Inflation
economics · beginner
An increase in the money supply, or in the general price level — depending on whose definition you accept.
Classical economists defined inflation as an expansion of the money supply, with price increases as the consequence. Modern usage usually means price inflation directly, measured by indices like CPI. Bitcoin's "inflation rate" refers to the rate of new-bitcoin issuance — currently under 1% per year and halving every four years.
The two definitions get confused because they're correlated, not identical. Money supply growth pushes prices up, but other forces — productivity gains, supply shocks, demand shifts — push them around too. The 2020–2022 inflation spike was a textbook example: M2 grew ~25% during the pandemic, and CPI followed with a delay, but supply chain disruption and energy shocks also contributed in non-monetary ways.
CPI itself has methodological critiques. Substitution (the basket changes when prices change), hedonic adjustment (a faster computer at the same price counts as deflation), and owner-equivalent rent's treatment of housing all systematically pull the published number down. ShadowStats, the Chapwood Index, and the Truflation feed are common alternatives, all of which estimate higher inflation than the official CPI.