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 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?
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
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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