Sunday, September 20, 2020

Three Trends of Inevitable U.S. Decline


It’s human nature to believe that the present determines the future. This is why it’s very hard to cheer up a depressed person; or why most lottery winners eventually go broke. In psychology, this phenomenon is called the “present bias.” This is why Americans can’t foresee a world where America is not the sole superpower.

But here are three powerful and irreversible trends that show the end of American hegemony is imminent.

**1. Center of Gravity of Global GDP

The US GDP is now about 24% of world’s GDP. This number used to be 50% in 1950. That’s what Trump means by “Make America Great Again.” But those peak MAGA days are never coming back, just like you can’t be young again. Here’s a chart that shows how the world’s GDP is moving back towards Asia.

**2. China has Caught Up and Will Surpass the US

Americans, in general, don’t like to hear anything positive about China. So, they kept their heads buried in the sand, while China caught up and surpassed the US in numerous areas. You can see my blog post on China’s global leadership on the incredible progress that the Chinese have made. America’s attacks on Huawei, TikTok, WeChat etc. only prove the superiority of Chinese technology. Within five years, China will surpass the United States of America in nominal GDP (here’s the math). Chinese Yuan is already becoming globally accepted, and the internationalization of RMB will accelerate (here’s another example). China’s digital currency, DCEP, will be the Kryptonite for Dollar, the Superman.

China Surpassed USA in PPP GDP in 2014

**3. Historical Cycle

Empires come and go. Ask the Romans, Greeks, British, Spanish, Portuguese, Dutch, Russians, and even the Chinese. Below is a screenshot from a video where billionaire Ray Dalio explains the rise of China.

Will China be an Empire like the US, with hundreds of military bases around the world? Probably not. Most likely we will have a “multipolar” world with China, EU and USA as three centers of power. However, there’s of course a reasonable chance that the US will collapse under debt, hyperinflation, and political chaos. In that case, Eurasia — Europe + Asia — will be the new epicenter of great power.

In a way, Trump is like the last emperor of China — a clueless baby who has no idea what’s coming …