Rabobank: Prepare For The Roaring 20s? Let’s Consider What Was Actually Going On In The 1920s

By Michael Every of Rabobank

Rip-roaring nonsense

Brexit is still in the balance, with BoJo going to Brussels. Let’s see what sprouts.

The US election is also still *potentially* in the balance depending on: 1) if the Supreme Court acts after Justice Alito’s deadline of 9am Washington DC time today, and how if so….on which note Senator Ted Cruz appears set to argue for the Trump camp at any hearing; and 2) from a constitutional/bare-knuckle realpolitik perspective, how key state legislatures react before 6 January.

Moreover, US fiscal stimulus is still in the balance as once again no agreement can be struck on the key details.

However, aside from the odd day-to-day wobble, markets don’t really care. Consider this Moneyweek front cover: “Prepare your portfolio for a return of the Roaring ’20s”. It shows key policymakers such as Yellen about to enjoy the Charleston at a speak-easy, and argues “Don’t believe the pessimists. What with the end of lockdown and central bankers taking charge of government spending, party time is just around the corner.”

Really? I know markets like buy the rumour/sell the fact, but lockdowns are getting tighter in many places, not looser, and are likely to stay that way for months yet. Central banks are certainly speaking easy, and being easy with the old liquidity. Yet like curmudgeonly 1920’s US cops, and arguably of the Keystone variety, governments are NOT embracing huge fiscal stimulus policies even when they can do so. Most of the key political signals are that the desire is for a net rolling back of state support as soon as possible, rather than an expansion from Wall Street to Main Street.

So, yes, markets may well be right about the asset prices side of things. It is after all QE-a-go-go, and the Establishment does not have a single idea about what else it can do other than push assets higher (again), as has been the case since the 1980s. However, anyone thinking this is going to make everyone’s life ‘roaring’ is missing the real picture.

Let’s just consider what was actually going on in the 1920s. Yes, some got incredibly rich in a Gilded Age extravaganza of illicit booze and wild bohemianism, as kick-the-can-down-the-road asset bubbles papered over impossible to repay WW1 war debts; and isn’t it fun to dress up in ‘The Great Gatsby’ fancy dress at staff Xmas parties?

Yet in Italy, Mussolini’s fascists had seized power in 1922. Over in Germany, Hitler carried out his failed Bavarian beer-hall putsch in 1923 and started to write Mein Kampf in prison. The UK was trying desperately to get and keep sterling back on the gold standard at too high an exchange rate, suffering depression and massive social unrest. There was even a general strike in 1926, something hard to imagine when “Űber” alles in the 2020s means something totally different from the 1920s. Late in the decade, the Bank of France was busily hoarding gold, helping to destabilise an already unstable global economy.

In short, the 1920s was a decade of biting deflation, wild inflation, nasty stagflation, and only saw normal inflation in some places at some times. Perhaps the comparison is apt when I think about it like that.  

And now for more rip-roaring nonsense.

I had thought that comparing the 2020s to the 1920s in a positive sense was peak 2020. I was wrong; because shortly afterwards I saw “Former Israeli space security chief says aliens exist, humanity not ready” in the Jerusalem Post, translated from the Hebrew-only Yediot Aharonot paper. NOW we are peak 2020, surely.

The story claims: “This “Galactic Federation” has supposedly been in contact with Israel and the US for years, but are keeping themselves a secret to prevent hysteria until humanity is ready…If true, this would coincide with US President Donald Trump’s creation of the Space Force as the fifth branch of the US armed forces, though it is unclear how long this sort of relationship, if any, has been going on between the US and its reported extraterrestrial allies.” See? Spaaaaaace Foooooorce has a purpose!

“Trump is aware of them, and was on the verge of disclosing their existence. However, the Galactic Federation reportedly stopped him from doing so, saying they wished to prevent mass hysteria since they felt humanity needed to “evolve and reach a stage where we will… understand what space and spaceships are.” When does he liven up one his rallies with these out-of-this-world anecdotes?

Look, the guy interviewed was clearly brilliant but is now 87, so let’s be kind. Perhaps he’s just recalling the final pre-credits scene of Mel Brooks’ “The History of the World Part 1.”

In 2020 terms, this clearly outranks saying Hugo Chavez and China collaborated to print ballots in Mexico and reprogram voting machines to ensure a Biden US election win; that and the wild statistical anomalies credible statisticians (and some lacking credibility) point out in the same election. Has the Galactic Federation congratulated Biden yet by the way?

Clearly this story is going to do wonders for an internet so sadly lacking in unpleasant conspiracy theories. Yet one also has to wonder if it is really only the US and Israel in this ‘Galactic Federation’. (And what does the US bring to the table? J)

Perhaps the British were involved but left in a huff over access to space fish;

Perhaps the French were involved but left when they weren’t allowed to call it Le Federation Galatique and make French an official language;

Perhaps China’s recent leaving of its national flag on the moon was an attempt to gain entry; and

Perhaps Elon Musk is involved – except if he were he would probably be tweeting about it already.

Regardless, this crazy story is still only a slightly taller tale than a ‘roaring 2020s’ waiting ahead for all, or of any kind of roaring 2020s being a good thing in the larger scheme of things.