EC, you have read John Keynes book have you not? If you understood what he said you would realize the dollar bill is nothing more than a place holder, the infrastructure for financial transactions to occur upon.

Absolutely. That's why goldbugs hate this.

This very simplistic view of inflation is based on Germany after WW1.  Inflation is caused by a number of things, not simply the over printing of money in relation to the GDP.  The fact that the US sells bonds should tell you our monetary policy is not about printing money, otherwise why sell bonds, just print the money to cover government expeditures.   You're thinking of 2nd and 3rd world countries who attempt to meet their expenses when they can't sell enough bonds or raise enough tax revenue.  Remember Latin American Debt crisis??

The amount of inflation in the US is based on three things:  1. On the innovative ability of a manufacturer to produce a product more cost effectively, whether through automation, labor, material, location, distribution or design. e.g. the cost of computers; 2. The number of competitors, i.e. lots of competitors forcing innovation or few competitors allowing the passing of cost increases (inflation psychology); 3. closely linked to #2, Demand vs. Supply of the product - the seller will always charge what the market will bear sometimes with no relation to the actual cost.  The sales price rises exponentially (not proportionally) the closer it gets to a shortage.  Inflation in this case is directly a result of too little product chased by too many buyers. 

Inflation can be both good and bad, good in that as a product's price rises, it draws more competitors to produce the product (or alternatives) and thus sets the stage to bring product availability in line with demand.  A good example of this is oil, at $100/barrel there greater insentive to innovate alternatives or the efficiency of use than at $50/barrel.  Oil at $3/gal meant little insentive.  Or inflation can be bad if inflation psychology sets in as when manufacturers just pass on the costs and so don't bother to compete.  Again oil is a good example of this.

Government policy can cause overall inflation by keeping interest rates too low thus causing the economy to expand too fast since companies then begin to compete for resources to expand thus causing a shortage. Hence the Fed constantly messing with the interest rate.

Hanlon's Razor: Never attribute to malice that which can be adequately explained by stupidity. dscott's corollary: The line between malice and stupidity is called depraved indifference.