Imo don't get too hung up on GDP numbers as they are flawed based on a fixed flat currency.
One might expect total recorded world trade, exports plus imports, over all countries to equal financial flows payments plus receipts. But in fact, during 1996–2001, the former was $17.3 trillion, more than three times the latter, at $5.0 trillion. The problem is our accounting system for trade. To reduce the trade surplus Japan had with the USA during the 1990s, I*instructed our clients to buy gold on the COMEX and take delivery. The gold was thus exported and resold again into London. The trade surplus Japan held over the USA was reduced for there is no distinction between a manufactured product and raw commodities. It is always measure in dollar flows in and out.
Likewise, most financial capital flows are not recorded at all. Financial transactions between international financial institutions are cleared by netting daily offsetting transactions. Hence, U.S. banks have claims on Japanese banks for $10 billion and Japanese banks have claims on U.S. banks for $12 billion. Therefore, the net flow recorded in the transactions will be cleared through their central banks with only $2 billion from the United States to Japan. Then if the purchase of the goods in the USA by Japan are financed, the goods may travel but no money moves between the countries when financed by a USA bank.
Since the collapse of Bretton Woods, the introduction of the floating exchange rate system has rendered the global capital flows total gibberish from a formal accounting standard since the value of the dollar rises and falls making comparisons impossible using a system that was designed with a fixed exchange rate structure*in mind. Since the 1970s, this floating exchange rate has resulted in a*sustained and unexplained balance-of-payments discrepancies in both trade and financial flows. The unrecorded capital flows in netting out positions distorts the real picture.*
One might expect total recorded world trade, exports plus imports, over all countries to equal financial flows payments plus receipts. But in fact, during 1996–2001, the former was $17.3 trillion, more than three times the latter, at $5.0 trillion. The problem is our accounting system for trade. To reduce the trade surplus Japan had with the USA during the 1990s, I*instructed our clients to buy gold on the COMEX and take delivery. The gold was thus exported and resold again into London. The trade surplus Japan held over the USA was reduced for there is no distinction between a manufactured product and raw commodities. It is always measure in dollar flows in and out.
Likewise, most financial capital flows are not recorded at all. Financial transactions between international financial institutions are cleared by netting daily offsetting transactions. Hence, U.S. banks have claims on Japanese banks for $10 billion and Japanese banks have claims on U.S. banks for $12 billion. Therefore, the net flow recorded in the transactions will be cleared through their central banks with only $2 billion from the United States to Japan. Then if the purchase of the goods in the USA by Japan are financed, the goods may travel but no money moves between the countries when financed by a USA bank.
Since the collapse of Bretton Woods, the introduction of the floating exchange rate system has rendered the global capital flows total gibberish from a formal accounting standard since the value of the dollar rises and falls making comparisons impossible using a system that was designed with a fixed exchange rate structure*in mind. Since the 1970s, this floating exchange rate has resulted in a*sustained and unexplained balance-of-payments discrepancies in both trade and financial flows. The unrecorded capital flows in netting out positions distorts the real picture.*
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