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 time value of money is very specifically not *directly* about money. It’s about what you could do *with* that money.
It’s all about the potential earning you could make if you put that money to good use. Both from “basic” stuff like stocks and bonds that have an interest rate but even from the idea that you could invest that into a business. $10,000 today that lets you buy a second widget maker for your factory is worth more than $10,000 a couple years from now
If you didn’t put that money to use then you lost out on that value. Money itself is worthless until it’s been used to do something, that is specifically what time value of money is about.
Also if older currency itself just…got more valuable over time:
a) that makes the economy *way* more complicated than it needs to be. Can you imagine going to the store and trying to buy something and they need to check the date on every single bill you give the cashier? Even if you use debit or credit the transaction is made way more complicated for no reason.
b) it means people horde money and you get deflation. That would have a huge negative impact on economic growth because people would refuse to buy anything because they would rather save.
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