Between 1914 and 1981, the Consumer Price Index went from 10 to 90.9.
Cumulatively, prices increased 809.0%, which works out to an average of
3.35% per year. Put differently, a dollar in 1914 bought what
$0.11 buys in 1981.
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.
The headline number is an average. Individual categories moved very differently over this
period. Here is what $100 of 1914 spending costs in 1981, by category:
Category
Avg. yearly inflation
$100 in 1914 →
All items (CPI-U)
3.35%
$909
Food
3.36%
$918
Apparel
2.80%
$635
Not shown because the BLS began these indexes after 1914: core (all items less food & energy) (1957–), energy (1957–), housing (1967–), medical care (1935–), transportation (1935–), recreation (1993–), education & communication (1993–).
Long periods are sampled every 5 years; the calculator above covers any pair of years.
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.
MLA: “Inflation from 1914 to 1981: $100 is worth $909 today.” InflationCalculator.com, U.S. Bureau of Labor Statistics CPI-U data, https://inflationcalculator.com/inflation/1914-to-1981/
APA: InflationCalculator.com. Inflation from 1914 to 1981. Based on U.S. Bureau of Labor Statistics CPI-U data. Retrieved from https://inflationcalculator.com/inflation/1914-to-1981/