As an Australian there is one glaring fault with the chart presented by the Wall Street Journal. The start date given for the rates data is 31st August 2007. On that date the Cash Target Rate, as set by the RBA (Reserve Bank of Australia), was 6.5%. On the following dates, the RBA increased interest rates 7 Nov 2007, 6 Feb 2008 & 5 Mar 2008. Each rate increase was 0.25% leading to a Cash Target rate of 7.25%. Since 5 Mar 2008, there have been four interest rate cuts, totalling 3%, leaving the current cash rate at 4.25%.

If the start date of the chart was 31st March 2008, then the Australian interest rate would show a bigger decline.

The chart as presented by the WSJ doesn’t accurately reflect what has happened to interest rates in Australia since 13 Aug 2007.

I know that having the inital interest rate values on the left hand side might be messy on the bump charts, but IMHO it would allow the reader to mentally calculate the value decrease i.e having 6.25% as the intial Australian value and 4.25% would allow the reader to recognise that the total decrease is 2%.

Cheers,

Ben

Robert Kosara at EagerEyes.org has a post up now on a similar subject, pointing out how many charts have the names of food, and wondering why. I though you might call this a “dry spaghetti chart” for the straight lines, but that feels a bit too forced. Straw chart? Yarrow stalk chart? :-)

To address the distance traveled/distance to zero issue, you could plot the rates on a log scale, which produces a slope proportional to change in value/initial value. I initially made this chart, but excluded it to keep the post reasonably short. This isn’t too bad a chart other than the congenstion in the top left.

Regarding your second point, to keep my investment of time down, I rejected the thought of trying to locate all of the individual interest rate histories. I’m a programmer, not an economist. Your post helps to bridge the gap, and shows what the two-point line chart leaves out.

I’ve quickly put together a scatter chart showing 3 of the central banks’ interest rates since 2004 to illustrate the difference that an earlier startpoint makes. It’d be better with all the banks listed (and probably as a line chart showing more clearly where there were periods without any change) but I’m pushed for time at the moment and for some of the banks it is pretty difficult to figure out where they store the rate information on their websites!

Anyway, thanks for this excellent resource.

The text at the left is not visually appealing enough to suppress our eyes’ natural attraction to the graph, so it must be a rare individual who views the graph with the fine print in mind. And the slope does not show how far each item has to go to reach zero, the slope is related to the difference between the starting points of consecutive country’s data. This is pretty arbitrary itself.

As you point out, the starting point is rather arbitrary, and the use of only the endpoints is itself misleading. I’d thought of this point, but did not expand upon it in my post. If we switch to a line chart as I’ve suggested, we should make the extra effort to get at least monthly data, to better show the nature of the decline in rates.

One could argue it is the relative change that is a better indicator of “panic”, so New Zealand’s 39% drop is nothing compared to Switzerland’s 60% drop, which is more in line with the UK’s.

In fact, the issue may not be in the visualisation but in the data selection. The footnote points out that the ECB actually raised its rate in July this year, something which does not come out through any of the charts. Even more notable is the fact that the ECB’s rate has apparently (I’m just looking at their data, I have no idea about economics) fluctuated frequently between 2% and 4.75% several times since 1999 – from March 2003 all the way through to March 2006, their rate was the same or lower than the current rate of 2.5%.

The significant of August 2007, as the start point for the chart, appears to be that the UK’s interest rate was at its highest point for the past few years. That hardly seems an objective comparator, and in any case serves to lengthen the actual decline: by October 2008, UK rates were at 4.5%, the same as they were in October 2005 (i.e. Happy Days). It is only in the past 3 months that there has been a notably steep decline. A reasonably similar trend is seen when looking at the Australian interest rates over the same period.

There is clearly something significant to be found in the recent (past 3 months), sharp reductions in interest rates, but this is obfuscated by the very selective time period used to display the data, and the fact that only 2 data points are shown per series.

All of which is a roundabout way of saying that even if the bump/line chart is a better representation of the data, it is still a misleading use of the available data.