I didn’t buy that formula when I majored in Economics (1980 grad) and I don’t buy it today. Global flow of funds makes it nonsense. As does how we measure savings.
When Savings is defined as After-Tax Income minus Expenditures it means not counting:
1) Pre-tax savings vehicles like 401K’s
2) The principal payment portion of the mortgage payment, which is SOLELY counted as an Expenditure
3) Asset movements, up and down
The Chinese are not free market capitalists, it’s pretty stupid to include them in your equation. They report WHAT THEY WANT TO REPORT, we have no idea what their true numbers are. What we DO KNOW EXACTLY is our trade deficit with them.
>> I didn’t buy that formula when I majored in Economics (1980 grad) and I don’t buy it today <<
If you want to reject the way every major government, every major international economic institution and every recognized national income expert defines the basic components of GDP, GNP and related measures, then go ahead. It’s a free country.