Decline Of A Great Power

I had a short break in March, and during that period there was a series of news-worthy events which sent shockwaves around the world. I made an article about the collapse of Silicon Valley Bank, but there were others which I normally would have written an article on. Today we will briefly look into the news and summarise what is happening.

Saudi Arabia and Iran Peace Talks
Saudi Arabia and Iran were long time enemies, with the US backing the Saudis and clamping down hard on Iran through sanctions under the pretext of Iran not doing its part in the nuclear deal. If we look at the map of Middle East, we know that the whole region is extremely unstable and peace has not been in the region for very long.

Destabilising the region and planting troops there, making allies with a few select countries and raising one of them as a puppet leader is one of the many ways that the US tried to exert control over the region. If we look at the territorial size of Iran, you will realise why Iran is such a big deal. Iran and Saudi has always been fighting for leadership in the region. But under diplomatic talks facilitated by China, both countries have made peace and will set up embassies in each other’s countries. While US officially said they knew about what was happening, we know that if US is indeed truly committed to peace and stability, it would have achieved it years ago. Now that the 2 big brothers of Middle East has shook hands, it is definitely another step forward towards peace.

What this means: US has lost significant control of the Middle East to China. While the US uses force to exert control, China chose a win-win approach where China gets access to natural resources and being a leader behind the scenes, and the Middle East gets their peace and able to do business normally.

Iran-China-Russia Military Exercise
These 3 countries are known rival or enemy countries of the US. Their conflict with US needs no further explanation. However there has never been such an open challenge to the US and the West as having the 3 of them coming together to conduct exercises, right in the Middle East, the ‘territory’ of the US. The inability of the US to stop them also signal to the others the weakening control of the US and their inability for continued influence.

And with that, other countries began to move as well.

Movement By Other Countries
Honduras soon severed ties with Taiwan, officially changing its stance to be aligned with China on the Taiwan issue. Former Taiwan president Ma Ying-jeou insisted on making a trip to China despite internal pressures, representing the pro-China faction. Naturally, North Korea took the chance to jump in and challenged the US, with Kim Jong Un announcing that they will increase the quantity and quality of their nuclear weapons. European leaders are visiting China one after another. Brazil has also reached a deal with China to ditch the USD and transact in RMB for their trades.

If you ask me, the next to move would probably be Turkey. But that is just my guess.

The Weakening USD
The speed at which the Chinese RMB replace USD in a series of trade has stunned the world and sent even the non-ignorant citizens of the US into a panic. From Brazil’s deal with China to transact in RMB, to Saudi Arabia’s investment in China’s petrolchemical industry (hint: petrolyuan instead of petroldollar?), from Russia’s turning to the RMB to Indonesia’s attempt to move away from the USD, recent years and especially recent months have seen a panic among the countries who has a heavy reliance on the USD.

The US has been plundering others through its manipulation of the USD, and now that China has risen up, they are beginning to consider alternatives. What will happen to the US if people no longer trust or use their currency? For one, there will definitely be an economic crisis. The US will not be able to spend as much as people are now unwilling to take in USD. Countries will go: No man you gotta pay what you buy now because we cannot allow you to put the bill on tab.

What this means: US who is used to getting cheap stuff by oweing people and manipulating the debt after that will gradually find themselves unable to do that anymore. Their purchasing power will drop greatly, which means domestically they will suffer inflation and a shortage of goods. When people do not have the basic resources they were so used to getting, there will be unhappiness. There will be civil unrest. But more importantly, the US as a whole will not have as much resources as before, and naturally their capability to rule the world will drop.

Externally the demand for USD will drop and basic economics tells us that if the demand drops, the price will drop. The value and price of the USD will drop. Indeed, the demand for USD seems not to be as great as before, falling to a 25 year low in 2021 when the world was still peaceful. We foresee a further drop in the future.

TikTok Ban
The TikTok ban was heavily discussed. Some say it was because the congressmen themselves had stakes in the rival companies such as Meta and Google. Some say it was because of wanting to get rid of Chinese influence. These are all secondary impacts which does not hold water. Politicians and businessmen have no loyalty. They would not go all the way out to pass a law just to protect a company which they bought some shares from. They could easily dump them and jump to another company. The root reason in my opinion is because TikTok is using US resources to earn money.

I have said earlier that in the future, data is a tool of production, or a resource for production. Much like the oil of today. The US has been going around the world snatching up resources (oil fields, mines) for their own benefit. Till date, nobody has the power or capability to go to US soil to physically take away their resources. So far all the resources we have seen are tangible resources – oil, minerals, metals etc. However data is also a resource. TikTok uses American data to generate income, and that revenue benefits the Chinese. I have no doubt the data is safe in American soil. They have no intention of passing the data to China anyway, at least not for now. But resources are limited. Just like how US plundered African resources, leaving them with less, so it is the same in this data war. TikTok had snatched the data resource away from the other American companies, and this whole issue impacts US negatively. This is a fight to retain the resource and to wield control over this particular tool of production.

What Can We Do?
There is no doubt that the US is failing because of weak leadership and internal strife. While the Democrats and Republicans had been at each other for the longest time, these few years see the strife taken to another level and without any bottom line nor decency anymore. That being said, a decline of a great empire does not mean that it will be finished off. It may be, just like Rome. It may not, just like how the decline of the Great British Empire does not make England anywhere near dead.

For one, I will suggest not putting unnecessarily huge amounts of money in the US financial system, if you are already doing so. The US financial system does not only refer to their banking industry, but also their stock market. If you have 100,000 USD in the stock market and the loss of such amount cause you irreversible damage, consider taking out half as a safety measure.

Secondly, consider buying gold. Gold is never meant for an investment but as a hedge against turbulent times. If you are young, it may not be suitable for you. However if you are old and about to retire, consider putting a portion of your money into gold. At the end of 1 or 2 years, you may lose some money due to gold price fluctuations, but at least you know with gold, the bulk of your money is protected.

The US is declining. Whether it dies in the end or not, nobody knows. But its impact is far and wide. We cannot change the world, but we can read the situation and take active steps suitable for our context in order to protect our hard-earned assets.

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