The Bloated US Economy by Taiwan US-China expert video: Watch “虛胖的美國經濟！2024.01.16【亮子立學｜郭正亮】EP46 @funseeTW” on YouTube

Summary of main points of the YouTube.

The US economy is bloated as measured in the following measures as compared to the Chinese economy (my comment in italics):

1. The US counts its GDP by adding personal consumption, government spending, investments and exports of goods and services. While this has the advantage of capturing a full picture of all the economic activities, it tends to count more than once the same economic activity. China counts its GDP by the gain in value in the production of goods and services (prices of the goods or services minus cost to produce the goods or services). This gives a truer picture of the industrial economy, but tends to undercount services, especially where the services do not involve the financial and legal systems. China has a large sector of informal or underground services which is not counted in its GDP. For the above reasons, the IMF estimated that China’s GDP in purchasing power parity surpassed that of the US in 2013.
2. The US GDP includes a huge service sector in 2021: real estate (11.5%); medical insurance, public health, public assistance and education (16%); and plus litigation and prison services (7%). Add 2.5% for defense spending to that for a total of about 28% which is not productive for the nation. China has much lower % of non-productive sectors in these areas. Medical and legal services in the US are notoriously expensive compared to other countries.
3. Industrial production in the US constitutes only about 11% of its GDP, while for China it is 26%. China’s industrial production is equal to that of the sum of those of the US, Japan and Germany. Much of the value counted in the US GDP is through financial transactions which may add little real value to the economy. An extreme example is the recent SEC approval for the trading of ETFs of virtual currencies like bitcoins. (Other examples are the credit default swaps and other mortgage derivatives that caused the 2008 financial crisis. In the commodities market, for example, speculation is usually many times that of real buyers and sellers engaged in actual production. )
4. Even though China has a large debt burden, this debt is supported by real assets like public infrastructure, production facilities and housing. It may take more time for the debt to be digested over time, but as long as the debt is under control, it will not be a problem. A huge portion of US debt on the other hand is based only on the faith and credit of the US government to print dollars and sell US bonds.
5. The US economy has become a rentier or parasitic economy which makes much of its money by fleecing other countries through the dollar hegemony. It purposely instigates wars in other parts of the world, causing a loss of confidence in those areas and capital flight from them to the deepest and safest capital market in the US. (A good example is the Ukraine war, where it is estimated that about 8-10 trillion dollars of capital fled the EU for the US.) The foreign capital invested in the US causes the US assets to be inflated. As one example, Tesla’s P/E ratio is 64 in the US stock market while its competitor BYD’s P/E ratio is only 13.5 in the Chinese stock market. Recently BYD (a Chinese EV manufacturer) has sold more cars than, and is outcompeting, Tesla in the Chinese market. But the US can continue to play this game only when the US dollar hegemony is intact. This is why the US thrives on wars. If China and Russia are able to quell conflicts in the world and confine them to small disturbances without causing capital flow to the US, then the US will lose the advantage and have to compete on level ground with all other countries. That is why the US government loves war and abhors peace.
6. Currently US federal government expenditures are 6.3 trillion but only has 4.6 trillion in income, resulting in a 1.7 trillion deficit. Of the 6.3 trillion expenditures, 73% are mandatory and cannot be reduced. The current interest on the US debt of 34 trillion dollars is 0.5 trillion, but will increase to 1 trillion at 3% next year. So come next year the federal mandatory spending will increase to 77% of the budget, leaving discretionary spending at only 23%, which will include defense spending. This means that any further increase in defense spending will need to be made up by cutting other discretionary spending, so as not to further increase the federal debt level.
7. Since the US industrial economy is lopsided in the services areas, the need for such services and the GDP generated will shrivel should there be a war with China, and the US will not be able to sustain a protracted war at all. Besides, the US government itself has few assets it can deploy in a war in a short time, unlike China which has a large state-owned sector that can swing into action in a short time.