Value of $100 in 1914, adjusted to 1929

What happened to prices between 1914 and 1929

Between 1914 and 1929, the Consumer Price Index went from 10 to 17.1. Cumulatively, prices increased 71.0%, which works out to an average of 3.64% per year. Put differently, a dollar in 1914 bought what $0.58 buys in 1929.

Consumer prices barely moved in 1914, rising just 1.0% for the year, even as the country’s financial plumbing was rebuilt from the ground up. The Federal Reserve Banks, created by the Federal Reserve Act signed the previous December, opened their doors on November 16, giving the U.S. a central bank for the first time since the 1830s. Weeks earlier, the outbreak of war in Europe had spooked the New York Stock Exchange into closing for more than four months, the longest shutdown in its history, as officials worried European investors would dump American securities for gold. Domestically, the bigger story was labor: Henry Ford’s decision to pay factory workers $5 a day, announced in January, roughly doubled wages on his assembly lines and pushed other manufacturers to raise pay just to keep workers from leaving. A first-class stamp still cost 2 cents, a price that had held since 1885 and would keep holding for three more years, even as the war reshaping Europe began pulling the American economy toward the sustained wartime inflation of 1917.

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The destination year: 1929

Consumer prices were unchanged in 1929, the CPI’s annual average flat for the second time in six years and a fitting close to a decade that began with wartime inflation and ended in rough price stability. By year’s end the index stood 14.5% below its 1920 peak and roughly 73% above its 1913 starting point, a reminder that even a “stable” decade left prices well above where they had started. The stability in the cost of living masked what was building in financial markets. The National Bureau of Economic Research dates the start of the Great Depression to that August, the month the business cycle peaked, months before most Americans noticed anything was wrong. The break came that October: panic selling hit Wall Street on Black Thursday, October 24, and returned even worse on Black Tuesday, October 29, when the Dow Jones Industrial Average fell about 12% in a single session. Billions of dollars in paper wealth disappeared within days, and the crash marked the start of a downturn that would pull consumer prices into their steepest sustained decline of the 20th century over the next four years. First-class postage was still 2 cents, a price that would hold until 1932.

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