It's a Wonderful Calculation

November marks the official start of the "It's a Wonderful Life" season, in which my wife and I will use the DVD of this Frank Capra classic as background viewing more or less continuously until we ring in the new year two months from now. There are several major plot points in the movie that center around specific amounts of money. It's difficult to get a good grasp on the scale of these dollar amounts unless you adjust them for inflation. Fortunately, there are many good inflation calculators available online. Using the consumer price index (CPI) data from the last 200 years, they can calculate what a dollar amount from a prior year would be worth today.

For example, when Mr. Potter tries to hire George Bailey, George angrily says he's making $45/week, not $40. In the story time line, this happens in about 1933. $45 dollars in 1933 is equivalent to about $714/week in 2007 dollars (the last year for which this particular calculator has CPI data), or about $37,130. By comparison, Mr. Potter offers him a three year contract at $20,000/year. That is equivalent to about $317,160/year. That's a huge amount of money for a small-town businessman scrimping to get by, particularly when compared to what he makes at the building and loan. That's what makes it all the more amazing when he turns it down flat.

Later, Uncle Billy accidentally hands Mr. Potter the Bailey Building and Loan's $8000 bank deposit with the newspaper. That $8000 loss is what drives George to the brink of suicide. It doesn't sound like much, but in 1945 dollars, that was like misplacing over $91,200 now. Sadly, given recent economic news, it still doesn't sound like much. I wish any banking executive could get upset over a loss of $90K. You can almost hear the modern day dialog now: "Do you have any idea what this means? Bankruptcy and scandal and prison! Well, no, not really! But after the government bails us out, they might shave a few percent off my massive annual bonus! I may have to drive the same car for two years in a row! Intolerable!!" Sigh. I think I need to go watch "It's a Wonderful Life" now...