Value of $100 in 1913, adjusted to 1981

What happened to prices between 1913 and 1981

Between 1913 and 1981, the Consumer Price Index went from 9.9 to 90.9. Cumulatively, prices increased 818.2%, which works out to an average of 3.31% per year. Put differently, a dollar in 1913 bought what $0.11 buys in 1981.

1913 is where this site’s price history begins, because it’s where the Bureau of Labor Statistics’ own consumer price data begins. The CPI wasn’t published in real time back then; the BLS built the earliest index retroactively from retail price records collected starting in 1913, which makes every dollar figure on this site ultimately anchored to that year’s prices. It was also the year the machinery of modern federal economic policy was built. The 16th Amendment, ratified in February, cleared the constitutional path for a federal income tax, and the Revenue Act that followed in October imposed a top rate of just 7% on income above $500,000, a narrow tax that would later be reshaped into the broad-based system that funds the government today. In December, Congress passed the Federal Reserve Act, creating the central bank that would eventually take on fighting inflation as one of its core jobs, including the 19%-plus interest rates it deployed against the 1970s and early 1980s price surge. Consumer life in 1913 was correspondingly simple by later standards: a first-class stamp cost 2 cents, a price that held from 1885 all the way to 1917, and the Ford Motor Company introduced the moving assembly line at its Highland Park plant that year, a manufacturing breakthrough that would spend the next decade driving down the cost of a car faster than prices elsewhere were rising.

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The destination year: 1981

1981 was the year the inflation fever finally broke, at an extraordinary price. Consumer prices rose 10.3%, the second year of back-to-back double-digit inflation and the last time the U.S. would see one. To end it, Paul Volcker’s Federal Reserve drove its policy rate above 19% and let borrowing costs go where they may: a 30-year mortgage cost more than 18% by autumn, car loans and business credit froze, and homebuilders mailed the Fed two-by-fours in protest. The squeeze tipped the economy into recession in July, the deep 1981–82 downturn that would push unemployment past 10%. But it worked. Inflation fell by nearly half within a year and to under 4% by 1983, the disinflation that defined the following two decades. Even the price of mailing a letter told the year’s story: postage went up twice in eight months.

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