Monetary inflation and credit expansion change the lines of capital investment but not the overall amount of resources devoted to building the capital stock. They divert capital investment into lengthening the capital structure of the economy by expanding investment in the higher stages relative to lower stages. So, yes, some particular entrepreneur may have his project funded because of monetary inflation and credit expansion, but for the economy as a whole no additional resources are moved into building up the capital stock. There is no shift of resources overall into capital buildup because monetary inflation and credit expansion leave the demand for consumer goods and the lowest stage capital goods intact. In fact, the demand for consumer goods may increase as people’s wealth rises from the asset price inflation, e.g., the stock market boom, the housing bubble, etc. set in motion by monetary inflation and credit expansion. The boom that results from monetary inflation and credit expansion is therefore characterized by over-consumption and mal-investment.
Take a look at Joe Salerno’s article: