Why isn’t the time value of money applied to currency in terms of purchasing power? Let’s say I have a dollar from 1930. I should be able to exchange that dollar today anywhere based on its present value, right? Doesn’t make any sense to me but I’m slow
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Because the idea itself doesn’t make sense?
The idea of the time value of “money” is simply a recognition of the value of OTHER stuff relative to time. Money here is just the measuring stick.
The idea is used a lot in terms of valuing alternative uses of resources. The idea being using a resource today has to return more than the initial resource itself for that use to be justified. That additional return is discounted by TIME. “Money” in this sense, is a proxy for “resource”.
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