This worldwide pandemic was quite different from earlier localized epidemics. Across the world, the flu killed about 40 million people, or 2% of the world’s population. Since it is estimated that a third of that population became infected, the death rate for those infected was about 6%.
In the United States, about 550,000 died of the flu, or half a percent of the US population. A first, mild wave of infections came in the spring of 1918, followed by a more deadly one from September 1918 to January 1919. One of those killed was Frederick Trump, grandfather of President Donald Trump. President Woodrow Wilson caught the flu but survived, albeit impaired, as did Walt Disney, General John Pershing and the leaders of France and the UK, Clemenceau and Lloyd George.
World War I was in its last year in 1918, and movements of soldiers internationally and domestically helped to spread the flu virus. The overlap of the war and the pandemic makes it difficult to isolate the economic and financial effects of each. But economist Robert Barro and collaborators took a stab at separating the war and flu effects by means of econometric analysis. They estimated that both war and flu depressed real GDP growth and consumption spending, and raised inflation in both the world and the United States. The flu was less important than the war in these outcomes, but not insignificant.
They found for the United States that the flu by itself reduced real stock returns by seven percentage points and returns on short-term government debt by 3.5 percentage points, while it raised inflation by five percentage points. These results are broadly consistent with the Dow Jones average increasing in nominal terms by 10.5% in 1918, when the CPI inflation rate was above 15%, and both annual real GDP growth overall and per capita being less than 1% during the years 1918-19.
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