Posted by: Armel | October 15, 2008

Decoupling Theory: Is It Over ?


The IMF trough Dominique Strauss-Kahn  said some time ago that decoupling theories wouldn’t work. If the assessment was made after analyzing the curve of the downturn this year, I think that’s an obvious conclusion to make in the face of a recession in the West.

I think decoupling as I advocated it here works as another diversification strategy during slowing growth or relative stagnation. But the idea that Decoupling was going to continue to provide the same returns on equity (on a strict % basis) during periods of recession or depression in the US & Europe, is simply not feasible to begin with. As we know during hard times like these, the access to credit and capital becomes expensive and by simple math, given the expected lower growth out of emerging markets, it wouldn’t make sense to promote an all out Decoupling strategy in these conditions.

So i agree with DSK and OZ for now, let’s just say it’s a wrap until the next Bull period when the markets once again want to balance risk and diversify through emerging economies. But how long before that happens again?

Armel Njeunou



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