The Wall Street Journal calls the last ten years a “lost decade” for stockholders. The S&P is now about where it was in 1999. Stock market investors are ten years older and wiser; but not a penny richer.

And now they’re beginning to wonder about the whole scheme of things. The stock market was supposed to make them rich. “Stocks for the long run,” was the mantra of the late ’90s. Buy...hold...you can’t go wrong. But 10 years seems like a long time. If they don’t go up in a one decade, what makes buyers think they’ll go up in the next? Plus, even now, the S&P still trades at a P/E over 18 – which isn’t cheap. It seems as likely that stocks will go down in the next 10 years as up.

And, of course, there’s the housing market. Ten years ago few people doubted that if they just put money into property and left it there, they would make a good profit. For quite a while, it seemed to be true. But now, for the first time in U.S. history, housing prices are falling nationwide. They’re down about 11% from the peak...and leading economists think they have another 20% – 30% to go. What’s worse, Americans are realizing that it costs a lot of money to hold onto a position in property. There are bills to pay – taxes, utilities, maintenance...all of which seem to be going up.

You could add to those things the growing realization that wages in the United States are not going up. This inconvenient truth was masked – for more than 30 years – by rising household incomes and increasing debt. Real wages per hour didn’t go up, but more Americans worked and put in more hours. Then, they turned to credit cards and housing finance to increase their spending power. Both of those avenues have come to dead ends recently.

But here’s a little bright spot. According to a Bloomberg report, the Fed’s efforts to loosen credit really have done the job. Mortgage resets have been much less of a problem than anticipated – because the resets are linked to Libor, which has been pushed down by central bank action.

Of course, people are still losing their homes in record numbers – but it’s not necessarily because of the mortgage resets.

Also, the feds are looking at various plans to bail out homeowners in advance of the upcoming elections. Neither party wants long lines of angry, homeless voters lining up at the polls in November.

But the malaise that is spreading over America is more than just a matter of numbers. Ten years ago, America seemed invulnerable. Its money was on top of the world. Its military could take on the entire rest of the planet, if necessary. Its stocks were flying. Its houses were rising. Its financial institutions were the most dynamic, innovative and solid on earth. Nothing could stop it.

Ten years later, stocks have gone nowhere...housing is on its way down...the Pentagon is gummed up in a trillion-dollar war it can never win...and Wall Street has revealed itself not as cunningly cupid, but as blunderingly stupid.

More than that, the fantasy failed. Americans permitted themselves such an extravagant conceit that they practically begged the gods to punish them. “They sweat; we think,” was the gist of it. They allowed themselves the illusion that their new, post-Reagan, Internet-savvy capitalism would make them rich without saving money...and without actually producing anything. They thought the rest of the world would extend them boundless credit – forever.

Now the scales are falling from their eyes...they’re beginning to see things more clearly. As a result, consumer confidence has dropped to the lowest level more than 30 years. Most people think things are bad...and few think they will get better. In the history of such surveys, never have so few people expected their incomes to increase over the next six months – less than 15% of those polled.

Americans will be busted and broken by the realities of the real world in the 21st century. But they will eventually be bent into a better shape.

 Now what?

The easy milestones have been hit – gold at $1,000; oil at $100. Stocks have gone down (though the Dow is still about where it was; in nominal terms stocks have gone nowhere). And the dollar has gone down decisively against the euro.

America has become a huge empire. All empires are extraordinary things...fragile and doomed to failure. When the Soviet Union threw in the towel, America was left without any major competition. herself.

In that sense, it was no accident that the financial industry invented subprime debt...and then put it in its own coffers. Nor was it any accident that households spent more than they could afford. Nor that Congress went on the biggest spending spree in history. Nor that George W. Bush took the nation into an unbelievably pointless and expensive war, effectively squandering not only the nation’s credit...but also its military advantage.

Meanwhile, Americans’ eagerness to spend money they didn’t have on things they didn’t need caused a huge boom in places they’d never been. Asians built factories, roads and entire cities with money gotten from selling gadgets to Americans. Arabs built ski-slopes in the desert...and constructed towns on manmade islands.

And even their former enemies – the Russians – created one of the world’s largest piles of U.S. dollar reserves, and saw their own wages rise 6 times in the last eight years. These foreign competitors have been adding to their skills, their savings, and their capital bases – just while the United States has been running its own down.

This drama is far from over. We are only at the beginning of it. The next scenes should be even more interesting. The dollar will lose its status as the world’s reserve currency (possibly with episodes of hyper-inflation)...China and Russia will greatly increase military spending (with some dangerous moments, as the US still tries to throw its weight around)...

U.S. stocks will work their way down to real values – with P/Es below 10...and the average American household will find itself no better off, financially, than the average family in, say, Latvia or Malaysia. Then, Asian manufacturers will outsource production to an area where wages are low and productivity is high – Arkansas, maybe.