Value of $100 in 1930, adjusted to 1973

What happened to prices between 1930 and 1973

Between 1930 and 1973, the Consumer Price Index went from 16.7 to 44.4. Cumulatively, prices increased 165.9%, which works out to an average of 2.30% per year. Put differently, a dollar in 1930 bought what $0.38 buys in 1973.

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: 1973

Consumer prices rose 6.2% in 1973, nearly double 1972’s 3.2%, as Nixon’s wage and price controls were phased out through the year and pressure the controls had been holding back broke loose. The bigger shock arrived that October, when Arab oil-producing states embargoed exports to the United States and other supporters of Israel in the Yom Kippur War. Crude oil, which had traded around $3 a barrel, approached $12 by early 1974, and gas lines became a fixture outside filling stations nationwide. Earlier in the year, the Paris Peace Accords, signed that January 27, ended direct American combat in Vietnam and set a 60-day deadline for withdrawing remaining U.S. troops, even as fighting between North and South Vietnam went on. Financial markets read the year correctly as a turning point: the Dow Jones Industrial Average peaked at 1,051.70 on January 11, a level it would not reach again until 1980, before the oil shock and rising interest rates dragged it into a two-year bear market. A median household earned $10,512 in 1973, a new home sold for a median $32,500, and gas averaged 38.5 cents a gallon, still under half of what the embargo’s effects would bring the following year. Consumer prices stood 348.5% above their 1913 level by year’s end, with the decade’s worst inflation still ahead.

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