Paris, 1930. The Ritz Bar, among other places.
Though the date is never specified, we know from the text that "Babylon Revisited" takes place after the stock market crash of 1929 – characters repeatedly refer to "the crash," which is clearly a recent event. Fitzgerald wrote the story in December of 1930, so we might assume he set the tale in the same year.
"Babylon Revisited" is very much the product of its times. The 1920s is seen as a decade of partying, drinking, and jazz. Fitzgerald's literature is one of the hallmarks of this so-called Jazz Age (also called the Roaring Twenties) and his own fast-paced lifestyle (see "Genre") epitomized the extravagance of his American generation. The stock market crash in 1929 brought the party to a screeching halt and ushered America into the Great Depression.
In the 1920s, the character of Charlie Wales was living an extravagant lifestyle in Paris. Now that he's returned to Paris in the very sobering early 1930s, he can look back at his debauchery with new eyes. Similarly, Americans of the time were looking back at their own wasteful lifestyles of the 1920s. "Babylon Revisited" isn't just the story of Charlie Wales, but the story of a generation who was paying the price (so Fitzgerald thought) for their irresponsible behavior.
In "Babylon Revisited," the extravagance, the decline, the dissipation, and the attempt at atonement take place on both a personal and grand scale. Just as Charlie wonders how long he'll have to pay for his sins, so Fitzgerald must be wondering for how long the depression of the 1930s will continue. Biographer Richard Lehan explains that "Fitzgerald believed in a one-on-one relationship between personal and historical tragedy and a causal connection between the irresponsibility that characterized the 1920's and the suffering of the 1930's" (Source: Richard Lehan, Scott Fitzgerald and the Craft of Fiction, Southern Illinois University Press, 1967). This relationship is clearly explored in "Babylon Revisited."
The Ritz bar is an example of the historical roots of "Babylon Revisited." The bar has always been an American hang out for expatriates in Paris, but never so much as in the 1920s when Paris was a hot spot for wealthy Americans (like Fitzgerald). The bar plays an important role in "Babylon Revisited." It frames the story in the opening and the closing scenes, and it is the heart of Charlie's old Paris.
In this way, the Ritz bar is a symbol; everything Charlie says about the Ritz bar we can apply to Paris as a whole. When Charlie says that "[t]he stillness in the Ritz was strange and portentous," we understand that the quiet of Paris was uncomfortable and unwelcoming to him. "It was not an American bar anymore – he felt polite in it, and not as if he owned it. It had gone back into France" (1.9). In "Quotes," we talk about the ways in which Charlie is in exile from many different things. This passage about the Ritz shows that he has even been exiled from his old Paris; even his favorite haunt is foreign to him now.