What The Black Death And Spanish Flu Can Tell Us About What Comes Next

I like stress eating when I when the world is really bad. Yeah, stress eating is also enjoyable. But the reason I bring it up is because in the current situation we've seen the coronavirus pandemic, there are a lot out of historic parallels to this particular outbreak. So almost immediately when this whole thing started, people started reaching back to the Black Death of the Middle Ages. We also had people talking about parallels with the Spanish influenza pandemic

of nineteen eighteen. Lots of people looking at history to try to figure out what's going on right now and what the economy might actually look like once this outbreak has subsided. Yeah, that's exactly right, Especially um, the Spanish flue, the Spanish influenza of nineteen eighteen. It's been numerous stories

about that. I guess because maybe of all the different like sort of like pandemics we've had in the past, we probably have this sort of you know, most accurate recollection of like what the medical experts were saying at

the time. Of course, everyone's seen those charts of the second wave of the Spanish flu, so of all the you know, lots of but as you say, lots of attempt to look at history to figure out what they mean for the president, right, and whenever we talk about financial history, Uh, there's one guess that we really like to have on. We're going to have him on again. It's Jamie Cather would a k. A finance history guy from O'Shaughnessy Asset Management. He also runs a website called

investor Amnesia dot com. We've had him on before. We're going to have them on again to walk us through what we can learn from previous outbreaks or pandemics and what they tell us about the current situation. So Jamie, thanks so much for coming on. Thank you so much

for having me back. So Jamie, maybe to begin with, you know, Joe mentioned that a lot of people have been focusing on the Spanish influenza pandemic of nineteen in particular, But is there one moment in history that you've focused on in your readings and um, and you're studying of this topic, one moment of history that is the most relevant to our current situation. Um So, I think that, like you guys talked about, there's a lot of people going back to both the Black Death and the Spanish Flu.

There's a lot of other kind of epidemics and pandemics and history that are also interesting, but they're all really different, including the Spanish flu. It's fairly different in terms of just the disease, but also kind of the time it occurred in versus today. So I think there are a lot of differences more than similarities. But there are some interesting trends in both today and the Spanish flu that

are similar. And one that I found really interesting was just there is a paper that talked about the Amazon effects that occurred in the Spanish flu, which sounds crazy, but um, we've all talked about how kind of sears was the original Amazon and there was evidence I think it isn't a Federal Reserve paper that showed on a monthly basis during in the second wave that was in the fall, which is the worst of the three waves.

That the sales and business activity for Sears, Roebuck and montgomer Reward, which had mail order catalogs, increased in the worst months of the Spanish flu when more places were shut and kind of lockdown was taking place, and then as the economy started to reopen again, sales started to decline back to normal levels. But there's like the spike when people were at home or of ordering through these mail order catalogs, just like today everyone orders from Amazon

while they're kind hunkered down at home. So if if if the Sears catalog was the Amazon of that, what's what was the peloton of that crisis? I can't even imagine. I feel like there's some ridiculous contraction that you see like some elastic band's workout machine or something. No. No. But there's a lot of kind of anecdotes like that which are just very reminiscent of today. There were things

like retail foot traffic was down in some areas. But what was interesting is that then after the kind reopening started to occur, that the some some retailers not all obviously reported that the kind of bounced back after the reopening made up for more than like the sales from when their business had to be shut down, So that

was kind of interesting. Well, we should note on that note, since you brought up retail sales, that we are recording this on June at um now about nine in the morning and just half an hour ago today we got the retail sales for May and they came in way better than expected. They basically come in came in double on on a month over month basis, about double what

people were expecting. So as long as we're talking about the sort of eco side, the pent up demand equivalent of the Spanish Blue, this month's retail sales report would bear out once again a sort of similarity. And it's interesting to see kind of today and in the Spanish Blue, the different industries and types of retailers that did well and which ones didn't like today and you see Zoom

and other companies like that. Clorox stock was rocketing for a while, but in Spanish Flu the Federal Reserved paper showed that mattress sales actually increased something ridiculous like or something because bed rest was such a commonly prescribed like cure by doctors for people who had symptoms, and so people were just going out and buying mattresses because that was what doctors were telling to do, is just stay

