Let me be clear about one thing in my criticism of Mr. Xie. I do not discount the possibility of a major bout of volatility in the Chinese markets so I agree about the risks. But a long term investment in Chinese companies that are well run is not a bad bet over the longer term even with this volatility and with the inevitable declines. The simple fact is that China is investing in its infrastructure and is accumulating capital that can be put to productive use, even if that use was not what the initial investors intended. Contrary to what Andy has been implying in the past, the Chinese are not better off because they exchange the real goods that they produce for US dollars that are used to purchase treasuries and paper assets. For China to move forward it will have to use its substantial capacity to build more products for its own citizens and to make much less for Americans who are broke and unable to afford the goods that they used to buy in large quantities from China.

This is not to say that the US has to collapse if the government gets out of the way because the US manufacturing sector still makes many products that are in demand and is much more productive than it has ever been. (It would be even more productive if the US government let the inefficient companies go bankrupt but that is a subject for another post.) The problem with the US is its expanding government and a regulatory system that has grown under every president since Eisenhower. The path to salvation lies with freer markets and less government. Fortunately for the Chinese people, its government has chosen to reluctantly follow such a path. Unfortunately, the West seems to be going the wrong way.

Yep. Those who cynically say that the American super-consumer is dead don’t take into account the fact that they ran into the wall with the pedal floored. They’re dead. And there’s no more easy credit and our job market/economy is dysfunctional and wages are going to be further depressed by that and global wage arbitrage continuing.

So it’s not because they’ve become wonderfully frugal and conscientious all of a sudden (with some exceptions, of course). But the credit card has been effectively cancelled for lack of ability to service the debt. It’s not complicated.

I think it’ll be interesting to see how it plays out and I fall more into the “consumer’s not coming back” camp because the debt that fueled the spending isn’t and won’t be available. I also believe that the demand for the debt won’t be there either.

Absolutely. Hong Kong property values will fall with Fed policy and are influenced by mainland cash…no duh. Andy has been warning that the world can’t go on with the China-USA you-buy-our-stuff-we-buy-your-paper since 2003 at least. Morgan Stanley Asia has driven this point into the ground. But the USA can not just resurrect its manufacturing sector nor will Americans ever give up the consumer culture. And China still has BILLIONS of potential customers in the Indian subcontinent, the middle East, central Europe, Latin America, and Afrida to sell too. I love Andy Xie’s writing. His pieces are always succint and accessible but this latest is fluff.

“For good?”" Spoken like a true prognosticator …who doesn’t understand American culture.