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I was interested to note the FT’s evocation of the 1920s in the context of recovery from the Covid-19 pandemic (FT View, December 3). However your warning about how the Roaring Twenties ended might be more prescient than the optimistic scenarios the editorial also outlined.

First, the Roaring Twenties label is more appropriate for the American experience than the British or European one. For the latter, the decade is notable more for chronic economic problems and political instability. British gross domestic product is estimated to have contracted by around 18 per cent in 1920-21, and shrank again in 1926, the year of the general strike. The latter episode provides an indication as to how poor conditions were in certain industries and regions at that time: the Great Depression had arrived early and with sufficient severity to render the experience of the 1929-32 period mild by comparison.

Second, the Roaring Twenties have already arrived in today’s financial markets. The conclusion that “financial markets have already recovered” ignores the fact that risk asset prices were high before the pandemic and are now higher still. A benign interpretation is that low inflation and low interest rates have given rise to a logical repricing via the discount rate effect. A less benign gloss is that governments have succeeded in generating the greatest financial bubble in history, including one in the price of their own debt.

Cryptocurrencies and anything that smells of lithium are among the more obvious manifestations of a bubble. The less obvious ones include markets that are far larger and more dangerous. The spectre of Wall Street in 1929 and indeed Japan in 1989 might well be found to have been looming large.

Deri Hughes
London E15, UK

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