By the time Krebs returns, his hometown had quit “the greeting of heroes” and “the reaction had set in.” What is this reaction? How does it affect Krebs?

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Krebs has missed the big celebration for returning veterans. As Hemingway says, “People seemed to think it was rather ridiculous for Krebs to be getting back so late, years after the war was over,” as if his credibility as a soldier was determined by the timing of his return. It’s...

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Krebs has missed the big celebration for returning veterans. As Hemingway says, “People seemed to think it was rather ridiculous for Krebs to be getting back so late, years after the war was over,” as if his credibility as a soldier was determined by the timing of his return. It’s not clear what exactly the “reaction” might be, but it’s not too hard to imagine that after the “hysteria” of welcoming home the soldiers, people were worn out with paying special attention to veterans and simply wanted to get back to their lives. Krebs wants the same thing, in a way. Had he come home to a big welcome, I don’t think he would feel any differently. Krebs also simply wants his life “to go smoothly,” which I have to understand as meaning that he would like to find a place where he no longer has to explain himself or lie about his true feelings, as he does to his mother and casual acquaintances when he tells stories about the war.

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Harold Krebs fights as part of the United States Marines in World War I, and he doesn't return from the Rhine until 1919, long after the first wave of soldiers has returned home. The first soldiers to return home were greeted with a kind of "hysteria," but by the time that Krebs returns home, "the reaction had set in." This reaction is that people start becoming bored by soldiers, and they are tired of hearing about the war.

Krebs at first does not want to talk about the war and the heavy fighting he has seen. Later, he is ready to speak about the war, but no one around him wants to hear about it. He finds that he has to lie and elaborate on his war stories to get anyone to listen to him, and then he too develops a reaction to the war and doesn't want to speak about it anymore. In fact, he feels nauseous when the subject of the war arises. All of the valuable things he did during the war are lost to him, and he doesn't appreciate them anymore. As a result, Krebs becomes detached from the world around him. He spends his time lolling about his parents' house, and though he would like a girlfriend, he doesn't even want to put in the effort to impress a girl. He has become dissociated from and unfeeling toward the world around him. 

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Harold Krebs returns to his small Oklahoma hometown a year after World War I ends. He is not greeted because he had enlisted instead of being drafted. Hemingway writes:

The men from the town who had been drafted had all been welcomed elaborately on their return. There had been a great deal of hysteria. Now the reaction had set in.

The "reaction" is a response to the horror stories brought home by the troops. The people in the town just want things to return to normal, the way they had been before the war. When Krebs is ready to talk about his real experiences no one cares to listen:

His town had heard too many atrocity stories to be thrilled by actualities. Krebs found that to be listened to at all he had to lie.

We can assume these lies involved great acts of heroism. Although World War I was not devoid of heroes it basically involved large massed armies waging trench warfare in the very worst conditions. Stories about bravery and heroism are, however, what the townspeople want to hear because these stories return them to their simplistic and provincial view of the world. They are afraid of the modernity which was ushered in by the war. It's not surprising that many Americans resisted involvement in the next war until they could no longer do so. 

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