“Unprecedented.” I keep hearing that.
The great twentieth-century fictional philosopher Inigo Montoya once remarked, “You keep using this word. I don’t think that means anything to you. “
In 1918, one of the worst global pandemics in human history spread worldwide and killed many people. The free world was at war with the Germans and prices exploded during the war and its aftermath.
Bureau of Labor Statistics:
The era of the First World War and its aftermath, 1917-1920, created uninterrupted steady inflation in the country at any time since then. From December 1916 to June 1920, prices rose at an annual rate of 18.5 percent, an increase of more than 80 percent.
Even a cursory examination of the CPI component indicators of the First World War reveals the breadth of price increases in that period: virtually every series shows a sharp rise. Even those series that grew more slowly, such as housing and fuel, were again half as expensive in 1920 as they were in 1915. Most food, clothing and dry goods cost more than double.
Your great grandparents didn’t read articles about CPI every day because CPI didn’t even exist in the early 20’s. And if it’s published somewhere, it’s for government officials and economists, not Fox News hosts.
And then, in 1920-1921, there was an 18-month recession that popped the rising price bubble and allowed inflation to recover at a more moderate pace. This restraint will set the table for the most important decades of innovation and economic progress.
And look, people were happy that prices were falling and that the post-epidemic, post-war economy was normal. The following cartoon ran in a magazine during the fall of 1921, a hundred years ago today:
(Cartoon via The Museum of American Finance)
A century goes by. Something happens.
In 2020, one of the worst global pandemics in human history spread worldwide and killed scores of people. The free world was at war with the virus and prices exploded during and after the war. Inflationary pressures resulted in a shockwave between the inventory drawdown, shutdown manufacturing and a year-long shutdown.
And then the war stabilized the virus, as scientists and drug developers and policymakers gradually gained the upper hand. Offices, shops and factories have reopened and people have left their homes again in search of human connection, lucrative employment, leisure and happiness. Auto manufacturing and semiconductor shipments and oil drilling resume and then prices start in the economy (add your own ending with this sentence here …)