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The Great Leveling
An e-mail exchange with a reader
19 September 2003

Dear Mr. Nystrom,

I am confused as to why the interest in calling what is happening a depression? That is an old, worn term that frankly does not relate well to what is, in fact, happening. In the depression wealth evaporated. What we are living through is the most massive transfer of wealth in the history of mankind. The export of jobs via the internet and global manufacturing is causing and will continue to cause tremendous upheaval in the west.


You raise an interesting point. I started the site at the end of 2001, when it looked to me like a depression in the west was imminent. As it were, things did not exactly play out per my original forecast. Just as the run up in the stock market lasted longer than I expected, the unwind is also lasting much longer than I anticipated.

I am no longer living in the United States, but have relocated to Taiwan. From what I see, it looks as though the world economy is picking up again. Fundamentally, though, everything is based on debt and there is so much debt outstanding that it is difficult for me to see a smooth ending to this. The only thing that saved us this time, in my opinion, was the massive drop in interest rates that allowed people to refinance their debt at lower rates, but at the same time it enticed people into taking on more debt. The situation is inherently unstable - any kind of a rise in interest rates will cause massive defaults and the ripples will be felt across the economy. But I have no idea what other tricks the powers that be have up their sleeves.

As far as the massive transfer of wealth - this is a keen observation. Wealth is moving abroad, lifting the living standards of those here in Asia, certainly, while at the same time causing the standards to fall, in some respects, in the U.S. I read in the paper that the U.S. has the highest productivity, but also works the most hours. This is in sharp contrast to 1990, when it was Japan who was working so much that the U.S. cried foul! We forced them to work less, but we picked up the slack. And look what happened to Japan over the last decade. Now it looks like China is the rising powerhouse in the East. With an average hourly manufacturing wage of $0.50 per hour, it is no wonder that American jobs are fleeing the States, never to return.

Instead of the Great Depression, how about the Great Leveling? It is really only fair, Americans can't hog the good life forever. But on the other hand, everyone can't live like Americans, either. Planetary resources simply wont support it. The production of cars in China is up 89% in the first 8 months of this year – what will this mean to the future of the ozone hole, the future of global warming, the future of life on the planet, to say nothing of the future of oil prices?

- Michael

Mr. Nystrom,

One of the things that I have learned is how few people are really paying attention beyond their small corner of existence. I am one of 11 children from a middle-income family, grew up through the 72-74 recession, 1980 recession, and now this "whatever we call it." In my family the debt load is staggering on a relative basis to incomes. My siblings are using their home equity loans as permanent overdraft accounts. All wives are working as many hours as they can possibly manage and the men are getting burned out. The bills keep coming. Taxes are actually increasing in each town to support schools since the state and fed cut back. Gas, fuel and food prices are climbing, while the only things getting cheaper are TV's and PC's. The big lie with PC's is that internet access and cable TV are now considered utility bills, and they keep climbing, too.

Americans simply consume too much. I have 5 TV's in the house, 3 computers, 2 of which have broadband, 2 cars, a boat, a pool, a 3500 sq ft house on which I pay $8500 in taxes, mortgaged at 55% ovf value (which is slightly slipping), 3 kids in private school, and a wife at home. I need to be very aggressive on taxes to avoid paying 60%in total, and I am killing myself to make ends meet. And now she wants a lake house!!!! Its as if the crash of 2000 never happened and the sky is the limit. I look to the media and lack of self control as partly to blame, but moreover, it’s the big lie that is hurting us most.

Americans don't read anymore to express their position in life, rather they consume. Remember when a well-read person was looked up to? Those days are gone in this country. It’s all about stuff with Americans.

In each of my siblings’ situations, they all feel that one day magically they will pay off all this debt and live mortgage free. That day some feel will be the death of my parents where they will get a reasonable size check. Because we are truthful the situation reveals itself. I suspect my neighborhood is the same way, but of course nobody talks about it. This transfer of wealth is happening quickly. We are losing 50,000 WWII vets a month, and that transfer is being used to retire debt rather than for more investment, which is sad. The government in all its forms is getting bigger; defense spending and public projects provide much of the growth.

The problem is that NOBODY GETS IT!! The public (and the world) does not yet understand that the US Dollar comes from a printing press. Its value is based solely on what we purport it to be. Our military might and strong US corporations are what is holding up the value of the US dollar both now and in the past. But our corporations are quickly exporting their core competency overseas. Have you heard that Ernst & Young now sends its grunt accounting work overseas at night for delivery back to the US in the morning? JPMorganChase now sends its customers numbers overseas for spreadsheet analysis and then it is returned the next morning. When you and I got out of business school, these were pretty good jobs to get; now they are gone. This is a massive transfer of wealth and productivity overseas. My guess is that all this skews the measure of US productivity.

Most of all I am worried and saddened. I am worried for my family and my friends who don't see the problems that we have created for ourselves. We are working so hard we rarely see each other and when there is an opportunity for a gathering, the expectations are set so high that nobody can afford the price of getting together. The men are all going to die young, and when the smoke clears, the survivors will wonder what it was all for.

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