The state of the global economy and the rivalry between the USA and China

According to Ray Dalio, investor and founder of Bridgewater Associates, groundbreaking changes in the global economy can be predicted based on historical analogies. When at the same time: a) too much debt is created, and central banks print a lot of money and buy debts; b) internal conflicts break out, exacerbated by poor economic conditions; c) there are major international conflicts between rival powers; (d) natural phenomena such as droughts, floods, pandemics and climate change occur; and e) a new technology emerges that causes evolutionary advances in productivity and living standards (e.g. the industrial revolution and the computer/AI revolution), then we are dealing with the so-called Five Great Forces creating the Great Cycle responsible for groundbreaking changes in the world order.

The rivalry between the US and China affects the entire global economy. Dozens of middle- and low-income countries, from Ghana to Ethiopia and Pakistan, are battling an escalating debt crisis. These countries face escalating debts, primarily to state-owned Chinese lenders who lend easily. As the borrower grapples with the debt crisis, Western institutions, led by the International Monetary Fund, make their aid conditional on China’s willingness to restructure previously issued loans. And China is not always willing to cooperate. An example of such a situation is Suriname, which has been plunged into a financial crisis for three years. IMF assistance to Suriname is being held up due to the conflict between the traditionally dominant Western institutions and China.