Irrational Exuberance. The 2020s Are Starting to Look a Lot Like the 1920s

“Irrational exuberance refers to investor enthusiasm that drives asset prices higher than those assets’ fundamentals justify.”Investopedia


The 1920s, a.k.a. The Roaring 20s, was a time of wild speculation and outsized behaviors. Average consumers, one hundred years ago, got caught up in a speculative fever that helped drive the stock market up until it ultimately crashed. It was a time when the tangible chased the intangible as hard currency turned into dashed dreams.

Call it “irrational exuberance.” The moment when your emotions take over and you believe that what goes up will never come down. That may describe the enthusiasm we are currently seeing for NFT’s, GameStop stock, and cryptocurrencies.

With that in mind, we can see some parallels between the 20th century’s and the 21st century’s versions of the Roaring 20s. Ironically, or maybe not so ironically, both decades emerged tfrom the aftermath of global pandemics (the 1918-19 Spanish Flu Epidemic) and the (2020-2021 Coronavirus Epidemic).

Consider NFT’s, non-fungible tokens. NFT’s are digital images that, use a blockchain like Etherium to house and guarantee original works of art that exist only in a digital format. A cartoon image of a cat, fittingly entitled “Nyan Cat,” was created by Chris Thomas and recently sold for $590,000. A brief video, named “Beeple,” was created by Mike Winkelmann and sold for a whopping $6.6 million.

I am not casting doubt on the value of these images (eye-roll), but it does seem a bit irrational that individuals are investing millions of dollars in something that they cannot touch. Talk about chasing the intangible with the tangible.

Cryptocurrencies are the rage of those who are driven by FOMO, “fear of missing out.” The 2020s are seeing average consumers investing in Bitcoin, Ethereum, and Dogecoin. Currencies that are backed by pretty much nothing and whose values are largely driven by an excess of animal spirits.

And don’t forget about the toy industry’s own GameStop. GameStop, a gaming retailer that was struggling with the Pandemic, suddenly saw its stock price soar after small investors who congregated on Reddit decided to go all-in on the stock. As a result, the share price once trading under $20 per share is currently trading at $166.

The 1920s had wing walkers, flappers, goldfish swallowing, and dance marathons. Today we have TikTok, where you can probably see all of that and more.

It all seems a bit too much like history is repeating itself. The worry in all of this is, of course, the stock market crash that ended the 1920s and launched the Great Depression. Let’s hope that this time around, these roaring 20s conclude on a happier note.

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