I've not read the book on the Third Industrial Revolution - will comment after I read the book - it's on the to-read list - thank you for the recommendation. I am familiar with Ray Dalio/Zoltan Pozsar's PoV on this - and agree with the long term implications of where this is headed - but where I push back is the immediate catalyst of that happening.
Reserve currency is the ultimate two-sided network effect - it will continue to be used grudgingly as much as everyone gripes about the cost of such a setup (does anyone not complain about Visa/Mastercard rail fees? is anyone ex-China making a tangible dent on the dominance of the V/MA rails? Before anyone says buH mY BNPL - all the BNPL networks use V/MA's debit networks) - it clearly is unsustainable - but the market stays irrational longer than you can stay solvent - so you need a catalyst to get the timing right. Like, everyone knows Alipay/Wechat Pay is superior to Visa/Mastercard as a model, yet it's not adopted globally by non-Chinese people for non-China related purchases, but if you whip out your Visa/Mastercard, it is accepted everywhere. My view is that things like this don't change just because they 'should' change - there needs to be a credible catalyst path for things to change.
Which is why I get back to my original question, specifically what you see in the next 5-10 years to change this. I'm familiar with all the long-term arguments and agree with them.
War would be certainly a catalyst, but the destructive costs certainly is not preferable.
Yes, the only thing that could cause the end of the USD as the global reserve currency in the next 5-10 years is a China-US war.
I would put the odds of this happening at 10-20%, so whilst it probably won't happen, the consequences are dire and is part of the reason why I'm here.
Patch has mentioned a 25-35% GDP decline estimate (presumably from RAND) which applies to both China and the USA. Such figures are comparable to the Great Depression, plus the effects would cause a economic depression globally that affects everyone.
And if Japan joined in such a war, the figures for Japan would be even worse given its position as a densely populated island with no natural resources which relies on seaborne shipping, and which is close to China.
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And if you agree with the long-term arguments, the question becomes how to navigate the inevitable decline of the US over the next decades
I'm using nominal GDP because living standards of developing nations gets crushed every time Fed prints or tightens - LatAM in the 80s, ASEAN in the 90s (including Korea, which had to get an IMF bailout), and now - almost every country in the world has been importing American inflation.
China is a separate case given price controls on basic commodities - but that's another can of worms that's not quite relevant for this specific instance.
I'm skeptical about the population argument on Indonesia - the institutions haven't been built by Sukarno/Suharto to enable development. By that logic, Brazil, with over 200mln people, should also be a force to be reckoned with - yet Brazil is the chicken that never takes flight (if you talk to Brazilians this is what they will tell you).
Your argument for Indonesia to 'work' - has to be backed with how you believe the country can get its' shit together under Widodo. (if I'm putting on my Studwell hat here - it would be a combination of land reforms, export discipline, and capital controls - basically the Asian Tigers + China playbook)
It's not just China's price controls on basic commodities.
China is so much more self sufficient because it is geographically the same size as the continental USA, so import prices just don't matter as much.
And when there are commodity price rises, it means more revenue redistribution within China, rather than currency outflows.
I'm not saying that Indonesia will succeed, I was saying that Indonesia's geography as an island archipelago isn't a critical roadblock to having an efficient logistics system, given the concentration and number of people on the island of Java. Plus thinking about it, Indonesia's geographical position on the equator means that there are literally no Typhoons, unlike in Japan.
I'm pretty negative on Brazil escaping the middle-income trap. Here's a few old posts going back to 2017 on why I think that:
sinodefenceforum.com/t/indian-military-news-reports-data-etc.5934/page-370#post-464569
sinodefenceforum.com/t/indian-economics-thread.8765/page-26#post-666715
