The Global 'Decoupling Theory' is Garbage

Asian Stocks Fall Most in 3 Weeks on Growth Concern; Banks Drop: “Asian stocks declined, sending a regional benchmark to its biggest loss in three weeks, after the Federal Reserve said U.S. economic growth is slowing and Morgan Stanley said Japan may enter a recession.

Mizuho Financial Group Inc. and HSBC Holdings Plc led banks lower on speculation a quarter-point interest-rate cut by the Fed yesterday won't rekindle growth in the world's largest economy. Canon Inc., BHP Billiton Ltd. and PetroChina Co. retreated on concern demand for electronics and raw materials will slump.

“Market sentiment has been shaken,” said Yang Haeman, who manages the equivalent of almost $1 billion at NH-CA Asset Management in Seoul. “A U.S. slowdown is already quite certain and investors now are also worried that this will result in a global slowdown.””

They should be worried. The ‘decoupling theory’ was a weak one at best.
Naked Capitalism presents the case in the post America Faces Day of Reckoning With Debt:

“Evans-Pritchard explicitly disagrees with the "decoupling" thesis, which says that even if the US has a sharp contraction, the rest of the world need not be affected.”

Nouriel Roubini has taken issue with this idea since 2006. His updated views: Recoupling rather than Decoupling: the Forthcoming Contagion to China, East Asia and Emerging Markets

This is a global economy. This is a global credit bubble. This is a global credit crunch. Therefore, the consequences will be GLOBAL.