- It will be more like 1929 if the Fed doesn’t change course, she said.
- Wood said it’s possible we’re going back to the Roaring Twenties.
Cathie Wood, founder, and chief investment officer of investment management company Ark Invest, tweeted on Saturday her concerns that the Federal Reserve might cause inflation and a worldwide economic catastrophe similar to that of 1929.
During the Great Depression, she said, the Federal Reserve boosted interest rates “to squelch financial speculation” in 1929, and then in 1930, Congress passed the Smoot-Hawley Tariff Act, which imposed duties of more than 50% on more than 20,000 commodities worldwide. It will be more like 1929 if the Fed doesn’t change course, she said. Twitter and Tesla CEO Elon Musk also agreed.
Back to Roaring Twenties
It’s possible we’re going back to the Roaring Twenties, Wood said, “if inflation is unwinding as we believe.” She even said that the structure is extremely similar.
If inflation is unwinding, as we believe, then we could be heading back to the future, the Roaring Twenties, the last time several general purpose technologies evolved at the same time: telephone, electricity, and the internal combustion engine. The setup is remarkably similar!
— Cathie Wood (@CathieDWood) November 12, 2022
The executive from Ark Invest brought up the fact that wars and the Spanish Flu plagued the world before the Roaring Twenties. She went on to say that inflation reached a high of 24% in June 1920 and that the Federal Reserve reacted by hiking interest rates by a factor of less than two from 4.6% to 7% in 1919–1920.
The Fed cut interest rates from 7% in May 1921 to 4% in July 1922, “tripping the switch for the Roaring Twenties,” as Wood put it. Inflation subsequently fell “precipitously in one year to negative 15% in June 1921.”
“Given conflicting data and the stark difference in these outcomes, the Fed should be debating the possible risks associated with its current policy, at the very least, instead of voting unanimously.” Wood said, referencing the Great Depression and the Roaring Twenties as two conceivable outcomes.
