Dear Financial Voice Reader

Tuesday 16th December 2014 11:11 EST
 

Dear Financial Voice Reader,
I write to you from New York, just as the US loses it’s crown as the world’s largest economy this week. Over the past 2000 years there have only been four countries which have held the title of ‘world’s largest economy’. The title does not switch often. So this is a rare time in our lifetimes.
Those four countries in chronological order are: India, China, United Kingdom, USA, China (again from 2014).
What does this mean for power and fortune for us?
Well the American’s power was at a peak probably in the 1960s. The United States represented 38.69% of the world's economy in 1960 (highest point), and was at its lowest point at 21.42% in 2011.
The EU is just about the world’s largest economy if it were one country – but it’s economic power is weak as measured by share of world GDP: The European Union represented 34.6% of the world's GDP at 1980 (highest point), and was at its lowest in 1985 at 25.01%.
China’s achievement today as the world’s largest economy is tempered by the fact that it peaked in terms of share of the world GDP in 1820 – at 32.9%. That’s a level it took to reach 1,820 years after India had the same share of world GDP in 1AD. (The World Economy by Angus Maddison)
According to Angus Maddison the United Kingdom produced 9.1% of the world's economy in 1870.
The poor Russians, as the Ruble tumbles alongside their pride, the Soviet Union represented 14.31% of the world's economy in 1969 (highest point) and at the year of its dissolution (1991) only produced 3.58% of the world's economy (lowest point).
So how are things forecast for 2015 and how do we make money from all this? Well if we follow growth then investing in the stock market indices of China and India makes sense as they are expected to grow the fastest and that’s a safer bet than trying to pick the right individual company to bet on.
For 2015, China will be number one – about 2.5 times bigger than India. It is 8 UKs. India is 3 UKs. But that quickly tells you when you compare UK and India that what matters in terms of power is the ability and willingness to project power globally and having the resources to do it, and in terms of wealth what matters is how much per person you produce. In that regard UK and US still lead most of the world’s countries.


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