The Wall Street Waltz: 90 Visual Perspectives, Illustrated Lessons From Financial Cycles and Trends, Revised and Updated Edition

Chart 41

Long-Term Interest Rates: Four Countries in the World Economy

This chart reveals a secret most economists refuse to acknowledge: We live in a world economy and cannot escape what's going on outside our borders. Here are 20 years of long-term interest rates in four Western nations. Note that none of the countries avoid the major peaks, such as 1970 or 1974. The major troughs happen at about the same time, too. When one country's rates rise, so do rates in the others; when rates fall, they do so in all the countries.

While folks stubbornly cling to the notion that a country can buck the trend, it rarely happens—and then usually by going down the tubes. Economists are heavily misguided by political thinking and, thereby, prone to argue that we can control our destiny separate from the destinies of other nations. Politicians spout economic isolationism and their own prescriptions. After all, who would vote for a riverboat captain who didn't claim abilities to control his boat—regardless of wherever the currents might meander? But in matters economic, history's force argues that we're all in it together. While President Reagan took credit for taming recent U.S. inflation and high interest rates, he didn't generate these results; he was merely along for the ride. Almost no one looks overseas to see that these developments were unfolding all over a global phenomenon.

It's been this way forever. Note the charts of commodity and wholesale prices from the 1920s and the 19th century ...