Value of $100 in 1937, adjusted to 1951

What happened to prices between 1937 and 1951

Between 1937 and 1951, the Consumer Price Index went from 14.4 to 26. Cumulatively, prices increased 80.6%, which works out to an average of 4.31% per year. Put differently, a dollar in 1937 bought what $0.55 buys in 1951.

Consumer prices rose 3.6% in 1937, the fastest pace since before the Depression and the fourth straight year of gains, leaving prices 10.8% above their 1933 trough though still 15.8% below the 1929 peak. The recovery did not last the year. The National Bureau of Economic Research dates a new business cycle peak to that May, the start of what became known as the Recession of 1937-38. Policy tightened on two fronts at once: the Federal Reserve had doubled bank reserve requirements over the preceding year to head off inflation it worried was building, and the federal government pulled back its own spending even as new Social Security payroll taxes began draining money from paychecks months before the first benefit checks went out. Together they choked off a recovery that had not yet reached its pre-Depression footing. Not every milestone that year was economic. The Golden Gate Bridge opened to traffic on May 27 after four years of construction, at the time the longest suspension bridge span in the world, a rare bright spot in a year that would end with the economy sliding backward again. First-class postage held at 3 cents.

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The destination year: 1951

Consumer prices rose 7.9% in 1951, up sharply from 1950’s 1.3% and the fastest increase since 1947, as Korean War buying and a defense spending surge hit an economy still adjusting to peacetime. Much of the jump came early in the year, before the government stepped in: the Office of Price Stabilization imposed a general ceiling on prices January 26, and the Wage Stabilization Board froze wages soon after, the broadest peacetime controls since the war began that June. The year’s more lasting change came in monetary policy. On March 4, the Treasury and the Federal Reserve signed the Accord, ending the Fed’s wartime obligation to hold down interest rates on government bonds and freeing the central bank to fight inflation on its own terms for the first time since 1942, a shift that would shape Fed independence for decades. Congress raised taxes that October to help pay for the war: the Revenue Act of 1951, signed October 20, lifted individual and corporate income taxes along with a range of excise taxes, the third increase in taxes since fighting began in Korea. Consumer prices finished 1951 162.6% above their 1913 level. First-class postage held at 3 cents, and the minimum wage stayed at 75 cents an hour.

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