Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

by Ray Dalio

I would worry a lot if we were to see an emerging fight over sovereignty, especially if we were to see a “Fourth Taiwan Strait Crisis.” Would the US fight to defend Taiwan? Uncertain. The US not fighting would be a great geopolitical win for China and a great humiliation for the US. It would signal the decline of the US Empire in the Pacific and beyond in much the same way as the British loss of the Suez Canal signaled the end of the British Empire in the Middle East and beyond. The implications of that would extend well beyond that loss. For example, in the British case it signaled the end of the pound as a reserve currency. The more of a show the US makes of defending Taiwan the greater the humiliation of a lost war or a retreat would be. That is concerning because the United States has been making quite a show of defending Taiwan while destiny appears to be bringing a direct conflict to a head before long. If the US does fight, I believe that a war with China over Taiwan that costs American lives would be very unpopular in the US and the US would probably lose that fight, so the big question is whether that would lead to a broader war. That scares everyone. Hopefully the fear of that great war and the destruction it would produce, like the fear of mutually assured destruction, will prevent it.