Ironies abound. In the early 1970’s Richard Nixon, arguably the most anti-communist U.S. President ever, opened up relations with China to the West. Rarely has any public official of meaningful rank acted so much against type. Although arguments against the Nixon presidency have been recited in hundreds of books and in virtually any forum one can name, he always earns credit for bringing China into the world’s economy. And indeed China has added a great deal to world growth. The country, by a wide margin, has provided the most important factor to 21st century world economic growth. For the most part America has welcomed China’s inclusion into the world’s economy.

But in the past few years it also has become clearer that China’s growth—while beneficial globally—may threaten America’s world hegemony. When China announced plans in 2013 to develop a trade initiative to cover much of the East, dubbed One Belt One Road (OBOR), it did not draw much attention. But other announcements and agreements followed that forced America and the West to take notice. First, China split that initiative into two pieces, a land-based Silk Road Economic Belt (SREB) and a maritime trading route, Maritime Silk Road (MSR). One goal is to spur Eastern economic growth to benefit China and let the Middle Kingdom use its steel, cement and other secondary industrial material production to eliminate excess capacity—seemingly a win-win situation for most major Eastern players.

That China was not simply bloviating became clear when several new banks came along. First came a BRICS bank, a kind of counterpart to the IMF for the BRIC countries plus South Africa and maybe others too. After BRICS came the Asian Infrastructure Investment Bank (AIIB), which invited all major Western countries to join. America declined and also urged its European allies to do so. Probably for the first time since WWII our allies countered U.S. wishes, taking action on what America increasingly considers a strategic threat. Indeed perhaps the most galling Chinese project in conjunction with OBOR and its various financing organizations was a plan to invest $45 billion to build a corridor through the utterly recalcitrant terrain of Pakistan. The China-Pakistan “road” would directly link China and the Arabian sea and give China a trade route to the Gulf states, which continue to hold most of the world’s conventional, i.e. cheap, oil. The Gulf states’ only competitor might be Russia,  already a strong ally of China.

In short, China clearly wants to lay claim to the most of the undeveloped part of the world and seeks an upper hand in securing resources wherever major resources lie.

The West has begun to worry big time. How ironic. Whereas Nixon the China hater opened China, the task of economically confronting China now falls to arguably the most liberal President of modern times. President Obama’s proposed Trans-Pacific Partnership (TPP), a somewhat ham handed attempt to assure an American presence in the East even if it excludes the two largest Eastern land masses, China and Russia, comes just as many analysts fervently consider free trade a curse for high paid blue collar workers—indeed all blue collar workers. Right or wrong, many Democrats claim that NAFTA, the last major free trade pact, granted a boon to the rich and established an economic curse on factory workers that largely hollowed out America’s middle class. Now the President, more than any other before him identified with recognition of economic inequality, must make way for what many believe will create even greater inequalities.

We also see a second irony embedded in the China-America mosaic. America’s biggest claim to hegemony is its military. No one could sanely argue that America does not have the world’s largest military (though some might say that we trail the East in cyber security, a question we leave for a later time).  But some dispute whether one military—even as strong as that of the U.S—can rule the roost everywhere at once. Undoubtedly the world looks to America to help counter extremist incursions. And despite its very mixed results, America has generally responded.

What makes this ironic is the location of most of these hotspots—indeed probably all that make any difference—are in the East, where China seeks hegemony. While America and China share many trade partners and want to better economic relationships with them, every American bomb dropped on ISIS (or other brutal organization) at least indirectly helps China.

China’s only military flexing to date has been in the China Sea, a resource-rich area where its actions have drawn America’s watchful ire (and some from Japan, as well) without yet creating serious confrontations. China seems to want to establish a claim more to negotiate for resources than to establish military controls. In other words, China, has largely remained far less militaristic than its biggest rival.

The dangers: not only do we ironically help advance China’s economic gains. We also risk overextending ourselves. China and the East plan to spend more than $1 trillion annually on infrastructure to further China’s economic hegemony in Eurasia, and who knows where else. Meanwhile, how much of Europe can we count on to remain allied primarily with the West. Whatever happens to current Greek negotiations, clearly Greece has a major fall back. Russian pipelines will potentially deliver gas to Europe through Greece, and Chinese fast trains may deliver goods to Germany and the Balkans that can move still further from Greek ports.

America at some point must choose to build its own major infrastructure projects. Everything from our waterways to our electric grid are in disrepair. But we will shoulder the costs of that new infrastructure—unless we reach some acceptable accommodation with China on shared responsibilities—alongside much larger military expenditures. America faces the classic guns and butter dilemma that created havoc during the Viet Nam era. While we might be spend ourselves into an ever deeper hole, China will focus, hawk-eyed, on building economic relationships to assure its populace a very prosperous 21st century. This could prove most ironic of all if it were to lead to America’s loss of its cold war with China, in the same way that the U.S. defeated the Soviet Union in the previous cold war.

We believe this entire mess could still possibly result in a happy ending—giving both the East and West relatively peaceful, mutual prosperity. But the hour is late and the glass contains very little more sand. Passing TPP and accepting mutual economic positions in the East with China could help. So could accommodation with Greece despite the risk that other beleaguered Euro countries will want more as well. I do not yet recommend buying canned goods but, do acquire some insurance (if you have not already). In other words, all investors should allocate some funds to gold and gold correlates. Inflation—perhaps a lot—seems ever more likely. Now, unlike 2008, the Fed must proceed with caution. A new economic crisis would be much harder to manage than in 2008 since the Fed retains much less worldwide power today. Another round of quantitative easing cannot assuage all that would ail a deflationary economy.