Why the 2020s Won’t Be like the Roaring 20s
Reincarnation of the Roaring Twenties—one century on from the 1920s—is the lead speculative narrative this new year on Wall Street, it seems.
The storytellers, well aware of how interest income–famine investors seek “justification” to load up on ever-higher-priced equities and risky credit paper, turn to the history lab with its notoriously small sample sizes. They have spotted that 2021 marks the hundredth birthday of a postwar decade famed for rapid prosperity growth in the US. Bingo: translate postwar into postpandemic.
The narrative deserves to encounter rational skepticism on at least four counts.
First, the government debt explosion during the pandemic is a blight on any emerging prosperity, Paul Krugman and Olivier Blanchard notwithstanding.
Second, there is no counteroffensive in sight against the monetary inflation unleashed during the pandemic. That stands in contrast to the Fed’s sharp monetary contraction of 1919–20 to reverse wartime inflation ahead of the Roaring Twenties, or indeed to the Fed’s later abandonment of government bond price fixing in 1951 which preceded the long Eisenhower boom.
Third, a Wirtschaftswunder (economic miracle) in Germany is nowhere to be seen—nor anything similar in today’s number two and three economies (Japan and China). Yet it was the fantastic recovery and economic expansion in the Weimar Republic, then becoming again the number two economy, which played such a key role in extending and deepening the roaring twenties. Importantly, this occurred in the context of extreme optimism, albeit short lived, about world peace.
Fourth, an assault on monopoly power such as to reestablish the freedom of entry essential to thriving free market capitalism is still only a tentative project. By contrast, the trust busting of President Teddy Roosevelt had oc
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