How do they get calculated?

This page has answers:

The CPI consists of a family of indexes that measure price change experienced by urban consumers. Specifically, the CPI measures the average change in price over time of a market basket of consumer goods and services. The market basket includes everything from food items to automobiles to rent. The CPI market basket is developed from detailed expenditure information provided by families and individuals on what they actually bought. There is a time lag between the expenditure survey and its use in the CPI. For example, CPI data in 2023 was based on data collected from the Consumer Expenditure Surveys (CE) for 2021. That year, over 20,000 consumer units from around the country provided information each quarter on their spending habits in the interview survey. To collect information on frequently purchased items, such as food and personal care products, approximately another 12,000 consumer units kept diaries listing all items they bought during a 2-week period that year. This expenditure information from weekly diaries and quarterly interviews determines the relative importance, or weight, of the item categories in the CPI index structure.

The CPI represents all goods and services purchased for consumption by the reference population (U or W). BLS has classified all expenditure items into more than 200 categories, arranged into eight major groups (food and beverages, housing, apparel, transportation, medical care, recreation, education and communication, and other goods and services). Included within these major groups are various government-charged user fees, such as water and sewerage charges, auto registration fees, and vehicle tolls.

If you want to see the current makeup of the basket of goods whose prices are tracked, and their weights in the index, here is Table 1 of the most recent report. And if you want to follow the price of a specific category over time, the Federal Reserve Bank of St. Louis keeps a really helpful interactive chart service for almost every public economic stat. Here is Table 1 of the CPI report.

It’s a lot of data collection on prices across a lot of transactions, and a lot of list prices, and a lot of locked in contract prices, to determine how much people are spending on different types of things, whether the quality of those things is changing over time, and what percentage of a typical household income gets spent on those types of things.

1 oz = 28.35 g

Maybe that 1/3 of a gram is shorting someone, but a single ounce is closer to 28g than to 30g.

Obviously depends on the specific item.

Here’s the national averages for:

Flour

Milk

Boneless chicken breast

Or an entire table of food items they’ve been tracking monthly prices on for years.

The Five Dollar Footlong was a promo created in 2003 when the normal price of a footlong was $6, by a single franchisee. By the time the promo went national, supported by the chain itself (and a national ad campaign), in 2008, that became a big enough deal to really move sales. And they watered it down at some point (by late 2010 when I was working next to a Subway and no other lunch options, I remember it only being a specific sandwich that rotated monthly, with all other footlongs regularly priced). And it was eventually discontinued in 2012.

It’s hard to pin this particular promo and call it totally representative of all pricing in the mid 2010s.

$5 in April 1980 dollars is the inflation adjusted equivalent of $20 in December 2025:

https://data.bls.gov/cgi-bin/cpicalc.pl?cost1=5.00&year1=198004&year2=202512

We’re just going to have to agree to disagree.

I think that’s right. To summarize, here’s where I think we agree and disagree:

We agree: GDP is not a particularly good metric for measuring international economic influence.

We disagree: You think adjusting GDP by PPP makes it better for this context, and I think that adjustment makes it even worse.

We agree: Exports matter for discussing economic power on the international stage.

We disagree: I think imports and investment also matter. You clearly don’t, by dismissing them as mere consumption and financial engineering.

We agree: United States economic power overseas is in decline, including in the hegemony of the US Dollar, and its importance/influence through organizations like the World Bank, IMF, WTO, or even things like the SWIFT banking network.

We disagree: I think the United States is still much, much stronger than China on global economic influence. The lines may cross, where China overtakes the United States, but I think that would be in the future, whereas your comment suggests you believe those lines crossed in the past.

In the end, a country like Venezuela wants to sell barrels of oil to buyers, for a good price. That means things like U.S. sanctions (especially when enforced by the entire west) will hurt more than Chinese aid helps. At least as of 2026.

Maybe you’re not dreaming big enough on what makes ideal conditions. The fraudulent Nikola company managed to film a semi “driving” a few km without a powertrain, by just letting it roll downhill. I bet there’s a place that has a high enough altitude and smooth enough roads for a long downhill descent where 600km on a 300km battery is possible.

Makes me wonder about the wheel’s rotational inertia, too. In theory, a hubless wheel could be lower mass overall without the need for a center axle/hub and spokes connecting the outside to the center. But that’s all weight saved in the center of the wheel with lower effect on overall rotational inertia. Visually, the picture that makes the thumbnail in this post shows that the brake disc has to be further from the center of the wheel, which I imagine adds a lot more weight (more material necessary for the overall brake disc being a larger circle) and a lot more rotational inertia (further from the center).

Maybe the whole design itself can save weight in certain places that make up for the weight added in other places. But I just have a ton of questions, and am overall pretty skeptical of the long term potential of this design.

Looks cool, though, I guess.

The hubless wheel is on their current models. It’s basically their signature differentiator.

