Value of $100 in 1932, adjusted to 1971

What happened to prices between 1932 and 1971

Between 1932 and 1971, the Consumer Price Index went from 13.7 to 40.5. Cumulatively, prices increased 195.6%, which works out to an average of 2.82% per year. Put differently, a dollar in 1932 bought what $0.34 buys in 1971.

Consumer prices fell 9.9% in 1932, the steepest single-year drop in the CPI’s history to that point and the third straight year of decline following 1930 and 1931. Wages, farm incomes, and industrial output all kept falling, and Congress tried to arrest the credit collapse by creating the Reconstruction Finance Corporation that January, capitalized at $500 million with authority to borrow up to $1.5 billion to lend directly to banks, railroads, and other struggling businesses. Relief did not reach ordinary households as quickly. That summer, tens of thousands of World War I veterans and their families camped in Washington demanding early payment of a service bonus not due until 1945; in July, U.S. Army troops under General Douglas MacArthur forcibly dispersed the encampment, an episode that badly damaged the Hoover administration’s standing months before an election it was already losing. Voters delivered their verdict on November 8, electing Franklin D. Roosevelt in a landslide over the incumbent Hoover on a promise of relief and a “new deal for the American people.” Roosevelt would not take office until the following March, leaving a long and difficult transition during the depths of the crisis. First-class postage rose from 2 cents to 3 cents on July 6, the first change to the rate since 1919.

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The destination year: 1971

Consumer prices rose 4.4% in 1971, down from 1970’s 5.7% as the recession that started in December 1969 finally cooled demand. The bigger economic story came that August 15, when President Nixon closed the “gold window” that let foreign governments exchange dollars for gold, ending the Bretton Woods system that had anchored the dollar since World War II. The same address announced a 90-day freeze on wages and prices, the first peacetime controls the country had seen, an attempt to break inflationary expectations without the slower grind of tighter money. The “Nixon Shock,” as it came to be known, let the dollar float against other currencies for the first time and set the stage for a wage-and-price-control regime that would run in various forms into 1973. Politically, the country lowered its voting age that year: the 26th Amendment, ratified July 1, extended the vote to 18-year-olds, capping a campaign built on the argument that men old enough to be drafted to Vietnam were old enough to vote for the people who sent them. The Postal Service, independent since 1970’s reorganization, raised first-class postage from 6 to 8 cents that May. A median household earned $9,028 in 1971, up from $8,734 the year before, while gas held near 36 cents a gallon and a new home sold for a median $25,200. Consumer prices stood 309.1% above their 1913 level by year’s end, still years away from the double-digit inflation the controls were meant to prevent.

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