Are Increases in the Consumer Price Index What Inflation Is All About?
The main problem with this way of thinking is the definition of inflation. Most economists hold that inflation is a general rise in prices that can be captured by the consumer price index, but they disagree about the causes of inflation. In one camp are the monetarists, who argue that changes in money supply cause changes in the CPI. In the other camp, we have economists who argue that inflation is caused by various real factors. These economists have doubts about the proposition that changes in money supply cause changes in the CPI. They believe that it is likely to be the other way around. We suggest that inflation is not rises in prices as such but the debasement of money. Historically, inflation originated when a ruler would force the citizens to give him all the gold coins under the pretext that a new gold coin was going to replace the old one. In the process, the king would falsify the content of the gold coins by mixing it with some other metal and return to the citizens diluted
