If there is one timeless piece of literature that depicted euphoria in America, it would have to be The Great Gatsby. While many of you would say that you read that book decades ago, for me, I read that book two years ago during my junior year of high school.
The Great Gatsby was a book that introduced kids to The Roaring 20s. With it, I don’t think many of us would be able to piece the Prohibition Era and a booming stock market together.
Before we talk about The Great Gatsby, let’s talk about why America, during the 1920s, was prosperous while the rest of the world struggled.
With farms, factories, and cities destroyed, all the European countries that were involved with the war needed capital to rebuild. But because the war was very expensive, many European financiers were low on dry powder (slang for capital). Also, the terms of the Treaty of Versailles forced Germany to pay France and the UK a ton of money in reparation.
But remember, Germany lost the war. How in the world could Germany be able to repay the reparations if their spending gave them a negative return on investment?
With Europe having an insatiable demand for capital and with no one from the continent willing (or able) to provide the capital to their country, Wall Street had a big opportunity.
And it wasn’t just Wall Street that had a big opportunity, other businesses in the US had a big opportunity as well.
Remember how Europe’s infrastructure and facilities were destroyed? Well, how could Europe provide everything their people needed for recovery if they can’t provide themselves with the things needed for recovery?
And that is how the Roaring 20s. started. US firms providing farm products, building materials, capital, etc. American businesses have never been more profitable. Because the demand for all of these products was huge, American businesses hired more people and from there, wages rose. As wages rose and more people started working, people had disposable income live never before.
Additionally, because factories were operating at full capacity, producers got to utilize the benefits of economies and scale and thus were able to sell those goods at lower prices and higher margins.
Combine all of that and the US economy was robust. The Middle Class grew like never before. The standard of living skyrocketed. Urbanization has brought people from the farms to the cities.
And don’t forget that prohibition has given criminals a hugely lucrative opportunity. How else was Gatsby able to make his millions?
But what about the 1918 Spanish Flu?
Like the times we currently live in, businesses back in the late 1910s also suffered tremendously. The lockdowns forced many small businesses to shut down and hindered the ability of the nation’s young to achieve higher education.
Interestingly, while healthcare companies were the only ones experiencing record profits during the Spanish Flu, in the present day, it’s the technology companies that were mostly reporting record profits during the coronavirus pandemic.
While there isn’t much study into how the record healthcare profits from the Spanish Flu contributed to the Roaring 20s, we do know that the wartime economy of the late 1910s helped reduce the economic impacts of the Spanish Flu.
The Great Gatsby
With Americans quickly moving on from the Spanish Flu and enjoying the booming economy, writer F. Scott Fitzgerald noticed the euphoria and excess that Americans had. Instead of depicting the current era with enthusiasm like everyone else, he depicted it in a perspective no one saw coming.
From watching the 2013 Great Gatsby movie, all I have to say is that the director, Baz Luhrmann, has done a phenomenal job depicting American society during the Roaring 20s. You see the many people living in the city where rent prices are high. In Long Island, the elite are living in huge mansions in Long Island with hundreds of butlers and having backyards the size of stadiums. Gatsby’s parties are grander than any Silicon Valley IPO party or Bar Mitzvah that the world has ever seen. Americans lived above their standards during those times and Americans were confident that the economic boom won’t stop.
Additionally, the movie depicts the people that weren’t able to fully benefit from the booming economy. The coal miners and business owners living in the Corona Ash Dump were the people that weren’t making much but were essential to keeping the power in the city going.
Like every economic boom, you’re going to have the general environment of euphoria and with that, you’re going to have groups of people that are going to contribute to the economic boom but won’t fully benefit from it.
The Great Gatsby is a timeless piece of literature that provides readers a taste of one of America’s greatest booms. The 2013 movie of the novel has helped me and so many others comprehend the excess and euphoria that historians and author F. Scott Fitzgerald tried to convey to his readers.
Some of you might be wondering if America and the rest of the world would experience a Roaring 2020s. With the stock market hitting all-time highs and many Americans developing a fear of missing out from the stock market gains, it’s possible that America could finally experience euphoria once again after a decade of cautiousness.
But once again, I’m not a financial advisor and whatever I wrote is a history lesson, not financial advice. I’m an amateur movie fanatic that follows the stock market. Films like The Great Gatsby help me understand behavioral economics and history has helped me make better investment decisions.
Please do your own research before making any investment decisions.