Value of $100 in 1930, adjusted to 1949

What happened to prices between 1930 and 1949

Between 1930 and 1949, the Consumer Price Index went from 16.7 to 23.8. Cumulatively, prices increased 42.5%, which works out to an average of 1.88% per year. Put differently, a dollar in 1930 bought what $0.70 buys in 1949.

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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The destination year: 1949

Consumer prices fell 1.2% in 1949, down from 1948’s 8.1% gain and the first annual decline since 1939, the first real break in a decade otherwise defined by wartime and postwar inflation. A mild recession drove the drop: the National Bureau of Economic Research dates a downturn from November 1948 to October 1949, as businesses worked off inventories built up during the postwar buying boom and price pressure finally eased. The Cold War hardened around the same time. On April 4, the United States, Canada, and ten Western European nations signed the North Atlantic Treaty, committing to treat an attack on one member as an attack on all and formalizing the Western alliance against Soviet expansion. That August 29, the Soviet Union tested its first atomic bomb, ending the American nuclear monopoly just four years after Hiroshima and Nagasaki and setting off an arms race that would run for decades. Congress closed out the decade’s wage policy that October, passing the Fair Labor Standards Amendments of 1949 to raise the federal minimum wage to 75 cents an hour effective the following January, nearly double the 40 cents that had held since 1945. The decade closed with consumer prices 140.4% above their 1913 level, up 70% since 1940 alone even after 1949’s decline. First-class postage held at 3 cents.

More about inflation in 1949 →