To show how far emerging markets have fallen, and where they are headed for 2009, look no further than the theory of ‘decoupling’, says Irwin Greenstein, writing for Contrarian Profits.

The idea of decoupling gained prominence in 2006, and achieved superstar status in early 2008, as emerging markets boomed. Advocates of decoupling professed that the rising prices of commodities, which overnight turned many third-world countries into boomtowns, let these long-neglected economies decouple from the G8 and other industrialized nations. By decoupling, they could finally set their own economic destiny.

Well, if there is any economic theory headed for the trash heap it’s decoupling. That’s because, as the markets have proven, young economies are largely dependent on more mature industrialized economies for their financial survival.

Cash, credit and construction fed the so-called Commodity Supercycle, which pushed emerging markets to all-time highs over the past few years. Now that cash, credit and construction are gone, investment opportunities in emerging markets look bleak for 2009.

For example, the Financial Times reported yesterday record volumes of government bonds from the industrialized nations could crowd out emerging markets from a shrinking pool of credit.

Some $3 trillion in government bonds expected to be issued by the big developed economies in 2009 – three times more than in 2008, the FT wrote.

The timing couldn’t be worse for emerging markets. Not only do they need to repay record debts, but they are also dependent on credit to fund new capital-intensive ventures in mining, exploration and drilling so they can be responsive to an eventual turnaround in global markets.

This creates an environment for a new rash of sovereign defaults – turning back the clock by decades on countries in Latin America, Eastern Europe and Asia.

For investors, emerging markets could be a roller coaster ride at best.

As decoupling proves to be a false idol, emerging markets have clearly proven how closely tied they are to the U.S. and Europe.

With that in mind, the International Monetary Fund issued a forecast last week that said U.S. economic growth will be close to zero for the rest of 2008 and the few months following.

The IMF expects a gradual recovery in the U.S. starting in Q2 2009 – an outlook shared by most advanced economies.

Bottom line for emerging markets is that they will continue to be crippled by the global financial contagion at least through the first half of next year.