Today in the 21st Century, it’s common for couples to both work to earn a living. Most of these couples would tell you that if they didn’t both work, life would be a struggle to make ends meet. However, it didn’t used to be this way. To answer the question, “how much was a dollar worth in 1920?”, we compare prices of 1920 to 2020. We will also look at purchasing power and the value of the US Dollar.
What is purchasing power?
“Purchasing power is the value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing power is important because, all else being equal, inflation decreases the amount of goods or services you would be able to purchase.” –Investopedia
One thing that significantly affects inflation and purchasing power is money printing. When the US Treasury and the Federal Reserve Bank coordinate to print large amounts of money, it causes inflation. Inflation is simply an increase in the money supply. The bigger the money supply, the less the money in your wallet is worth. Moreover, inflation is a hidden tax. As a result, money you have in your bank account loses purchasing power when money is printed by the government.
On March 23, 2020, it was announced that the US Government would be giving out stimulus checks to Americans. In addition, they planned to give money and loans to businesses hurt by the COVID-19 epidemic. Almost overnight, approximately $2 Trillion in loans and grants were printed out of thin air. Throughout 2020 and 2021, more stimulus checks were given to Americans, driving up the national debt and increasing inflation dramatically. As a result, the internet went viral in creating money printing memes. One of those memes was the now infamous “money printer go brrrr” meme.
Consumer Price Index
According to the US Bureau of Labor Statistics, the consumer price index has increased 1.3% in the past 12 months (before seasonal adjustment).
“The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. Indexes are available for the U.S. and various geographic areas. Average price data for select utility, automotive fuel, and food items are also available.”
-The US Bureau of Labor Statistics, Definition of Consumer Price Index (CPI)
A consumer price index value of 1.3% seems reasonable for 2019-2020. If inflation or the CPI were only 1% per year, that means that in 100 years one US Dollar would lose about half its purchasing power. For example, $100 in 1920 would only purchase $50 worth of goods in 2020. However, real inflation for items we buy every day is much higher. In addition, we’ll soon see what the real inflation values are, and they are not pretty.
The US Dollar Has Declined in Purchasing Power Since 1913; The Stated CPI Does Not Reflect Real Price Increases
In addition, the US Bureau of Labor Statistics provides a handy Inflation Calculator. Using their calculator, you can estimate what purchasing power (based upon inflation) is today compared with years past. For example, $10 in 1920 is equal to $136.28 today. That means that in the 100 years prior to 2020, the dollar has suffered approximately 1300% inflation over time.
Since the Federal Reserve Bank was formed in 1913, the dollar has been in steady decline. The dollar’s purchasing power has decreased dramatically since 1913. Using the US Bureau of Labor Statistics CPI calculator, the US Dollar has lost approximately 96% of its purchasing power since 1913. This is an alarming statistic. But it doesn’t answer the question of how much was a dollar worth in 1920?
How Much Was a Dollar Worth in 1920?
Food Prices Have Lower Inflation Values; Housing Prices Have Increased Dramatically Since 1920
To answer the question, “how much was a dollar worth in 1920?” let’s look at some specific examples of prices in 1920.
According the website The People History, in 1920 one US Dollar could purchase:
- 3 lbs of steak for $1
- 2 lbs of coffee for $1
- 2 lbs of bacon for $1
- 18 oranges for $1
- Approximately 2-4 dozen eggs for $1
- 1 ½ gallons of milk for $1
- 50lb of watermelon for $1
The price of a new home in 1920 was approximately $1,200-2,200 (Average = $1,700). According to The Ascent, a family home costs $280,600 in the year 2020. This is a 16,500% increase in home prices from 1920.
Using the US Bureau of Labor Statistics provides a handy Inflation Calculator, we can see that the US Dollar has become weaker. On average, goods and services are (on average) 1360% more expensive today, compared with 1920. A US Dollar today has lost approximately 93% of its purchasing power since 1920.
Can You Purchase a Home with One Year’s Salary? In 1920 You Could
According to IRS Data from the early 20th Century, the average salary in 1920 was approximately $3,269.
What’s interesting is, according the website The People History, in 1920 the average home cost during this time period is around $1,700. Moreover, comparing the average annual salary of $3269 to the cost of a new home, you can see that it only required about half an annual salary to purchase a home in 1920. Now, consider the average salary today and the price of homes. In contrast, could you purchase a home with half of your annual salary? Clearly things have changed and Americans are becoming poorer.
Hopefully we’ve answeredthe question, “how much was a dollar worth in 1920.” Clearly, inflation has had a significant impact on prices over the past 100 years. The purchasing power of the US Dollar has declined significantly over that period.
What Can We Expect Regarding Future Prices?
The past is never a good indicator for what may occur in the future. However, in this case it seems clear that answering the question, “how much was a dollar worth in 1920?” may also point to future results. We can expect more inflation in the United States and expect the US Dollar to be weaker in purchasing power over time.
Disclaimer: It is important to note that Piggy Bank Coins does not provide financial advice. We don’t endorse or recommend any financial investments. Instead, we provide information for educational purposes to those seeking knowledge regarding personal finance. However, in the spirit of transparency, note that the author is an investor in cryptocurrencies, precious metals and some equities.
In addition, The Federal Trade Commission (FTC) requires that Piggy Bank Coins disclose to readers that we may receive commissions when you click our links and make purchases. However, this does not impact our reviews and comparisons. We try our best to keep things fair and balanced, in order to help you make the best choice for you.