"The rich are richer than ever the world over, with more than enough evidence available to confirm that this is the case. Furthermore, it is so on an unprecedented global scale now that China and her citizens have led the rise of the APAC region to prominence and power alongside the American and European economic blocs. As we shall see, America’s decline is the decline of only one main sector of her economy, along with the rise of others. No, the baby is not going to be thrown out with the global bath water, and there will be no doomsday collapse with one exception: a 30% chunk of the middle class in America whose lives and careers and futures have been decimated."

The above quote is from my recent article published by Wall Street veteran Rick Ackerman at his investment advisory website, and it's point is at the heart of my argument against a severe deflation or doomsday collapse in the global economy. We can easily begin by suggesting that the economic balance of power across various sectors of the global economy are shifting, by both industry and social demographic classes. Meaning, industry sectors such as IT, Energy Services and Healthcare are seeing growth worldwide. While on the demographic sector side, we have the American middle class demographic sector experiencing a serious economic decline; this reality balanced against the Chinese middle class demographic sector experiencing an equally significant rise in lifestyle and economic power.

Threat of Debt Vs. The Joy Of More Wealth

The world is awash in $USD trillions of fresh debt, primarily debt issued by the United States Federal Reserve to avert disaster in the financial markets, and by China's banking system to continue stimulating China's amazing economic growth this past few years.

Yet there is a happy result for some; the world is also awash in wealth, wealth which is primarily in the hands of the increasingly rich and semi-rich of the American, European and Chinese bloc. While deflationists correctly and intelligently point out grave analytical concerns over the stability and corruption of the debt based, derivatives-driven Western banking system including Wall Street, they have discounted too far the power of the world's existing wealth to keep the world humming along. This wealth includes the unprecedented level of new wealth created in China.

Even a conservative look at the middle class housing sector in China reveals 100,000,000 apartment homes which are now worth an average of 5 times greater yet are still priced reasonably. If homes which were worth USD $35-50,000 (250,000-450,000rmb) are now worth a conservative 3 times more, then the total newly created asset wealth is $15 Trillion unencumbered by mortgages. This conservative projection focuses on the broader market of average middle class homes across China, not including the luxury property sector with sky high prices the media focuses on with its concerns about a China "property bubble".

With respect to the complex interconnectedness of the world we live in, China-American relations are at the heart of economic and political stability across the globe. Here we argue that in addition, that Western wealth and China's new wealth together are a force to be reckoned with. While this wealth is rightfully resented by those millions of people across the globe whose lives have been damaged by the financial shenanigans which continue unabated by the Western banks and Wall Street, this enormous pool of wealth just may be the glue that holds everything together awhile longer, giving our leaders enough time to unwind the underlying mess which continues to threaten the future.

The original China - America argument centered around the deflation question is founder at this link: http://www.rickackerman.com/2010/07/risk-of-depression-low-says-our-man-...

Mario Cavolo
Shanghai