Keep in mind that our income has outpaced inflation. The last component is globalization, or what I call, the deregulation of the word of the world economy. Any company or country can compete profitably by offering lower prices. There are 6 billion in the world and 2 billion just joined the world club of capitalism. The biggest advantage for the world economy is access to cheaper labor.
Corporation get more workers for less money, deflationary.
With globalization, it allows companies to produce their products anywhere where it is cheaper, ship to another market and resell at a higher price. We call this process arbitrage. Manufacturing locations just don t matter anymore. In the next 10 years, deflation, I believe, is the only game. If Alan Greenspan is going to tie the prime rate to the inflation rate then the long term prediction is that interest rates have no where to go but down.