There’s reason to be skeptical of the company and its claims as a whole, but at least that particular feature has shipped and has been test driven by reviewers:

https://thepack.news/11000-km-in-2-months-marc-travels-rides-the-verge-ts-across-europe/

We are far beyond the GDP vs. GDP(PPP) that started this.

No, you started talking about PPP in response to a news story that described the United States and China competing over influence over the Venezuelan economy: Chinese aid and investment in response to United States sanctions. Those are essentially going to be dollar denominated, and PPP doesn’t matter. I’ve been saying from the beginning that you were wrong to bring PPP into the discussion, because this discussion, in this thread, isn’t about domestic consumption in either China or the U.S.

The US’s main problem is it’s lack of industrial production.

Again, when talking about the effects of sanctions and foreign aid and investment, we should be talking about transactions that occur in the currency at issue. If China wants to provide aid to Venezuela in RMB, Venezuela will either need to spend that on Chinese producers or exchange for another currency to spend elsewhere (including Venezuelan Bolivars being spent domestically). If there’s going to be a currency exchange, then PPP of the aid providing nation doesn’t matter. A million USD from China is worth the exact same amount as a million USD from the U.S.

On the world stage, as an economic power, the US is losing to China.

I think if we’re talking about on the world stage, as an economic power, the interconnected West is best understood as a power bloc. U.S. inconsistency and unpredictability on things like Russian sanctions actually show the limits of U.S. unilateral power while still showing the power of the broader Western order. Yes, China and Russia want to provide the world with an alternative multipolar order, and fragmentation of the Western powers may open up opportunities for that vision, but that competition is playing out along alliances, not isolated nations. In any event, PPP doesn’t have anything to do with that particular competition.

Today? Probably not.

More than 2 weeks ago, when this was published? In that context, based on what was common knowledge among the public then, I understand why he erred on the side of overexplaining that the U.S. military was on the cusp of escalating to an invasion.

If we’re not comparing the ability of a citizen to buy things with the fruit of their labor. What are we comparing?

In this particular case? I think we’re comparing Chinese and American ability to project economic influence (from trade or aid, to outright bribes or coercion or boycotts or sanctions or everything in between) over Venezuela.

The normal person

But the normal person has nothing to do with governments dealing with other governments on the global stage. And that’s what this story is about, Venezuela being caught between two competing visions of their future in the international order.

If a country wants to build an airport in their capital city using the resources of foreign governments seeking to influence them, the question isn’t about how many eggs the citizens of those countries can buy in their home turf, but about how much concrete and steel and heavy machinery those other countries can provide in the country considering offers.

No serious economist uses GDP as a metric for actual economic production. Can we please at least use GDP (PPP)?

In terms of flexing on foreign countries on the international stage, though, raw GDP (or at least imports and exports) is pretty important.

The PPP calculation comparing China to the United States may tell us a lot about how much a resident of either country can expect to experience using the local currency domestically, but if we’re talking about influence over a third country, in that third country’s local currency, then I think each respective PPP back home doesn’t matter as much.

The Federal Reserve is the entity that can creates dollars out of thin air, bevause they control the interest rate of the dollar.

They control the base currency by physically printing dollars and lending money directly to banks. Then, more significantly, they influence the money supply by influencing how much commercial banks are lending, through interest rate operations, and sometimes through market operations that provide liquidity for certain types of securities (especially government bonds).

Taken together, it’s the power to create or destroy money in response to macroeconomic trends.

The Federal Reserve system is independant of the US federal government.

Kinda. The board of governors is chosen by the president to 14-year terms, theoretically making them independent of any specific President’s specific priorities. But there’s a Supreme Court case heading when the President can fire the governors, which might effectively end or limit Fed independence.

The individual federal reserve banks also operate in their regions with a lot of leeway to meet local needs, and those are public/private partnerships where nationally chartered banks also have a voice in their operations.

My “We’re totally different from Enron” accounting report has a lot of investors asking questions answered by the report.

In my mind the concept was one of regulatory oversight.

No, the core concept is one of whether a bank has full reserves, sufficient to cover all of the deposit liability. If the bank keeps only a fraction of the total liability in reserves, then that’s a fractional reserve.

Do you think that when a bank loans money to another bank they are creating money out of thin air?

Yes, that creates money.

If they can do that then why do they need to borrow money?

They need to borrow money for liquidity, to cover the payments they owe to others. An IOU isn’t money, so having a bunch of IOUs in the asset column may require a bank to pledge those IOUs to borrow some money from someone else, maybe even another bank. Then, with money in hand, they can make payments to fund their own operations (pay employees, rent, vendors, taxes, etc.) and pay depositors on demand.

And as a financial institution borrows too much and pays that interest, or is overextended without enough assets to remain solvent/liquid to be able to make payments as they’re due, they may find themselves with insufficient creditworthiness to be able to borrow freely (as other banks are wary of lending to someone who might not pay back). And they might fail. So that general concern always provides a limit on how much they can borrow from other private entities.

