Over the past few years, many
analysts and economists have
derived a new theory about global economic growth. This theory is
often referred to as decoupling. The thesis is that emerging markets, less
developed markets or BRIC countries are young and vibrant markets filled
with unlimited potential for economic growth. In the period before the
crash, this argument seemed terribly attractive. Developed countries
economies were often growing at 1 to 3% while emerging markets were notching
up growth close to or exceeding double digits.
All this changed as a result of the crash. In the fall of 2008, all
economies around the world went into a tailspin.
In the coming months, markets everywhere reached new lows. Investors
discovered that the world economy was indeed globalized.
Since then, many economies in emerging markets have recovered
far faster than economies in the developed world. This has resulted in the
resurrection of the decoupling `story'. Creators and marketers of a variety of
investment products have fashioned no end of ways to cash in on the prospect of never
ending growth which is sold to investors as assured returns. The forecast for
these emerging markets seems bright indeed.
Certainly, looking at the present situation, it is easy to succumb to
these arguments. China's growth rate is over 10%. India and Brazil are growing
at about 9%. According to the IMF, both economies should continue their
growth at the rate of 6.8% in 2011. This is far better than their forecast for
developed countries of a mere 2.6%.
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