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This is a historically illiterate piece which totally misunderstands the boom of the 1920s and the factors which drove it.
First off, this was after WW I when the gold standard was reinstated at pre-war parity (a transfer from the working class to asset holders, basically). https://twitter.com/Telegraph/status/1288923167143145472
First off, this was after WW I when the gold standard was reinstated at pre-war parity (a transfer from the working class to asset holders, basically). https://twitter.com/Telegraph/status/1288923167143145472
Secondly, the US built an export base and international capacity shipping shit to Europe (arms, foodstuffs, etc). Instead of wind down the capacity, Woodrow Wilson decided to subsidize small farmers using institutions for loans from the war.
So all the cheap money flooded into the system by Wilson/Democrats sustained an unsustainable export boom while the return to gold at pre-war parity created an asset boom.
Thirdly, there was the Treaty of Versailles which required Axis powers (Germany) to pay in gold for debts.
Thirdly, there was the Treaty of Versailles which required Axis powers (Germany) to pay in gold for debts.
So for a whole host of reasons, we had gold inflows into the US combined w/a govt led boom in exports and transfers to asset holders.
The end result was a gigantic capacity boom (kinda like China today or Brazil in the 50s+60s or lotsa other examples).
The end result was a gigantic capacity boom (kinda like China today or Brazil in the 50s+60s or lotsa other examples).
Obviously, this boom is unsustainable if the world lacks demand. If the world is drowning in debt like it was at that time, there's no demand.
If you're driving the excess capacity and there's no demand, you're accumulating losses in the banking system.
If you're driving the excess capacity and there's no demand, you're accumulating losses in the banking system.
The minute the boom stops, you end up w/a nasty capacity unwind. Most countries manage this by not allowing capacity to unwind and instead choosing a "lost decade" instead where you slowly adapt out of the model by raising household consumption slowly.
Ofc, we're the United States, so we're crazy and we decide we'll let the bottom fall out instead. Since we were on a gold standard, large fiscal/Keynesian stimulus is impossible.
The end result is a slow grind over years which smashes wages and yields spikes in unemployment.
The end result is a slow grind over years which smashes wages and yields spikes in unemployment.
That holds until you make a decision to start printing money. At that point, you've hit the bottom.
It was no coincidence FDR both wrote down WW I debts and got us off the gold standard. There was no other option.
It was no coincidence FDR both wrote down WW I debts and got us off the gold standard. There was no other option.
So no, the kinda boom we're about to get after the COVID pandemic will be very different from the boom of the 1920s cuz there's:
1. no gold standard
2. no WW I
3. no Treaty of Versailles leading to a fragile network of gold flows
1. no gold standard
2. no WW I
3. no Treaty of Versailles leading to a fragile network of gold flows
