Value of $100 in 1921, adjusted to 1961

What happened to prices between 1921 and 1961

Between 1921 and 1961, the Consumer Price Index went from 17.9 to 29.9. Cumulatively, prices increased 67.0%, which works out to an average of 1.29% per year. Put differently, a dollar in 1921 bought what $0.60 buys in 1961.

Consumer prices fell 10.5% in 1921, the mirror image of the wartime inflation that had more than doubled the cost of living between 1913 and 1920. The Depression of 1920-21, one of the sharpest contractions in U.S. history, bottomed out that July according to the National Bureau of Economic Research, even though it had lasted barely eighteen months. Unemployment climbed toward one worker in ten as businesses cut production and prices to work through wartime inventories, but the same collapse in prices also meant the recovery, once it started, had room to run without reigniting inflation. Warren Harding took office March 4, promising a return to “normalcy” after a decade of war, pandemic, labor unrest, and rapid price swings; his administration moved quickly to cut top income tax rates and federal spending. Congress also acted on immigration that year: the Emergency Quota Act, signed May 19, capped annual arrivals from each country at 3% of that nationality’s population in the 1910 census, the first time the United States had set a numerical ceiling on immigration. The law favored northern and western Europe and cut total immigration by more than half compared with prewar levels; Congress tightened the formula again in 1924. First-class postage held at 2 cents, unchanged since mid-1919.

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The destination year: 1961

Consumer prices rose 1.0% in 1961, down from 1960’s 1.7% as the economy climbed out of recession, a recovery the National Bureau of Economic Research dates to that February. Politically, the year opened with a changing of the guard: outgoing president Dwight Eisenhower’s farewell address on January 17 warned of a growing “military-industrial complex,” and three days later John F. Kennedy was sworn in, urging Americans to “ask not what your country can do for you.” The new administration’s first major foreign-policy test came quickly and badly: a CIA-organized force of Cuban exiles landed at the Bay of Pigs on April 17 aiming to topple Fidel Castro, and without the U.S. air support Kennedy withheld, the invasion collapsed within three days. Cold War tensions hardened further that August, when East German forces sealed the border between East and West Berlin overnight, building what would become the Berlin Wall and stopping the flow of refugees to the West. Domestically, the wage floor moved for the first time in five years: the Fair Labor Standards Amendments of 1961, effective that September, raised the minimum wage to $1.15 an hour and extended coverage to roughly 3.6 million additional workers. Consumer prices finished 1961 202.0% above their 1913 level. First-class postage held at 4 cents.

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