If you go to the Minneapolis Fed site, you'll see an inflation calculator in the right-hand margin. If you put $1 into it, with a starting year of 1913 and an ending year of 2009, you'll see the number $22.06 pop out.
The right wingers divide 22.06 by the number of years (96) and say, "see, we've had a 23% yearly inflation rate since 1913! The dollar is worthless!" The sandwich mistress who took my $5 bill and gave me a sandwich an hour ago might disagree, but anyhow, it doesn't matter: the right winger's argument is math fail, because we're talking about COMPOUND interest -- each year's inflation is based upon the previous year's value of the dollar, not upon 1913's value of the dollar.
The equation to calculate compound interest is (1+i)**n where i is the interest rate and n is the number of years. For example, $1 compounded at 5% interest for 10 years is $1.63, *not* $1.50 as you might expect if you're an idiot. So if we're trying to discover the inflation rate over the past 96 years, we need to take the 96th root of $22.06, then subtract 1 from it. Which is 1.03275-1, = 0.03275, = 3.275% average yearly inflation over the past 96 years.
Now, you might ask, "is 3.275% average yearly inflation a good thing?" But of course! As I've previously pointed out, without inflation, money turns into mattress stuffing rather than being in banks. And we want money in banks because bank lending allows the capital expenditures to respond to future demand using the future income generated by that future demand, and thus allows a capitalist system with functioning banks to be far more flexible and nimble at meeting consumer needs. I.e., a capitalist system simply works better -- is more flexible and nimble -- if we have a moderate amount of inflation each year, where "moderate" is generally considered by economists to be somewhere between 2% and 4%. Which, I might point out, describes 3.275% to a tee.
So anyhow: There's the math. Next time some idiot wingnut says "we've had 23% inflation every year since 1913!", you can whack him upside the head with this math until he staggers off, bleeding what pitiful mattress stuffing substitutes as "brains" from his ears. Have fun!
-- Badtux the Math Penguin
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(What I feel like doing to right-wing idiots sometimes).
I guess we know why they consider public education as a failure.
ReplyDeleteDear demented bird
ReplyDeleteI found your blog by following the link from your comment on Jazzbumpas blog. I read a couple of entries, thinking, who the Hell is this guy? Then I read the July 5 entry, signed "the irate penguin" and I knew immediately: this guy is one of US. Hello.
BTW: as for the stupid motherfucker right wing cretins, how is it that an entire class of working people can be convinced by the fact that they have a color TV, a car and air conditioning that they are "middle class"?
One last shot; "they only call it class war when we fight back".
Like your blog.
Are you shitting me? Have you actually seen someone making the claim that $1->$22.06 over 96 years equals a 23% inflation rate (or the equivalent math fail)? That is stunning. And frightening.
ReplyDeleteThat picture is almost what the new kitten was doing, constantly, once she started living here. I think the other cats finally broke her of it.
ReplyDelete