In a rapidly globalizing world, the ”decoupling theory” was never totally persuasive. Given the evidence of the last few months – capital flow reversals, sharp widening of spreads on sovereign and corporate debt and abrupt currency depreciations – the “decoupling theory” stands totally invalidated.
Similarly, in the housing market, home price indices have been slow to recover, and mortgage delinquency rates and the number of foreclosures have been rising. Against this background, the pace at which the recovery in the corporate sector has been spreading to the household sector has remained moderate.