Purchasing power

The number printed on a banknote never changes. What changes is what that number can do.

Purchasing power is the honest way to think about money, because it looks past the figure and at the shopping. A note left untouched in a drawer for decades is physically identical when you take it out, and buys substantially less — nobody stole from you, the ruler simply got shorter.

It is also the right lens for comparing across time and place. Saying a Roman soldier earned some number of denarii means nothing on its own; what matters is how much bread, land or labour that number bought.

Inflation is measured as the rate at which purchasing power falls. Its opposite, deflation, is purchasing power rising — which sounds appealing until you look at what it does to spending and to debts.