THE FUTURE OF MONEY Bernard A. Lietaer - library.uniteddiversity ...

duration of the project. (All values are rounded to the nearest dollar
for illustration purposes, since carrying lots of decimals would not
modify the argument presented.)
We all know that money in the future is worth less than money
today. How much less depends critically on the 'discount rate'
applied to the project.
Our analyst knows he could deposit $91 in a bank today at a 10%
risk- free rate of return, and automatically get $100 a year from now.
Therefore the $100 a year from now is identical to $91 today. By the
same reasoning, the second year's 8100 would only be worth $83, the
third's $75, etc. By the tenth year, the $100 inflow only represents to
him $39; and in the fifteenth year a paltry $24.
So what looked like a perfectly reasonable investment, getting back
$1,500 on a $1,000 investment of Figure 8.3, turns out as a lacklustre
project when looked at through the Near-Seeing Glasses of our
financial analyst.
If we projected these forwards for a century, the last $100 would
really be worth only seven cents. Two centuries out we are looking at
a few hundredths of a cent. No wonder that in our societies we do
not usually think about the effect on our decisions 'for the seventh
generation', a process which would require us to take into account
two centuries in the future...
There is nothing wrong with the financial analyst's eyesight or his
reasoning. He just applies straightforward financial logic to a
currency, which has a positive interest rate.
Short term vision versus sustainability