Value of $100 in 1927, adjusted to 1930

What happened to prices between 1927 and 1930

Between 1927 and 1930, the Consumer Price Index went from 17.4 to 16.7. Cumulatively, prices declined 4.0%, which works out to an average of -1.36% per year. Put differently, a dollar in 1927 bought what $1.04 buys in 1930.

Consumer prices fell 1.7% in 1927, a mild retreat after three years of gradual increases and part of a shallow up-and-down pattern that ran through the second half of the decade. Aviation delivered the year’s signature moment: Charles Lindbergh departed Roosevelt Field, New York, on May 20 and landed at Le Bourget Field outside Paris roughly 33.5 hours later, the first person to fly the Atlantic solo and nonstop. Detroit closed a chapter of its own that May, when Ford halted the Model T’s production line after nearly 19 years and more than 15 million cars sold, idling tens of thousands of workers while its factories retooled for the Model A. The Federal Reserve, meeting with European central bankers that summer, cut its discount rate to ease pressure on currencies still recovering from the war, a move later cited by economists including Milton Friedman and Anna Schwartz as fuel for the stock market speculation that built through the following two years. First-class postage held at 2 cents.

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The destination year: 1930

Consumer prices fell 2.3% in 1930, a mild decline compared with what was coming but the first sign that the summer 1929 downturn was not going to be short. The National Bureau of Economic Research dates that contraction from August 1929, and by the time it finally bottomed out in March 1933 it would run 43 months, the longest of any downturn in the NBER’s chronology back to 1854. Congress made the trade picture worse in June, when President Hoover signed the Smoot-Hawley Tariff Act, raising duties on more than 20,000 imported goods to some of the highest levels in a century. Trading partners retaliated with tariffs of their own, and global trade volumes collapsed over the next several years, deepening a downturn economists still debate how much the tariff itself worsened. The financial system cracked that fall: a regional banking panic culminated in the December 11 failure of the Bank of United States in New York, at the time the largest bank failure in American history, wiping out more than $200 million in deposits. It was the first of four banking panics that would hit the country before 1933 was out. Consumer prices still stood 68.7% above their 1913 starting point, but the direction had clearly turned. First-class postage held at 2 cents, unchanged for eleven straight years.

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