Recently a judge or someone in power in California defined a bee as a fish. It was something like that, though if not exactly that, it realistically doesn’t matter. Markets always speak, including markets for ideas. Ridiculous can’t last forever. Furthermore, foolishness about what a bee is can’t be too consequential.

Inflation is consequential. Without a doubt. And since it’s consequential, it’s essential that there be an understanding of the word’s meaning.

Ok, so what is inflation? It’s a decline in the standard as it were, a devaluation of the currency. To provide an easy explanation of inflation, in 1933 FDR decided to revalue a dollar that was exchangeable for 1/20.67 of a gold ounce to one that would exchange for 1/35th of a gold ounce. FDR devalued the dollar 59% by decree. The devaluation was the inflation.

It’s easy to see why inflation is so damaging. FDR’s foolish decision, one made without much thought, says it all.

Figure that all manner of contracts, service agreements, and hourly pay arrangements, had been denominated in dollars. FDR’s obnoxious decision eviscerated their meaning.

With every debtor, there’s also a creditor. For the debtor/creditor relationship to work to the benefit of both sides on the way to abundant credit, the monetary meaning of the arrangement can’t be altered. FDR turned the meaning upside down.

There are no companies and no jobs without investment first. No economic religion can evade this truth. When investors put money to work, they’re seeking future returns in dollars. FDR’s reckless decree proved a huge tax on existing investments, plus a deterrent to future investments. Yet people wonder why the 1930s were so slow economically, at least in a relative sense…

And then there’s the matter of “the people” who comprise any economy. They earn dollars. Get it? FDR’s mindless decision robbed them of their earnings, and savings. Yes, socialism tends to be economically enervating.

With inflation, it’s useful to establish what it is. That’s the case because the various economic Schools are presently seeking to re-define it. Actually they’ve long been trying to redefine it.

Right now Lawrence Summers and other Left-of-Center economic eminences claim too much economic growth causes inflation. Ok, but too much growth isn’t devaluation. Figure that growth is a logical consequence of investment, and as logic would indicate about what is a logical consequence of investment, it’s least likely to take place during periods of actual inflation. Really, why would investors put wealth to work in pursuit of uncertain returns while knowing that the returns will come back devalued?

From there, we can say that Summers’s vision of too much prosperity causing the economy to “overheat” is a laughably obtuse attempt to redefine inflation. That’s the case simply because the investment that powers growth is all about producing more and more goods and services at prices that continue to fall. Put more bluntly, the surest sign of economic growth is falling prices. And no, falling prices are NOT deflation. As reason dictates, a falling price frees up dollars for pursuit of other goods and services, including ones formerly out of reach.

The above digression into “deflation” is important in considering inflation. If falling prices aren’t deflation (see above), rising prices on their own aren’t inflation. If we’re paying more for certain goods, we’re logically paying less for others. Still, some errantly view inflation as “rising prices.” No, the suggestion that rising prices cause inflation is as boneheaded as saying that wrecked houses cause tornadoes. Causation is reversed.

It’s important now with higher prices plainly evident. What’s less evident is that the higher prices are evidence of “inflation.” Think about it. We surely know that lower prices are a consequence of work divided on the way to the production of exponentially more at costs that continue to fall. Yet in 2020, tragically inept politicians (a redundancy? You bet) chose global lockdowns as a virus mitigation strategy. Work that had been divided up among billions of workers around the world suddenly ground to a halt. A miracle of ever falling prices was handcuffed. That prices are higher today as these remarkable symmetries are rebuilt is kind of a statement of the obvious. Alas, the imposition of command-and-control is not inflation.

Some say it’s government spending? Funny about this is how many members of the Right say government spending is inflation. They say the spending increases “demand” in the economy. Which is the Right’s implicit way of saying “We’re all Keynesians now!” Back to reality, all demand begins with supply. Which is a reminder that government can at best shift demand from one set of pockets to another. If you’re confused, just pickpocket the next person you come across. The $20 you take from this individual so that you can buy things means the thieved individual has $20 less.

Something’s wrong here. Yes, there is something wrong. It’s about definitions. While the dollar has surely been weakening during much of the 21st century, over the last two years it’s risen against the pound, euro, yen, and seemingly every other foreign currency. More important, it’s risen against gold too. Yes, this would be the first “inflation” in history that took place as the dollar’s value increased. Inflation is once again a serious subject. Too bad what’s serious is being redefined.

John Tamny is editor of RealClearMarkets, Vice President at FreedomWorks, a senior fellow at the Market Institute, and a senior economic adviser to Applied Finance Advisors (www.appliedfinance.com). His most recent book is When Politicians Panicked: The New Coronavirus, Expert Opinion, and a Tragic Lapse of Reason.Originally published by RealClearMarkets. Republished with permission.