# Eli5: How can money increase in value over time without changing?

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Excuse the weird title, but I think a. Example should make it clearer, when people say: person A had money in 1900, say 100,000\$, that is equal to 1,000,000\$ in todays money?

How does that work?
Or what do they mean exactly?

Like if my Great grandfather had 1 million that remained untouched till this day shouldn’t that 1 million remain as a 1 million even today?

In: Economics

The money doesn’t increase in value over time. It decreases in value; in your example where \$100k in the past is the equivalent to \$1M today it’s because the money decreased in value. It means you’d have to have \$1M in today’s money to equal the value of \$100k in the past. e.g. if you were to go to the grocery store and bout \$100k worth of groceries in 1900 you’d need \$1M in today’s money to buy the same amount of goods.

They generally mean that the value of how much \$1 can purchase has shifted over time, and that a person making \$100,000 in 1900 is like a person making \$10,000,000 today. It’s helpful for people to understand roughly how rich someone was, because back in a day when a house might be a few hundred dollars, owning thousands of dollars was a big deal, whereas today owning thousands of dollars won’t get you much at all.

What they mean is that with the same amount of money you could buy more things in the past. Now, due to inflation, you can buy less. \$100,000 a century ago are like \$1,000,000 today because back in those times, with \$100,000 you could buy the same amount of stuff that you can now with \$1,000,000. Basically, money is worth less now.

If you great grandfather had 1 million that remained untouched, that’s worth 1 million today, because the number doesn’t change. But that million was worth more back in his days, than it is now for you.

In general, money loses buying power over time. This is called inflation.

> Example should make it clearer, when people say: person A had money in 1900, say 100,000\$, that is equal to 1,000,000\$ in todays money?

In this example, the work needed to get 100,000\$ in 1900 would be equivalent to the work to get 1,000,000\$ today. Or in other words, the buying power of 100,000\$ in 1900 would be equivalent to the buying power of 1,000,000\$ today.

> Like if my Great grandfather had 1 million that remained untouched till this day shouldn’t that 1 million remain as a 1 million even today?

Yes, but what your grandfather could buy with 1 million is much more than what you can buy with the same million.

*Prices* change over time. In general, they get higher. This is called inflation, and there are many places you can learn about why/how it happens.

Money indeed stays the same over time, but inflation means that the amount it can buy is changing. In your example, the \$1 million saved by your great grandfather purchases less now than it does the day he set it aside because prices have risen since that day.

Suppose a gallon of milk used to cost 10 cents but now costs 2 dollars. Your great grandfather could buy 10,000,000 gallons of milk with that money. You can buy 500,000. In order for you to buy the same amount of milk as your great grandfather, you would need \$20 million. That’s the sense in which people will talk about a certain amount of money in the past being equivalent to a larger amount today.

They are adjusting the numbers to account for inflation… basically saying that somebody with \$100k in 1900 would have similar buying power to somebody who had \$1m today.

Of course if your great grandfather had \$100k and put it into a savings account or invested it, he’d likely have WAY more than \$1m today.

You grow apples. You exchange apples for stuff around the town. So say 10 apples gets you a beer.

Other people start planting apple trees and now there’s an abundance of apples. Each is worth less because there are plenty. So now the bar wants 20 for the beer.

\$1 million back then would remain \$1 million today but the difference is the purchasing power back then would have been wayyy more. The equivalent to \$13 million in 1920 according to [ this calculator](https://www.usinflationcalculator.com/). Basically you could have bought way more for your money back then. It’s all down to inflation. There’s no limit in the amount of USD notes that can be printed so they [devalue in purchasing power over time](https://howmuch.net/articles/rise-and-fall-dollar).

you have less buying power. so lets say u had 200 bucks in 1900 or so. back then there was less actual bills and coins to go around so 200 bucks would be worth more. if there was 1 billion bucks total, those 200 would be worth .0000002% of teh entire amount. then if there was now 1 trillion bucks to go around those same 200 bucks would only be worth 1/1000th of what they were a century ago, so .0000000002%. dis is called inflation. if more money is printed, wutever u have would be worth slightly less and if you got some milk for 30 cents back then, itd cost 30 bucks today, again because thered be more bills and coins.