Why if I have $100 right now, 10 years later that same $100 will have less purchasing power? Why can’t our money retain its value over time, I’ve earned it but why does the value of my time and effort go down over time?
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The short answer is that the purpose of money, or cash specifically, is to function as a means of exchange rather than a store of value.
Inflation encourages this construct, by incenting people to spend cash or convert it into other assets, such as stocks, bonds, real estate, gold, beanie babies, etc if the goal is to store value.
If money retained the same value over time, or even worse from an economist’s perspective increased in value, then people would be incented to not spend money which would reduce spending as a whole and reduce incomes across the entire economy.
This is why most central banks target a 2% inflation rate, and why currency is not pegged to a specific value such as an amount of gold. Pegging currency to a specific, uncontrollable asset can lead to wild swings in that currency’s value which can have severe, negative impacts on the entire economy.
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