Originally Posted by
VisionWings
compound interest says if you’re five percent behind and gain 50% you’re further behind.
.95* 1.5=1.425
1* 1.5=1.5
now you’re 7.5% behind when you were 5% behind last cycle.
Not quite.
If you're talking percentages, you're still only 5% behind.
1.425 / 1.5 = .95
If you move two contracts (or whatever units) by the same percentage factor then the percentage gap remains the same.
You're correct in absolute dollar terms (not percentage) we'd be further behind. 1.5 - 1.425 = .075.
Difference is significant, especially because other factors such as inflation eat into that gap.
So yes, I agree we remedy the gap with a larger increase. ~58% if it's ~50% bump elsewhere.
.95 x 1.58 = ~1.5
1.0 x 1.5 = ~1.5
This closes difference in absolute terms.