Like it or not, the relative wealth of America versus the rest of the world has slid precipitously over the past few years. Let's examine all the ways that other countries have become drastically richer on a relative basis versus the USA - and conversely how we have become poorer as a nation.

First, the massive boom in oil prices and virtual every other hard commodity. This has directly increased the coffers of countries as diverse as The Middle East, Russia, Brazil, Nigeria, and Canada. At the cost to our pocketbooks at home and to generally increasing inflation here. The economies of those and other countries are far more driven by raw material prices, so they are increasing wealth on a relative basis versus us.

Second, the meltdown in the American financial sector. While there has been a credit crunch worldwide, the overall effect has been much greater here and the panic in the mortgage sector is worse here. Many of the nation's biggest and most well known financial institutions have seen massive market capitalization losses -- some even failing and/or having to be bailed out by the government. On a relative basis, we have lost a great deal of market capitalization and power in this sector versus the rest of the world. This is in addition to the giant drop in the housing value of this country's real estate, which I'm sure is similar to Japan's plummet from its 1989 highs.

Third, the decline of the dollar as the world's preferential currency. The abysmal dollar owes its root to several causes, in my view. The massive printing of money by the Federal Government and the Fed being among the leading causes -- government spending is at an all time high, and the Fed is actively providing more liquidity to the system, including through all the recent bailouts, weakening the dollar further. Rising interest rates and general government waste and inefficiency also contribute to this -- and you can't ignore the cost in blood and money of the Iraqi War.

The point is, all it has taken is a minor shift as to the allocation of government bonds countries such as Japan, China, and Saudi Arabia are buying. These countries were very heavily weighted to buying Treasuries for so long, each tiny shift they make to being more exposed to the euro, and our dollar sells off. I'm not saying they are dumping all dollar products and our currency is going worthless - but I am saying there are small shifts going on in many economic areas to giving the euro/pound some preference.

So what is the solution to this decline in American wealth? There is no simple one, but a giant drop in oil and other commodity prices would be a start. Over the longer term, we certainly need to get off our dependency on fossil fuels. We need to get a leaner, meaner, more efficient Federal Government (good luck with that!). The Fed needs to put a tighter monetary policy in effect to strengthen the dollar -- and to better watch out when bubbles are forming, before they burst.

But I see a longer term possibility, that I know is very controversial. Instead of contracting NAFTA due to protectionism, we actually expand NAFTA to be a real Economic Union between the USA, Canada, and Mexico (similar to the EU). This would allow us to diversify our economy with those countries' natural resource market share. The sharing of passports (again similar to the EU) would allow labor to go where it is needed for growth, regardless of borders between the countries. We would also benefit from the emerging market growth of Mexico. You might say this would hurt the dollar and our standard of living, but I don't think Germany & France and have been hurt much by their joining the EU and the euro -- and it has likely strengthened their worldwide position and standard of living in the long run.

A possible longer term merger would combine the USA, Canada, Mexico with South American powers Brazil and Argentina (and maybe more regional countries eventually) into an American Union. This would create a truly diverse economic conglomeration to compete with the China, India and EU of the future.

Price Headley is the founder and chief analyst of BigTrends.com.