Value of $100 in 1971, adjusted to 2020

What happened to prices between 1971 and 2020

Between 1971 and 2020, the Consumer Price Index went from 40.5 to 258.811. Cumulatively, prices increased 539.0%, which works out to an average of 3.86% per year. Put differently, a dollar in 1971 bought what $0.16 buys in 2020.

Consumer prices rose 4.4% in 1971, down from 1970’s 5.7% as the recession that started in December 1969 finally cooled demand. The bigger economic story came that August 15, when President Nixon closed the “gold window” that let foreign governments exchange dollars for gold, ending the Bretton Woods system that had anchored the dollar since World War II. The same address announced a 90-day freeze on wages and prices, the first peacetime controls the country had seen, an attempt to break inflationary expectations without the slower grind of tighter money. The “Nixon Shock,” as it came to be known, let the dollar float against other currencies for the first time and set the stage for a wage-and-price-control regime that would run in various forms into 1973. Politically, the country lowered its voting age that year: the 26th Amendment, ratified July 1, extended the vote to 18-year-olds, capping a campaign built on the argument that men old enough to be drafted to Vietnam were old enough to vote for the people who sent them. The Postal Service, independent since 1970’s reorganization, raised first-class postage from 6 to 8 cents that May. A median household earned $9,028 in 1971, up from $8,734 the year before, while gas held near 36 cents a gallon and a new home sold for a median $25,200. Consumer prices stood 309.1% above their 1913 level by year’s end, still years away from the double-digit inflation the controls were meant to prevent.

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The destination year: 2020

2020 was the year the pandemic rewired the price data without triggering the inflation spike that followed it. Consumer prices rose just 1.2% for the year, the mildest pace since 2015, as COVID-19 lockdowns emptied roads, closed airports, and crushed energy demand. Oil told the starkest story: on April 20, U.S. crude futures fell to about negative $37 a barrel, the first negative settlement in the market’s history, as storage capacity ran out and no one wanted the physical barrels. Gasoline followed it down, falling to about $1.80 a gallon nationally that month before recovering to average $2.17 for the year. Grocery prices moved the other way: pantry stocking and meatpacking-plant disruptions pushed food-at-home costs up faster than usual, a rare case of food and energy pulling the index in opposite directions. Washington answered with the $2.2 trillion CARES Act, signed March 27, which sent $1,200 payments to most adults and added $600 a week to unemployment benefits as states ordered widespread business closures. The Federal Reserve cut its policy rate to near zero in two emergency moves that same month and pledged to buy Treasury and mortgage bonds “in the amounts needed” to keep credit markets working, an open-ended commitment beyond even its 2008 response. None of it showed up in the CPI yet: the stimulus, the supply shocks, and the reopening whiplash that followed would build into the fastest inflation in four decades over the next two years.

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