Economic train wreck in the U.S.

After subprime, decoupling just might be the most overused word of the year in economics.
A quick database search yields hundreds of newspaper stories about the decoupling phenomenon in the past three months alone.

Here's the theory: Forget the notion that the global economy closely tracks the fortunes of the mighty United States, that voracious consumer of everything.

The disciples of decoupling would have us believe that a new paradigm has taken root as a housing slump hacks at the foundation of the world's largest economy. This is a made-in-America event, after all, so why would Europe, Asia and emerging markets succumb to the downward drag? Instead, they argue that booming Asia will lift Europe, along with emerging markets from Africa to Eastern Europe.

The International Monetary Fund added credibility to the theory, with a convincing chapter in its April World Economic Outlook, titled "Decoupling the Train." The gist of its argument is that a rash of foreclosures in Las Vegas doesn't have much to do with what's happening in London or Lagos. The IMF later projected that the global economy would suffer only a minor hiccup as the U.S. slowed, expanding at a healthy 4.8-per-cent clip in 2008 versus the 5.2 per cent it had earlier projected.

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