Value of $100 in 1945, adjusted to 2021

What happened to prices between 1945 and 2021

Between 1945 and 2021, the Consumer Price Index went from 18 to 270.97. Cumulatively, prices increased 1405.4%, which works out to an average of 3.63% per year. Put differently, a dollar in 1945 bought what $0.07 buys in 2021.

Consumer prices rose 2.3% in 1945, up from 1944’s 1.7% but still modest, a rate that understated how much pressure had built up behind wartime price and wage controls, which stayed largely in place even as the conflict that justified them came to a close. The year opened with a shock at home: Franklin Roosevelt died of a cerebral hemorrhage on April 12, less than three months into an unprecedented fourth term, and Vice President Harry Truman was sworn in that same afternoon. The war Roosevelt had led for nearly four years ended without him. Germany surrendered on May 8, and Japan surrendered on August 15, after atomic bombs fell on Hiroshima and Nagasaki that month, with the formal signing aboard the USS Missouri on September 2. Domestic policy kept moving even as the guns fell silent: the federal minimum wage rose to 40 cents an hour that October 24, the final step of the schedule Congress had built into the 1938 Fair Labor Standards Act, up from 30 cents in 1939 and 25 cents at the law’s start. Consumer prices stood 81.8% above their 1913 level, a gain that would look modest next to what followed once wartime controls actually came off. 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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