If I Had 2 Million Dollars

In July of 1992, the Barenaked Ladies released their debut studio album Gordon, which included one of their most popular songs: “If I Had $1000000.” Considering all the inflation we’ve had recently, you know that $1 million doesn’t buy as much as it did in 1992, but how much less? As measured by the Consumer Price Index in the US, prices have roughly doubled since 1992, meaning you would need about $2 million to buy the same amount of stuff as in 1992.

(Note: the Barenaked Ladies are Canadian, and prices in Canada haven’t quite doubled since 1992, but this song was included on early demo tapes in 1988 and 1989 released in Canada, and prices have roughly doubled there since then.)

So the value of a dollar that you held since 1992 has lost roughly half of its purchasing power. That’s bad. But how bad is it? What’s the normal US experience for how long it takes for prices to double?

It turns out that even with the recent huge run-up in inflation, we just lived through the lowest period of inflation for anyone alive today.

To give some historical perspective, I looked back to 1913 (the first official CPI measurement) and looked at each subsequent decade to see how long it took prices to double. Using each year ending in the number 3 is somewhat arbitrary, but it nicely fits with the history of the CPI and our most recent period of doubling starting in 1993 (July 1992 was just a rough doubling — the exact doubling is from August 1993).

For each year, I started in January and then looked to see how many months it took for the CPI-U index value to double. For example, starting in January 1913 it only took 86 months, or until March 1920, for consumer prices to double. That’s a high rate of inflation. Likewise, in 1973 it only took until November of 1980 for prices to double.

Our most recent period of doubling, starting in 1993, took 350 months to double, or until March 2022. That’s a very low rate of inflation overall, even though lately rates have been hitting 40-year highs. The best period in the chart starts in 1923, where it takes almost 45 years for prices to double (a few people alive today were alive in 1923, but they probably don’t remember it).

I haven’t done a systematic analysis of every possible starting point, but I’m pretty sure the post-1913 record holder is July 1920. Prices from that date take 625 months, or over 52 years, to double from that starting point. That’s until May of 1972! There was pretty significant deflation throughout the 1920s and during the first few years of the Depression.

Of course, if you know a little economic history, you know that price inflation was radically different in the US before the 20th century. Other than periods of war, the US experienced mild deflation throughout the 19th century. The cumulative effect is pretty massive, with overall price level being lower in 1900 than in 1800.

Data aren’t available monthly before 1913, but there are good estimates for annual inflation going back to before the US even existed as a country, such as this series from MeasuringWorth (an excellent resource) back to 1774. Estimating a consistent series that far back is challenging, so don’t take it as being exactly perfectly correct, but these are the best current estimates produced by economic historians that have dedicated their careers to working on these questions.

Using that data, I believe the best year I can find is 1778. The price level peaked that year and started to gradually decline. It did surpass the 1778 level in both the War of 1812 and the Civil War, but thanks to even more deflation in the late 19th century, it would not be until World War 1 that it surpassed the 1778, and even at the end of the 1930s it was still around this level. It would not be until 1954, or 176 years later, that the price level doubled starting with 1778 as the base. Wow!

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