The global economy has clearly decoupled from the US and world growth remains close to 4 per cent in spite of the absence of any increases in domestic US demand. Continued expansion abroad, especially in the emerging market economies, has in fact cushioned the slowdown and so far prevented recession in the US. Hence we are also experiencing the first episode in history of reverse coupling, in which the rest of the world pulls the US forward rather than the opposite.

The most striking feature of the current global economic situation is that the US is the only major country that is seriously contemplating recession and that has adopted aggressive expansionary policies to combat that risk. Most other countries are more worried about inflation than slower growth. Many are experiencing reduced growth, to be sure, but part of their slowing is a natural cyclical reaction to four years of near-record global expansion, at more than 4½ per cent from 2004 to 2007, and the need to focus on price stability. The additional losses because of the housing and credit crises in the US amount only to a couple of 10ths of 1 per cent in most areas, including Europe and Japan. It will reach a full percentage point or more only in the fastest growers such as China, where expansion will remain near 10 per cent. Many of these cuts are in fact welcome as their central banks are tightening monetary policy rather than easing it.