5th August 2011 - 2 Bad Maths

I noticed as my twitter feed flew past today the following link which amused me in a strange sort of way. It's an image of a poster claiming to solve the world financial crisis along with some conspiracy claims. In the middle of the poster they make the following claim.

*An estimated 51% of retail prices are a result of interest on the National debt. This means that as of right now, everything in stores is 51% more than it would be if we used a national currency like the United States Note.

What amused me was that someone claiming to solve the monetary crisis doesn't understand basic percentages.

Suppose an item costs $10. From the first sentence, we have that 51% of this price is interest on the National Debt. That would be $10 x 0.51 = $5.10, so without this interest on the item, it would cost $10 - $5.10 = $4.90.

The claim in the second sentence claims that everything in stores is 51% than it would be without the National Debt, as the poster claims that the United States Note will solve this. This 51% is now referring to the 51% of $4.90 (the price without debt) which is $4.90 * 0.51 which is about $2.50. If the second sentence were true, the item would cost $4.90+2.50=$7.40 which it doesn't. So how much more is being paid as the 51% is clearly wrong and not enough.

As we want the percentage to be compared to the price without the debt, we write the extra paid, $5.10, as a fraction of the price without debt and multiply by 100 to turn it into a percentage.

5.10/4.90 * 100 = 104% (to nearest percent)

What this tells us is that instead of paying about half extra as the poster claims, people are paying more than double what the price would be without the debt payments!

This illustrates how important it is to know what any percentage is of so that mistakes like this do not occur.