[COFFEE] Changing World Order: USA vs China

Have you seen this video by Ray Dalio?

Dalio has measured key components to an empire’s success over the history and came up with this chart:

So it looks like it all starts with good education, which is followed by innovation, then comes competitiveness, output, trade, followed by military power and financial domination. The final cherry on the top is that your currency gains the World’s reserve currency status.

Here’s the data for the US:

So it’s evident that the US is way past its prime when it comes to education, competitiveness, or even output. Somehow the innovation is still an outlier.

And here an aggregation of all factors for all empires in the last 500 years:

So we can see that we had periods of domination: first the Chinese, followed by Dutch, British, and Americans. Dalio has analyzed what happened in the past to be able to tell us what will happen in the future. And each time the history repeats itself.

Lower output means lower prosperity. The rich manage to protect their interest, but the standard of living of the poor decreases which leads to a widening gap between the rich and the poor. But this is just a symptom, not the cause of the initial problem. The empire then tries to help the situation by using their reserve currency status and printing money. But it always ends with a downfall.

So here’s my question to you: do you think the US is on the way out and China will replace it as #1 World power? Are we going to have a World War or will this conflict resolve peacefully? Can we act based on that prediction?


是的! 学习中文.

Btw it sucks, in Chinese one really have to write a poem to come to 二十个字.

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Well it’s only a matter of time until China has the highest GDP in the world. Based on PPP they already surpassed the USA. India will follow next.

But times haves changed. Maybe there won’t be many individual countries in 200-300 years due to globalization and migration.

I tried with Mandarin. I suck in languages even if I speak some… I’d love to start again though.
China is really cool and there is a lot I’d love to see about china.

They only have a couple of issues, I assume like some other empires, unlike the US that started sort-of well and had its up and downs.

If they change some of the cultural shift that has born in the last 100years and the government understands that they are “fighting” useless “wars”, it might happen.
Let’s just hope they won’t learn from the russian and start paying politiician around the world…

At the moment I think it won’t happen also because china don’t want it to happen.

Regarding GDP, I am not an avid youtuber, but I think you can easily find a couple of videos about how GDP works and how China has such a high one. It revolves around building infrastructure and housing.

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Funny that Dalio seemed to have changed his mind because he reduced all of his EM positions recently and boucht S&P instead:


Well, we’re talking about multiple decades, during which this unveils, so it could be that short term you have some other factors that exert stronger influence.

China has some natural wonders, but I don’t see what’s so cool about China that is inherently Chinese. Just look at how the communist government is handling the latest covid outbreak in Shanghai. People are trapped in their homes, cannot even go shopping, rely on centrally distributed grocery deliveries. Many are starving, just look at the videos of people screaming in terror from their balconies. Drones and robo-dogs are patrolling the streets and blasting government orders through the speakers. It’s freaking scary how this country operates. Is this our future? I think some western leaders, like Justin Trudeau, look at this unrestricted power with envy.


China has much more than just “some natural wonders”. It has a shitty government at the time, hopefully for the Chinese and everyone else this will change.

Exactly. Government changes, culture, nature etc. stays.
…actually I hope that at least some of their “cultural” issues will disappear as well :slight_smile:
But as I said, they are a creation of the last century issues they had. I am talking about the “Chabuduo” (o Cha Bu Duo) problem they have.

Rich Chinese culture and heritage has been largely destroyed by communism and the cultural revolution. They were literally razing heritage sites. This heritage lives on in Taiwan. I wonder if it could ever be restored. But I would like you to expand on that thought, what does China have to offer, in your opinion?


Sorry I don’t have a very articulated thought to share. My feeling comes from having spent a few months travelling through China several years ago, when I have experienced a rich and diverse culture. Cuisine in particular comes to mind.

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Don’t invest (too much) in US
Don’t invest in EM

(Some of) You guys plan to stick 60+% of your equity allocation into Europe? :sweat_smile:

VT is currently at:

  • 9.90% Emerging Markets
  • 15.50% Europe
  • 10.70% Pacific
  • 0.20% Middle East
  • 63.70% North America


  • 60.3% US
  • 27.4% World ex CH/US
  • 9.9% Emerging Markets (3.1% China, 1.9% Taiwan, 1.6% India)
  • 2.4% Switzerland

I think it makes sense to follow something close to that.


The reasons you provide for not investing can of course be considered valid from a moral/emotional perspective. From an investment perspective though, there are some counter-arguments:

  1. Government reform is generally less appreciated by investors than government stability. Countries with one or two dominant political parties tend to attract more investment than countries with numerous political factions and frequent changes of power. There are a few exceptions, but historically that has been the general rule.
  2. Human rights violations are certainly a moral concern. However, investors tend to ignore these if returns are good. This is one of the reasons why many totalitarian governments have been tolerated or even instated by capitalists.
  3. The Chinese covid strategy is difficult to understand, so no comment here. However, a decline in production could have the positive effect of preventing the economy from overheating, which arguably led to the recent real-estate hiccups.
  4. Condemning Russia is again a question of morals/emotions. From a strictly business perspective, the development of strong ties between China and Russia in the mold of the US or EU could potentially result in massive economic growth in northern and central Asia as it would link one of the world’s largest sources of raw materials with one of the world’s largest sources of industry and manpower.
  5. European and subsequently US imperialism created the current western world, for better or worse. Countries which profited/profit the most from imperialism are still among the wealthiest in the world. So while imperialism is highly contested, from a purely financial perspective, there is a clear positive correlation between imperialism and prosperity.

Personally, I believe the US will largely keep its economic lead. I also see China (and Russia, to a lesser extent) continuing to grow economically and in terms of political influence. Of course, these are just my personal opinions.

That said, I also invest (and consume) based on personal convictions. That may explain why I’m happy, but not extremely wealthy.

Since what happened in March if I was in charge of sourcing production for a business I would no longer consider China for ethical reasons, for risk of sanctions and of consumer boycott. I assume this will be the case for many western companies.

China will be hurt by keeping doing business with all the bad guys

Maybe. But that is difficult to prove from a historical perspective. Even Germany and Japan, which arguably commited some of the most blatant attacks on neighboring countries AND lost eventually profited from imperialism to where they were leading economic powers again within 20 years. Of course, things do not always necessarily follow the same pattern, but they certainly tend to.

Except that for some products (some chemicals for instance) you might not have a choice, since it is the only producer left (or the quantities produced in other countries are simply not enough to cover demand).

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I’m reviving this topic because I keep reading bad news about the democracy in the US and I wonder if I’ve fallen in a bubble of pessimism or it is really happening.

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About what? There is no democracy in US.

Ok, let’s be neutral.
It’s not what “there is” or “there is not”. It’s about stability.

I’d say we’re at a pivotal moment. Either they manage to keep and reinforce their democracy and they could keep playing beacon for the world for some time (they’d even be in a very strong position to do so) or they fail to do so and turn into some sort of autocracy, which seems well on its way, at which point, they’re toast. Their world leadership position is contestated enough that they’d have a hard time maintaining their economic and military dominance, along with the USD as a prized reserve currency.

I’m not very hopeful but I’m willing to believe, the US burning down from the inside wouldn’t help our own position (mainly by putting on an example that democracies are fake and that grabbing for power is rewarded - we do have some of the same problems at home, though they’re rather marginals for the time being).

That being said, the whole world is in disarray, few are the countries who could really step up to take world leadership. We are living in interesting times.

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