Value of $100 in 1919, adjusted to 1928

What happened to prices between 1919 and 1928

Between 1919 and 1928, the Consumer Price Index went from 17.3 to 17.1. Cumulatively, prices declined 1.2%, which works out to an average of -0.13% per year. Put differently, a dollar in 1919 bought what $1.01 buys in 1928.

The fighting in Europe ended in November 1918, but American prices kept climbing through 1919 almost as fast as they had during the war itself, rising 14.6% for the year. Wartime price and production controls were being dismantled, millions of soldiers were returning to the civilian labor market, and demand that had been held back for years ran into supply that had not caught up, a combination that kept the cost of living rising even with the guns silent. Workers, whose pay had fallen behind three straight years of double-digit inflation, pushed back: a general strike shut down Seattle in February, Boston’s police force walked out in September, and a nationwide steel strike that same month drew in roughly 350,000 workers and ran into the following January. One price did fall that year: first-class postage reverted to 2 cents on July 1, ending the wartime 3-cent rate that had funded part of the war effort since late 1917. By year’s end, prices had risen close to 75% since the CPI’s 1913 starting point, compressing more than a decade of typical peacetime inflation into six years of war and its aftermath.

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The destination year: 1928

Consumer prices fell 1.7% in 1928, the second straight year of mild decline even as the stock market climbed sharply, a widening gap between asset prices and the cost of living that later economists pointed to as an early warning sign. The Federal Reserve tightened policy repeatedly over the year, raising its discount rate in an effort to slow the flood of borrowed money pouring into stock purchases without derailing the broader economy, a balancing act it ultimately failed to manage. Herbert Hoover won the presidential election that November, defeating Democrat Al Smith on a platform built around continuing the prosperity of the Coolidge years; few voters or policymakers anticipated how quickly that prosperity would end. First-class postage remained at 2 cents, a price that had now held for nine straight years.

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