A new study by economists reveals that three quarters expect an American recession by 2021. They do not blame the Federal Reserve, however. Most people see bad effects as a result of large and rising federal deficits. (Photo: Thinkstock)
Five and five years ago, in a world unlike now, I loved exploring old books from the library's backstacks.
Among my favorite finds were Wesley C. Mitchell's 1927 opus, "Business Cycles: The Problem and Its Setting." Mitchell, a visionary, spied on the National Bureau of Economic Research (NBER), which pioneers financial data collection to understand setbacks and extensions.
In Mitchell's book, I found a crazy fun map I highlighted in my 1987 book, The Wall Street Waltz, called "Conspectus of Business Cycles in Various Countries, 1790-1925", which extends the United States and other nations' economic cycles.
Started with America and England in 1790, it expanded to include major European nations in the 19th century. In 1890, it covers Europe, Australia, Asia, Canada and large Latin American nations. It turned out that setbacks and expansions around the world changed globally earlier than anyone thought (via data that was not exactly accurate, but basically correct).
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Far before globalization became a buzzword, the world was quite darned global. The global business cycle was always stronger than normal perceived – still.
Through the 18th and 20th centuries, parallel America with England. Perhaps European nations cycling together in the 19th and early 20th centuries are not so shocking.
But China, India, and Japan are parallel to them, along with North and South America? Everyone had long, the 1890s. All suffered from setbacks in parallel with America's notorious panic from 1907.
Individual nations sometimes change, but major trends are global. If you understand this, you understand why, and how things are going abroad, directly affect you here at home.
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Old books show the same global interest rate patterns. Country to country, both long-term interest rates and inflation are tracked each other more than people thought 150 years ago or are still thinking now.
U.S. and Western European bond yields have typically adjusted since World War II ended. However, AC Pigous's 1929 classic, "Industrial Fluctuations," showed sales prices in Germany, England and the United States which moved in virtual locking from 1860 to 1910.
Federal Reserve Chairman Jerome Powell (Photo: Wikimedia Commons)
A brutally funny fact? Since our revolutionary war, inflation has routinely, here and abroad, spiked during and immediately after major wars. People remember the high inflation of the Vietnam era, but forget about the prices spiked around the Korean War and the two world wars. Even the Civil War and the War of 1812 brought inflation-spikes. We don't have the big disturbing wars anymore, fortunately.
These old studies show that it is very unlikely today that interest rates will rise and bond prices will fall without the cause being global. Wobbles in one country are not rippled globally. It is the other way round. Most of the world pulls back wobblers toward the average.
This is threatening now than 20, 50 or 150 years ago, due to technology. The largest global banks from all continents can borrow in one country and borrow another one faster than you can read this column. Any major US bank can arbitrage long-term interest rates globally, and effectively ensure that we move in parallel with overseas. So if you are worried about mortgages, bank loans, buying or selling bonds or interest rates on business, think global.
A simple web source for global data, including inflation, interest rates, GDP and much more, is tradingeconomics.com.
You will save yourself a lot of anxiety by thinking globally. Last year, people lost a lot of betting Italy's rising long-term prices would continue to be linked to populist political fears. They forgot that prices increased in America and elsewhere – a global move that softened Italian fears. When our prices finally fell back, these speculators complained. Global top-down views keep you calm, centered and richer, almost always.
Ken Fisher is the founder and CEO of Fisher Investments, author of 11 books, four of which were the New York Times bestsellers, and number 200 on the Forbes 400 list of richest Americans. Follow him on Twitter @ KennethLFisher
The views and opinions of this column are the author's and do not necessarily reflect those of the United States TODAY.
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