Let’s dance the Oswald Spengler, whose Decline of the West sold millions after it came out a hundred years ago. Is the doomster back in business? “Example is not proof,” teaches the Talmud. Neither is historical analogy. Still, there are some nasty parallels between then and now. Here is the short-list.
Item 1: The pandemic.
First, the better news: COVID is not the Spanish Flu, which claimed some 50 million lives after invading the planet in 1918. Raging for two years, the Flu did not strangle the world economy. Actually, the Dow Jones increased by 30 percent in 1919—just as it did in 2020. In the Roaring Twenties, the pandemic was quickly forgotten. But beware: the real thing—the Great Depression—hit in the Thirties and lasted a decade.
Now, the worse news: today, the causal link between disease and depression operates almost instantaneously. In Q2 of 2020, a few months into the pandemic, the U.S. economy shrank by 32 percent, the worst single-quarter since systematic data were being collected. The eurozone economy suffered the deepest contraction on record. By comparison, the so-called Great Recession of 2008 was a blip. As one COVID wave segues into the next, no sane observer would wager on a speedy recovery.
You don’t have to engage in Spenglerian metaphysics, nor claim clairvoyance, to predict the convulsions to come, whichever way COVID breaks, vaccine or not. Unless the Deity intervenes by erasing two-hundred years of economic theory and experience, trillions of stimulus cash plus astronomic infusions of liquidity are bound to unleash a deluge of inflation. At this point, Mad Magazine’s Alfred E. Neuman’s “What, me worry?” is like Valium—relief without rescue.