at home, you know, at bed rest. And so randomly the mattress industry did very well, while other like retail groceries, um,

they dropped like a third. And then there were a lot of other businesses and kind of towns in Arkansas, which is what the Federal Reserve paper focused on, which some of their business dropped like se So I'm curious and you've touched on this already, but once the Spanish flu sort of fell away, once the pandemic ended, did we see the economy bounced back, corporate profits bounced back and make up the lost income that had occurred during the outbreak or was there sort of a permanent hit

two output. So the problem with this period is like there's not as great economic data as you would think, which is frustrating obviously because at a time with this everyone's looking back to find the economic data. There is some, but from what I've read, the effect of the Spanish flu was pronounced, but it was over the short term

and then there was a fairly quick bounce back. Um as I said, like some of the examples of retailers saying that the business boom once they could reopen made up for the losses incurred during the kind of lockdown. And there were some businesses that actually reported a increase over the prior year in sales, which was remarkable. But the economy kind of bounced back. But also you have to keep in mind of how much that was due to the Spanish flu and how much was due to

the war ending. But bounce back was kind of short lived in itself, because in you then had a recession, but in terms of the Spanish flu impact, it seemed to be harsh but short lived, and the bounce back was pretty swift. Was there any like did they do any stimulus or anything like? Was there any economic policy

to counter the effect? I mean, one of the things that's been striking that a lot of people have cited for the surprising resilience of the economy and the market during this crisis is just the degree to which policymakers moved extremely fast, perhaps having learned some of the lessons of the Greek recession about a decade ago. Was there a economic policy response. Uh that time around, You know, there could have been, not from what I've read. I've read a number of papers on this, and I don't

recall seeing there was. It wasn't pronounced enough to be kind of prevalent throughout the research that I've read. Yeah, Tracy, it's interesting and speaking of history, how often economic stabilization measures that we sort of take for granted as making sense in it a downturn, more spending, lower rates, etcetera. Like they just didn't know anything back of the day. Like it's a crazy reading back of like past prices.

How like clueless policy makers looked relative to the sort of conventional wisdom today about what you need to bounce back. It's always stands out to me when reading about past crises. I didn't know anything. I mean, I guess it depends how far back in history you go. The Romans were pretty good at that stimulus. But okay, we're gonna get off track. I do want to go slightly further back and talk about, um, the Middle Ages, the Black Death

aka the Great Plague. A lot of people have been looking at that one and talking about the labor market. What might happen to wages and inflation. And I've seen different theories on this. So one explanation says that after the Great Death, so many people died that there was

a shortage of labor and wages eventually went up. But I've heard other people say that one of the reasons wages went up is basically a bunch of the peasants revolted and sort of violently forced better earnings for themselves. What have you learned so far, Jamie, Like what do

your readings tell you on that topic? And if you survived, then in terms of the Black Death, everything came up peasants like it was a great time to be a peasant after the Black Death because like you mentioned, as you mentioned there there is a lot of disagreement over which is crazy to think about it, like something that happened hundreds of years ago, and there's still so much

disagreement among like economic historians of what happened. But from what I've read, there seems to be a agreement that there was a rise in wages after the Black Death because, as you mentioned, so many people died, and to put some numbers around it, the estimates are between seventeen and twenty eight million Europeans and the Black Death was from thirteen seven to thirteen fifty three. And what made it actually so pronounced in its impact was the fact that

there wasn't one isolated outbreak. It kept coming back in waves for decades. I think Britain experienced thirty different outbreaks of the play between thirteen three in like thirteen I can't it was like fifty year period. Basically there is an outbreak every four years of the play. So it just kept coming back, like every time they thought that they were done with it, it would just come back, and each time it was less was less severe, but I mean still was the plague and it was killing

off people. So it just kept coming back all over year. But in England it was basically every four years. But as you mentioned, Tracy, because so many people had died.

