Value of $100 in 1957, adjusted to 2021

What happened to prices between 1957 and 2021

Between 1957 and 2021, the Consumer Price Index went from 28.1 to 270.97. Cumulatively, prices increased 864.3%, which works out to an average of 3.60% per year. Put differently, a dollar in 1957 bought what $0.10 buys in 2021.

Consumer prices rose 3.3% in 1957, up from 1956’s 1.5% and the sharpest increase since the Korean War price surge of 1951. The jump fed a growing debate among economists over “cost-push” inflation, prices climbing from rising wages and material costs rather than excess demand, a debate that would recur for the next quarter century. The Federal Reserve tightened policy to fight it, and by August the tighter money combined with falling business investment to tip the economy into a recession, according to the National Bureau of Economic Research’s dating. The Cold War took a technological turn that October, when the Soviet Union launched Sputnik, the first artificial satellite, on the 4th, stunning the American public and setting off both the Space Race and a surge in federal science and defense spending the following year. Civil rights reached a crisis that September in Little Rock, Arkansas: after Governor Orval Faubus used the National Guard to block nine Black students from Central High School, Eisenhower federalized the Guard and sent the 101st Airborne Division to enforce the Supreme Court’s desegregation order. Consumer prices finished 1957 183.8% above their 1913 level. First-class postage held at 3 cents, and the minimum wage stood at $1.00 an hour.

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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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