Value of $100 in 1939, adjusted to 1978

What happened to prices between 1939 and 1978

Between 1939 and 1978, the Consumer Price Index went from 13.9 to 65.2. Cumulatively, prices increased 369.1%, which works out to an average of 4.04% per year. Put differently, a dollar in 1939 bought what $0.21 buys in 1978.

Consumer prices fell 1.4% in 1939, closing out a decade in which the CPI fell in six years and rose in four, leaving prices 18.7% below their 1929 level even after the mid-decade recovery. Measured against the start of the CPI’s modern record, prices still stood 40.4% above their 1913 level, a reminder that even a decade defined by deflation left the cost of living well above where it had been a generation earlier. The decade’s final months reset the economic picture entirely. Germany invaded Poland on September 1, and Britain and France declared war two days later; the United States stayed formally neutral under the Neutrality Acts, but Allied orders for war materiel began flowing to American factories almost immediately, a demand shock that would do more to end the Depression over the next few years than any peacetime relief program had managed. Domestic policy kept building on the New Deal’s framework, too: the federal minimum wage rose to 30 cents an hour that October, the second step in the schedule set by the 1938 Fair Labor Standards Act. Amid it all, the New York World’s Fair opened April 30 in Queens, themed “The World of Tomorrow” and drawing tens of millions of visitors with exhibits on television and other technologies promising a more prosperous decade than the one just ending. First-class postage held at 3 cents.

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The destination year: 1978

Consumer prices rose 7.6% in 1978, accelerating for a second straight year as rising wages, a weakening dollar, and climbing energy costs outpaced the Federal Reserve’s response. Fed chairman G. William Miller, appointed by Carter that March, kept interest rates too low to slow the trend, a policy later cited as one reason inflation kept building toward the following year’s crisis. California voters responded to their own version of the problem that June, passing Proposition 13 by nearly two to one to cap property tax rates after years of rising home values had pushed tax bills up alongside them. Foreign policy delivered one of the decade’s genuine breakthroughs: President Carter brought Egyptian President Anwar Sadat and Israeli Prime Minister Menachem Begin together for thirteen days of negotiations at Camp David that September, producing a framework for peace between the two countries that was signed as a treaty the following March. First-class postage rose to 15 cents that May 29, a rate that would hold longer than any other in the decade. The year ended in tragedy: cult leader Jim Jones directed the mass murder-suicide of more than 900 followers at a remote settlement in Guyana that November 18. A median household earned $15,064 in 1978, a new home sold for a median $55,700, and gas averaged 63 cents a gallon. Consumer prices stood 558.6% above their 1913 level, with the decade’s worst inflation still to come.

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