencies) of a number of units at a given unit cost ... which could also be units of currency (so it's a currency converter for random sums of money AND an invoice calculator)
3) The number of units available from a supplier for a given sum of the purchaser's currency, determined by unit cost in the supplier's currency (so you can decide to spend X amount of your own currency, rather than overspend)
Again, it's not too draconian (the greatest difference is 1:88, which is considerably less than some real-world examples, such as the Italian Lira)
Since the relationships between economies are scaled, the relative differences between two pairs of nations is maintained ... two nations three economy types apart at the top end of the scale, will have pretty much the same exhange ratio as two nations three economy types apart at the bottom end of the scale.
Furthermore, as it can be taken that all nation's budgets are in their own currencies and all currencies are relative, it will iron out the discrepancies we so often see now, where a nation with a weak economy can still afford to purchase ridiculous amounts of goods from other nations with much stronger economies ... Right now, because all the trading is done in USD, the weaker nation can still generate a high GDP/budget with a high population and high tax rate ... but with the ERM I am proposing, the weaker nation's currency will not be as valuable and so they will not be able to afford quite so much ... unless they go to a cheaper supplier, of course, such as a nation with a weaker economy than their own.
I feel that this will allow for much more realistic trading between nations ... Moreover, the possibility of realistic currency trading arises too, since it becomes worthwhile to buy a strong currency and hang on to it (rather than converting it to USD) to offset the loss in value of a nation's own currency as their economy takes a downturn ... Your own currency may only be worth half of what it was last year, but the Swiss Francs you bought back then (at 2:1) have retained their value, giving you four times the buying power in your own terms.
As I don't have hosting facilities myself, I see three options with regard to 'publishing' my solutions:
1) post the code here for people to copy and paste into their own html docs ... clumsy, to say the least, and not very appealing.
2) I'll list a specially created email account and mail the docs to people upon request ... unreliable and prone to delay
3) Someone else hosts them.
If there's enough demand, I'll furnish the html docs I've created by one of the three methods outlined above.
Let me know