What happened was that suddenly all these lords who had previously seen over these manner systems where the peasants were working the land and the lord would collect rent um views from the peasants, they suddenly faced this problem where they had all this land previously was a good thing, but suddenly now there weren't as many peasants to work.

Until the land, so the peasants were able to demand higher wages, and also they had the ability to kind of shop around their services to other lords, which previously wouldn't have been the case. But because every lord was so desperate to hire people to work their land that if the lord a peasant was currently working for it didn't offer them better working conditions, living conditions, and wages, then they could just go to another lord who would

be willing to offer them those um conditions. So for the peasant and other kind of jobs related to agriculture, which outside of the city, nine out of every ten people were making a living related to working with soil in this period, which is crazy, they could go and get higher wages. And there was one example of like a plowman who in thirteen he was making two shillings a week, and then thirteen forty nine he was making three shillings a week. Then in thirteen fifty his wages

had grown to ten shillings a week. So yeah, you can, and that's just like one example of many. The Fed's got to raise rates that kind of wage grow the ECB of the ECB high grade. But you know, I didn't realize until you said it just now that there were so many ways. But now I'm looking at like, you know, I'm looking at the Wikipedia page of the Black Death. It's funny, there's almost no way to talk about old timey things without automatically sort of superimposing modern

conceptions of how the economy worked back onto them. Like I mean, I joke about the E SPP graz and grades. Obviously there was no ECB of but I you know, my first question, like the first thing that comes to my mind is like that has to be like really bad form business capital expenditure plans, because who wants to like plan for the future when there's so much uncertainty about the next time the Black Death is going to come along. Well, there was no ECB, but they did

try and control wages, which I'll get too in a second. Overall, so that was one stark example of the guy quintuple in his weekly wages in like two years. But overall, the estimates are that wages rose between twenty and from the thirteen forties to the thirteen sixties. Again pretty pronounced.

But one thing that was a counter to this rise in nominal wages was there was a pre substantial rise in inflation because the gold and silver supply remain constant, but the amount of people decimated, so there was just a higher ratio of gold and silver per capita, So much of those kind of nominal weekly wage gains were

offset by this inflation. But to Joe's point about ECB or some regulatory authority trying to control things, there was obviously a lot of There were a lot of upset lords because they didn't want to deal with these peasants who were suddenly cocky and knew that they had kind

of had leverage in this situation. And there are all of these lords who were complaining about peasants who would barely do any work, like they would make a huge fuss about being asked to do anything, and if they did do jobs that they were doing haphazardly because they just knew that the lord wouldn't be able to find a replacement for them. So the lords tried to lobby the youth authorities to do something about this problem, and what ended up happening was the government put out two

statutes in thirteen forty nine and thirteen fifty one. In thirteen forty nine, there was the Ordinance of Laborers and then the Statute of Laborers in thirteen fifty one, which both were aimed at pertailing wages, and they both stipulated that wages for peasants had to be set at pre plague levels, and again that was to kind of address this situation where people were quickly getting five times what

they were making before the plague. And there are also rules that the peasant couldn't leave and kind of shop around his services to other lords, again to prevent this issue of people leaving in manners being left or lords being left with no one to till their manners. So there was no interest rate policy or anything, but there is definitely statutes put in place to try and prevent the wage growth from spiraling out of control. Wait, so just just to be clear who was putting Who is

making the statute? Which which which, which governing body or which royal family or whatever was believe Parliament got it, royal family or whatever. I wanted to go back to the the inflation point. You mentioned that the gold and silver ratio to actual human beings was one thing that was pushing prices up. But what did we see during the Spanish flu outbreak? Did we see? I mean, we wouldn't have had the same type of coinage obviously, and we might have had hit to productivity because of the

war and various disruptions. But what did we see in that one? Again, inflation didn't camp them up as much as I thought it would have during um my reading. But I know that there was a brief uptick in inflation, But it seems like most of the effects for the Spanish flu where brief. Even if they're kind of severe, they were short lived. Um. But for inflation, I know that there was a short uptick, but I don't think

that there was anything um substantial. Again, this is also kind during the war, so the government was doing a lot to kind of try and control prices in terms of quotas and everything and keeping prices stable, because I know that after the war ended some industries, I think Cole was one of them where the government wasn't buying as much instead of help setting prices and stabilize them, that the prices kind of dropped after the war ended.

