"I read another article on potential problems down the road for China and its Asian counterparts. This is from the most recent Economist.

"This causes me to think about the current global political, economic, and investment landscape. The bad news is that it seems that the world economy is taking a page from Hollywood in its desire to make franchise films that can have unlimited remakes. In this case, it seems to most closely resemble "Nightmare On Elm Street".

"Before I am dubbed a Gloom and Doom fanatic, let me say that I bought in hook, line, and sinker to the commodity secular bull market and emerging market growth theme in the early 2000s and have not changed course. What has changed is my view that we are in for a volatile ride that will have many hiccups before it is over. This, I believe, will create a few more "once on a lifetime" opportunities for the patient and disciplined investor or trader. As for the current markets, I believe we are seeing an oversold bounce and possible relief rally over the fact that the inevitable Greek default has been kicked down the road a bit. I realize that the view that markets will head down again and break 200 day support is somewhat contrarian, but I just do not see what there is that looks so promising at this point. Possibly, I am waiting for the inevitable "fat pitch" and that I may have to wait a long while.

"All of the versions share the same quality of out of control debt bubbles that are unsustainable.

"Nightmare On Elm Street I." The U.S.
I have never bought in to a serious recovery. It has been an artificial, monetarily induced recovery. Corporate balance sheets are in wonderful shape, but so what, if they are unwilling to hire or do any significant capital spending? Now we have hit a so called "soft patch". But this is a soft patch off one of the, if not the, weakest recoveries on record.

"Economic data charts on consumer spending, production, housing, employment, wages, and the lot, show how weak this recovery has been compared to historical averages (at this point in time after a recession). Now, even Bernanke who claimed victory because stock markets rose, is openly stating that it may not be temporary and that some weakness cannot be explained??

"Europe is playing hot potato with the current Greek crisis and the question of what else is out there. I guess the French are currently holding the potato, hoping they can delay the inevitable. But it seems almost inevitable that Greece will suffer because of the austerity measures being put on them. Greece will default inevitably, and the banks will be bailed out, a la America. And so it goes.

"But I think it is the making of Nightmare On Elm Street 3 that is potentially the scariest. I have read too many articles on Chinese style capitalism. Who knows, maybe authoritative Capitalism is the answer for a country of close to 2B people. At least that is what the government says in mocking western style liberal capitalism. Somehow, this does not give me a warm and fuzzy feeling inside. This is a country bent on growing 10% a year.

"An economy of 2B people growing at that rate is not sustainable, especially when they currently consume between 20 and 50% of the commodities produced, depending on what commodity it is. My understanding is that the state controls the Central Bank (this is common knowledge), controls the 5 major banks, decides who gets funded and who does not, reliquifies the banks often, moves the bad debt off of the bank books and onto the books of Sovereign Wealth Funds. But the biggest current threat is apparently at the local government level, where many local areas are struggling with bad debt.

"Furthermore, another huge exporting country and emerging market leader, South Korea, is also beginning to experience serious household debt problems.

"Change does not happen quickly and I think it is naïve to believe that China will become the world economic power it seeks to be without some serious problems along the way. Hopefully, these problems can be turned into opportunity as opposed to something much uglier."

David Fuller's view Thanks for your detailed thoughts and the Economist article link above. It speaks of future tensions among the middleclass and you also say in this sentence:

"What has changed is my view that we are in for a volatile ride that will have many hiccups before it is over."

At the risk of sounding flippant, my response is - and thus it always was.

The world is constantly changing and we are affected by many seemingly random chaos and cycles. Volatility is everywhere, in our weather, in some relationships, our perceptions, and not least in the markets. That is what makes life so interesting - sometimes too interesting - and also uncertain.

The Economist thinks that China's middleclass will become restless, and wonders how the ruling party's leadership will manage these tensions.

Sure, but this is certainly not a prospect or dilemma unique to China. The remarkable story is the rapid and continuing emergence of this large middleclass in China and many other developing countries, which are more accurately described today as growth economies.

As an investor, I would be more worried about countries where the economic middleclass is shrinking on both an absolute and relative basis.