Sunday, July 5, 2015

Being a Millionaire Isn't What it Used to be

One evening a few weeks ago, some friends and I wound up talking about the U.S. "roaring twenties," and all the "millionaires" created, and wondering just what $1 million 1925 dollars would be in 2015 dollars. Obviously the price level has multiplied greatly since 1925, but how many times? Five? Fifteen? Fifty? None of us were really sure.

The handy CPI calculator at FRB Minneapolis came to the rescue: $1 in 1925 is $13.67 in 2015. That is, you'd need $13.67 million in 2015 to have the purchasing power of someone with $1 million in 1925!

If you want to dig a little deeper, the Fed's full annual CPI data 1801-2015 appear in the table below (year, CPI price level, inflation rate). Note that the price level was stable during 1801-1913, after which it grew steadily forevermore. Quiz: Besides steady inflation, what didn't exist in the U.S. before 1913 but has been with us ever since? You know the answer.

Don't get me wrong. I'm not wishing we were back in 1880 with no Federal Reserve System. But the price level pattern certainly does suggest that the benefits delivered by central banks come at a significant cost, namely the inflation tax, which is highly regressive, borne disproportionately by the unsophisticated poor.


1801
50
-2.0%
1802
43
-14.0%
1803
45
4.7%
1804
45
0.0%
1805
45
0.0%
1806
47
4.4%
1807
44
-6.4%
1808
48
9.1%
1809
47
-2.1%
1810
47
0.0%
1811
50
6.4%
1812
51
2.0%
1813
58
13.7%
1814
63
8.6%
1815
55
-12.7%
1816
51
-7.3%
1817
48
-5.9%
1818
46
-4.2%
1819
46
0.0%
1820
42
-8.7%
1821
40
-4.8%
1822
40
0.0%
1823
36
-10.0%
1824
33
-8.3%
1825
34
3.0%
1826
34
0.0%
1827
34
0.0%
1828
33
-2.9%
1829
32
-3.0%
1830
32
0.0%
1831
32
0.0%
1832
30
-6.3%
1833
29
-3.3%
1834
30
3.4%
1835
31
3.3%
1836
33
6.5%
1837
34
3.0%
1838
32
-5.9%
1839
32
0.0%
1840
30
-6.3%
1841
31
3.3%
1842
29
-6.5%
1843
28
-3.4%
1844
28
0.0%
1845
28
0.0%
1846
27
-3.6%
1847
28
3.7%
1848
26
-7.1%
1849
25
-3.8%
1850
25
0.0%
1851
25
0.0%
1852
25
0.0%
1853
25
0.0%
1854
27
8.0%
1855
28
3.7%
1856
27
-3.6%
1857
28
3.7%
1858
26
-7.1%
1859
27
3.8%
1860
27
0.0%
1861
27
0.0%
1862
30
11.1%
1863
37
23.3%
1864
47
27.0%
1865
46
-2.1%
1866
44
-4.3%
1867
42
-4.5%
1868
40
-4.8%
1869
40
0.0%
1870
38
-5.0%
1871
36
-5.3%
1872
36
0.0%
1873
36
0.0%
1874
34
-5.6%
1875
33
-2.9%
1876
32
-3.0%
1877
32
0.0%
1878
29
-9.4%
1879
28
-3.4%
1880
29
3.6%
1881
29
0.0%
1882
29
0.0%
1883
28
-3.4%
1884
27
-3.6%
1885
27
0.0%
1886
27
0.0%
1887
27
0.0%
1888
27
0.0%
1889
27
0.0%
1890
27
0.0%
1891
27
0.0%
1892
27
0.0%
1893
27
0.0%
1894
26
-3.7%
1895
25
-3.8%
1896
25
0.0%
1897
25
0.0%
1898
25
0.0%
1899
25
0.0%
1900
25
0.0%
1901
25
0.0%
1902
26
4.0%
1903
27
3.8%
1904
27
0.0%
1905
27
0.0%
1906
27
0.0%
1907
28
3.7%
1908
27
-3.6%
1909
27
0.0%
1910
28
3.7%
1911
28
0.0%
1912
29
3.6%
1913
29.7
2.4%
1914
30.1
1.3%
1915
30.4
0.9%
1916
32.7
7.7%
1917
38.5
17.8%
1918
45.2
17.3%
1919
52.1
15.2%
1920
60.2
15.6%
1921
53.6
-10.9%
1922
50.3
-6.2%
1923
51.2
1.8%
1924
51.5
0.4%
1925
52.7
2.4%
1926
53.2
0.9%
1927
52.2
-1.9%
1928
51.6
-1.2%
1929
51.6
0.0%
1930
50.2
-2.7%
1931
45.7
-8.9%
1932
41.0
-10.3%
1933
38.9
-5.2%
1934
40.2
3.5%
1935
41.2
2.6%
1936
41.7
1.0%
1937
43.2
3.7%
1938
42.3
-2.0%
1939
41.8
-1.3%
1940
42.1
0.7%
1941
44.2
5.1%
1942
49.1
10.9%
1943
52.0
6.0%
1944
52.9
1.6%
1945
54.1
2.3%
1946
58.6
8.5%
1947
67.1
14.4%
1948
72.2
7.7%
1949
71.5
-1.0%
1950
72.3
1.1%
1951
78.0
7.9%
1952
79.8
2.3%
1953
80.4
0.8%
1954
80.7
0.3%
1955
80.5
-0.3%
1956
81.7
1.5%
1957
84.4
3.3%
1958
86.7
2.7%
1959
87.6
1.0%
1960
88.9
1.5%
1961
89.8
1.1%
1962
90.9
1.2%
1963
92.0
1.2%
1964
93.2
1.3%
1965
94.7
1.6%
1966
97.5
3.0%
1967
100.2
2.8%
1968
104.5
4.3%
1969
110.2
5.5%
1970
116.7
5.8%
1971
121.7
4.3%
1972
125.7
3.3%
1973
133.4
6.2%
1974
148.2
11.1%
1975
161.7
9.1%
1976
171.0
5.7%
1977
182.1
6.5%
1978
196.0
7.6%
1979
218.1
11.3%
1980
247.6
13.5%
1981
273.2
10.3%
1982
290.0
6.1%
1983
299.3
3.2%
1984
312.2
4.3%
1985
323.2
3.5%
1986
329.4
1.9%
1987
341.4
3.7%
1988
355.4
4.1%
1989
372.5
4.8%
1990
392.6
5.4%
1991
409.3
4.2%
1992
421.7
3.0%
1993
434.1
3.0%
1994
445.4
2.6%
1995
457.9
2.8%
1996
471.3
2.9%
1997
482.4
2.3%
1998
489.8
1.6%
1999
500.6
2.2%
2000
517.5
3.4%
2001
532.1
2.8%
2002
540.5
1.6%
2003
552.8
2.3%
2004
567.6
2.7%
2005
586.9
3.4%
2006
605.8
3.2%
2007
623.1
2.9%
2008
647.0
3.8%
2009
644.7
-0.4%
2010
655.3
1.6%
2011
676.0
3.2%
2012
689.9
2.1%
 2013
700.0
1.5%
 2014
711.4
1.6%
 2015*
720.3
2%