Value of $100 in 1972, adjusted to 2012

What happened to prices between 1972 and 2012

Between 1972 and 2012, the Consumer Price Index went from 41.8 to 229.594. Cumulatively, prices increased 449.3%, which works out to an average of 4.35% per year. Put differently, a dollar in 1972 bought what $0.18 buys in 2012: the 1972 dollar lost 81.8% of its purchasing power over these 40 years.

Consumer prices rose just 3.2% in 1972, the calmest year of the decade and a sharp break from the previous two years. The relief was largely engineered: Nixon’s wage and price controls, imposed as a 90-day freeze in August 1971, had settled into a series of “phases” that capped how much businesses could raise prices through the election year. Economists would later argue the controls mostly deferred inflation rather than curing it, storing up pressure that broke loose once they were lifted. Nixon spent political capital on foreign policy that year, traveling to Beijing that February in the first visit by a sitting U.S. president to the People’s Republic of China, a trip that began normalizing relations Washington had frozen since 1949. Closer to home, five men were arrested breaking into the Democratic National Committee’s offices at the Watergate complex that June 17, an event that drew little attention at the time but would eventually force Nixon from office. None of it dented his re-election bid: Nixon carried 49 states against Democrat George McGovern that November, helped by an economy that, on paper, looked more stable than it had in years. A median household earned $9,697 in 1972, a new home sold for a median $27,600, and gas held near 36 cents a gallon for a third straight year. Consumer prices stood 322.2% above their 1913 level, a lull that would not survive contact with the controls’ expiration and the oil shock still to come.

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The destination year: 2012

In 2012, prices rose 2.1% and $100 from 1972 had the buying power of $549; the year's average CPI of 229.594 is the level behind every 2012 figure on this page.

2012 put a number on what the Federal Reserve was aiming for. In January the Fed announced a 2% inflation target, and consumer prices rose 2.1% for the year, almost exactly on it. Gasoline averaged $3.62 a gallon, another annual high, but the pace of increase cooled from 2011’s 3.2% as food and core prices grew more slowly.

The bigger story was housing and jobs. Home prices began to recover, and the median new home sold for about $245,200, up from $227,200 the year before. Median household income was $51,017. The federal minimum wage held at $7.25, and a first-class stamp rose to 45 cents.

In September the Fed started a third round of asset purchases, this one with no fixed end date, aimed at lowering unemployment. Overseas, the European Central Bank’s July pledge to do “whatever it takes” to save the euro calmed bond markets. A summer drought across the Midwest drove corn and soybean prices to records, a shock that reached grocery shelves only partly, because most of what shoppers pay for food covers processing and transport rather than raw crops.

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