Value of $100 in 1926, adjusted to 1951

What happened to prices between 1926 and 1951

Between 1926 and 1951, the Consumer Price Index went from 17.7 to 26. Cumulatively, prices increased 46.9%, which works out to an average of 1.55% per year. Put differently, a dollar in 1926 bought what $0.68 buys in 1951.

Consumer prices rose 1.1% in 1926, a third straight year of mild inflation and part of the price stability that defined the middle of the decade. Florida’s real estate boom, which had peaked the previous year on speculative buying of undeveloped land, ended abruptly that September when the Great Miami Hurricane made landfall near the city, killing hundreds and wrecking the market for land whose value had rested on continued speculation rather than anything underneath it. In Detroit, Henry Ford moved his company to a five-day, 40-hour work week without cutting pay, a break from the standard six-day schedule that other large employers would gradually adopt over the following decades; Ford argued publicly that workers with more leisure time would also become better customers for the cars his factories built. Consumer prices remained low enough by historical standards that a first-class stamp still cost just 2 cents, the same price it had held since mid-1919.

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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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