An Inflation Calculator – With Data for Any Day Since 1913!

If you’ve ever tried to find daily inflation numbers so you can put together some research like this or like this, you’ll notice that that data doesn’t really exist.  Sure, you can sort of put a set together from Treasury Direct’s data warehouse… but good luck trying to find that data in an easy to consume form from a place that doesn’t make you jump through hoops.

That in mind, I figured I should probably just build a tool which does the hard work for you.  So, today I present this calculator which allows you to calculate the difference in value of a quantity of money due to inflation between any two arbitrary days – since January 1, 1913.

A Slow Devaluation

If you have seen a graph of inflation over the last century or so, you’ll note that it wasn’t until the post-World War II era that we started to see relatively predictable levels of inflation in the economy.  Well, in the 1970s, perhaps not so predictable – but regardless, we’ve seen a slow decline in the purchasing power of fixed dollar amounts over the last 70 or so years (Graph through April 1, 2013):

The inflation adjusted value of a dollar from 1913.A bad thing?  Actually, no, not completely… a low but stable level of inflation is roughly the ideal path to chart for the success of an economy.  You see, inflation is a ‘call to action’ – a catalyst, if you will, in order to get people to mobilize their money productively.  In a deflationary period, the value of currency increases – and things start to work in reverse.  If value is moving in reverse, why buy non-necessities?  They will cost less in real money tomorrow.  If banks react by paying negative interest rates, why bother investing?  You can ‘make money’ by hiding your cash in the backyard.

Truth is, economic policy as we know it works with a policy of steadily increasing inflation, but not so much in a deflationary spiral.  Witness the Great Depression – many Economists have argued that the deflationary spiral created by the money supply’s contraction worsened the whole episode (and can be seen in the graph above as the sudden spike in the 1920s).  Even noted libertarian Nobel Prize winner Milton Friedman notes the inflexibility in the gold standard (and the inability of the Fed to ease) made the Great Depression worse.

Monetary policy has come a long way – and countries today practice a policy known as ‘inflation targeting‘ – they literally not only aim internally for specific inflaiton numbers, but also publish their goals publicly.  That policy finally bore fruit in the United States when Federal Reserve Chairman Ben Bernanke set an explicit inflation target between 1.7% and 2.0% at the beginning of 2012.

Methodology

This is my most ambitious calculator yet.  It automatically polls the St. Louis Fed’s FRED database and downloads CPI-U, non inflation adjusted monthly. It saves it as XML on the DQYDJ servers.

The script which does the calculation is a different script.  It reads the XML file, and applies some simple math to figure out the change in the value of money between two dates.  Assuming you enter valid dates, first it finds the two months buffering the date you pick.  If it can’t find one, it uses linear extrapolation from the last two entries to predict a daily CPI index (as of press time, I had data through 2/1/2013 – so anything in February – April would be extrapolation).  If it finds two months buffering a date, it figures out the number of days in the month and uses linear interpolation to come up with a daily value.

Why the effort?  Well, other than being the first on the internet with this calculator, I do intend on building it into other tools in the future – including some calculators where you can figure out daily inflation adjusted returns for various assets classes.  I’m not sure that sort of information exists anywhere.  I intend to bring it to you.

And yes, I fully expect most people will use this calculator to find out the change in value of a money between today and a birth date (either a reader’s or a closer relative’s?).  Have fun with it!  I’ll be happy if you figure out something interesting based on the work I’ve done.

Let me know what you think in the comments!

Comments

  1. JT says

    This is a really cool tool, PK. Hope people make use of it. I really like that it can go forward and backward. Bookmarked this!

    • says

      Well, you know the real reason, right? I couldn’t find daily CPI to go with gold and silver returns (the data I can get is daily). When something doesn’t exist, you might as well invent it, right?

  2. Brick By Brick Investing says

    Quite depressing to see how far the dollar has declined in value. Great tool, thanks for developing and sharing!

  3. Joe says

    Good news everyone: a dollar today is finally worth less than half its value on my date of birth. Wait, that’s not the good part. I have a solution. If money is worth less, all we need to do to solve the problem is PRINT MORE MONEY. Can I get a job at the Fed yet?

  4. jackaz says

    You inspired me. I checked prices of stuff like food, clothing & housing in 1913.Clothing and food has increased in price commensurate with what we’d expect with inflation, (mostly). Housing, OTOH, is way outta line with expectations. (Link to links: http://bit.ly/185LCsq) I’d be interested to hear your perspective on why it is so out of line with inflationary expectations.

    • says

      I’d say your sample size is too small. Some places and items are going to inflate more than others – New Jersey included. I’m sure you can rent a house for $358 a month in Detroit – but you might be better off just buying it instead.

      As for housing, I had a piece on affordability some time back. Check it out.

      (I invented the DQYDJHAI out of sarcasm, but it basically tracks affordability vs. income. I have a few more articles that reference it.)

      • jackaz says

        I love it – a sarcasm-fueled index. I think we’d be better off if we had more of those. As a trader, I have seriously considered putting the time in to create something mind-boggingly stupid, like a phases-of-the-moon / ES correlation index or a Baseball Standings / ES correlation index. I believe you can use just about anything to trade with as long as you use good money management, and such an index might even “prove” it.

    • PK says

      It appears so because CPI is usually on a lag (we’re attempting to grab a new release every week or so), but what you’re actually seeing is us projecting forward the daily CPI of the last month we have data for – in your case, probably January. Feel free to take a look at the code – you can right click inside the iframe and open it, then view the source.

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