A Post-COVID Recovery is Unlikely to Resemble the Roaring 20s; The Years 1919 and 1999 Serve as More Insightful Comparisons

10 Pages Posted: 3 May 2021 Last revised: 12 Jun 2021

Date Written: May 2, 2021

Abstract

As of June 12, 2021, the end of the COVID-19 pandemic appeared to be fast approaching. As such, there is now increased debate with respect to the nature of a post-COVID economic recovery. Several financial writers have referenced the Roaring 20s as a historical period that may provide useful lessons. However, a deconstruction of the key economic drivers during the Roaring 20s suggests that this period provides few parallels to the circumstances in 2021. There are two historical periods, however, that do offer useful comparisons: the years 1919 and 1999. Drawing from the lessons from these two years, it seems plausible that a post-COVID recovery may combine a consumer spending rebound that is reminiscent of 1919 with increased speculation in the stock market that is reminiscent of 1999. The paper concludes by encouraging investors to exercise caution, noting that neither the spending rebound in 1919 nor the speculative stock market bubble of 1999 lasted long. Therefore, it seems conceivable that after the initial, post-pandemic euphoria wears off, a similarly painful economic contraction and market correction could soon follow. Should this scenario occur, readers may benefit from considering this possibility and preparing psychologically for the consequences.

Keywords: COVID-19, Economic Recovery, Stock Bubble, Roaring 20s, World War I, Inflation, Call Money, 1920-1921 Depression

JEL Classification: G00, G01, N22

Suggested Citation

Higgins, Mark, A Post-COVID Recovery is Unlikely to Resemble the Roaring 20s; The Years 1919 and 1999 Serve as More Insightful Comparisons (May 2, 2021). Available at SSRN: https://ssrn.com/abstract=3838380 or http://dx.doi.org/10.2139/ssrn.3838380

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