One rhetoric topic these days is “because the emerging economy, the rest of the world no longer coupled with US economy”, specifically, the rest of the world will not have a recession if US goes in to recession.
If you look at world currency market, it is even more convincing – the USD has been depressed more than 1/3 in the past 4 years.
Is it really true? Well, on one hand because the emerging markets are becoming bigger economies and hence have more resilience to external turbulence (read US recession), so the influence of US economy to other economies are less significant than it use to be.
However, somewhere in the world there is a saying – the thinnest camel is bigger than a horse – which is very true in describing the current situation of US.
The “reduced” influence of US economy is still too significant to be “ignored”.
The truth is in the past 3 to 4 years, it is not a US recession, rather the fear of a US recession drove US dollar down. And the fact that it’s the “fear of recession” instead of a real recession is the cause easily explains the “de-couple” theory.
Because US is not in a recession, US consumers are still spending, so the rest of the world can still sell to US, and that’s why their economy is still growing -- why its not “de-coupling”? -- Because US economy was also growing, despite wide spread fear of a recession. That has been the case for the past 3 years.
Or you can say it was the “fear” de-coupled, not the economy. In China and India where economy expands in double digits, it’s far harder for them to think about recession – in comparison to in the US where economy was growing 2 or 3 percent a year, it is much closer to the magical number “0” – where positive and negative cross.
And recently, when US is really in the recession (at least US business and consumers are spending less), you can see all over the world, the economy starting to choke. Some people out there was surprised and said world economy “re-coupled” – not quite right, it is just this time, the wolf really attacked, unlike previous occasion “wolf is coming” was shouted just for the sake of fear.
I feel some people are driven by fear and hatred more than hope and love. The new order of the world is not that US collapse, it is that other nation rise – it’s not about US getting unimportant, it is about other nation also getting important – it’s not about US is in trouble, it is about other nations are out of trouble.
For the “new order” of economy, I would not expect in the short term that US will be irrelevant – a US recession, will still cause world economy slow down. The change is, now if China goes into recession, the world economy will also slow down, big time!
It’s not that world de-coupled with US, it is other economies are coupled with the world better now.
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