As I mentioned yesterday, the late 1970s and early 1980s saw a classic quantum leap: the advent of the personal computer, which resulted in the disappearance of many large classic American companies.

It is happening again.

Once we get through this difficult economic period, and we will, we will find ourselves in an entirely different World

Some pundits compare what is happening now to what happened when the dot-com bubble burst, figuring one bubble is just like another.Those pundits are only looking at the bubble part and not paying attention to what the bubble created because where we are going now is much bigger than just a bubble. It is a change in our entire way of life.

The dot-com bubble created an entirely new industry around the Internet and digital media. Any time a new industry is created, a lot of money must be invested in the act of creating that industry. Although there is a similarity between the hype that went into touting investments in dot-coms and the hype that went into touting investment in houses, the outcome is not quite the same. The money spent on the dot-coms created expensive new technology that was re-sold for a fraction of its development cost and re-purposed to form the base of broad advances in digital technology. Innovations always cost more than improvements. All that bubble money came from investors and was in the form of equity investment in the new companies that created the new digital technology that made global commerce much easier to achieve.

The real estate bubble was just a credit bubble and the bubble money came from the easy availability of consumer and real estate loans. Although it may have led to the building of more houses, stores and office buildings, its real effect was to create China. It created a new offshore manufacturing industry and it financed huge advances in the globalization of commerce. Where would China be if the American consumer hadn’t gone on a massive buying spree, enhanced by a false sense of wealth produced by the increase in the value of their houses and the money they borrowed against that increased equity?

The answer is that, in the same way India benefitted from the dot-com bubble by becoming our outsourced call-center and tech support department, China benefitted from our credit bubble by becoming our outsourced manufacturing sector.

Not only did the dot-com and real estate bubbles globalize commerce, they created a massive new consumer class made up of the previously impoverished citizens of the old Communist countries, Southeast Asia, India, and China. America now has an expanded marketplace that can afford to buy expensive American goods and services.

The East can now afford to shop American.

Conversely, most of us Americans are now considerably less arrogant about how much we must be paid. After months, and sometimes years, of diminished wages hidden by the largesse of credit-induced real estate appreciation, the delusion is coming to an end: our wages have not been keeping up with inflation. In fact, wages have stagnated or declined over the last several years and there has also been a shift from formal full-time employment to contract and part-time employment. But we didn’t notice because we all felt rich.

We felt rich because we were told we were rich by Alan Greenspan who regularly reported that household income was rising, based on the price appreciation of real estate. When one stops to think about this statement it becomes clear that it doesn’t make much sense in a reality-based world. One only receives income when one sells an appreciated asset and puts the proceeds of the sale in a bank account. Borrowing against the equity created by real estate price appreciation is not true income. It is accumulation of debt.

Nevertheless, we felt rich because we were able to spend money that we were encouraged to borrow out of the price appreciation in our houses and we spent that money on mountains of inexpensive goods made in China.

So now we are not feeling so rich. In fact, we are feeling distinctly ill over real estate and consumer debt payments that have all magically ratcheted up a few notches as has our cost of transportation, food, and goods. Our standards of living are declining while the Chinese and Indian standards of living are rising, and this is just the beginning.

The pain we are all feeling is directly linked to the natural global evolution toward an economic equilibrium. Our credit bubble financed the changes that brought us to the tipping point that triggered this evolutionary economic wave

When the rate of change slows and we again find ourselves in socio-economic stasis, what will our lifestyles look like. Perhaps we should look back on the early 1970s and compare life before the personal computer to our lives now. In the early 1970s, only science fiction hinted at how we now live our lives. What will be the result of our current changes?