For the first time since Abraham Lincoln was President the United States will not be the World Largest Economy

After about 150 years, China is again the largest economy in the world. The US has been the largest economy in the world since about the time of President Abraham Lincoln or maybe Rutherford Hayes (1880).

7 Score and 14 years ago

Madisons GDP estimates go back to 1820. Madsison’s GDP numbers indicate that China has been the world’s largest economy since about 2009. According to Maddison series, China’s 2010 (when the series ends) GDP is $PPP 10.7 trillion, and US GDP is $PPP 9.4 trillion. China overtook the US in 2009, thus ending a period that began around 1860, when US overtook….whom? China!, to become the number one world economy.

Note: some economic historians believe the US became the number one economy in 1872 and took over that title from the UK. GDP estimates of today can be plus or minus 20-40% as the the 25% adjustment shows. So there is even more difficulty estimating the GDP 150 years ago. However, Maddison and other economic historians did thorough work and so did those involved in the 2011 ICP.

Now the World Bank, IMF and University of Pennsylvania (Penn World Tables) are broadly agreeing on the PPP GDP.

But They said Japan in the 1980s would pass the USA

Japan never got closer than 33% of the US economy in purchasing power parity terms and not closer than 65% in exchange rate terms.

Some say China will not pass the US in exchange rate terms before 2100

Those who made that prediction assume that the US will grow at an average of 4.5% GDP growth per year and China will be 6.0% GDP growth per year or less.

They also assume the yuan will not strengthen by 50-100%.

The US could have stronger GDP growth but policies would have to change. The last quarter saw almost 0% GDP growth in the US and the US has been average about 2.0-2.5% GDP growth during the “recovery” of the last few years.

A prediction on China not passing the USA in GDP exchange rate terms is a bet that the US will have a very strong economy and good economic and political policies. If only that would end up being true.

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