Value of $100 in 1915, adjusted to 2021

What happened to prices between 1915 and 2021

Between 1915 and 2021, the Consumer Price Index went from 10.1 to 270.97. Cumulatively, prices increased 2582.9%, which works out to an average of 3.15% per year. Put differently, a dollar in 1915 bought what $0.04 buys in 2021.

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: 2021

2021 was the year inflation stopped being background noise. Consumer prices rose 4.7% on average for the year, and the pace kept building as the months went on: by December, the 12-month rate had reached 7.0%, the highest since 1982. The proximate cause was a supply chain that could not keep up with a fast-reopening economy. A global semiconductor shortage choked new car production and pushed used vehicle prices up by more than a third, the single largest line item in the year’s inflation math. Lumber, appliances, and shipping capacity told versions of the same story: demand snapped back faster than factories, ports, and truckers could handle it. Washington added fuel in March with the $1.9 trillion American Rescue Plan, on top of the relief already in the pipeline since 2020. For most of the year, the Federal Reserve called the price surge “transitory,” a temporary reopening effect expected to fade on its own, and held its policy rate near zero. By November, with inflation still climbing, the Fed reversed course and began winding down its bond purchases, the first step toward the rate hikes that would follow in 2022. Gas averaged $3.01 a gallon for the year, up from about $2.17 in 2020, while the federal minimum wage held at $7.25, unchanged since 2009. In hindsight, 2021 reads as the hinge year: the point where “transitory” inflation became the multi-year fight the Fed spent the next two years trying to win.

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