What you're seeing here is a massive wage arbitrage, played out over decades. Once you have a policy of free international trade (globalization), the related jobs eventually migrate to the source of cheapest labor. That's not the end of the story, though. As those workers improve their situation, their demand for wages will rise at the same time ours drop. Eventually the two reach equilibrium and it will be no cheaper to source goods in China than in the USA or Europe.

The high price of oil is accelerating this trend. As transportation costs soar, labor and materials that are closer to their end markets become more attractive. This will accelerate the trend towards equilibrium, so it's really a question of what level that occurs at. Does everyone drive a car to work? Do we all (Chinese included) live in suburban McMansions and shop at Wally Mart anchor malls? Or does local trade and commerce re-emerge, along the lines of Catherine Austin-Fitts' Solari societies? How much of what we need will be made locally in the years ahead? Will we drive 20 miles to buy imported food and clothing, or walk to the town market to buy them directly from the people who make them...ie, our neighbors?

Fact is, we already have the philisophical, intellectual and technological ingredients to make the transition. It's really a matter of priorities, and those will change as we lose the ability to demand something which we haven't actually earned.

As investors, we need to see beyond the impending crisis and figure out ways to not just survive, but prosper in the years ahead. There are lots of opportunities here, and as the situation becomes more pressing, more and more people will start to implement them. As with most things, look to private individuals, not government, to set the pace.

It may actually be more pleasant to live in this future world, once people have a better sense of what's important. Life in a small town circa 1920 may be the model here. More limited in some aspects, but with a far richer social life, where people actually know each other and can depend on their honesty and sincerity.

Kind of like the Waltons, but without the bib overalls.

ebear