There were a few deflationary periods in US history. The concept just seems unusual because so little deflation during the second half of the 20th century. In fact, the sharp and consistent rise in prices from 1950 to 2000 was unprecedented since the founding of the country. American consumers saw prices fall in the period from 1817 to 1860 and again from 1865 to 1900. The most dramatic deflation in U.S. history occurred between 1930 and 1933.
The price of money in the 19th century
The USA had a single currency until after the Civil war, but economists can still track the consumer price from the point of view of market value of gold. In 1991 economist John McCusker published historical monetary values in the United States, he found that the price level (average of current prices across goods and services produced in the economy) was actually 50% higher than in 1800 he was in 1900.
Prices rose during the war of 1812, before again falling around 1815-1817. Based on the growth of industrial mechanization, commodity prices fell and output increased successively until the beginning of the Civil war. The US government printed money and borrowed heavily during the war, but stopped after peace resumed.
In the period between 1873 and 1879 saw the price drop by almost 3% per year, however, the real growth of national product by almost 7% over the same period. Despite the demonstrated economic growth and rising real wages, historians call this period the “long depression” due to the fall in the price level.
The fed, the great depression and inflation
When the fed was created in 1913, the price level in the United States was still lower than it was in 1800. Over the next 100 years the dollar has lost 96% of its value, causing the nominal price increase of nearly 2000%.
Despite this, the most dramatic period of deflation in U.S. history occurred at the beginning of the great Depression. Prices fell on average by 10% from 1930-1933. In contrast to the productivity driven deflation in the 19th century, this decline is the result of collapsing the financial sector is characterized by banks and Bank failures.