Inflation

Inflation is an increase in the money supply — not “prices going up.” That distinction matters: rising prices are a downstream symptom, not the thing itself.

Money supply vs. price level

When new money enters an economy faster than goods and services do, each unit of money commands less in exchange. The Cantillon Effect explains how that plays out unevenly — some prices move first, others lag, and the effect looks nothing like the “everyone loses equally” story.

What inflation is not

Prices moving — in either direction — is not inflation on its own. A phone getting cheaper because production got more efficient, or a mango getting pricier after a bad harvest, is the market doing its job: relaying real information about scarcity and productivity through the price system. Treating “some prices went up” as proof “inflation happened” erases the difference between the market correctly repricing goods and the state debasing the money everyone prices things in.

That’s why a general price index is a blunt, after-the-fact symptom, not the disease. The disease is the money printing; the index just shows where the rash surfaced first — see Cantillon Effect for who gets hit, and when.