[The Editors' Verdict] Post-COVID-19 and the "Roaring 20s"

[Asia Economy Reporter Choi Il-gwon] The post-pandemic world is gradually approaching. Despite the resurgence of the novel coronavirus disease (COVID-19) worldwide due to cold weather, causing a rapid increase in confirmed cases and deaths, voices discussing the 'post-COVID-19 world' are clearly growing louder in many places.

In the United States, statements from infectious disease experts suggesting a gradual return to normal life centered around the first half of next year, when vaccination is expected to be in full swing, are being prominently featured. Since this outlook is based on the period after the start of 'booster shot' vaccinations, the timing of the return appears to be more concrete. Additionally, the G30, a think tank advising global financial policies, recently expressed concerns about a 'default crisis' where companies may be unable to repay debts following the COVID-19 crisis. In Europe, proposals have even emerged, particularly in Italy, to forgive the massive debts incurred due to COVID-19. In contrast to global trends, China has announced plans to tighten monetary supply. Even amid ongoing economic stimulus involving massive funding, China seems to be seeking its own exit strategy. With vaccine distribution underway to eradicate the virus, it appears clear that we are heading toward the end of the tunnel.

In Europe, the phrase 'Roaring 20s' has recently been circulating. The Roaring 20s refers to the 1920s, following the end of World War I in 1918 and the disappearance of the Spanish flu, during which suppressed desires were unleashed. Similar to a century ago, the world, having endured COVID-19, may exhibit vigorous activities such as revenge consumption across all sectors.

During that period, new products like wireless telephones and radios flooded the market, and productivity improvements such as mass automobile production were prominent. Medical achievements like the development of penicillin and insulin also began to emerge. As productivity innovations lowered product prices, consumption increased. Some even describe the post-COVID-19 era as a 'new version of the Roaring 20s.'

This optimistic sentiment is also evident in the markets. Funds have already started flowing into the stock market based on expectations of future corporate earnings, and commodity prices are rising on forecasts of increased demand. This suggests that vigorous activities in consumption and production will emerge after COVID-19. Thanks to revenge consumption, major countries' economic growth rates are expected to surge next year, making a V-shaped recovery possible.

The explosion of suppressed economic activities clearly helps economic growth in the short term.

The question is how long this vigorous activity will last. Looking back at the history of the Roaring 20s, the outcome was bleak. It marked the beginning of the Great Depression in 1929. The productivity improvements led to price declines, the effects of which appeared ten years later. The United States enjoyed prosperity until just before the Great Depression, but consumer price inflation rates in 1927 and 1928 were already negative.

Given this precedent, the economy after COVID-19 cannot be taken for granted. The world narrowly avoided an economic crisis through indiscriminate monetary and fiscal policies involving money supply expansion and interest rate cuts to stimulate the economy. The cost has been massive debt and widening economic disparities. Senior financial figures' concerns about corporate default crises also stem from the inability to be optimistic about the post-COVID-19 situation. While some forecasts predict sharp inflation due to strong consumption, there are also many opinions that 'prices will not rise.' One foreign media outlet stated, "When we return to normal life, previously unseen problems will surface." The real crisis may still be something we have yet to experience.

This content was produced with the assistance of AI translation services.