Value of $100 in 1934, adjusted to 2021

What happened to prices between 1934 and 2021

Between 1934 and 2021, the Consumer Price Index went from 13.4 to 270.97. Cumulatively, prices increased 1922.2%, which works out to an average of 3.52% per year. Put differently, a dollar in 1934 bought what $0.05 buys in 2021.

Consumer prices rose 3.1% in 1934, the first annual increase since 1926; every year from 1927 through 1933 had been flat or falling, so the turn marked a real break after eight years without a single gain. Currency policy did some of the work. The Gold Reserve Act, signed January 30, formally devalued the dollar by raising the official price of gold from $20.67 to $35 an ounce, part of the administration’s deliberate effort to reflate prices after four straight years of deflation. Financial regulation tightened at the same time: the Securities Exchange Act of June 6 created the Securities and Exchange Commission to police stock exchanges and enforce disclosure rules, a direct response to the speculation blamed for the 1929 crash. The recovery was fragile and unevenly felt, especially on the Great Plains, where drought had turned overplowed farmland to dust. Over May 9-11, high winds lifted an estimated 350 million tons of topsoil into the air, darkening skies as far away as Washington and New York and giving city readers who had never seen a wheat field a first glimpse of the disaster building in Kansas, Oklahoma, and Texas. Consumer prices stood 35.4% above their 1913 level, still well below the 1929 peak but rising for the first time since the Depression began. First-class postage held at 3 cents.

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The destination year: 2021

2021 was the year inflation stopped being background noise. Consumer prices rose 4.7% on average for the year, and the pace kept building as the months went on: by December, the 12-month rate had reached 7.0%, the highest since 1982. The proximate cause was a supply chain that could not keep up with a fast-reopening economy. A global semiconductor shortage choked new car production and pushed used vehicle prices up by more than a third, the single largest line item in the year’s inflation math. Lumber, appliances, and shipping capacity told versions of the same story: demand snapped back faster than factories, ports, and truckers could handle it. Washington added fuel in March with the $1.9 trillion American Rescue Plan, on top of the relief already in the pipeline since 2020. For most of the year, the Federal Reserve called the price surge “transitory,” a temporary reopening effect expected to fade on its own, and held its policy rate near zero. By November, with inflation still climbing, the Fed reversed course and began winding down its bond purchases, the first step toward the rate hikes that would follow in 2022. Gas averaged $3.01 a gallon for the year, up from about $2.17 in 2020, while the federal minimum wage held at $7.25, unchanged since 2009. In hindsight, 2021 reads as the hinge year: the point where “transitory” inflation became the multi-year fight the Fed spent the next two years trying to win.

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