Which country’s economy is best off with high inflation?

U.S. inflation figures for August beat expectations again.

The market had expected the CPI inflation rate to be 8.1%; the official figure from the Bureau of Labor Statistics was 8.3%.

Inflation figures remain high not only in the United States, but also in major economies around the world today.

Consider the inflation figures for the world’s 20 largest economies, which together account for more than 80 percent of the world’s GDP.

Data source: BIS, www.tradingeconomics.com

As you can see from the table, according to the official inflation figures of each country, except for China, Japan, Saudi Arabia, Switzerland and Indonesia, 15 other countries have inflation rates above 5%, and half of the countries have inflation rates above 8% — which means that, even according to the official statistics, the money in people’s hands buys 8% less in a year.

Not to mention Argentina, Turkey, Russia and Brazil, where inflation has always been high, but the European Union and the United States, which account for more than half of the world economy, have had historically low inflation rates of 8.3% and 9.1% respectively. Visible, a new round of inflation has spread around the world.

After all, central bankers have been saying that inflation of around 2 per cent is the inflation rate they want.

Inflation is well above central bank and government targets and is generally well above the average over the past 30 years, with official inflation hitting 40-year highs in many countries, including America.

With inflation this high, which country has the best economic growth?

Now that countries have released their economic report cards for the first half of 2022, let’s take a look at the numbers

To simplify the comparison, we have divided the G20 economies into three tiers, based on the size of their economies in 2021:

The US, China and the Eurozone are of the same order of magnitude, each with a GDP of more than $10 trillion, and can be compared side by side;

Japan, Germany, India, the UK and France are on the same order of magnitude, with economies of $3-6 trillion, put them together;

Other countries, whose economies are basically under $2 trillion, are not the focus of this comparison.

Among the top 10 countries in terms of GDP growth in US dollars:

China is less than half the size of the United States, India is one-fifth the size of the United States, and Brazil and Canada are growing at roughly the same size as their economies relative to the United States.

Japan ranked the worst, followed by Germany, France and Italy in the euro zone, all in negative territory, the worst in a decade.

If you look at nominal GDP growth in local currency terms:

India is at 20 percent, followed by Canada, Brazil, the United Kingdom and the United States, at roughly the same level;

Japan was the worst again, followed by Italy, Germany, France and China in the euro zone.

If you look at real growth in local currency terms:

India tops the charts again with 13.5%, followed by the UK at 5.8%, then Canada, France and Italy are on a par; Japan was once again ranked the worst, followed by China, the US, Germany and the entire European Union and Eurozone.

Of these, because the dollar is the benchmark against which economies are compared in size, I would argue that dollar-denominated nominal GDP growth is the most important, followed by real growth (which can largely be manipulated by governments through inflation), and that local-currency nominal growth rate doesn’t matter much — if an economy is shameless, Printing money like Venezuela, Zimbabwe and nominal growth of 100%, 1000% is not unusual.

Of course, the so-called GDP, after all, is just a government statistic, a country, people really feel the economy is good or bad, there are two numbers: inflation rate and unemployment rate.

Inflation represents the rise in prices. It means that ordinary people have to deal with the increase in the cost of daily living and whether they have enough money to spend. The unemployment rate is a measure of people’s ability to find jobs and earn money.

This has led to the creation of the Misery Index, which describes the economic misery felt by the people of a country in terms of inflation + unemployment. Here we can borrow an assessment of how major economies feel to their citizens.

According to the table, how people feel about the economy in the world’s 20 largest economies today:

Turkey is the most miserable, with a misery index of more than 90, followed by Spain, also with 23.

Next come Russia, Brazil, India and the Eurozone as a whole, with a misery index of 15-20;

Next come Britain, Germany, France, Canada, the United States, Mexico and Indonesia, with a misery index of 10 to 15.

Next came Australia, Saudi Arabia, South Korea and China, all rated between 5 and 10.

Switzerland and Japan, by contrast, were the countries where people felt least economically miserable.

It must be said that the inflation rate, the weight of the statistics of different countries, resulting in significant differences in the results. As for the unemployment rate, there are great differences in the statistical methods of different countries, and the horizontal comparability is relatively small. Here we simply use the official unemployment rate data.

If you really want to compare the perception of high and low unemployment, you should use the country’s current data to see how it compares with what has been normal for quite a long time.

By that measure, unemployment in America, the euro zone and Japan is at historically low levels. In contrast, China’s current surveyed unemployment rate is at a historically high level.


Considering the overall level of the past, when comparing the economic data of the United States, China and the euro zone over the past six months, the United States is undoubtedly the best, China is the second best and the euro zone is the worst.

With unemployment at historic lows and absolute growth at its highest, the economy has only one big problem right now: excessive inflation, which is why the Fed is raising rates.

Inflation in the euro zone is also historically low, but its problems are not just high inflation, but also a sharp depreciation of the exchange rate and poor economic growth.

China’s dilemma is that corporate and household leverage is peaking, growth is stagnant and unemployment is relatively high.

For the rest of the world, Japan and Germany is a pair of siblings, both suffering mainly from current economic stagnation, with Japan suffering from extremely high debt leverage and poor prospects for future growth — Germany is better in terms of pure economic growth, but Japan is better in terms of economic pain felt by its citizens.

Compared to India, UK and France, India is in the best situation right now. It’s a bit like a bad version of the US with high growth, low leverage, a little low inflation, and its biggest problem is low level of economic development. Britain and France, too, are in roughly bad shape, with Britain in slightly better shape because it can devalue at its own discretion.

The other 13 countries, combined with the misery index and GDP growth data, are Brazil, Indonesia, Canada, Mexico and Australia. The others are either not growing at all in dollar terms, or the misery index is too high. The worst, of course, are Turkey, Spain, Russia and Italy. The top 4 worst of the 13 countries


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