Value of $100 in 1917, adjusted to 1934

What happened to prices between 1917 and 1934

Between 1917 and 1934, the Consumer Price Index went from 12.8 to 13.4. Cumulatively, prices increased 4.7%, which works out to an average of 0.27% per year. Put differently, a dollar in 1917 bought what $0.96 buys in 1934.

1917 is when World War I inflation stopped being a background trend and became the dominant fact of American economic life. Consumer prices rose 17.4% for the year, more than double the previous year’s already sharp increase, as the country’s April 6 entry into the war layered federal war spending on top of an economy already strained by military demand and worker shortages. Congress paid for the war with the War Revenue Act that October, which sharply raised income taxes, created a new tax on wartime business profits, and, in a small but very visible change for ordinary households, raised the cost of a first-class stamp from 2 cents to 3 cents that November, the rate’s first move since 1885. Herbert Hoover took over the new Food Administration in August and asked Americans to conserve food voluntarily rather than face formal rationing, a campaign that became famous enough that “Hooverize” entered the language as a verb for cutting back. None of it slowed prices much: the 17.4% increase would be topped again the very next year, in 1918.

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The destination year: 1934

Consumer prices rose 3.1% in 1934, the first annual increase since 1926; every year from 1927 through 1933 had been flat or falling, so the turn marked a real break after eight years without a single gain. Currency policy did some of the work. The Gold Reserve Act, signed January 30, formally devalued the dollar by raising the official price of gold from $20.67 to $35 an ounce, part of the administration’s deliberate effort to reflate prices after four straight years of deflation. Financial regulation tightened at the same time: the Securities Exchange Act of June 6 created the Securities and Exchange Commission to police stock exchanges and enforce disclosure rules, a direct response to the speculation blamed for the 1929 crash. The recovery was fragile and unevenly felt, especially on the Great Plains, where drought had turned overplowed farmland to dust. Over May 9-11, high winds lifted an estimated 350 million tons of topsoil into the air, darkening skies as far away as Washington and New York and giving city readers who had never seen a wheat field a first glimpse of the disaster building in Kansas, Oklahoma, and Texas. Consumer prices stood 35.4% above their 1913 level, still well below the 1929 peak but rising for the first time since the Depression began. First-class postage held at 3 cents.

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