Value of $100 in 1920, adjusted to 1955

What happened to prices between 1920 and 1955

Between 1920 and 1955, the Consumer Price Index went from 20 to 26.8. Cumulatively, prices increased 34.0%, which works out to an average of 0.84% per year. Put differently, a dollar in 1920 bought what $0.75 buys in 1955.

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.

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The destination year: 1955

Consumer prices fell 0.4% in 1955, the first annual decline since 1949, as a strong rebound from the 1953-54 recession delivered growth without much price pressure; automakers and appliance makers competed hard on price for a booming consumer market. Organized labor consolidated that December, when the American Federation of Labor and the Congress of Industrial Organizations merged on the 5th under President George Meany, uniting roughly 15 million workers in the AFL-CIO after two decades as rival federations. That same day, a different kind of organizing began in Montgomery, Alabama: four days after Rosa Parks was arrested for refusing to give up her bus seat to a white passenger, the city’s Black community began a boycott of its buses that would last more than a year and help launch the civil rights movement’s mass phase. Markets got a scare that September: news of Eisenhower’s heart attack on the 24th sent the Dow Jones Industrial Average to its steepest one-day drop since the 1929 crash when trading resumed that Monday, before stocks recovered as the president’s health improved. Consumer prices finished 1955 170.7% above their 1913 level, essentially unchanged from where they stood a year earlier. First-class postage held at 3 cents, and the minimum wage stayed at 75 cents an hour.

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