please empty your brain below
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Exactly what I have been thinking about.
I think I read somewhere recently that if inflation runs at 4%, the value of a given sum of money is halved in 16 years. I can no longer find the link, but is this the case?
Blue Witch | 14.04.22 - 8:25 a.m. | #
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17 years
(1-0.04)17 = 0.5
diamond geezer | Homepage | 14.04.22 - 8:31 a.m. | #
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Thank you.
What about if inflation runs at 7% and at 10%?
Blue Witch | 14.04.22 - 8:59 a.m. | #
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(1-0.07)9.5 = 0.5
(1-0.10)6.5 = 0.5
so 4%... 17 years
7%... 9½ years
10%... 6½ years
diamond geezer | Homepage | 14.04.22 - 9:03 a.m. | #
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These sums for halving of value aren't quite right.
It should be to solve (1+x)^n = 2
not
(1-x)^n = 0.5
To see why they give different values for n, consider when inflation is 100%, i.e. value is halved after a year. But the second formula has no solution.
Nigel | 14.04.22 - 9:24 a.m. | #
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Sorry, my fault for using a formula that looked like it might be comprehensible rather than the correct one.
(1+0.04)18 = 2
(1+0.07)10 = 2
(1+0.10)7 = 2
So 18 years, 10 years and 7 years.
diamond geezer | Homepage | 14.04.22 - 9:39 a.m. | #
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Thank you both. Depressing reading. Spend it now while you can...
Blue Witch | 14.04.22 - 10:52 a.m. | #
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Or, more generally:
number of years = log 2 / log (1 + %)
So, to two decimal places,
4% -> 17.67 years
7% -> 10.24 years
10% -> 7.27 years
I'll get my coat.
Andrew | 14.04.22 - 10:52 a.m. | #
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Ugh, maffs! All I know is that everything is going up except my monthly income, which (before taxes) has stayed the same for 10 years now!
Cornish Cockney | 14.04.22 - 11:11 a.m. | #
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Just divide the interest rate into 70. Near enough right.
Bryn Davies | 16.04.22 - 8:50 a.m. | #
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