The View | Changing prices mean changing economies

Those who observed the 100th anniversary of the first world war last year recall that the terrible carnage resulted in a change in the old world economic order. The global economy swung from being pound-centric to dollar-based. Currencies moved from being backed by gold, to taxation-backed paper money. It led to government policies directed more towards the many rather than the privileged few, especially in Western Europe.

Those theorists who designed the world included John Maynard Keynes, who had experience in academia, government, and especially the markets. Global economies have evolved since.

So do last years' large and unexpected price changes in the US dollar, oil, and bond yields reflect economic revolution rather than evolution? This activity has occurred despite any significant global bubbles elsewhere and with few direct linkages between the movements.

In 2014, the markets were betting on evolution but this week were spooked by the row between the European Central Bank and Germany, which again raised the spectre that Greece might leave the euro zone. That could set off a chain reaction of events made worse by the big moves in dollar, oil and interest rates.

It is somewhat irritating to non-Americans that US policies, the domestic economic structure, their position in the global economy, and just plain good luck, have created clear blue water between them and the rest of the world. Such divergence between 3 per cent US annual growth and precious little elsewhere, topped with the possibility of US interest rate rises, meant dollar strength of nearly 13 per cent over the euro in the past six months.