Between 1928 and 1981, the Consumer Price Index went from 17.1 to 90.9.
Cumulatively, prices increased 431.6%, which works out to an average of
3.20% per year. Put differently, a dollar in 1928 bought what
$0.19 buys in 1981.
Consumer prices fell 1.7% in 1928, the second straight year of mild decline
even as the stock market climbed sharply, a widening gap between asset
prices and the cost of living that later economists pointed to as an early
warning sign. The Federal Reserve tightened policy repeatedly over the year,
raising its discount rate in an effort to slow the flood of borrowed money
pouring into stock purchases without derailing the broader economy, a
balancing act it ultimately failed to manage. Herbert Hoover won the
presidential election that November, defeating Democrat Al Smith on a
platform built around continuing the prosperity of the Coolidge years; few
voters or policymakers anticipated how quickly that prosperity would end.
First-class postage remained at 2 cents, a price that had now held for nine
straight years.
The headline number is an average. Individual categories moved very differently over this
period. Here is what $100 of 1928 spending costs in 1981, by category:
Category
Avg. yearly inflation
$100 in 1928 →
All items (CPI-U)
3.20%
$532
Food
3.35%
$574
Apparel
2.56%
$381
Not shown because the BLS began these indexes after 1928: core (all items less food & energy) (1957–), energy (1957–), housing (1967–), medical care (1935–), transportation (1935–), recreation (1993–), education & communication (1993–).
Long periods are sampled every 2 years; the calculator above covers any pair of years.
The destination year: 1981
1981 was the year the inflation fever finally broke, at an extraordinary price.
Consumer prices rose 10.3%, the second year of back-to-back double-digit
inflation and the last time the U.S. would see one. To end it, Paul Volcker’s
Federal Reserve drove its policy rate above 19% and let borrowing costs go
where they may: a 30-year mortgage cost more than 18% by autumn, car loans and
business credit froze, and homebuilders mailed the Fed two-by-fours in protest.
The squeeze tipped the economy into recession in July, the deep 1981–82
downturn that would push unemployment past 10%. But it worked. Inflation fell
by nearly half within a year and to under 4% by 1983, the disinflation that
defined the following two decades. Even the price of mailing a letter told the
year’s story: postage went up twice in eight months.
MLA: “Inflation from 1928 to 1981: $100 is worth $532 today.” InflationCalculator.com, U.S. Bureau of Labor Statistics CPI-U data, https://inflationcalculator.com/inflation/1928-to-1981/
APA: InflationCalculator.com. Inflation from 1928 to 1981. Based on U.S. Bureau of Labor Statistics CPI-U data. Retrieved from https://inflationcalculator.com/inflation/1928-to-1981/