In the Press: RACV Luncheon - A New World Order
In July, Daniel Reaper had the privilege of presenting Grey Street Partners' insights on "A New World Order" to a packed room of RACV club members. The presentation outlines several interconnected global shifts. The Great Regime Shift describes a fundamental transformation in the economic, monetary, and geopolitical order, driven by unsustainable structural imbalances. Cold War 1.0 vs 2.0 contrasts the historical U.S.-USSR rivalry with the current U.S.-CCP dynamics. The Great Diversification highlights the Middle East's transition into a tech and finance hub. Greenflation addresses the costly transition to Net Zero. The Baby Bummer explores the implications of declining birth rates, while The Death of the 60/40 signals the end of low-rate eras with rising uncertainty and volatility. Finally, Concentration Risk notes the heavy focus on the Mag7 in discussions, often overlooking the ASX's own concentration issues.
Is the U.S. Empire Falling? A Great Regime Shift
The question of whether the U.S. empire is declining centers on a great regime shift, marked by four key pillars signaling a transition in the world order: the end of the long-term debt cycle, de-dollarization, political polarization, and increased competition from rising powers.
De-Dollarization: Perhaps, But What’s The Alternative?
De-dollarization is underway but lacks a clear alternative, with the USD holding 58% of global reserves, followed by the EUR at 20%, GBP at 5%, JPY at 6%, and other currencies at 11%. BRICS nations are increasingly buying gold, as shown in rising purchase charts. However, the opinion holds that the U.S. possesses more gold than BRICS combined, and China's economic slowdown, aging population, and property crisis prevent it from becoming a robust challenger to USD dominance. This data draws from the IMF's Currency Composition of Official Foreign Exchange Reserves (COFER), noting the "other" category includes currencies like the Australian dollar, Canadian dollar, Chinese renminbi, Swiss franc, and others not separately identified, with China joining as a reporter between 2015 and 2018.contains the Australian dollar, the Canadian dollar, the Chinese renminbi, the Swiss franc and other currencies not separately identified in the COFER survey. China became a COFER reporter between 2015 and 2018.
US Debt Cycle: The Great Regime Shift, But Not Quite
The U.S. debt cycle illustrates a regime shift, though not complete, with charts depicting U.S. total public debt in billions and federal funds rates from 1980 to 2024, alongside debt-to-GDP comparisons between the U.S. and China. The opinion suggests China encounters similar debt issues but lacks the U.S.'s economic engine or reserve currency benefits to sustain growth.
Political Polarization: Far Left vs Far Right
Political polarization pits far left against far right, evidenced by a chart showing a 12-month moving average of the absolute difference in presidential approval ratings by party from 1960 to 2025. This leads to outcomes like violence, disrupted social discourse, political gridlock, and increased volatility. The opinion identifies the rise of Marxism against capitalism as the U.S.'s greatest risk over the next 20 years.
Near Peer Competition: From West to East
Near-peer competition shifts power from West to East, with charts comparing the percentage share of global goods exported by Western nations (U.S., UK, Germany, France, Italy) versus Eastern ones (China, Japan, South Korea, Hong Kong, Taiwan) from 1948 to 2023. China's rise out of poverty is highlighted through graphs on extreme poverty rates below $1.90 per day, life expectancy, and GDP per capita from 1980 to 2023. The opinion frames this as a technology competition boom in areas like EVs and AI, positioning it as Cold War 2.0 between the U.S. (West) and China (East).
Cold War 1.0 vs 2.0
1.0: US vs USSR
Cold War 1.0 focused on a war of information and ideology between the U.S. and USSR, pitting capitalism and democracy against communism and authoritarianism. Key elements included nuclear arsenals, with the U.S. holding about 23,300 warheads and the Soviet Union 40,150 in 1986; proxy wars like the 1950-53 Korean War and 1979-89 Soviet-Afghan War; and space achievements such as the 1957 Sputnik moment, Yuri Gagarin's 1961 spaceflight, and the 1969 Apollo 11 moon landing.
2.0: US vs CCP
Cold War 2.0 shifts to a war on technology between the U.S. and CCP, featuring tensions in the South China Sea over Taiwan's sovereignty, protected by the "Silicon Shield" which could escalate only if mainland social discourse worsens; U.S. bans on advanced chips and lithography tools; and the AI race, marked by DeepSeek as the modern Sputnik moment.
