D.E. Knuth, in his infamous The Art of Computer Programming, section 1.2.2, presents the following algorithm to efficiently calculate logarithms based on the method used by Henry Briggs:
Suppose that we have a binary computer and a number $x$, $1\leqslant x < 2$. Show that the following algorithm, which uses only shifting, addition, and subtraction operations proportional to the number of places of accuracy desired, may be used to calculate an approximation to $y=\log_bx$:
L1. [Initialize.] Set $y\leftarrow 0$, $z\leftarrow x$ shifted right $1$, $k\leftarrow 1$.
L2. [Test for end.] If $x=1$, stop.
L3. [Compare.] If $x-z < 1$, set $z\leftarrow z$ shifted right $1$, $k\leftarrow k+1$, and repeat this step.
L4. [Reduce values.] Set $x\leftarrow x-z, z\leftarrow x$ shifted right $k$, $y\leftarrow y+\log_b(2^k/(2^k-1))$, and go to L2.
My question arose from the exercise right after the aforementioned algorithm:
Determine the upper bounds on the accuracy of the algorithm in the previous exercise, based on the precision used in the arithmetic operations.
Knuth stays silent, giving no hints on its solution in his book.
I think I've seen something similar in the BKM Algorithm published in 1994. It uses a similar method to get logarithms and claims to have an error of $2^{-N}$ after $N$ iterations.
I kindly ask you to help me understand what does Knuth mean exactly by basing the determination of the upper bound on the precision used in the arithmetic operations, and how does one arrive at that error bound purely from this algorithm?