Friday 29 May 2009

Reader's letter of the day. Nearly.

Spot the glaring error in this otherwise superbly pedantic letter in today's FT:

Sir, John Taylor describes how inflation will bring down the federal debt-to-GDP ratio (Exploding debt threatens America, Comment, May 27) but his arithmetic is wrong.

Ten per cent year-on-year inflation would result in 259 per cent increases in price in 10 years, not 100 per cent as he states. Surely as a professor of economics he is aware of the "rule of 72" whereby "only" 7.2 per cent inflation would result in a doubling of prices every 10 years.

If he indeed knows this then he intentionally misleads; if he doesn't then the Hoover Institution, of which he is a senior fellow, needs to enlist a more competent mouthpiece to promote their right-wing ideology.

John L Frank, Chelsea, MI, USA.


Highlight to reveal the answer:
Ten per cent inflation for ten years increases prices by 159%, not 259%!!! I hope he and the FT are kicking themselves.

1 comments:

Don Norman said...

I caught Mr. Frank's error, but I am an economist and and work with financial and macro data. What is surprising is that the Financial Times which boasts a staff of economic and financial analysts printed a letter with such an obvious error. FT should acknowledge its error.