Value of $100 in 1933, adjusted to 2009

What happened to prices between 1933 and 2009

Between 1933 and 2009, the Consumer Price Index went from 13 to 214.537. Cumulatively, prices increased 1550.3%, which works out to an average of 3.76% per year. Put differently, a dollar in 1933 bought what $0.06 buys in 2009.

Consumer prices fell 5.1% in 1933, a smaller decline than 1932’s but enough to complete a four-year slide of 24.0% from the 1929 peak. The National Bureau of Economic Research dates the trough of that contraction to March 1933, closing out the longest downturn in its chronology, one that had run 43 months since August 1929. The bottom arrived alongside a change in government: Franklin D. Roosevelt was inaugurated March 4 and, within 48 hours, ordered every bank in the country closed to halt a fresh round of runs. Congress passed the Emergency Banking Act on March 9, letting solvent banks reopen under federal supervision, and the panic that had been building for months broke almost immediately. The administration moved on the currency next: Executive Order 6102, issued April 5, required Americans to turn in most gold coin, bullion, and certificates to the Federal Reserve, taking the country off the domestic gold standard (formal devaluation of the dollar followed the next January). Congress capped the year’s banking overhaul in June with the Banking Act of 1933, commonly called Glass-Steagall, which created the Federal Deposit Insurance Corporation and separated commercial banking from investment banking. Even after four straight years of falling prices, the CPI still stood 31.3% above its 1913 level. First-class postage held at 3 cents.

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The destination year: 2009

2009 is the rarest kind of year in the modern price data: one where the cost of living went down. The CPI fell 0.4%, the first full-year deflation since 1955, as the Great Recession hollowed out demand and oil unwound from its $147 spike the summer before. Gasoline that had cost over $4 a gallon in July 2008 averaged $2.35 in 2009, and that energy collapse dragged the 12-month inflation rate to −2.1% by July, the deepest reading since 1950. Policymakers treated falling prices not as relief but as a warning: deflation raises the real weight of debt precisely when households are drowning in it, which is why the Federal Reserve pinned interest rates near zero, began buying bonds by the hundreds of billions, and Washington passed a $787 billion stimulus. The medicine took: prices stabilized within a year, and 2009 remains the textbook case of why central banks fear deflation more than moderate inflation.

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