One is simple enough; just asking what the equivalent value for $500 in 1924 would be in today's dollars. The other, was that we are missing the forest for the trees by talking about valuations of the dollar, because human being aren't just money-making machines, we're spiritual creatures whose worth and whose lives need to be counted in more than just dollars & cents. The thing is though, both questions are actually linked in ways that I think perhaps I fail to make as clear as I should.
First off, question 1:
$500 in 1924 would be about $6244.60 in 2008 - a little more today - based on the increases in CPI over the years. CPI is often the main way we look at inflation, but we also look at buying power against other currencies, against gold, etc. There are many calculation tools readily accessible online, one of my favorites is the West Egg Inflation Calculator because it goes all the way back to 1800, but also the Bureau of Labor Statistics has one that goes back just through the existence of the Federal Reserve to 1913 which also is quite good.
Like I said... Simple enough. But what's this really mean? That is why it is important to address the second comment as well.
Am I missing the forest for the trees by talking about the value of money? No. I'm not... More to the point, I'm going to turn this back around on that secondary commenter. What enables us to really understand the big picture here, is first and foremost understanding that money is not an end in and of itself. In fact, quite the opposite.
Besides being a store of value and an easily standardized medium of transferring different goods (not to mention the primary source of information about needs & wants dispersed across large, decentralized populations), money is nothing if not a way to more effectively acquire the goods & services that make your life better.
Money isn't just an object to hold on to, to stuff in a mattress, a safe or a bank, to carry around in a locked briefcase, to fill a swimming pool with, or to stuff into a stripper's g-string. Sure you can use money for those purposes... But mostly, it's something to obtain by serving the needs of your fellow man, and then turn into houses, cars, computers, movie-nights, fancy dinners with your partners, vacations, baby bottles, laser-tag games and anything else you might want or need.
So everything I ever talk about related to money has to be filtered first through the understanding of what it actually is. Everyone has different wants & needs, and none of us have the skills or time to create absolutely everything we might want to have from scratch. And we shouldn't. The world is immensely better off when people are able to specialize in certain tasks and fields. So instead of just looking at inflation as a purely "monetary" cost, we need to look at it from a different vantage point at the same time.
One way too refocus the discussion is to shift the wording away from currency, and to something that is more tangibly meaningful to most people but which has a quality that necessarily can't change too much over the years.
For example:
If you were to buy a diamond engagement ring for $500 in 1924, the quality would be the equivalent of buying a $6300 diamond ring today. Something like this 2 carat diamond ring perhaps...
But today, $500 can only purchase something more like this...
...Now look, I'm not saying that the size of diamond ring you present to your potential fiance or the ring that you receive is in any way a full measurement of something as spiritual and intangible as love, but the point I'm making is that the devaluation of the currency is expressed in real life losses in the quality of things that we all value and make us happy.
It's not just about being "money-making machines", as the second commenter suggested, but about the ability we have to make gestures of affection for the ones we love, the quality of food, or transportation we can afford, the time we can spend relaxing and not working.
And YES, of course incomes have risen too in the last 85 years. And many goods have gotten much much cheaper over that time, helping us immensely. Only, wages don't seem to rise nearly fast enough to make up for the losses. This, actually, should be shocking for another reason entirely in my opinion - we have seen massive leaps in productivity throughout the 20th Century, and salaries have gone up partially as a response to that - but also just to compensate for "cost of living" increases. With both higher productivity and higher salaries, one would think that inflation would be greatly outstripped, and it still isn't. But the fact that salaries have gone up is still no legitimate counter argument, because it's not just about wages. It's also about savings.
So sure, it's easier to get $6,300 today than it was in 1924, and sure, $6,300 today buys a higher quality of life . But what if wages aren't a factor at all? What if the money we're talking about was just left to you by your grandparents or great-grandparents?
Another way we all need to think about these things is to imagine your grandfather or your great grandfather leaving you money.
If, for example, a $500 account held by your great-grandfather in 1924 just came to light and you were to be the beneficiary - that money sitting around has done nothing but lose value for the last 85 years. To put it broadly, the value of the dollar is 1/12th what it was in 1924. That 2 carat ring the money would have bought in 1924 is out of the question today.
Or... Imagine that, like in so many time-travel movies, we went back and started an interest-bearing account back in 1924 with the $500... Say at 3%
$500(1.03)^85 = $6,167.85
Makes sense, right? If inflation has been increasing on average 3% a year, then a 3% interest rate on a savings account would basically make up for the loss and you'd wind up with identical purchasing power.
But this is awful! Without the declining value of the currency, $500 would still buy you that 2 carat diamond, and 5 times that would still be pretty good year's salary. As I said, the purchasing power has declined to 1/12th of what it was... So the value that $6,167 gets you today should be more like $75,000.
Think about that.
If inflation hadn't killed the value of the dollar, a savings account like that with interest, started 85 years ago would be worth the equivalent of a very decent year of income... Again to put it in more human terms, this is the difference between being able to afford a raft like this:
...and a boat like this:
Or it could have paid off your school loans instead of just your credit card bill... It could buy you a lovely new luxury hybrid instead of just a 20 year old, 100+k mile used car that gets 12 mpg.
Or... You could just stick with the cheap car, a couple kayaks for the weekends, and spend the rest of the money on helping kids get educations or helping starving people in the 3rd world get food & water by supporting charities like the Red Cross, Children International, or PlayPump. Whatever you think is important, whatever you value, whatever causes you like and want to support - $500 left for you in 1924 would allow you to do so much more, were it not for the disastrous effects of inflation.
It's hard for people to wrap their minds around this idea sometimes, but it's a big problem. The hypothetical trust fund left to you by your great grandfather, with just a modest 3% interest over 85 years would be buying 12 times better a quality of life had inflation not worked steadily against it. Technology and efficiency increases over the last 85 years make the quality of life go up just the same, but a slow deflationary process would ultimately have meant an even better quality of life for the same money. A much better quality of life.
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