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Are We Getting Closer to Decoupling?

Decoupling is basically the idea that the global economy will change in the sense that it will no longer be driven by US consumption. Instead of the rest of the world lending the US money so that the US can buy their products/services, countries will invest in their own consumption, and the US will lose its inflow of capital.

Or at least, that is the story. Decoupling's most prominent proponent is likely to be Peter Schiff, who has been forecasting decoupling for several years now.

Is decoupling going to happen?

One piece of evidence supporting the notion is that market correlations in the US are changing. For instance, today (November 18, 2009), was a day in which US equities and the US dollar both declined in value, while precious metals rose. If foreigners stop financing the US economy, this is a trend that will continue.

For those who believe, as I do, that decoupling is increasingly likely, the opportunity is in shorting US dollar-denominated assets.

Disclosure: Short US dollar.