Value of $100 in 1921, adjusted to 1979

What happened to prices between 1921 and 1979

Between 1921 and 1979, the Consumer Price Index went from 17.9 to 72.6. Cumulatively, prices increased 305.6%, which works out to an average of 2.44% per year. Put differently, a dollar in 1921 bought what $0.25 buys in 1979.

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: 1979

Consumer prices rose 11.3% in 1979, the fastest pace since 1947 and the decade’s second bout of double-digit inflation after 1974’s 11.0%. The trigger was familiar: the Iranian Revolution that January halted Iran’s oil exports, and panic buying amplified the shortage, sending crude prices sharply higher over the year and motorists back into gas lines, with some states reviving the odd-even rationing last seen in 1974. Paul Volcker, appointed Federal Reserve chairman that August, responded with a strategy shift announced that October: the Fed would target the money supply directly and let interest rates rise as high as necessary to break inflation, whatever the short-term cost. That cost would arrive as a deep recession in 1981-82, but by year’s end 1979 had already delivered enough turmoil on its own. A reactor at the Three Mile Island plant near Harrisburg, Pennsylvania, suffered a partial core meltdown that March 28, the worst commercial nuclear accident in U.S. history, and on November 4, militants in Tehran stormed the U.S. embassy and took 52 Americans hostage, beginning a 444-day crisis that consumed the rest of Carter’s presidency. A median household earned $16,461 in 1979, a new home sold for a median $62,900, and gas jumped to 86 cents a gallon. Consumer prices finished the decade 97.8% above where they stood in 1969, very nearly doubling in ten years, and stood 633.3% above their 1913 level. The 1970s had opened with inflation cooling from the 1969 spike and closed with prices rising faster than at any point since 1947, setting up the Great Inflation’s final act in 1980.

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