Your Grandparents’ Dollar: 79 Years of Purchasing Power

In January 1947, the first full year the Bureau of Labor Statistics published monthly CPI data, the index for all items stood at 21.48. In January 2026, it stood at 326.59. That single number contains the entire monetary history of modern America: the postwar stability, the creeping inflation of the 1960s, the great conflagration of the 1970s, the Volcker counterattack, the Great Moderation, the post-2008 doldrums, and the post-pandemic surge. A dollar in 1947 had the purchasing power of $15.20 in today’s money. Or, equivalently: today’s dollar buys 6.6 cents of what your grandparents’ dollar bought.

The CPI is not a single price. It is a weighted basket of goods and services — food, housing, transportation, medical care, apparel, education — that the BLS updates periodically to reflect how Americans actually spend their money. It is the closest thing we have to a running score of how much the dollar has eroded, year by year, for nearly eight decades. What follows is the story that score tells, decade by decade, from postwar prosperity to the present.

The postwar American economy was, by the standards of what came later, a marvel of price stability. From January 1947 to January 1965, the CPI went from 21.48 to 31.28 — an increase of 46% over eighteen years, or about 2.1% per year. For a generation raised on Depression-era thrift and wartime rationing, this was a golden age of predictable prices.

The anchor was the Bretton Woods system. The dollar was pegged to gold at $35 per ounce, and other currencies were pegged to the dollar. This arrangement limited the Federal Reserve’s ability to expand the money supply — and therefore limited inflation. There were brief spikes: the Korean War drove prices up nearly 10% in 1951 as consumers, remembering wartime shortages, hoarded goods. But prices quickly stabilized. The Eisenhower and Kennedy years averaged inflation below 1.5% per year.

A dollar in 1947 still bought 69 cents of its original value by 1965. The erosion was real but gentle — slow enough that a family could save in a bank passbook account earning 3% interest and stay ahead of inflation. That world was about to end.

The most destructive period for the American dollar in modern history began not with a bang but with a slow, persistent acceleration. In 1965, the CPI stood at 31.28. By January 1982, it had reached 94.40 — an increase of 202% in seventeen years, or 6.7% per year. A dollar from 1965 had lost two-thirds of its purchasing power.

The causes were cumulative and reinforcing. Lyndon Johnson’s guns-and-butter policies — funding the Vietnam War and the Great Society simultaneously without raising taxes — pumped money into an economy already running near capacity. Richard Nixon, facing the 1972 election, pressured Fed Chairman Arthur Burns to keep monetary policy loose. Nixon also closed the gold window in August 1971, ending Bretton Woods and removing the last external constraint on dollar creation.

Then came the oil shocks. The 1973 OPEC embargo quadrupled oil prices overnight. The 1979 Iranian Revolution sent them soaring again. Energy costs cascaded through every sector of the economy — transportation, food production, manufacturing, heating. In 1979, CPI inflation hit 13.3%. By 1980, the prime rate was 20%. Mortgage rates exceeded 18%. The American consumer was being squeezed from every direction.

The damage was not just financial. The Great Inflation shattered public confidence in the dollar, in government institutions, and in the idea that tomorrow would be better than today. It was the defining economic trauma of a generation.

In August 1979, President Carter appointed Paul Volcker as Chairman of the Federal Reserve. Volcker’s mandate was simple and brutal: kill inflation. He did. The Fed raised the federal funds rate to 20% in June 1981 — the highest in American history. The economy plunged into the deepest recession since the 1930s. Unemployment hit 10.8%. Factories closed. Farmers went bankrupt.

But it worked. From January 1982 to January 2019, the CPI went from 94.40 to 252.56 — an increase of 168% over thirty-seven years, or 2.7% per year. More importantly, the trajectory was consistently downward. Inflation fell from double digits to the 4–5% range in the mid-1980s, to 2–3% in the 1990s, and to the 1–2% range in the 2010s.

The calmest period was the post-Global Financial Crisis decade. From 2007 to 2017, the CPI rose just 19.8% — an annualized rate of 1.8%. In 2009, the CPI actually dipped year-over-year for the first time since 1955, triggering deflation fears. The Fed’s 2% inflation target, established formally in 2012, was persistently undershot. Economists debated whether inflation was dead.

It wasn’t.

COVID-19 ended the era of low inflation with startling speed. In March 2020, the federal government began injecting trillions of dollars in fiscal stimulus — direct payments, enhanced unemployment benefits, PPP loans — into an economy whose productive capacity had been simultaneously curtailed by lockdowns and supply chain disruptions. The result was textbook: too much money chasing too few goods.

From January 2020 to January 2026, the CPI went from 259.13 to 326.59 — an increase of 26% in six years, or 3.9% per year. The peak came in mid-2022, when year-over-year CPI inflation exceeded 9% — the highest reading since 1981. Energy prices, food costs, and housing all surged simultaneously.

The Fed responded with the most aggressive tightening cycle since Volcker, raising the federal funds rate from near zero to over 5% in eighteen months. By 2024, headline inflation had fallen back toward 3%. But the price level never came back down. The CPI ratchets upward — it records cumulative erosion. The prices that rose in 2021 and 2022 became the new baseline. The damage was permanent.

The table below breaks the 79-year history into eight roughly equal periods. The pattern is unmistakable: two decades of crisis (1967–1987), bookended by long stretches of relative calm. The 1977–1987 decade was the worst — prices nearly doubled, rising 89.8% in ten years. The 2007–2017 decade was the calmest — just 19.8% total, or 1.8% per year, the lowest in the entire series.

The current period (2017–2026) has already accumulated 34.1% inflation in just nine years, driven almost entirely by the post-pandemic surge. At the current pace, it will finish well above the Great Moderation average.