Value of $100 in 1914, adjusted to 1941

What happened to prices between 1914 and 1941

Between 1914 and 1941, the Consumer Price Index went from 10 to 14.7. Cumulatively, prices increased 47.0%, which works out to an average of 1.44% per year. Put differently, a dollar in 1914 bought what $0.68 buys in 1941.

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: 1941

Consumer prices rose 5.0% in 1941, up sharply from just 0.7% in 1940 and the fastest annual increase since 1920, as rearmament and Lend-Lease production pushed demand well ahead of peacetime supply even before the United States formally joined the war. Congress had already tilted the country away from neutrality that March, passing the Lend-Lease Act to arm Britain, and later the Soviet Union and other Allies, without requiring immediate payment. That April, the government created the Office of Price Administration to hold down the cost of civilian goods, the start of a price-control system that would keep official inflation numbers well below what wartime demand alone would have produced over the next four years. Then, on December 7, Japan attacked the naval base at Pearl Harbor, destroying much of the Pacific Fleet and killing more than 2,400 Americans. Congress declared war on Japan the next day and on Germany and Italy three days later, ending years of debate over whether the United States should stay out of the conflict spreading across Europe and Asia. Consumer prices, already up 48.5% from their 1913 level, would climb far faster over the next two years as the economy converted fully to war production. First-class postage held at 3 cents, and the minimum wage stayed at 30 cents an hour.

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