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

by Ray Dalio

Typically, a country loses its reserve currency status when there is an already established loss of economic and political primacy to a rising rival, which creates a vulnerability

Generally speaking, the Chinese appear to want tributary-like relationships with most non-rival countries, though the closer their proximity to China, the greater the influence China wants over them. In reaction

there are two overriding considerations—economic and military.

the United States has the edge but the big question is whether the United States will be there to protect them militarily when they need it.

Russia and China each has a lot of what the other needs (natural resources and military equipment for China from Russia and financing for Russia from China).

Also, because Russia is militarily strong it would be a good military ally.

The United States’ greatest power comes from having the world’s leading reserve currency,

The United States is at risk of losing its reserve currency status.

Russia and China, which both are encountering these sanctions and are at great risk of encountering more of them in the future, are each now developing and cooperating with the other to develop an alternative payment system. China’s central bank has created a digital currency, which will make China less exposed to US sanctions.

Both countries developed their own money wiring systems to compete with the US

and it isn’t printing and monetizing a lot of debt.

The negatives are that China has a relatively large amount of domestic debt that has to be restructured, the renminbi is not a currency that is widely used for global trade and financial transactions, China’s clearing system is undeveloped, and money is not allowed to freely flow in and out of the currency.

China is now militarily stronger than the United States in the East and South China Seas so the US would probably lose a war in that region,

Some people imagine that China could achieve broad military superiority in five to 10 years. I don’t know if that is true.

East and South China Seas, and North Korea are the hottest spots, and India and Vietnam are the next

military wars between major empires started on average about once every 10 years, give or take a couple of years, and it has been about 75 years since the last really big one (World War II).

the best way to fight a war is to get strong and show one’s opponent one’s strength so they don’t want to fight violently.

there is a significant chance the next downturn will come around the time of the next presidential election in the US.