Value of $100 in 1940, adjusted to 1979

What happened to prices between 1940 and 1979

Between 1940 and 1979, the Consumer Price Index went from 14 to 72.6. Cumulatively, prices increased 418.6%, which works out to an average of 4.31% per year. Put differently, a dollar in 1940 bought what $0.19 buys in 1979.

Consumer prices rose 0.7% in 1940, snapping 1939’s decline and marking the first increase since 1937. The gain was modest, and the CPI still stood 18.1% below its 1929 peak, a reminder of how far the recovery from the Depression’s trough had left to go even as defense orders from Britain and France began reaching American factories. War was already reshaping domestic policy well before it touched American soil. Congress passed the Selective Training and Service Act that September, the country’s first peacetime draft, requiring men aged 21 to 35 to register and authorizing the induction of up to 900,000 men a year, more than a year before Pearl Harbor. That November, Franklin Roosevelt won an unprecedented third term, defeating Republican Wendell Willkie after campaigning on keeping the United States out of the war then consuming Europe and Asia. The promise would not hold much longer: within two years, wartime demand would push consumer prices up faster than at any point since the aftermath of World War I. First-class postage held at 3 cents, and the federal minimum wage stayed at 30 cents an hour, the level set the previous October under the Fair Labor Standards Act.

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The destination year: 1979

Consumer prices rose 11.3% in 1979, the fastest pace since 1947 and the decade’s second bout of double-digit inflation after 1974’s 11.0%. The trigger was familiar: the Iranian Revolution that January halted Iran’s oil exports, and panic buying amplified the shortage, sending crude prices sharply higher over the year and motorists back into gas lines, with some states reviving the odd-even rationing last seen in 1974. Paul Volcker, appointed Federal Reserve chairman that August, responded with a strategy shift announced that October: the Fed would target the money supply directly and let interest rates rise as high as necessary to break inflation, whatever the short-term cost. That cost would arrive as a deep recession in 1981-82, but by year’s end 1979 had already delivered enough turmoil on its own. A reactor at the Three Mile Island plant near Harrisburg, Pennsylvania, suffered a partial core meltdown that March 28, the worst commercial nuclear accident in U.S. history, and on November 4, militants in Tehran stormed the U.S. embassy and took 52 Americans hostage, beginning a 444-day crisis that consumed the rest of Carter’s presidency. A median household earned $16,461 in 1979, a new home sold for a median $62,900, and gas jumped to 86 cents a gallon. Consumer prices finished the decade 97.8% above where they stood in 1969, very nearly doubling in ten years, and stood 633.3% above their 1913 level. The 1970s had opened with inflation cooling from the 1969 spike and closed with prices rising faster than at any point since 1947, setting up the Great Inflation’s final act in 1980.

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