The US downturn may be over already; fiscal expansion and rate cuts will do their part and unemployment has not risen to levels that would lead the Fed to believe that major disinflation has been put in the bank. To justify further rate cuts would require either a far more pronounced downturn of activity or asset market distress-- rapid and large equity loses that undermine confidence or a large cumulative loss. In Japan policy is in a stalemate; lots of plans, nothing happening and, unfortunately, nothing that can work predictably and fast. Trading in Mori for the next Prime Minister won't make any difference. Japan will not grow although expecting an early and deep crisis is still premature.
In Europe there is a genuine chance for rate cuts to make the area look a bit more prosperous. But that comes with potential risks: lower rates reopen the fear of a carry trade against the Euro, a really bad idea on the eve of the introduction of the actual currency. There is also the lasting inflation issue; the ECB has yet to find its way to comply with the inflation target. But Europe does have the chance to surprise favorably; that does not mean it will happen as we saw just a few weeks ago in the unfortunate Trichet-Issing play.
In emerging markets, Argentina and Turkey are the hotspots. Both have very difficult politics and far too high debt. Both are to their knees in crisis potential. Brazil won't have a crisis but it certainly will experience the fall-out from Argentine distress.
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