You needn’t go so far as Jothamia, all you need is to look at the roaring 20s. Nominal wage rates rose very comfortably and yes all those people, doctors, bus drivers, store clerks became prosperous not in a few centuries, but just a year really.
1919 post-war, huge inflation bubble. Republican Harding led a deflation on purpose.
Here are the quotes:
I would be blind to the responsibilities that mark this fateful hour if I did not caution the wage-earners of America that mounting wages and decreased production can lead only to industrial and economic ruin.”
“Gross expansion of currency and credit have depreciated the dollar… We inflated in haste, we must deflate in deliberation. We debased the dollar in reckless finance, we must restore in honesty.”
We will attempt intelligent and courageous deflation
All the penalties will not be light, nor evenly distributed. There is no way of making them so. There is no instant step from disorder to order. We must face a condition of grim reality, charge off our losses and start afresh. It is the oldest lesson of civilization’
Here are the facts:
Fed rediscount rates rose from 4% to 4¾%, and then to 6% in January, 1920. The 1¼% interest rate increase in January, 1920 is still the Fed’s single most violent policy stroke. Rose to record high of 7% in June.
From its peak in June 1920 the Consumer Price Index fell 15.8 percent over the next 12 months.
The Dow - then of 20 leading stocks - peaked at almost 120 in November of 1919. It fell about 46.6% to almost 63 in August, 1921. The speed of the decline in economic prices was faster than during the Great Depression. During a 12 month period, wholesale prices fell almost 36.8%, consumer prices fell 10.8%, and farm prices fell 41.3%.
The unemployment rate peaked at 11.7 percent in 1921. But it had dropped to 6.7 percent by the following year, and was down to 2.4 percent by 1923.
Wages dropped 13% and never dropped as fast as prices. In the end, “real wages for urban workers increased by about 20% during the 1920s. Their wage gains were stretched even farther due to the falling cost of wonderful new mass-production goods.”
It was a bitter one year, but the country rallied as soon as the Fed lowered rates back to normal, 4% again in 1923, and that’s how we got the roaring 20s.
…that is until the Fed started another bubble in 1927 (for trying to help Britain maintain a strong pound), which caused our crash in 1929.
Hoover, however, kept labor rates firm, said to let other segments of economy suffer decline, but not labor, and we suffered stagnation, depression, and actually labor rates suffered worse in the end than 1920.