When this financial crisis began in earnest in early September there was much talk about how Brazil, Russia, India and China (BRIC countries) wouldn’t feel much effect because their economies were decoupled from the US, meaning that they just weren’t as dependent on America as they had been in the past. It sounded good then and still sounds good as an academic argument when I hear the talking heads espouse this view. The problem is that in practicality it makes no sense to continue to beat this drum and a person with a brain or an MBA (either one will do) can easily see why. I finish up after the jump.So while Russia may be selling more of their petro to China, China is paying for that petro by selling MORE goods to the US. And when the US stops buying MORE then Russia starts selling LESS…ergo coupling.Example: Christina is a seamstress, Rick is a Farmer, Pat is a carpenter and The Taylor Family is incredibly rich through centuries of inheritance. Originally Christina, Rick and Pat derived most of their income from selling their goods and services directly to The Taylor’s. However, as time went on Rick’s farm grew and he was able to buy MORE from Pat and Christina, meaning they could now sell LESS to The Taylor’s and therefore they were less dependent on them, or so they thought.
It turns out that Rick’s farm was growing only because The Taylor’s (the ones with all the money in this scenario) were buying MORE from him and he in turn was buying MORE from Chris and Pat. Once The Taylor’s decided to start buying LESS from Rick, what do you think Rick did with Pat and Chris bought more or less? So it turns out that they weren’t less dependent they were just getting The Taylor’s money from Rick instead of directly from The Taylor’s.
