Which is worth more: €10 or $10?
Two notes, same number on them. One says euro, one says dollar.
🤔 Can you answer that from the number on the note?
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No. The number is just a name for one unit of that currency. €10 buys a certain amount of things. $10 buys a certain amount of things. Which is "more" changes every day.
Try it: €10 is a few hundred thousand Vietnamese dong. That huge number does not mean the dong is weak — it is simply a smaller unit.
🤔 So what should you look at instead of the size of the number?
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Two things: what you can buy with it, and whether that stays stable over time. A currency where €10 is 300,000 units and stays 300,000 units for years is doing its job perfectly.
Same ice cream, ten years later
Ask your parents what one scoop of ice cream cost when they were your age. Then look at the price today.
One scoop of ice cream — and the money you need for it.
🤔 The ice cream did not change. So what changed?
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There are two ways to say the same thing — and both are correct.
Option A is how shops talk. Option B is how you have to think if you want to understand your own money.
What will it cost when you are older?
Type a price you know today, a yearly inflation rate and a number of years.
Example numbers. Real inflation changes every year — some years more, some years less.
🤔 You keep €1,000 under your bed for 20 years. Is it still €1,000?
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The number is still 1,000. The purchasing power is not. At 2% inflation, €1,000 buys roughly what €670 buys today — you lost about a third without spending a cent.
This is the reason Block 3 exists: money that only sits still slowly shrinks.
A little inflation — and the other kind
Most of the time inflation is slow. For the euro, the European Central Bank aims at about 2% per year over the medium term. At that speed you barely notice it from month to month, but over 20 years it is clearly there.
Sometimes it is not slow. Prices can double in a month, then double again. That is called hyperinflation, and it has happened in real countries — in Germany in 1923, and much more recently in Argentina.
🤔 Why is a little inflation not treated as a disaster, while hyperinflation is?
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Because people can plan around 2%. Wages, contracts and savings can be adjusted. When prices move every week, nobody can plan anything — and people stop trusting the money. Without trust, money stops working. That is Lesson 1 again.