Quote from: bitfreak! on December 13, 2012, 05:29:41 PM

Quote from: TangibleCryptography on December 13, 2012, 05:25:01 PM

Inflation in this case is the increase in the supply of money (sometimes called money supply inflation).

Well that was my first guess, but then I thought the blue line was plotting the increase in the money supply or "monetary base" (same thing right?) and so then I figured they should just be the inverse of each other? Huh

If the inflation rate were the inverse of the monetary base, then it would have units of BTC^-1. But inflation rate is actually a unitless quantity. It expresses the fraction by which the monetary base grows in one year. This chart shows the instantaneous rate of inflation, annualized.

"Money supply" and "monetary base" are the same thing in the absence of fractional reserve banking.