In his book, The Seventh Sense: Power, Fortune, and Survival in the Age of Networks, Joshua Ramo asks: “Do you believe the spread of democracy is inevitable? Or do you think we live in an age of global chaos and American decline?” He goes on to say, “The world is not one big, flat equally connected topology. It is filled with closed and gated worlds. By “gates,” I mean not only in-and-out passages but also protocols, languages, block chains. Whatever binds and shapes a topology is a gate.” Ramo concludes: “The critical question is: Who will be the gatekeepers of finance, biology, trade, and pretty much every other source of power?”
Among those who believe this is the critical question of our times there seems to be general agreement the winner will either be America or China. Perhaps the following articles provide a clue.
- Bloomberg (Huawei Reprieve: U.K., Italy and Germany Reject US Boycott)
Last year Huawei surpassed Ericsson to become the world’s largest telecoms equipment manufacturer and trailed only Samsung for smartphone sales. CEO Guo Ping said: “We are working with our partners to serve global customers with 37 availability zones across 22 regions.” Built on the success of networking equipment and now devices, Huawei has grown its revenues fivefold in less than a decade: around $20 billion in 2009 to around $110 billion last year.
- Victor Hanson in his book: The Case for Trump had this to say about Trump’s role in this ongoing collapse of established ideas and institutions: “Trump’s sometimes scary message was that what could not be fixed could be dismantled.” Hanson then quotes Kissinger as saying: “I think Trump may be one of those figures in history who appears from time to time to mark the end of an era to force it to give up its old pretense.”
- Fareed Zakaria on May 25th said Trump’s actions may usher in a “Sputnik moment” for China where it surges ahead of America just like America did to Russia.
The stock market is viewed by many as an unbiased, objective indicator in that money has no philosophy and knows no borders. If that is true, what does the following chart have to say about who is winning and who is losing?
Looks to me like the world has been the biggest loser and US high-tech, the big winner. China high-tech is down about 50% from its high but up from its lowest point. So, I accept this as evidence that America has fared better than China and the world X America. However, I also agree with the weak form test of the Efficient Markets Hypothesis that a time series of past prices does not predict future prices.
Checkmate or Surrounded With Nowhere to GO?
While the Trump administration is focusing on trade wars as a solution to stimulating our economy, China is focusing on inviting our former allies into their Gateland via their 21st century opening of the silk road called the “Belt and Road” Initiative. Xi Jinping claims China has signed up $64 billion in contracts during the current conference in Beijing.
Peter Frankopan in his book: “The Silk Road, A New History of the World,” says China’s One Belt One Road initiative, which is both a land and maritime Silk Road seeking to connect East Asia, Central Asia, the Middle East, Africa, and Europe, is, the driving force of 21st century geopolitics. If, as some observers say, Xi is playing a game of GO, where the winner surrounds his opponent leaving nowhere to GO, while Trump is playing chess. Trump may claim stock market results as, check, but not checkmate; while Xi closes the gate and puts a 5G lock on it.
It seems that Trump and his supporters believe in the stock market while Xi and his people believe in China. If Trump succeeds in telling the rest of the world who they can do business with and weakens China’s lead in the 5G race, is that checkmate? No
If China succeeds in forming a Gateland with SE Asia, central Asia, Europe, Russia and South America, where would that leave America and the rest of the world? Probably worse off.
One point that I have left out is the future role of the dollar in the global economy. This past year China has been the world’s largest purchaser of gold and has been steadily decreasing its holdings in U.S. Treasuries. China has been testing an electronic currency and is one of those countries calling for a replacement of the dollar as the exchange rate currency. That would be….Goodbye Camelot, I’m glad I knew you.