Going back to the Black Death for a second again, I'm doing Wikipedia history here, which is no no match for your war series academic history, but there's a line in here this is the Black Death. Most likely originated in Central Alasia or East Asia, from where it traveled along the Silk Road reaching Crimea by a Does that fit with what you've read about the history of the

Black Death? And I'm curious. You know, one of the things that's come up with this crisis and this virus is the degree to which it's sort of has temporarily and perhaps long term changed trade routes and certainly trained travel routes due to the fact that international travel is

temporarily almost completely non existent. With these recurring outbreaks in Europe over the span of you know, years and years and years, were there any changes to trade routes that you saw or that you've discovered in terms of the relationship between Europe and the rest of the world. Not so much in terms of trade route, but what there was definitely a noticeable shift in was the type of products in like types of agriculture that was burned in England.

And again it was because if you were a lord who had, you know, say a hundred acres and previously you had fifty peasants working that land, suddenly you have still had the same hundred acres, but maybe there was only fifteen peasants that could work to land, so you really weren't able to make use of that hundred acres.

And so what ended up happening, which again was great for the peasant, was the lord ended up leasing and renting out some of that acreage to ultimately peasants who were able to get that land and make a better living for themselves because they didn't have to share as much of the profit with the lord because they were

actually renting the land themselves. But the lord was also forced to then kind of move into areas of agriculture that were less um labor intensive, simply because they didn't have the labor to work the more labor intensive types of agriculture. So there was a push into things like animal livestock husbandry and planting more things like um grapes, apples, pears, and this kind of stuff instead of the more traditional green harvests which had been the case previously because those

were more labor intensive. So there's definitely a large shift in what types of crops the manners were producing um, which is pretty substantial. Well, so just you know, big picture, uh, you know, looking forward, and obviously we're it seems to be in this sort of post crisis period in the sense that, at least from an economic perspective and certainly a market perspective, a widespread view that the worst is

behind us. What type of things would you look forward from history or what kind of questions do you still have as a student of history in terms of how how the post coronavirus period will transpire. I think it, like many of us, I am looking to see whether this kind of recent uptick in cases and some of the states that reopened is going to be something more lasting,

or whether it's a brief uptick. Because we've mentioned it a couple of times that everyone is well aware of the second wave of the Spanish Flu, and although there are a lot of differences, um, I think that it's definitely interesting to see. Even before all the recent protests, there seem to be, like around Memorial Days, some kind of like switch where people just kind of gave up on social distancing and lockdown. Just judging by social media and the amount of people I saw it kind of

going out. So I think that's interesting to look out for because there are a lot of papers and examples from the Spanish Flu that are very reminiscent of today where there was business owners protesting about not being able

to operate their businesses and open up their shops. I am interested to see if that kind of trend continues, But also it'll be interesting to see what I think is in the next maybe crisis or crash, what people's expectations are in terms of monetary policy and fiscal stimulus based on what's happened this time around, Because I think it's one of those things where now that the door has been opened, what it seems radical this time might

become the expectation the next time around. So it'll be interesting to see what that kind of lasting impact is, just psychologically, because it might be the last time this happened, we got stimulus checks and the government really stepped into try and um save certain industries and sectors. But now this time you're saying you're not like and I think

that should be interesting. Well, you mentioned that, you know, everyone is seeing these charts and stories of remember the second wave of the Spanish flu was worse than the first, and of course that's not a lot of people's minds coming into the fall for blue season, to the extent that the coronavirus is seasonal, which we don't know that much about But was there anybody in nine eighteen saying, oh, remember, you know what happened the second wave of x or

is the awareness of the concept of a second wave something that makes this unique and thus maybe a reason to think that history won't play out because when you when you can observe something and when you can describe something, usually don't really get the same as last time. I think, well they might, it might not have been like the

