The shifting economic axis and the dollar’s “super-bitcoinization”

In an interview with podcaster Peter McCormack, entrepreneur and The Network State author Balaji Srinivasan forecast an imminent collapse of the Western economy, the “super-bitcoinization” of the US dollar and the emergence of Asia as the new global financial centre.

ForkLog has prepared a concise recap of the wide-ranging conversation, in which the creator of the network-state concept shared his views on China’s ascendancy, the global migration of talent and a new approach to education.

Rebalancing the global economy

Srinivasan began with what he sees as a crucial chart: the shifting geocentre of global GDP. It depicts 2,000 years of Eurasian economic leadership and is derived by averaging the economies of China, Japan, Southeast Asia, India, the Middle East and Europe.

Before the Industrial Revolution, Eurasia enjoyed a durable economic and military parity. With the advent of steam-powered machinery at the end of the 18th century, the vector began to shift rapidly toward the West.

“Then everyone started whacking each other with their new ‘wonder weapons’: World War I, World War II… When it was all over, Japan was destroyed by nuclear bombs, Russia was communist, India was socialist, Eastern Europe was broken, Central Europe was in ruins, even the United Kingdom had been bombed,” Srinivasan recalled.

After that global catastrophe, the United States was one of the few countries largely unscathed by war. As Srinivasan explains, 1950 marked the peak of Americanisation and accompanying centralisation. On the other pole stood “giga-countries”: the USSR with 300m people, and about a billion each in China and India. Their rivalry lasted some 40 years. After the collapse of the Soviet Union—and with it classical communism—socialist countries began moving toward market economies. Even China became capitalist, though it retained the label of a “communist state”, as did Vietnam.

Since then, the world economy has shifted back toward Asia—and far faster than before. What once took millennia, then centuries, has now happened in decades.

He describes the process as a “U-shaped curve” bringing the global economy back to its pre-1950 state. In his view, this renders obsolete the institutions created after the Second World War, such as the UN and the World Bank, because “money is where power is, and the West no longer has it”:

“I can show many other charts, but the essence is this curve. And the MAGA movement—and even Build Back Better—is an attempt to go back to 1950. Because that became the ‘zero point’ of the current establishment, from which, as they think, everything should begin.”

The founder of Network School (NS) believes we may witness absolute shifts in the economy, not just the frequent relative rebalancings of power. He urges a historical lens to understand the potential of India and China, which once constituted a large share of the global market.

“G7 countries are gradually reducing their share of global GDP, while BRICS countries are growing. But by BRICS people mostly mean China and India, to a lesser extent Russia and to some extent Brazil. Overall, the flip has already happened,” the entrepreneur believes.

He added that events are moving so fast that the true picture can be hard to grasp:

“If you’re not watching Asia, not observing Dubai and Riyadh, not studying different jurisdictions—you’re like someone looking at a fast-flying ball. If the ball is rolling slowly, you can look, turn away, look again—and it’s roughly in the same place. But if the ball is flying fast, you glance—it’s here, you turn away—it’s already over there. It’s moving much faster than you think. Many economic trends today are like that, they ‘fly’ at the speed of light. And since Hollywood films and Western media almost don’t show the rise of the East, you just don’t see it.”

China and the internet: two sponsors of change

Srinivasan argues that an America-centric world is no longer divided into “red” (conservative) and “blue” (Democratic) America. The conflict is now four-sided, with China and the internet added to the frame.

Thanks to advances in robotics and drone manufacturing, China threatens “red America” in production and military power, while the internet weakens “blue America” in media and finance:

“And this will only intensify over the next 10 years. The internet is AI and cryptocurrency. That means it will capture all media and all money. And China makes robots and drones. That is, it will capture all manufacturing and all military power. Of course, at the base of this is bitcoin, but I’m not talking only about it—I mean that every stock, every bond, every contract—all of it will move to the blockchain.”

The US does have a problem: components for Tomahawk missiles are made in China. In Srinivasan’s view, this will play an important role in the trade war and other conflicts between the two powers.

He called the tariff policy of US President Donald Trump futile, arguing it will not work under current conditions. After the first trade wars in 2015, China significantly diversified its income sources. Roughly 15–16% of Chinese revenues depend on trade with North America. If trade were to fall by 50%, it would be a non-critical 8% for China.

“I think that by 2035–2040—maybe earlier, maybe later—the following will happen: the Democrats will side with the Chinese communists, and the Republicans will become bitcoin maximalists,” the expert predicted.

Many neutral countries, such as Vietnam and Malaysia, suffer from tariff wars. Now they are forced to choose China’s camp. He cites the example of Vietnam’s 49% tariffs:

“For years it was told it was ‘with us against China’, and then suddenly—such a blow. And this is happening due to the absence of long-term strategic thought.”

Srinivasan also pointed to the accelerating decline of the US dollar and to hyperinflation. He compared bitcoin’s price growth over the past 16 years with a proportional weakening of the reserve currency:

“In 16 years, if you calculate compound interest, it’s ~10.41% devaluation of the dollar to bitcoin every month. So hyperinflation has already arrived. It’s just ‘super-bitcoinization’. It’s as if we’re on a bullet train that accelerates so fast and so smoothly that we don’t even feel it. […] In how many films have you seen aliens invade Earth? In many. How many films about killer robots? Also a ton. But you have almost nowhere seen what the end of the dollar looks like.”

In his words, the scale of China is palpable only when you are in the country itself. He said the same of the internet and cryptocurrencies—“you can see it only in the growth of communities and the political acceptance of bitcoin”.

Migration of minds and money

Capital and talented people are leaving Western megacities for Australia, Singapore and Dubai. Srinivasan believes the financial centres of the future will be Miami, Dubai and Singapore, rather than New York, London and Tokyo.

He expects the “Anglo-American world” to persist in Australia and New Zealand, because they “assess the situation more realistically and do not believe in their world domination”.

“The world is open before you now. There are about 30 countries with programmes for digital nomads. El Salvador is recruiting, Eastern Europe is recruiting, Japan, lots of other places. Even Hong Kong is recruiting; they have five different talent visas,” the entrepreneur commented.

Srinivasan noted the rapid rise in living standards and the economy in Asia using India as an example. The country has seen radical improvements in urban lighting, infrastructure and retail networks. Among other things, he highlighted Bangalore’s airport, comparing it with London’s Heathrow.

“If China is a state, then India is a network. International and internet Indians are an important part of the global network. If the future is China versus internet Indians, then the latter will make up a significant part of the internet. One reason is that in America Indians are second-class citizens, and on the internet they are first-class. In the US their visa can be revoked, they can be scolded, and on the internet they have the same bitcoin terms, the same smart contracts, the same identity—they are equal to everyone. The internet is a peer-to-peer network where everyone is equal, you can strike an honest bargain and make a fair deal. And that is enough for a fast-developing people. They do not demand special treatment—only equal treatment. And under equal conditions they can achieve a great deal,” Srinivasan believes.

The NS founder pointed to changes in the global education system. He criticised the modern methodology, which in his view was built for centralisation rather than personal development. He predicts the internet will transform learning, making it more akin to apprenticeship and self-education:

“The whole Prussian system, inherited from Germany, was intended to stabilise people for a centralised state. It was not designed to raise a person to the maximum possible level as quickly as possible, training him in the shortest time according to his abilities. Thus, I think that education will be completely transformed by the internet. And it will look more like America of the 18th–19th centuries. There is an excellent book, which tells how apprenticeship worked in Benjamin Franklin’s time. I think we will return to something like that.”

Srinivasan believes that network states—and in particular NS—by supporting young talent and building communities, can seed these changes.