"Inflation can be defined as _______"

Where X is whatever the hell you want!

For many years, the word inflation was not a statement about prices but a condition of paper money—a specific description of a monetary policy. Today, inflation is synonymous with a rise in prices, and its connection to money is often overlooked.

—Federal Reserve Bank of Cleveland, “On the Origin and Evolution of the Word Inflation”

I could not have summed up the problem any better. Thanks, Cleveland Fed!

Inflation can be defined as the overall general upward price movement of goods and services in an economy. The U.S. Department of Labor's Bureau of Labor Statistics has various indexes that measure different aspects of inflation.

—Bureau of Labor and Statistics, Overview of BLS Statistics on Inflation and Prices

Inflation is the act of debasing currency. The Consumer Price Index does NOT measure inflation. The Consumer Price Index measures an obvious symptom of inflation—the prices of consumer goods increasing.

But if you define inflation as “the general upward price movement of goods and services”, then suddenly you’ve muddied the entire discussion of who is to blame for rising prices. Asking, “Why did prices increase compared to last year at this time?” is very different from asking “How many new dollars were issued into the money supply compared to last year at this time?”

That difference is key!

Here again, is the Cleveland Fed to explain why:

What was once a word that described a monetary cause now describes a price outcome. This shift in meaning has complicated the position of anti-inflation advocates. As a condition of the money stock, an inflating currency has but one origin—the central bank — and one solution — a less expansive money growth rate. But as a condition of the price level, which may have originated from a variety of things (including a depreciating dollar, rising labor costs, bad weather, or a number of factors other than “too much money”), the solution to—and the prudence of—eliminating inflation is much less clear.

Whereas the first question has myriad potential causes, the second has only one: government monetary and fiscal policy. If you’re trying to impose a stealth tax on the poor and middle class, eliminating the vocabulary to identify the problem is an effective way to do it.

Referring to price increases as “inflation” is a contradiction in terms, and entirely counterproductive to policy discussions. We don’t need to invent a new term for rising prices. They’re called rising prices.

And the word for issuing new currency is inflation.