Value of $100 in 1915, adjusted to 1930

What happened to prices between 1915 and 1930

Between 1915 and 1930, the Consumer Price Index went from 10.1 to 16.7. Cumulatively, prices increased 65.3%, which works out to an average of 3.41% per year. Put differently, a dollar in 1915 bought what $0.60 buys in 1930.

Consumer prices rose 1.0% in 1915, the second straight year of near-flat inflation before the wartime price surges of 1916 through 1918. The year’s defining event had nothing to do with prices directly: a German submarine sank the British liner Lusitania off the Irish coast on May 7, killing 128 Americans and hardening U.S. opinion against Germany two years before the country entered the war. Economically, 1915 was a turning point of a different kind. A recession that had dragged on since 1913 began lifting as Britain and France placed growing orders for steel, munitions, and other war materiel with American manufacturers, and U.S. exports to the Allied powers climbed sharply through the year. That demand would keep building through 1916, eventually pulling prices up with it. On the regulatory side, the Federal Trade Commission opened for business in March, taking on enforcement of the Clayton Antitrust Act that Congress had passed the previous fall. A first-class stamp still cost 2 cents, unchanged since 1885 and still two years from its first wartime increase.

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The destination year: 1930

Consumer prices fell 2.3% in 1930, a mild decline compared with what was coming but the first sign that the summer 1929 downturn was not going to be short. The National Bureau of Economic Research dates that contraction from August 1929, and by the time it finally bottomed out in March 1933 it would run 43 months, the longest of any downturn in the NBER’s chronology back to 1854. Congress made the trade picture worse in June, when President Hoover signed the Smoot-Hawley Tariff Act, raising duties on more than 20,000 imported goods to some of the highest levels in a century. Trading partners retaliated with tariffs of their own, and global trade volumes collapsed over the next several years, deepening a downturn economists still debate how much the tariff itself worsened. The financial system cracked that fall: a regional banking panic culminated in the December 11 failure of the Bank of United States in New York, at the time the largest bank failure in American history, wiping out more than $200 million in deposits. It was the first of four banking panics that would hit the country before 1933 was out. Consumer prices still stood 68.7% above their 1913 starting point, but the direction had clearly turned. First-class postage held at 2 cents, unchanged for eleven straight years.

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