Value of $100 in 1931, adjusted to 1968

What happened to prices between 1931 and 1968

Between 1931 and 1968, the Consumer Price Index went from 15.2 to 34.8. Cumulatively, prices increased 128.9%, which works out to an average of 2.26% per year. Put differently, a dollar in 1931 bought what $0.44 buys in 1968.

Consumer prices fell 9.0% in 1931, a sharp acceleration from the 2.3% decline in 1930, as falling wages, collapsing farm prices, and a fresh wave of bank failures fed a downward spiral that the still-contracting economy could not shake. More than 2,000 banks failed during the year, far more than in 1930, as depositors who had watched earlier banks go under pulled their cash out of ones they feared were next. The crisis went international that September, when Britain suspended the gold standard amid a run on sterling. The Federal Reserve’s response made the domestic downturn worse before it made anything better: to defend the dollar’s own gold backing, the Fed raised its discount rate sharply that October, in two steps from 1.5% to 3.5%, tightening credit at the exact moment the economy needed the opposite. Not every headline that year was grim. The Empire State Building opened its doors on May 1, briefly the tallest building in the world, though so much of Manhattan’s office space sat vacant amid the Depression that tenants stayed scarce and New Yorkers took to calling it the “Empty State Building.” Consumer prices had now fallen for two straight years and stood 53.5% above their 1913 level, down from the 68.7% margin of just twelve months before. First-class postage remained at 2 cents.

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The destination year: 1968

Consumer prices rose 4.2% in 1968, up sharply from 1967’s 3.1% and the fastest pace in 17 years, as Vietnam War spending and a tight labor market pushed inflation higher despite the Federal Reserve’s earlier tightening. The year was marked by political violence: Martin Luther King Jr. was assassinated on a motel balcony in Memphis on April 4, touching off rioting in more than 100 cities, and Robert F. Kennedy was shot in Los Angeles on June 5, moments after winning California’s Democratic presidential primary, and died the next day. Washington tried to answer the inflation problem directly that June 28, when Congress passed a 10% income tax surcharge, the Revenue and Expenditure Control Act, temporarily raising taxes and cutting spending to cool an economy overheated by war and Great Society outlays; prices kept accelerating anyway. The cost of living rose in smaller, more visible ways too: first-class postage climbed to 6 cents that January 7, and the minimum wage rose to $1.60 an hour that February 1, the final step of the increase Congress had set two years earlier. Consumer prices finished 1968 251.5% above their 1913 level.

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