[AZLiberty]

Conventional inflation (or deflation) is monetary, measured by how much additional money the government "prints" (or electronically puts into circulation). The market can produce higher or lower prices for products based on scarcity, as demonstrated by eggs going to $2 a dozen this spring and back down to $1 now. Technology generally produces lower prices by reducing the required inputs to produce the same or even better outputs. All of these are going on at the same time.

Greenspan's "genius", as I've said before, is to inflate the currency at roughly the same rate as technology is driving the general price level downward, producing an apparent inflation rate of approximately zero, and siphoning off huge amounts of money for government spending without requiring additional taxes. This is, in part, what makes the Bush tax cuts work: the government still gets its cut (by printing it), and people think they're paying less taxes. As long as technology continues to drive down the general price level, no one's the wiser. In fact, it behooves the government to support technology improvement, since the faster technology drives down real prices, the more the goverment can extract through monetary inflation without attracting anyone's attention.