second wave exact phrasing. They're definitely people who were advocating for continue to kind of lockdown in quarantine because they're aware that people continuing to go out and temple and crowds with only they caused the flue to linger around longer. But it is interesting and related to your point is that one reason to be more optimistic for today is the reason is called the Spanish flu is because it

didn't originate in Spain. The reason it's called the Spanish flu is because during World War two or World War One rather, Spain was neutral and in other countries that were experiencing outbreaks of the Spanish for like the US, there's kind of this tacit agreement with the government between media and government that the media was not going to

report on bad news like this, like Spanish flu. I mean, World War One's going on, and the government didn't want stories about Spanish flu kind of running all over the front pages of newspapers. So there are definitely some stories on it, but they were kind of relegated to kind of the back pages of newspapers, so there wasn't much coverage.

And the reason that it's called the Spanish fluds because it Spain was neutral and so they didn't have that kind of tacit agreement in place, and so they were the ones kind of openly reporting it cases that were doing the most reporting, and so people started linking it with Spain, even though it was probably occurring in their own country as well. It just wasn't as widely reported.

But that to your point, is the fact that today it's the opposite where literally all we read about his coronavirus, right, so there is a much more widespread may. I can't imagine anyone who doesn't know what coronavirus is, and so everyone is gonna be more cognizant of the risks involved in how and where we can do things to prevent that continued spread of the virus. So that is definitely one major reason to be optimistic is there's much broader

knowledge of how to stop the spread. I think that's a good place to leave it. It's it's pretty rare for us nowadays to like end things on an optimistic note. So so let's do that, all right. Jamie Catherwood, a k A finance history guy, thank you so much for coming back on. And we should just mention, of course, that everyone should check out your website investor ammnesia dot com. Thanks Jamie, thank you so much for having me. Thanks Jamie.

That was great. So Joe, I found that discussion fascinating. I kind of knew that I would, but all those little tidbits and anecdotes of how you know, history has reacted to previous pandemics, I just find it so so fascinating. Yeah. Absolutely,

And Jamie is just the best, isn't it. Yeah? I mean, honestly, I know I've been sort of gushing about his output and his website, but if you enjoy finance, if you enjoy markets, or if you just enjoyed general history, following him on Twitter and reading his weekly newsletter things like that, it's just really interesting. He does a great job of going back to primary sources as well, so he'll often include cartoons of the time. You know, some of the

cartoons that accompany the Spanish flu are particularly poignant. It's just a really great thing to to go over. And again, maybe I'm weird, but I always derive a little bit of comfort from going back in time and seeing what previous generations had to deal with and and realizing that, you know, something's never really changed. Yeah, no, I love it.

And even the fact that there was an Amazon equivalent of these finish flow is pretty amazing because I was, like, you know, I thought that was gonna be a joker, that there wasn't really going to be. But the fact that even even back then they were like similar industrial changes.

And at some point we should do like a history of the catalog what was it the J. C. Penny Catalog has said Sears, Yeah, we should do an episode about the history of the series catalog because I think it's a pretty pretty um fascinating in its own right. How big of a deal that was absolutely and absolute giant of retail in the early nine early to mid nineteen hundreds. And then well we can see what's happening today. It kind of makes you think about Amazon's business model,

doesn't it. Yeah? Absolutely, I guess The other the other big point to consider from Jamie is the notion that there are some major things that are different today. So one we have more transparency when it comes to information about the coronavirus, and two we have the big, big reactions from central banks and other authorities. I guess that's that's pretty different, isn't it. Yeah? Absolutely? All right, Well, on that note, this has been another episode of the

All Thoughts podcast. I'm Tracy Alloway. You can follow me on Twitter at Tracy Alloway and I'm Joe wy isn't thought. You could follow me at the Stalwart, And you should follow our guest Jamie Catherwood. He is j f C Underscore three Underscore. As Tracy mentioned, he is a great follow on Twitter. Be sure to follow our producer Laura Carlson at Laura M. Carlson, followed the Bloomberg head of podcast, Francesca Levie at Francesca Today and check out all of

our podcast at Bloomberg under the handle at podcasts. Thanks for listening.