Value of $100 in 1921, adjusted to 1973

What happened to prices between 1921 and 1973

Between 1921 and 1973, the Consumer Price Index went from 17.9 to 44.4. Cumulatively, prices increased 148.0%, which works out to an average of 1.76% per year. Put differently, a dollar in 1921 bought what $0.40 buys in 1973.

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: 1973

Consumer prices rose 6.2% in 1973, nearly double 1972’s 3.2%, as Nixon’s wage and price controls were phased out through the year and pressure the controls had been holding back broke loose. The bigger shock arrived that October, when Arab oil-producing states embargoed exports to the United States and other supporters of Israel in the Yom Kippur War. Crude oil, which had traded around $3 a barrel, approached $12 by early 1974, and gas lines became a fixture outside filling stations nationwide. Earlier in the year, the Paris Peace Accords, signed that January 27, ended direct American combat in Vietnam and set a 60-day deadline for withdrawing remaining U.S. troops, even as fighting between North and South Vietnam went on. Financial markets read the year correctly as a turning point: the Dow Jones Industrial Average peaked at 1,051.70 on January 11, a level it would not reach again until 1980, before the oil shock and rising interest rates dragged it into a two-year bear market. A median household earned $10,512 in 1973, a new home sold for a median $32,500, and gas averaged 38.5 cents a gallon, still under half of what the embargo’s effects would bring the following year. Consumer prices stood 348.5% above their 1913 level by year’s end, with the decade’s worst inflation still ahead.

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