That is correct.

But he that gets first use of the new money gets to spend it before it circulates and eventually causes prices to rise. Monetary inflation does not immediately cause price inflation for a couple of reasons. First, in normal times, it takes a while (usually one to two years) for the new money to circulate and cause general prices to rise. Second, in times like we have now where we have deflationary instances in the economy credit contraction is having the opposite effect so the monetary inflation is being largely offset by deflationary pressures. The thing about the deflationary pressures, they do not always coincide directly with the exact same goods and services as where the new monetary inflation money is flowing. So what we end up with is some prices rising (where new money is flowing), some prices falling (where deflationary effects are being felt) and some staying the same. So over all, in aggregate, we could be seeing prices either rise, fall, or stay the same depending on the overall forces at work. Thing of it is, we do not live an "aggregate" life. So the guy down the street that his house is devaluing is not offsetting the cost of the gasoline we have to buy. So "aggregate" figures work great for academic professors and economists but work poorly for us in the real world that are trying to sell a house or buy food and gasoline.

The thing about monetary inflation (increasing the base money supply) in a fiat (backed by nothing) money regime, it ALWAYS eventually results in price inflation. It may take some time, but all evidence of history tells us that fiat currencies eventually fail because of the too big to ignore temptation of the authorities to create too much of it. Human nature gets the best of the authorities and the fiat money eventually gets produced in such great quantity to the point people will no longer accept it in trade for goods and services. It becomes worthless. So far the US dollar has only devalued 97% from the value it started about a hundred years ago. There is no real reason to believe the last 3% is sacrosanct.

John