My friend Dougie, a Moose Jaw businessman, asked me when I thought COVID-19 would end and the economy recover.
Here’s my answer.
Spanish Flu (1917-20) lasted only 18 months in Saskatchewan (1918-19). COVID-19 will only last about 18-months.
This means COVID will weaken by July 2021. Government spending on COVID programs will disappear by May 2021. ‘Conservative’ type governments will cut spending quickest and deepest. Loss of Government spending will result in a Recession beginning in August 2021 that will last 11 months — to late spring 2022.
By June 2022 pent-up demand for goods and/or services like travel will fuel world economies. There will be a rapid economic expansion. Employment and GDP will increase.
Boom times begin in July 2022.
These events follow the pattern of Government spending on World War One (1914-18) and World War Two (1939-45). War spending, like COVID spending, is about waste. Money spent on war is necessary but the money is never recovered. When a bombs explodes — a tank blows up or an airplane crashes there is no long term residual investment value.
Government spending on COVID-19 is like spending on war. Government money spent to help people and businesses cope with the COVID-19 Pandemic keeps the economy simmering, fights the ‘war’ but leaves no long term value.
When Government spends on infrastructure like roads or bridges it leaves long term value.
After each War, Government spending evaporated. A recession of 11 months followed. After the WW 1 Recession pent-up demand kicked in. The economy recovered. The stock market rose 30 per cent in 1919.
Similar conditions followed WW2.
Remember, Recessions are a creature of supply and demand Capitalism. They are regular and last about 11 months. The Boom Times of 2022 won’t last. Put a little aside for the Recession.
Richard Dowson, Medical and Military Historian
Moose Jaw, Saskatchewan
The views and opinions expressed in this article are those of the author, and do not necessarily reflect the position of this publication.
