Value of $100 in 1923, adjusted to 1940

What happened to prices between 1923 and 1940

Between 1923 and 1940, the Consumer Price Index went from 17.1 to 14. Cumulatively, prices declined 18.1%, which works out to an average of -1.17% per year. Put differently, a dollar in 1923 bought what $1.22 buys in 1940.

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.

More about inflation in 1923 →

The destination year: 1940

Consumer prices rose 0.7% in 1940, snapping 1939’s decline and marking the first increase since 1937. The gain was modest, and the CPI still stood 18.1% below its 1929 peak, a reminder of how far the recovery from the Depression’s trough had left to go even as defense orders from Britain and France began reaching American factories. War was already reshaping domestic policy well before it touched American soil. Congress passed the Selective Training and Service Act that September, the country’s first peacetime draft, requiring men aged 21 to 35 to register and authorizing the induction of up to 900,000 men a year, more than a year before Pearl Harbor. That November, Franklin Roosevelt won an unprecedented third term, defeating Republican Wendell Willkie after campaigning on keeping the United States out of the war then consuming Europe and Asia. The promise would not hold much longer: within two years, wartime demand would push consumer prices up faster than at any point since the aftermath of World War I. First-class postage held at 3 cents, and the federal minimum wage stayed at 30 cents an hour, the level set the previous October under the Fair Labor Standards Act.

More about inflation in 1940 →