Einstein said that the most powerful force in the universe is compound interest. But I think he got it wrong. The most powerful force is – time. It impacts everything we do. And the older we get the more we see it’s effects.
Take for example, the cost of products. Order a birthday cake today and you’ll be surprised how thin it is. They just aren’t as tall as they once were. The price of the cake hasn’t changed. So why the short cake? Inflation. As the cost of goods increases over time, either the price of the product has to increase, or you have to get less of it. With cakes, for the same $20 today, you get less cake than you did twenty years ago.
Without the long term perspective of time, no one would notice. But those of us that have been around a while can’t be fooled.
So which is the force, inflation or time? Both. But as strong as inflation and interest are, they have a small impact in any one period. But add the force of time, and the effects of these other factors are magnified, or compounded, quickly.