Pandemics vs. Post-War Recoveries

Pandemics vs. Post-War Recoveries

Posted April 12, 2020 by Ben Carlson

In 1943, the Federal Reserve along with the Committee for Economic Development put out a research piece called Business Booms and Depressions Since 1775.

World War II was still ongoing at that point but they wanted to look at the historical profile of post-war periods to get a better sense of what to expect when it was all over from an economic perspective.

Post-war recoveries followed a similar economic pattern from the War of 1812 to the Civil War to World War I. This paper outlined four phases of post-war economies in the United States:

1. Period of Uncertainty. This phase involved some turmoil and confusion because the country moved from production almost exclusively for the war times to production for peace times.

2. Post-War Recovery. This phase involved building up organizations and supply chains to introduce products to meet post-war demand.

3. Primary Post-War Depression. This phase involved speculation, an inflationary spike and overheating from post-war excesses which would eventually lead to a slowdown.

4. Prosperity. This was the back-to-normal phase where companies were all producing and selling goods as they were before the war and the economy got back on track.

The paper concluded:

Whether history will repeat itself at the end of this war and throughout the ensuing years remains to be seen. Many factors involved in the present situation did not exist at the end of the former wars. This war is conducted on a much broader scale with more intense and concentrated utilization of economic resources. The cost involved is much greater.

General fear of an immediate postwar depression has no sound basis.

This was actually a pretty good call. While there was a minor recession in 1945 when the war ended and an inflationary spike, there was no postwar depression or deflationary fallout, which was par for the course following wars of the past.

In fact, the period following the war was a lengthy boom for the United States. The 1950s remains the best decade on record for the U.S. stock market. The current situation has more similarities to a war than a financial crisis from my perspective. Productive capacity in many areas of the economy has either been diverted or completely shut down. We’re all fighting a common enemy. And millions of people have been displaced in order to fight that enemy.

To continue reading, please go to the original article here:

https://awealthofcommonsense.com/2020/04/pandemics-vs-post-war-recoveries/