The list of casualties from the financial crisis is turning out to be a long one. New Century Financial. Sachsen Landesbank. Northern Rock.  Bear Stearns.  IndyMac.  Fannie Mae.  Freddie Mac.  Lehman Brothers.  Merrill Lynch. AIG. And another one gone and another one gone . . . 

But it’s not just financial institutions that are toppling. There are plenty of other candidates that may be in the process of biting the dust, depending on just how pessimistic you feel. Independent investment banks look like they are gone already. What about central bank independence? Any bids on Anglo-Saxon financial capitalism? Or US economic pre-eminence?

One confirmed fatality is the strong version* of the decoupling thesis:  the proposition that the rest of the world economy, and emerging markets in particular, would be able to sail on largely unaffected by a significant hit to the US economy.  In the three months to September this year, emerging markets have suffered their largest financial outflows since 1995. The MSCI emerging-markets index has lost a quarter of its value over the last three months and emerging-market currencies have taken a hammering. Asian markets have wilted, Russia’s share market tanked to the extent that the authorities were forced to resort to a temporary shutdown, and stock markets in the Gulf have plunged. Turns out that financial globalisation means that financial shocks will go global. Who would have thought it?

*A weaker version of this theory – that the impact on the rest of the world of a given adverse US shock today, relative to the same sized shock (say) a decade ago will not be as large – may still have a bit of life left in it.

Photo by Flickr user nick, used under a Creative Commons license.