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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The time value of money is just a rigorization of the principle that we prefer having money now to money later. Would you rather have 100 dollars now? Or a promise that you will receive 100 dollars next week? Obviously we would prefer to have the money now. But how much would you pay for the promise of 100 dollars next week? 90 dollars? 95? This is the time value of money in effect
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