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Comment by lifeisstillgood | Hacker News Reader

It’s worth noting that pretty much all the growth in AI / Data centres is an accounting trick as well.

Nvidia just announced it’s investing X billion dollars into OpenAI who will turn around and spend 98% of that on Nvidia chips, so GDP rises, stocks rise but actual free market activity? Not so much

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GDP is a known silly metric, but it's easy to define and measure, so we keep using it.

I'm often reminded of the quote: "A man marries his housekeeper and that country’s GDP falls".

GDP is uncomfortably linked to granularity of measurement as well as the number of times money changes hands to accomplish a task. Split a pipeline over more businesses boundaries and suddenly GDP is "bigger" despite no change in value or utility.

GDP is not a silly metric, it measures economic activity that the government can tax; which is what matters to governments at the end of the day.

That's not true; it also measures government spending (e.g. on building infrastructure), which cannot be taxed because it makes no sense for the government to tax its own spending. Gross Private Product is the GDP equivalent that only includes taxable (private) activity.

I am pretty sure government spending is taxed in most countries. Both companies and employees pay taxes. Maybe you meant government revenue? (but then that’s the tax itself!)

Yep, government employees still pay income tax, and government contractors pay taxes on profits.

Some government spending is immune to some taxes which would otherwise be paid on similar private transactions (which taxes and transactions this applies to are different in different jurisdictions.)

Unless you have a transaction tax, this isn't really so. As a contrived example, company A buys thing from company B and sells it to company C, who sells it to company B, all at the same price. There's no profit anywhere in this system (so no tax), but there is economic activity (so, GDP).

Many countries charge a flat x% on revenue (not profit). There is also sales tax (VAT) which has to be eventually paid off by the final consumer. There also other taxes derived from the activity (real estate, employees, etc.). So hardly any company can "operate" without paying any taxes.

Corporate income tax is usually a small slice of the overall taxation of a country.

What GDP measures (and what I meant) is the visible part of the economy that the government has knowledge of; and therefore can (not necessarily do) tax.

In France they count illegal drug trafficking and illegal prostitution in the GDP, I doubt these are taxed...

Wouldn't those 2 things affect GDP exactly because it doesn't get taxed and a lot (presumably) of money goes into it? If the drug trade gets 100 euros, that's 100 euros that isn't going to a legitimate business or person that will pay taxes on that 100 euros.

It just means that Nvidia is selling the chips for equity instead of selling them for cash. That difference does not turn it into an accounting trick

Building physical data centres and GPUs will cost some real money.

GPUs aren't built in the US, though. I wonder, what percentage of all the stuff in a typical datacenter is actually made in the US

> GPUs aren't built in the US, though. I wonder, what percentage of all the stuff in a typical datacenter is actually made in the US

Does that matter? So many things these days aren't physically made in the US. So US companies don't get the profits and aren't needed?

The actual "made in" part is a small fraction of the total earnings. See how much an iPhone costs to make vs how much it gets sold for.

And now look at how making iPhones in China helped to grow the whole Chinese electronics industry, as opposed to inflating some virtual numbers for the US

And now look how the "virtual numbers" allow the USA to drag the rest of the world through the mud on a nosering.

The USA was the winner in all this, but apparently the people don't feel it. What might have gone wrong? (hint: wealth distribution, not manufacturing)

Well, the US definitely is dragging the rest of the world, the question is where and whether it's somewhere the rest of the world really wants to go. I think, we'll see soon enough

> helped to grow the whole Chinese electronics industry

Why do you want it? It wouldn't have grown in the US. The protests would have erupted before anything happened. There's huge amounts of contamination, pollution, deaths, low wages, over-work, etc...

Also US focused on designing the electronics and the ecosystem around it. Are you saying there's no industry around AMD, Broadcom, Qualcomm, etc that are fabless but hire vast amounts of people?

> as opposed to inflating some virtual numbers for the US

You have App Store / SaaS (i.e. developers) and a lot more.

Would you prefer an average developer salary vs below-minimum US wage factory assembler?

It's not just virtual numbers. Apple's investors and employees (mostly in California) keep about half of the price of every iPhone sold, which is more than people in China get or keep.

The margins collected by Nvidia end up in the US. And Nvidia and its employees get paid in the US. Only a small part of the revenue is outside the US.

Wait till you learn about how the Fed creates money

It isn't an accounting trick because the workers have to be paid and that money must be coming from somewhere.

In this case, it is coming from investors like Microsoft, Softbank, Saudis, ChatGPT subscriptions, etc.

They also spent a good chunk of that money on AMD stock, which is a trade that instantly became profitable the moment they announced it, without them ever doing anything.

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