Value of $100 in 1920, adjusted to 1945

What happened to prices between 1920 and 1945

Between 1920 and 1945, the Consumer Price Index went from 20 to 18. Cumulatively, prices declined 10.0%, which works out to an average of -0.42% per year. Put differently, a dollar in 1920 bought what $1.11 buys in 1945.

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: 1945

Consumer prices rose 2.3% in 1945, up from 1944’s 1.7% but still modest, a rate that understated how much pressure had built up behind wartime price and wage controls, which stayed largely in place even as the conflict that justified them came to a close. The year opened with a shock at home: Franklin Roosevelt died of a cerebral hemorrhage on April 12, less than three months into an unprecedented fourth term, and Vice President Harry Truman was sworn in that same afternoon. The war Roosevelt had led for nearly four years ended without him. Germany surrendered on May 8, and Japan surrendered on August 15, after atomic bombs fell on Hiroshima and Nagasaki that month, with the formal signing aboard the USS Missouri on September 2. Domestic policy kept moving even as the guns fell silent: the federal minimum wage rose to 40 cents an hour that October 24, the final step of the schedule Congress had built into the 1938 Fair Labor Standards Act, up from 30 cents in 1939 and 25 cents at the law’s start. Consumer prices stood 81.8% above their 1913 level, a gain that would look modest next to what followed once wartime controls actually came off. First-class postage held at 3 cents.

More about inflation in 1945 →