Gross Domestic Product for the World
All the stuff from all the countries
In the same way a bunch of economists calculate Gross Domestic Product (“GDP”) for the US, some smart people at the World Bank also calculate it for the entire World! (I guess at least the bank’s name is in line with what they are calculating.)
We know that the US is a big country and makes lots of burgers and other stuff, so it has a high GDP. But what about GDP for the entire planet, which is, believe it or not, even BIGGER than the US?
That’s a lot of stuff right there. It’s incredible to see just how much GDP has grown since 1960, though keep in mind this chart is more like a nominal GDP than a real GDP. Still, the change is massive.
One big reason this GDP metric is kind of like nominal GDP but not exactly like it is because there are additional influences from fluctuating currency exchange rates. Putting everything into dollars takes some additional math steps for economists because, surprisingly to Americans, not everyone uses dollars.
This can create some weird interactions. For example, if the dollar suddenly gets much stronger because it strengthens relative to other currencies, then GDP for the rest of the world, as measured in dollars, would fall due to the change in relative currency strength. It could make it might seem like the world’s real output is decreasing when that’s not really the case.
That kind of currency interaction was a factor for the drop in 2015/2016, which wasn’t some global recession, though at first glance it might seem that way.
Ultimately, the reason I chose this form of world GDP over the version that is more like real GDP is so I can (spoiler alert) compare it to the stock market like I did in Monday’s post. So, that’s coming up soon and has some fascinating implications.
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