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Amid economic slowdown, signs of new world order

Emerging markets are helping buoy global growth.

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SOURCE: International Monetary Fund and Wachovia Corporation /Rich Clabaugh–STAFF

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The world economy is cooling this year thanks to a slowdown in the United States, but something new is playing out: This slowdown is serving to amplify a shift in financial power toward Asia and developing nations.

Countries such as China and India are now big enough to help guide the global economy. In the past, a sharp downshift in the US and Europe would decisively slow the rate of global growth.

This time, emerging markets appear poised to grow collectively by 6.7 percent this year, according to recent forecasts by the International Monetary Fund. As a result, the IMF sees world gross domestic product (GDP) growing 3.7 percent, even though the US might experience a recession.

The US economy remains the world's mightiest. But even for Americans, this new economic order has immediate implications:

•Policymakers at the Federal Reserve must worry about upward price pressures for food and fuel – driven largely by rising demand in developing nations. That problem calls for tighter monetary policy, while the domestic consumer slump calls for the opposite policy.

•Demand for US exports from these new markets is providing a helpful cushion for growth, yet trade tensions could be an issue in the US presidential election.

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