I wonder if our recovery from the COVID-19 pandemic could repeat the ‘Roaring Twenties’ jazz era of F Scott Fitzgerald. Why not? There are some surprising similarities.
The Roaring Twenties were named for the era that followed the Spanish Flu pandemic of 1920. It was a truly unique history. World War One was over and women had just won the right to vote with passage of the 19th Amendment.
The COVID-19 pandemic wreaked as much havoc as World War One, with many more casualties. It resembled the Spanish flu epidemic in many ways—mask-wearing, business shutdowns, and more the 650,000 Americans dying then vs. the one million estimate of American deaths from COVID-19 and its variants.
And there was a very strong recovery as from today’s pandemic.
“By the dawn of the 1920s, the second Industrial Revolution had transformed the United States into a global economic power and drawn millions of Americans to cities,” said Britannica.
There is a growing chorus that suggests Americans could have a similar result from the COVID pandemic because of $ trillions poured into the U.S. economy as recovery aid as well as future economic growth.
Christopher Smart, a former Senior Treasury official writing in last week’s Barron’s Magazine, estimates that the Biden administration will mobilize a stunning $3.5 trillion in public and private money over the next decade that I believe could spur a ‘Roaring 2020s’ (my term) over the rest of this decade.
He reports that communiqués coming out of the just finished G-7 economic summit in Japan “confirm a rare moment in which leaders gather with both mandate and money to launch a golden age of industrial policy.”
Could it spur a third Industrial Revolution? No, but it will certainly give a boost to the current Information Age that is spawning its own Digital Revolution with $ billions being poured into chip manufacturing and modernizing the U.S. infrastructure.
This is already happening, even in the face of debt ceiling negotiations that could crimp the next fiscal year budget.
For instance, the Atlanta Federal Reserve just announced it had upped its estimate of second quarter GDP growth to 2.9 percent q/q, while other prognosticators have been more cautious, such as Goldman Sachs (2.0 percent q/q) and B of A (1.2 percent q/q)
GDP grew 1.1 percent in Q1 down from 2.6 percent in Q4 2022, according to the US Bureau of Economic Analysis (BEA)., but some indicators are showing stronger growth ahead, rather than a recession.
“The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2023 is 2.9 percent on May 17, up from 2.6 percent on May 16. After this morning's housing starts report from the US Census Bureau, the nowcast of second-quarter real residential investment growth increased from -6.3 percent to 0.6 percent.:”
The real estate sector has traditionally been a leading indicator of growth, and it is feeding an extreme housing shortage.
For instance, "Sales in the second half of the year should be notably better than the first half as job gains continue and more favorable mortgage rates are expected," said NAR chief economist Lawrence Yun. "Sales of new homes are already matching 2019 pre-COVID activity and are expected to increase in 2023, largely due to plentiful inventory in this segment of the market."
Much of the coming industrial growth touted by the G-7 is already baked into the cake of future spending because the Ukraine war and Chinese belligerence has caused a large increase in military spending, with many countries expending more money and resources on mitigating global warming as well.
In fact, the Ukraine war is also causing a faster switch to alternative energy sources and away from fossil fuels. Who knows what may happen next, but with the West now united in purpose, a younger, energetic generation of Americans wanting to be seen and heard, the future has never looked better.
Harlan Green © 2023
Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen
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