According to Bank of America Merrill Lynch,  emerging markets face slower portfolio growth, higher interest rates, and slower credit growth. This will constrain domestic demand, according to co-head of Global Economics Research Alberto Ades. He concludes that "net exports will need to do some of the lifting" to offset the impact of slowing US easing, and expects that our own growth will pick up enough to take up some of the slack.

The shocked, shocked, reaction after new Fed Chair Janet Yellen confirmed last week that the US central bank doesn't take account of emerging market growth in its tapering policy is a-historic. Our Fed already has a busy mandate: defending the currency, fighting inflation, and making sure that there are enough jobs. Most foreign CBs have only got to worry about inflation.

The global monetary system, at least since the Nixon ended the Bretton Woods peg of the US$ to gold, has always ignored emerging markets. Nixon famously said "I don't give a [expletive] about Italy. In the wake of the end of the gold peg and floating exchange rates, huge capital inflows (only partly from the OPEC countries) swamped Latin America and Asia developing countries. Some went into building public works the countries needed, but most of it just boosted the exchange rates of the recipient countries. Local banks could borrow cheaply in offshore markets.

What resulted was a boom in consumption and also in local stock markets.

When Paul Volcker arrived at the Fed his anti-inflation focus caused a halt to the capital outflows to third world countries. The Fed focused on one part of its mandate, fighting inflation. The bond markets shut the funding tap for emerging markets. Their exchange rates crashed against the high-yield dollar. Commodity prices plummeted. Parts for industrial production became very cheap.

Again in the1990s when Alan Greenspan's Fed dealt with the piñata crash in Mexico, and then the ruble rubble, and the "Asian Contagion", nobody criticized the Maestro. The Asian crisis of 1997 began in Thailand and spread to South Korea, Indonesia, Malaysia, Under the so-called Washington consensus, all serious economists favored imposing austerity on the troubled economies of commodity producing countries. In fact the Washington consensus was accepted by the International Monetary Fund, supervised the imposition of austerity on developing countries, as argued by Stanley Fischer, nominated to be Ms Yellen's deputy at the Fed, but then chief economist at the IMF. (In between he was the successful governor of the Israeli central bank; he is a dual national.)

Apart from Mr. Fischer, US Treasury economist Larry Summers, one of the developers of the Washington consensus, actually accompanied the Michel Camdessus mission to Jakarta. There the French head of the IMF was famously photographed with his arms crossed looking fierce as he demanded austerity from the local government.

Emerging markets austerity and the resulting deflation caused pain with job losses and loan defaults. But it also set the pace for manufacturing to pay off in the developed countries led by the USA (because inputs had become very cheap.) Raw materials prices fell sharply. Components and inputs for assembly in rich countries became cheaper. One result was the higher valuations of media, internet, and telecoms industries. Another was a certain hubris among economists of that era, who could talk about a new equilibrium and how useful it was to deregulate financial systems.

But the line changed in 2008 when the country facing a bust in credit was the USA. And suddenly it turned out that shutting the loan taps was going to create a risk of deflation not in a bunch of Third World countries, but in the Mother Ship of Finance, the USA.

So the Washington consensus dropped the need for austerity and reacted to the specter of deflation.

And here we are.