1. FORTUNE Letters Roger Williams
Time & Life Building 51 Mimosa Street
Rockefeller Center FULHAM
New York London
NY 10020 SW6 4DS
Tel: 0207 751 3107
Email: rogertycho@hotmail.co.uk
Email: D4004161@tees.ac.uk
10th
November 2005
Dear sirs,
From reading your article “Eye on the Economy” I have noticed that you have an
equation called the “misery index”. The following equation should cheer you up.
G + I = IR
Where G = Annual growth
I = Inflation
IR = Interest Rates
Take for example in the UK where the Chancellor is struggling to balance his books.
Maybe if he used more accurate figures or created more jobs in the private sector his
problems may decrease.
Eg. UK Interest Rates = 4.5%
Annual Growth = 1.7% (latest predictions)
Inflation = 2.5% (approx.)
4.2%
4.5% - 4.2% = 0.3%
Now forwarding to the interview with Warren Buffett and Bill Gates. Mr. Buffett is
quoted “you’re not going to have the GDP in nominal terms grow 5% a year and
everybody makes 10% a year.” Mr. Gates is also quoted “there must be something out
there returning 10%.
Well, from that response Mr. Gates must either keep his money under a mattress or gives
it all away to charitable causes.
Using the equation G + I = IR
gives you 3.5% + 6.5% = 10%, rearranging the equation to show G - IR = - I
2. now gives you 3.5% - 10% = - 6.5%
Therefore the final equation is G + I - IR = 0
It all depends on what your focus or goal is, controlling inflation, annual growth or
setting interest rates.
I hope you have fun with this equation and I hope to hear from you in the near future.
Yours faithfully
R M Williams