Is China playing a smart game of Risk?

**warning** this is a long post and all on macro economics. So quit now while you can…

Lately, the world economic state has felt like the end of a Risk game where one player has tipped the balance of power and steam rolls through the rest. Today, China seems to be in that position, holding most of the cards and by far the strongest table position.

I just read a compelling hedge fund writeup on the world macro economy. They make a strong case that the US Govt has lost its sovereign ability to control its economic growth and currency value to foreign creditors. They argue that china now controls the dollar’s valuation as it ties its currency to ours. When china halted its annual 14 pct planned appreciation it forced the dollar to rise and commodity prices to fall.

They raise a provocative question of whether china may be manipulating world markets.

Whether or not china has intentionally forced the dollar to appreciate and caused deflation in world commodity markets, it stands to be the massive beneficiary. With over 2 trillion dollars in surplus capital reserves china is now positioned to secure its economic and energy consuming future while the rest of the world watches helplessly.

If one agrees with the Peak Oil thesis – that oil supply growth peaked in 1972 and actual supplies peaked in 2001 – then china faces an oppty of historical proportion to corner the market on oil for decades to come.

While the new obama admin works to help the US position its economy for an alternative energy future that may be decades away, china can secure its next twenty yrs with cheap oil.

China could buy 40 billion barrels of oil at today’s prices (assuming they didn’t drive prices back up).

Course the US could have chosen to do the same if we weren’t committing that capital to shore up banks and mortgages. Which would you rather invest 2 trillion in today, bad US mortgages or oil?

If countries were stocks, china would be the highest P/E today with the strongest balance sheet, lowest cost of goods sold and broadest world markets for its goods.

The only other economic super power left, the saudi arabia, seems temporarily wounded by oil price declines.

So far both china and opec have traded through the US with both lending us the capital to keep doing business. Are we moving to a future where they trade directly with each other, oil for shoes and cars? Or like the end of the Risk game, do they count the US out and start competing with each other?

I remember in 1989 having the same feeling that the japanese had won and US was old and done. The Japanese had the more efficient manufacturing and were flush with cash. Just 10 yrs later japan was done and the US had won with IT.

It does feel ironic that at the dawn of the 21st century an american economy fueled by knowledge workers and information technology finds itself unable to compete with one fueled by low cost labor and another fueled by natural resources. The more things change the more they stay the same.

My take is that the US has a few big card sets yet to play. We will go through a long overdue correction. But we will come out stronger than before. Our people will focus on building new industries with the realization that we must produce goods and services for the rest of the world and not just for ourselves. If we want to maintain our national standard of living it will happen by creating more googles and amazons and not through real estate and stock bubbles.

Our country needs to invest now in engineers. We need to aggressively recruit them from abroad and develop them by refocusing our education.

I’m hopeful that obama as our new ceo will develop a long term strategy we can all invest in to make america win again. He should hire mckinsey to develop magic quandrants and help him define the 20 year strategy. America should look to develop the worlds great intellectual property. We should solve the hardest problems like sustainable energy. We should increase world productivity with googles and amazons. We should also develop the greatest entertainment for the world to spend all its newfound free time on (as we make everyone super productive).

We need a roadmap to exit industries we can’t compete in and trnasfer those jobs. If we stay in cars let’s double down with a winning strategy to make our cost of goods sold low and invest in world leading design and technology (as opposed to buy american ads).

If the govt is going to spend big now let’s make sure some investment goes to build not deplete our strategy oil reserves while the dollar is high and energy is (temporarily low). We can outplay china. They have inflated our currency, great. Let’s turn it into hard assets and play the coming depreciation as a country.

What I am most hoping for is that we have someone playing our side who is great at Risk:)

2 thoughts on “Is China playing a smart game of Risk?

  1. I can see China becoming the next world supwer power.. and they do have areas near to them that are rich in oil..
    If they start leaning towards an alliance with Russia they could be in a position to dictate worlds events..
    The problem with America is the modern day reverse Robin Hood syndrome, ie rich fat cats making billions while many struggle on low wages to pay basic bills

  2. I dont know if you will read this Mr. Pincus, but as your Zynga support cant or wont answer my question, I am hoping you can get someone to do that.
    FARMVILLE, we are the guinea pigs for this game,we are helping you as much as you are helping us by giving the game free at present. Unfortunately there are so many glitches at present that playing the game to give you feed back is almost impossible.
    I cant see posts, bonuses, adoptable animals, or mystery eggs from my ‘neighbours’ farms on my Facebook feed. Some applications are posting fine, other neighbours are receiving the posts. This also happens with cafeworld. We have all double and triple checked our privacy settings and application settings we are all allowed to post to each other and the applications are also allowed to post. This has been a problem since the privacy settings update by Facebook. Take a look at the bug reporting forum and you will see how many people this is affecting. There is no point in playing if you cannot get posts from neighbours. I have posted in the bug reporting, discussions, etc. I have sent messages to your so called support department. Unfortunately even though I explain fully that we have all, every single one of my friends and neighbours, checked our settings, checked the application settings, cleared cache, reinstalled flash etc., etc., your support department chooses to reply to me not with an actual answer but just to tell me my answer can be found ‘here’. Well it isnt. It just tells me to go to the application settings and check the ‘allow posts’ box this time, last time it was clear cache etc. They seem to think that we are all idiots who cannot do these simple things without prompting. By the sound of the forum, everyone is getting the same treatment. Perhaps you can talk to your support section and get them to answer my question above and also whether this is a game problem or a facebook problem. If they would only do this they would halve their complaints. We all enjoy this game, and most of us are happy to put up with the glitches which seem to get sorted within a reasonable time, lost gifts, plants, animals etc., but this has gone on for over a month now and I have not been able to adopt any animals, get any bonuses or open any mystery eggs, let alone the shared food from cafeworld. THIS IS NOT A PROBLEM WITH MY SETTINGS, MY NEIGHBOURS SETTINGS OR THE APPLICATION SETTINGS. Please Mr. Pincus, please get one of your technical people to look at this problem. The game was designed to be interactive between neighbours and I would guess hundreds of thousands of others cant do this. How can we give you feedback on a game that we cant play. Please also stop them from sending out the standard ‘idiot’ emails, we havnt all accidentally hidden the feed, not everyone will send in a message without checking every option first. I am insulted to be honest, when I send in a message which is quite clear to have it totally ignored and someone just press and button to send a ‘get rid of them’ email. Its not good customer service. If this is a
    Zynga glitch that you are working on fine, I will wait, but even though there are hundreds of reports in the bug reporting thread, it is not mentioned in the known bugs thread. If it is a facebook problem, then just a sentence saying this would get a hell of a lot of people off your back. If it is a facebook problem, tell them to fix it!! A little communication please Mr. Pincus would go a long way in keeping your guinea pigs playing the game, who will eventually pay for that priviledge if you eventually get rid of all the bugs that we are telling you about. We are saving you a lot of money on research on these games, please just give us a little consideration and answer the questions that have been asked.

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