Lessons Learned
Unlike USSR, China’s state capitalism allows private sector growth under CCP oversight.
Unlike USSR, China prioritizes pragmatic, non-ideological partnerships – BRICS.
The Sputnik Moment: Space Race vs AI Race – 1.0 vs 2.0
The Sputnik moment parallels the space race of Cold War 1.0 in 1957 with the AI race of Cold War 2.0 in 2025 via DeepSeek. Jevons Paradox explains how improvements in technology's cost efficiency can paradoxically increase resource consumption. that resource.
Are We on Track For WWIII? The Silicon Shield - Taiwan's Protection Against Chinese Attack
The risk of WWIII hinges on the Silicon Shield, Taiwan's defense against Chinese attack, centered on advanced chips produced by TSMC, which manufactures over 60% of global semiconductors and 90% of the most advanced ones for smartphones to military systems. This shield may weaken due to TSMC's $100 billion U.S. factory investments, though Taiwan's N-1 policy restricts exporting cutting-edge tech to keep production domestic. U.S. defense involves monthly Navy transits through the Taiwan Strait to assert navigation freedom. The opinion states that China's social discourse must worsen significantly for a Taiwan invasion likelihood to rise, currently at 5% but expected to increase over time.
The New Oil - Chips: Government Spending to Drive Wider Distribution of Semiconductors
Chips are the new oil, with governments investing to broaden semiconductor distribution, as shown in charts of spending by countries like the U.S. ($52.7B CHIPS Act), EU ($43.3B EU Chips Act), China ($142B), and South Korea ($59B). Advanced logic chip production market share bars compare 2022 and 2032 projections, with Taiwan dropping from 69% to 47% and the U.S. rising from 0% to 9%.
Declining Birth Rates: The Global Demographic Challenge
Declining birth rates are emerging as a critical global issue, with significant implications for economies and societies. South Korea leads this trend with the world’s lowest total fertility rate (TFR) at 0.72 children per woman, well below the 2.1 replacement level needed for population stability without immigration. Projections indicate a drastic 58% population decline over 75 years, dropping from 51 million in 2025 to around 20 million by 2100, a crisis labeled a "national emergency" by President Yoon Suk Yeol. Economic barriers, such as high housing costs and long work hours, alongside a culture prioritizing career and travel, deter family formation. Strict immigration policies further limit population replenishment, exacerbating the aging workforce and rising old-age dependency ratios.
This phenomenon extends beyond South Korea, with global TFRs plummeting: Japan at 1.2, China at 1.09, and the EU at 1.53, while developing nations like India approach sub-replacement levels. By 2050, 2.4 billion people will live in countries below the 2.1 threshold. The economic impact is profound, with shrinking workforces threatening growth—Japan’s working-age population has fallen 15% since 1997—and surging dependency ratios straining pensions and healthcare, with U.S. Medicare costs projected to double by 2035. Social challenges include eldercare crises and loneliness, notably in China’s 4-2-1 family structure, while immigration debates intensify tensions in regions like the EU.
Policy responses, such as Hungary’s tax exemptions, yield mixed results, complicated by rising global debt of $313 trillion in 2023. The image provided, featuring the GSP logo and the theme "Invest in Tomorrow, Today" from a July 2025 presentation, underscores the urgency for strategic investment to address these demographic shifts. Declining birth rates signal a need for nations to rethink labor, welfare, and immigration strategies to mitigate long-term instability, making this a pivotal focus for global growth planning.
The Great Diversification: Middle East’s Pivot From Oil to AI and Tech (GCC Nations)
The Great Diversification sees GCC nations pivot from oil to AI and tech, with charts showing oil/gas GDP percentages declining from 2000 to 2024 for Qatar, Kuwait, Saudi Arabia, Oman, UAE, and Bahrain. Key transformations include a 5x population surge with 40-70% HDI gains, 14-19 year life expectancy increases, and 50% of the population as foreigners; deserts to degrees with 50% literacy rises and 10% of global tertiary students; nomads to 150M visitors via 50-100x growth; desert towns to megacities with 2-3x urban expansion and 85% urbanization; telegraphs to AI leaders through over $150B in investments from 2024-2027; and oil vaults to global wealth titans as GCC SWFs manage $4.9T, projected to reach $8T by 2030.