''Governments cause inflation,'' said The Financial Post last week. To many readers, this will rank among the less sensational revelations of the day, on a par with recent scientific work proving that the panda is indeed, as any child could tell you, a bear. But, in the sense The Post story means it, it's also wrong. And not just wrong, but dangerously wrong.

The story quotes a Bank of Nova Scotia study showing that market-based prices rose 3.1% from fourth-quarter 1989 to fourth-quarter 1990, while government- regulated prices rose 9.4%. Inflation, in other words, has moderated, but ''the drop has been disguised by price and tax increases piled on by governments.'' Worse, said the story, the Bank of Canada has been cranking up interest rates in response to this artificial inflation.

The Post devoted another story to it the next day, noting that ''the Bank of Canada will have to clamp down on the private sector to reduce inflation for years to come in order to offset rising public-sector inflation.'' And when March inflation figures were released later in the week, showing a 0.4% rise wholly the result of increases in cigarette taxes, they seemed to confirm the explanation. Market prices, 3.1%; regulated prices, 9.4%. Governments cause inflation.

First point: So much for regulation, the consumer's friend.

Second point: This isn't inflation; it's a rise in prices, which is not the same thing. Inflation is a fall in the value of money, which may or may not mean a rise in the price of other things. Government prices rise, because that's how governments extract revenue from the populace. Certainly, we'd all like to evade that burden by raising our own prices and wages to compensate. But it's an impossibility: sooner or later, someone's got to pay. For the Bank of Canada to accommodate this endlessly accelerating game of musical chairs with money creation would only end up giving the whole economy the dizzy-spins.

Third point: The alleged excessive tightness of bank policy in alleged response to this alleged inflation still left non-regulated prices rising 3.1%. Though this was awarded the adjective ''only'' in the story, on the basis that this was the lowest such number since the 1970s, it's about 50% higher than the average measure of inflation in the first two decades after the Second World War. It would be one thing if the bank were trying to keep increases in the consumer price index to zero, and thus forcing non-government prices to fall. But the overall CPI was up 4.9% in the fourth quarter - much higher than it would be if only goverment prices were rising.

Fourth point: Believe it or not, the Bank of Canada employs competent economists, many of them college graduates, capable of distinguishing between one-time spikes in the CPI owing to government price increases and the ongoing debasement of the currency that is inflation.

Fifth point: Unfortunately, the bank does not employ economists competent enough to avoid the latter. The overall price level has not been rising in recent years because of ''cost-push'' factors (see third point) but because of double-digit money supply growth. Some of us were warning about this in the late 1980s; lately the bank has admitted that ''if monetary policy had been more restrictive then . . . interest rates would be lower now.'' Governments do cause inflation, but only because they control the money supply.

Sixth point: If every increase in the CPI causes higher interest rates, then we should have expected the introduction of the goods and services tax, which added another 1.4% to the CPI in January, to send rates through the roof. So how come rates continued to fall after the GST? Answer: CPI increases don't cause higher interest rates. Why? Because markets can tell the difference between CPI spikes and inflation. And markets look where inflation is going, not where it's been. Bank policy tightened in 1990. Inflation is destined to fall. Hence the fall in interest rates, even as the HD:s said inflation had risen.

This may seem like so much pedantry. So inflation is not the same as rising prices: big deal. But it's precisely this confusion that gives credence to critics like Toronto-Dominion Bank's chief economist Doug Peters, who claim the bank and the government are riding a ferris-wheel of futility: higher taxes lead to higher inflation, which means higher interest rates, which add to government borrowing costs, which necessitate higher taxes, and around and around again. Stop the wheel, they say, and we can get off. We have.