US and China better not escalate
Previously I mentioned that we can breathe a sigh of relief given that China didn't take a more serious military action other than a 4-day military drill.
But... China broke its promise and extended the military drills near Taiwan. This increases the exposure to 'accidents' that may lead to a more intense conflicts.
Ray Dalio just penned a LinkedIn post a day ago about this. If you have read his "Principles for Dealing with the Changing World Order", you would have know that he has studied the history of superpowers extensively and have built a model to track the progress of present-day relative powers.
He also said that conflicts and wars were common whenever a new superpower challenges the throne.
He created an index to measure a number of factors that included military spending, deployment, sentiment against the other country, and more. The index measured 1.2 standard deviation above the average and that means we are in the range of major conflict.
In contrast, WW1 conflict index measured 1.3 between UK and Germany. But he also warned that a high index reading doesn't always prelude to a war, example was the Cuban Missile Crisis with a score of 0.9 where the tension was defused.
The problem with Taiwan is not Taiwan. It is the rivalry between China and the US, as Dalio put it in his post,
"Even though the US fighting to defend Taiwan would seem to be illogical, not fighting a Chinese attack on Taiwan might be perceived as being a big loss of stature and power over other countries that won’t support the US if it doesn’t fight and win for its allies."
Ultimately, he still believes an all-out war is improbable. Just that both sides are not backing down so as not to look weak. So this tension will go on for a long time.
It is okay if it is just a war of words. He is just afraid of mindless escalation that unknowingly inch the powers closer to direct military conflict. When that happens, all of us will feel the impact. We will get worse recession and crazy inflation.
It will make the latest zero-covid induced weak inflation and purchaser price index numbers in China look inconsequential.
A superpower's reign averaged about 75 years based on history. If this stat remains true, we will all witness a superpower changeover in our lifetimes, just whether we see it while we are young or in old age.
Unfortunately history has also suggested that these are not peaceful times. It will be a luxury if we are still able to complain about the weather and worry about not getting rich fast enough.
But... China broke its promise and extended the military drills near Taiwan. This increases the exposure to 'accidents' that may lead to a more intense conflicts.
Ray Dalio just penned a LinkedIn post a day ago about this. If you have read his "Principles for Dealing with the Changing World Order", you would have know that he has studied the history of superpowers extensively and have built a model to track the progress of present-day relative powers.
He also said that conflicts and wars were common whenever a new superpower challenges the throne.
He created an index to measure a number of factors that included military spending, deployment, sentiment against the other country, and more. The index measured 1.2 standard deviation above the average and that means we are in the range of major conflict.
In contrast, WW1 conflict index measured 1.3 between UK and Germany. But he also warned that a high index reading doesn't always prelude to a war, example was the Cuban Missile Crisis with a score of 0.9 where the tension was defused.
The problem with Taiwan is not Taiwan. It is the rivalry between China and the US, as Dalio put it in his post,
"Even though the US fighting to defend Taiwan would seem to be illogical, not fighting a Chinese attack on Taiwan might be perceived as being a big loss of stature and power over other countries that won’t support the US if it doesn’t fight and win for its allies."
Ultimately, he still believes an all-out war is improbable. Just that both sides are not backing down so as not to look weak. So this tension will go on for a long time.
It is okay if it is just a war of words. He is just afraid of mindless escalation that unknowingly inch the powers closer to direct military conflict. When that happens, all of us will feel the impact. We will get worse recession and crazy inflation.
It will make the latest zero-covid induced weak inflation and purchaser price index numbers in China look inconsequential.
A superpower's reign averaged about 75 years based on history. If this stat remains true, we will all witness a superpower changeover in our lifetimes, just whether we see it while we are young or in old age.
Unfortunately history has also suggested that these are not peaceful times. It will be a luxury if we are still able to complain about the weather and worry about not getting rich fast enough.
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doctorpot1 : China have been trying to de-dollarise the East too. Building a new BRICS based reserve currency. This is an exciting time for investing as the passive approach of just DCA in SPY may not work as well, if there is a shift in the world order and reserve currency status.