The Value of 2 Dollars in 1920 Compared to Today

In the early 20th century, the purchasing power of money was quite different from what it is today. For instance, 2 dollars in 1920 had the buying power of approximately 30 dollars in the middle of 2022. This article explores how the value of money has changed over the last century, focusing on housing, food, and income to provide a comprehensive understanding of the economic shifts.

The Value of Money Over Time

When considering 2 dollars in 1920, its equivalent purchasing power in 2022 was around 30 dollars. This significant disparity highlights the considerable changes in the value of money over the past 100 years. To better illustrate this, let's examine the cost of a new house in 1920.

A new house back in 1920 cost about 6296 dollars. However, this house likely lacked modern amenities such as electricity, plumbing, heating, or air conditioning. If we adjust for current prices, a new house worth approximately the same in today's terms would cost around 94,000 dollars. Even adding some additional amenities, the figure would be around 100,000 dollars. In stark contrast, in 2022, one might struggle to buy a decent house for such an amount, as it would most likely lead to purchasing a shack in a slum for that price. This demonstrates that the cost of housing has significantly increased over the years.

Food Prices and Inflation

While the cost of housing has skyrocketed, the cost of certain food items has not increased as drastically. For example, in 1920, a loaf of bread 20 ounces in size cost around 31.25 cents. If we adjust this price for inflation, it would roughly be 4.6875 dollars in today's money. In contrast, a loaf of Wonder Bread 20 ounces in size currently costs about 2.72 dollars when I wrote this, and a store-brand bread would be even less. Thus, the price of bread has increased significantly less than the average inflation rate.

On the other hand, average adjusted gross income in 1920, reported as "net income," was 3269.40 dollars, which is equivalent to around 49,041 dollars in today's money. However, according to the IRS, the average gross income for the most recent available year is 72,090 dollars. This shows that the average individual is earning much more now than they did in 1920.

The Puzzle of Currency Printing

Another fascinating aspect of the value of money is the printing of currency. After 1920, the US government printed new currency, particularly in 1923. If you had two one-dollar notes in 1920 and kept them in perfect condition for over a century—it's worth noting that such careful preservation is improbable—the value of each of those $1 notes would be approximately 9,000 dollars as of 2023, according to Heritage Auctions. This is a remarkable increase, more than the value that would be expected based solely on inflation rates.

The inflation rate alone would not explain this dramatic surge in value, suggesting that other factors such as supply and demand, changes in government policies, and other economic events also play a significant role in determining the value of money over time.

In conclusion, the value of 2 dollars in 1920 is vastly different from today's dollars. While housing, which once was more affordable, has become unaffordable for many, certain essential goods like bread have become more accessible. This article highlights the complex dynamics of inflation and economic value over the century.