Promoted by PPP

Money illusions have been something of an obsession here recently (for instance). As an example of just how much difference they can make, the economic order of the world, which is comfortably dominated by the United States at international exchange rates, is on the brink of its greatest transition for half a millennium if accounting is conducted according to PPP.

From Bloomberg:

China is poised to overtake the U.S. as the world’s biggest economy, while India has vaulted into third place, ahead of Japan, using calculations that take exchange rates into account.

China’s economy was 87 percent of the size of that of the U.S. in 2011, assessed according to so-called purchasing power parity, the International Comparison Program said in a statement in Washington yesterday. The program, which involves organizations including the World Bank and United Nations, had put the figure at 43 percent in 2005.

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