Value of $100 in 1923, adjusted to 1931

What happened to prices between 1923 and 1931

Between 1923 and 1931, the Consumer Price Index went from 17.1 to 15.2. Cumulatively, prices declined 11.1%, which works out to an average of -1.46% per year. Put differently, a dollar in 1923 bought what $1.13 buys in 1931.

Consumer prices rose 1.8% in 1923, the first increase since 1920 and a sign the postwar deflation had run its course; the economy settled into the steadier growth that defined much of the rest of the decade. The year’s biggest shock was political rather than economic: Warren Harding died August 2 in San Francisco while returning from a trip to Alaska, and Vice President Calvin Coolidge was sworn in the next day at his family’s farmhouse in Plymouth Notch, Vermont, administered the oath of office by his own father, a notary public, by lamplight. Coolidge would go on to preside over the low, stable inflation of the “Roaring Twenties.” The contrast with Germany that year was stark. The Weimar Republic’s currency collapse reached its peak in November 1923, with prices doubling every few days and a loaf of bread costing billions of marks; Germany introduced a new currency, the Rentenmark, that month to halt the spiral. U.S. consumer prices, by comparison, had moved in single digits or held flat every year since 1921, a gap that shaped how American economists would later think about what made the postwar inflation of Europe so different from the mild swings at home. First-class postage stayed at 2 cents.

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The destination year: 1931

Consumer prices fell 9.0% in 1931, a sharp acceleration from the 2.3% decline in 1930, as falling wages, collapsing farm prices, and a fresh wave of bank failures fed a downward spiral that the still-contracting economy could not shake. More than 2,000 banks failed during the year, far more than in 1930, as depositors who had watched earlier banks go under pulled their cash out of ones they feared were next. The crisis went international that September, when Britain suspended the gold standard amid a run on sterling. The Federal Reserve’s response made the domestic downturn worse before it made anything better: to defend the dollar’s own gold backing, the Fed raised its discount rate sharply that October, in two steps from 1.5% to 3.5%, tightening credit at the exact moment the economy needed the opposite. Not every headline that year was grim. The Empire State Building opened its doors on May 1, briefly the tallest building in the world, though so much of Manhattan’s office space sat vacant amid the Depression that tenants stayed scarce and New Yorkers took to calling it the “Empty State Building.” Consumer prices had now fallen for two straight years and stood 53.5% above their 1913 level, down from the 68.7% margin of just twelve months before. First-class postage remained at 2 cents.

More about inflation in 1931 →