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Decoupling of the Emerging Markets from the US Essay

With the U. S. economy struggling more in recent months than it has in a long rime, emerging global markets are being faced with some interesting questions as they form their policy for the coming years. Because certain American markets are slumping at the current time, the global economy is seeing a significant amount of decoupling from those emerging markets that want to distance themselves from the problems in the United States. The basic premise behind the idea of decoupling is that certain markets want to make sure that their financial policy steers clear of one that is in trouble.

In this case, the American economy is going through something of a slow down, so the emerging European markets must take this into account. A Wall Street Journal article by Joellen Perry takes note of this trend and addresses the ways that certain foreign markets might be looking to decouple from the United States. In that article, Perry writes, “Though the key policy rate is likely to stay at 4%, perceptions of how much the bloc can decouple from the US could loom large in upcoming interest-rate decisions” (Perry).

Along this line of thinking, it is fairly evident that the French economy

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is decoupling from the United States. They are not the only foreign market making such a move, though. In addition to France, other countries in the European Union have been decoupling at an alarming rate in recent months, as well. There is certain speculation among some economists that the theory of decoupling is a fundamentally flawed one, though. According to those people, even though the European Union might be posturing in an attempt to gain global influence, the global economy really cannot survive an American downswing.

According to these analysts, the best thing for the economies of the European Union and for the American economy is for America to be operating at its highest level of performance. An Emily Kaiser article from the Rueters News Service indicated, “However, as credit problems that began in the U. S. mortgage sector spread across the globe with surprising speed, ensnaring financial firms from Australia to France, that decoupling thesis looks unlikely to hold up, at least for now” (Kaiser).

With the United States’ problems stretching far throughout the world, it looks like there is some more evidence to suggest that the global economy could not survive if the American government struggled even further. This is especially true in certain markets like housing, where the American economy has always carried the torch for other global markets throughout the world. At current standing, the jury seems to still be out on whether or not the global decoupling theory is a good one or whether it is an attempt from certain European markets to push their position in the global economy.

Market analysts have suggested that in order for the global economy to prosper in spite of the American downfall, places in Asia would have to push more dollars into the global cash flow. Specifically, China would be counted on to vamp up its contribution if things were going to continue along their currently charted course. Still, it appears that the most realistic take on the current global economic situation is that the American economy continues to be the flag bearer and most important of all global economies in terms of setting trends.

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