They can borrow from the central bank as a lender of last resort, but that carries a cost (and can still only borrow as much as their assets can support). If they’re paying more interest to their creditors than they’re collecting from their borrowers, they’re gonna fail.

Do you believe that the US government must collect taxes before it can spend money? Or do you agree that government spending is self financed and money creation (in spending by the US government) is only limited by concerns of inflation?

No, the government can (and does) borrow money to finance its operations, as well. For the U.S., the sheer amount of government spending is such a high percentage of economic activity that it would be highly inflationary to combine the fiscal power of spending money with the monetary power of controlling the money supply (through creation of base currency, influencing private transactions and interest rates to control bank-created money, and buying/selling securities on the open market).

I think if we lived in a different system without an independent central bank, we’d see a lot of different things going on, including a temptation to elected officials to just create money without regard to inflationary effects. But in the current system, most of the money is created by banks.

Do you believe that Banks hold digital money in their reserves? I do.

Yes, that’s what we’ve been talking about the whole time. When a commercial bank creates a loan, that’s just a ledger that creates an asset in one column and a liability in another column. It could be paper, or it could be digitally stored. If the funds are transferred electronically to another bank, that’s often an electronic record with no physical movement of anything. So yes, those are effectively digital dollars that can be withdrawn as paper money on demand at any given time.

it’s true that banks can create money when they lend more than they have in reserves and assets

To be clear, the article is saying (and I’m saying) that the bank creates money every time it makes a loan, in the amount of the loan. Regardless of whatever its reserve and asset situation is. An asset and a liability are created in that moment that cancel out, and then each side can take their asset and do something with it: the borrower uses that cash to spend, and the lender uses that loan balance as an asset it can borrow against or otherwise count on income from.

IMO bank loans are credit but the bank loans are repaid with actual money.

It’s repaid with actual money, but it’s all actual money. When the loan is created the balance in the deposit account can be withdrawn or transferred from there and it’s real money that can buy real goods and real services. The money is created, and then it’s real money in the economy. Then the loan is repaid with real money, and then destroyed in the act of repayment and reducing the balance owed on the loan.

Also, you mentioned fractional reserve banking but that no longer exists. It ended around 2020 when the government changed regulations and no longer requires banks to hold any ratio of reserves to debt.

No, that had the opposite effect of what you think. The minimum reserve requirement was abolished, so banks could then do fractional reserve banking in any fraction they pleased, including even smaller ratios than what was previously allowed. The change in regulation didn’t eliminate fractional reserve banking; it eliminated limits on fractional reserve banking, and every bank continued to hold a reserve that is much, much smaller than 100% of the amount of their deposit liabilities. So the fractions still exist. And can continue to exist in any number, with other practical limits on their ability to loan (creditworthiness and solvency).

VTWAX is still like 65% US equities. It hasn’t diversified out of U.S. exposure (and frankly, international stocks aren’t protected from U.S. economic crises). A lot of people think about full blown collapse and crisis, but wouldn’t know what to do about lethargy and stagnation for decades, but still roughly the same economic and financial paradigm.

I think U.S. equities are overpriced right now, especially when looking at market cap weighted indexes (because the U.S. tech bubble seems to represent a much higher percentage of any given index). And I’m concerned that the correction will just be decades of tepid growth or even stagnation where decades of investment won’t actually earn a good return. Not that I’m investing in something else, other than maybe the soft skills I’ve described in my earlier comment.

Your own link from the Bank of England starts off with the thesis that agrees with me:

This article explains how the majority of money in the modern economy is created by commercial banks making loans

And you might as well link to the canonical URL of the PDF or the Bank of England website landing page for that article instead of Google Drive acting as a middleman.

The money in the bank’s reserves started its life by being created by the federal government.

No, you’re misunderstanding how the money supply works. The creation of physical printed money might happen by the government, but those physical dollars represent such a small portion of the overall money supply.

First of all, through fractional reserve banking, one physical dollar can get multiplied many times over to represent many dollars in circulation. Especially because most transactions happen on paper, through a ledger that transfers funds from one account to another.

Everything you’re saying still relates to the practical limits of money creation by commercial banks, in terms of creditworthiness (banks don’t want to lend money they can’t get back) and liquidity/regulation (banks don’t want to be left vulnerable without sufficient reserves to satisfy account holders demanding their deposits).

Realistically, the bank takes one of their own assets, such as the balance on the loan, and uses that as collateral to borrow liquid cash as needed for its own reserves (which are only a fraction of the total deposits in its accounts). And every dollar in a circle in a closed loop that doesn’t touch the Fed is a dollar that doesn’t actually trace back to a governmental entity. The Fed is a lender of last resort, but they’re a last resort because they generally charge higher interest than bank to bank loans.

So of the entire money supply, the vast majority of it is dollars created by banks, not dollars created by the government.