Value of $100 in 1923, adjusted to 1951

What happened to prices between 1923 and 1951

Between 1923 and 1951, the Consumer Price Index went from 17.1 to 26. Cumulatively, prices increased 52.0%, which works out to an average of 1.51% per year. Put differently, a dollar in 1923 bought what $0.66 buys in 1951.

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: 1951

Consumer prices rose 7.9% in 1951, up sharply from 1950’s 1.3% and the fastest increase since 1947, as Korean War buying and a defense spending surge hit an economy still adjusting to peacetime. Much of the jump came early in the year, before the government stepped in: the Office of Price Stabilization imposed a general ceiling on prices January 26, and the Wage Stabilization Board froze wages soon after, the broadest peacetime controls since the war began that June. The year’s more lasting change came in monetary policy. On March 4, the Treasury and the Federal Reserve signed the Accord, ending the Fed’s wartime obligation to hold down interest rates on government bonds and freeing the central bank to fight inflation on its own terms for the first time since 1942, a shift that would shape Fed independence for decades. Congress raised taxes that October to help pay for the war: the Revenue Act of 1951, signed October 20, lifted individual and corporate income taxes along with a range of excise taxes, the third increase in taxes since fighting began in Korea. Consumer prices finished 1951 162.6% above their 1913 level. First-class postage held at 3 cents, and the minimum wage stayed at 75 cents an hour.

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