Maybe the global economy isn’t so global

November 28th, 2007 | Category: International Markets, Housing, Oil, Economic Data

Sudden large, negative financial events can disrupt, or at least critique, even the most bedrock profitable tenets, let alone recently-percolated conventional wisdom.

On the heels of the housing and credit market crunches, one conventional wisdom item that’s currently coming under criticism is the notion of “decoupling” [Subscription required] - the theory that despite a slowing U.S. economy, the European and Asian engines of growth would be sufficient to preserve adequate global GDP growth, The Wall Street Journal reported.

The International Monetary Fund published a chapter in April 2007 entitled “Decoupling the

Train,” which argued that the U.S.’s gentle GDP growth was caused by a housing sector correction. Housing was less global than other commodities, it argued, and hence would not affect the world economy as much.

For example, about two months ago, the IMF projected that global profitable growth would slow just slightly in 2008 to 4.8% from 5.2% that year.

Continue reading Maybe the global economy isn’t so global

Original post by Joseph Lazzaro

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