Value of $100 in 1920, adjusted to 1932

What happened to prices between 1920 and 1932

Between 1920 and 1932, the Consumer Price Index went from 20 to 13.7. Cumulatively, prices declined 31.5%, which works out to an average of -3.10% per year. Put differently, a dollar in 1920 bought what $1.46 buys in 1932.

1920 was the last year of the inflation that had built since the war began: consumer prices rose 15.6% for the year, leaving the CPI more than double its 1913 starting level after seven straight years of increases. The boom behind those increases turned to bust before the year was over. The Federal Reserve, worried about speculation, pushed its discount rate to a record 7% that spring, and wholesale prices, which had led the wartime runup, began collapsing within months. The National Bureau of Economic Research dates the resulting downturn from January 1920 to July 1921, one of the shortest but steepest contractions in U.S. history, and consumer prices followed into outright decline, falling 10.5% in 1921. Two constitutional changes reshaped the country that year, too. The 18th Amendment’s ban on alcohol took legal effect January 17, enforced under the Volstead Act Congress had passed the previous October. Then, on August 18, Tennessee’s ratification of the 19th Amendment secured women’s right to vote nationwide, and women cast ballots in a presidential election for the first time that November, when Warren Harding won on a promise to return the country to “normalcy” after a decade of war, pandemic, and rising prices. First-class postage held at 2 cents, unchanged since mid-1919.

More about inflation in 1920 →

The destination year: 1932

Consumer prices fell 9.9% in 1932, the steepest single-year drop in the CPI’s history to that point and the third straight year of decline following 1930 and 1931. Wages, farm incomes, and industrial output all kept falling, and Congress tried to arrest the credit collapse by creating the Reconstruction Finance Corporation that January, capitalized at $500 million with authority to borrow up to $1.5 billion to lend directly to banks, railroads, and other struggling businesses. Relief did not reach ordinary households as quickly. That summer, tens of thousands of World War I veterans and their families camped in Washington demanding early payment of a service bonus not due until 1945; in July, U.S. Army troops under General Douglas MacArthur forcibly dispersed the encampment, an episode that badly damaged the Hoover administration’s standing months before an election it was already losing. Voters delivered their verdict on November 8, electing Franklin D. Roosevelt in a landslide over the incumbent Hoover on a promise of relief and a “new deal for the American people.” Roosevelt would not take office until the following March, leaving a long and difficult transition during the depths of the crisis. First-class postage rose from 2 cents to 3 cents on July 6, the first change to the rate since 1919.

More about inflation in 1932 →