The Roaring Twenties occurred after the Spanish Flu pandemic. Will it happen again after the Covid19 pandemic?
So many holders here, and on other threads I follow, have moved to a position of high cash, holding one or two companies they think will shine through the dark times ahead. And when you look at all the fundamentals and indicators I well and truly get it.
But, perhaps history tells us a different story. Is the true driver human emotion ? Here are some thoughts on an article I have just read ...
This is the Dow Jones through the Roaring 20's, before the Great Depression ( and let's not talk about that right now !! ).
So how did America recover? How did the country manage to turn from a global war, total economic failure, and devastating pandemic to a time of wealth, luxury, and innovation?
In his book Economics and the Public Welfare, economist Benjamin Anderson writes that in 1920–1921, “we took our losses, we readjusted our financial structure, we endured our depression, and in August 1921 we started up again.…”
Anderson continues by stating: “The rally in business production and employment that started in August 1921 was soundly based on a drastic cleaning up of credit weakness, a drastic reduction in the costs of production, and on the free play of private enterprise. It was not based on governmental policy designed to make business good.”
That may be the economic stimulus behind the Roaring Twenties, but what were the residual effects of the influenza pandemic?
Perhaps the pandemic helped Americans to understand the fragility of life and the uncertainty of the future. As economic theory suggests, people will save more when they believe that they’ll have less income in the future. In contrast to this, however, is the fact that people will actually spend more when they believe the end of all existence is imminent. It makes sense, at least from a carpe diem perspective. Why not spend money before this short life ends?
This may explain the tendency to consume that was so prevalent during the 1920s. Americans had just endured a global war that claimed millions of lives and a virus pandemic that claimed millions more. They must have wanted to take advantage of the present, and they did this by spending more than had ever been spent before. This spending spurred an increase in production, which in turn stimulated the blighted economy.
Will the coronavirus pandemic have a similar impact on spending and production within our modern economy? It very well might
In addition to being a time of wealth and innovation, the Roaring Twenties were known for being a time of celebration. And regardless of whether we see the Roaring 2020s, overcoming the COVID-19 virus will certainly be a reason to have a time of celebration once again.
So just maybe, the naysayers have it wrong, and the roaring 20's of the last century will become the roaring 20's of this century as history literally repeats itself. And ADO may well be one of the catalysts.
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