Between 1929 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
3.27% per year. Put differently, a dollar in 1929 bought what
$0.19 buys in 1981.
Consumer prices were unchanged in 1929, the CPI’s annual average flat for
the second time in six years and a fitting close to a decade that began with
wartime inflation and ended in rough price stability. By year’s end the
index stood 14.5% below its 1920 peak and roughly 73% above its
1913 starting point, a reminder that even a “stable” decade
left prices well above where they had started. The stability in the cost of
living masked what was building in financial markets. The National Bureau
of Economic Research dates the start of the Great Depression to that
August, the month the business cycle peaked, months before most Americans
noticed anything was wrong. The break came that October: panic selling hit
Wall Street on Black Thursday, October 24, and returned even worse on Black
Tuesday, October 29, when the Dow Jones Industrial Average fell about 12% in
a single session. Billions of dollars in paper wealth disappeared within
days, and the crash marked the start of a downturn that would pull consumer
prices into their steepest sustained decline of the 20th century over the
next four years. First-class postage was still 2 cents, a price that would
hold until 1932.
The headline number is an average. Individual categories moved very differently over this
period. Here is what $100 of 1929 spending costs in 1981, by category:
Category
Avg. yearly inflation
$100 in 1929 →
All items (CPI-U)
3.27%
$532
Food
3.39%
$567
Apparel
2.63%
$386
Not shown because the BLS began these indexes after 1929: 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 1929 to 1981: $100 is worth $532 today.” InflationCalculator.com, U.S. Bureau of Labor Statistics CPI-U data, https://inflationcalculator.com/inflation/1929-to-1981/
APA: InflationCalculator.com. Inflation from 1929 to 1981. Based on U.S. Bureau of Labor Statistics CPI-U data. Retrieved from https://inflationcalculator.com/inflation/1929-to-1981/