Anyway, sorry to say but there seem to be some flaws here. First is international competition -- you seem to dismiss it entirely. Since you place your inflation in the realm of manufactured goods, this is a glaring omission. Um, China? Second is that we have not seen any evidence of fewer companies yet, or not that I know of. You focus on "manufacturers" but that's not sensible really, unless you're only concerned about manufactured goods... Anyway manufactured goods are easy to import, so again there's that. Note that Hyundai has been making big inroads to the US car market. By bringing in a good product with a low price. Low price being the key here. We can say that a weak won has helped them, but that changes little. And if it's Ford vs Chevy or Toyota vs Hyundai, it's still competition. That's not mentioning the Tata Nano... indeed the number of car manufactures has skyrocketed if we look globally. Maybe you have a response here. Another problem here is the idea that financial difficulty will lead to fewer firms. There is a contrary argument to be made: as people are laid off or can't find employers, they'll start their own firms. Some of these may indeed be manufacturers... I read some time ago a NY Fed study which claimed that firms started during periods of tight credit tend to be sturdier than those founded in times of easy money. (To start a firm now you need to actually make money...) But I've seen many people strike out on their own lately. I've started up with a partner and now we're hiring, taking advantage of the current abundance of quality labor. It's even conceivable that expansionary periods cause greater consolidation in the ecology of firms through M&A, while recessions don't stop small firms from emerging. Of course I don't know. Can you point to any historical evidence here? What I've seen is more on my side... Let's also not forget that infotech products are increasing in importance to us, and that Moore's Law continues unabated. Have you seen the price of an Asus Eee PC? Made in Taiwan of course.... How about iPhone prices? This trend will continue. Note that in the 1930's 's Lost Decade pace of technology did not decline. Consider music. It's gone from being $13 for a CD to the current "payment optional." Books are next since E-Ink makes digital books palatable. Neither of these used to be "tech." In a recession technology can be harnessed to lower costs. Witness the online tutor who commands a lower wage than their in-person counterpart. Or LegalZoom.com. Meanwhile outsourcing should continue. Oh and what about Skype, or Google Voice? Manufacturing technologies will also follow this trend. So where does technology fit into your scheme? As I see it the price of "things" other than land has risen more slowly than the price of commodity inputs. Most inflation was in land or services. But technology is for the most part deflationary or disinflationary, and it's historically been unaffected by recession or depression. Also many business failures are due to an obsolete business plan, so monopoly is not a concern... So you've got, in my view, to include global trade, technology and start-ups in your dualflation hypothesis, as well as move away from simple manufacturing, and maybe provide some empirical evidence that monopolies will come out of this downturn. I hope this can help somehow. Just trying to falsify it, which is what a hypothesis is there for, right?
I realized after posting this that I'd made at least one error, saying there's no evidence of fewer companies. Of course there are fewer companies as businesses fail. I guess there have been a great deal of failures in the UK. What I should have said is that there's no evidence I've seen of less competition. It strikes me that if we think globally, there may indeed not be fewer businesses now than in, say, November 2007. Also, there must be fewer well-funded start-ups, but as many or more boot-strappers who may develop real grit and creativity in the absence of a large credit line. So there is an element of creative destruction. Obsolete business models as a whole fail; new kinds of firms come in.
yes you are right there would be inflation caused by international competition. the main point i was really trying to make is that there would be both what is known as cost push inflation (a reduction in the output in relation to money supply causing a price rise) and demand pull inflation (an increase in the money supply relative to the output causing a price rise due to a surplus of money). the problem is this the mainstream economic position is that cost push inflation namely inflation caused by a limitation of production of any kind can lead to a inflationary gap does not exist. they claim inflation is a monetary occurrence only. my point about dualflation was in affect saying there will be inflated prices because of effectively cost push inflation as well as demand pull inflation. however as cost push inflation is not acknowledged in the mainstream the only way i could put that argument forward was to say it was as a result of monopolisation and price rigging. from your comments you believe cost push inflation does exist on an international basis if not in a domestic economy. as a result you would find it difficult to hold that argument in a debate over inflation (although i myself agree with you). the problem is this the monetarists attempted to claim that inflation is a natural occurrence each year and must be controlled. effectively they tried to make economics a statistical mathematical science. as cost push inflation puts a spanner in the works of that position it is not acknowledge. here is a link that gives BRIEF explanation and some comments on it. http://first-timer-busecon.blogspot.com/2009/03/cost-push-inflation.html this is one of the most topical areas of modern economics. especially now as people are questioning the economic thinking that put us here. what i tried to do with my explanation of dualflation was to get around the opposition of cost push inflation by effectively reclassifying it. in short it is better to rename something and the threat being acknowledged than it is to call it the same thing and get it dismissed because macroeconomists careers are at risk, which they should be anyway. thanks for your reply and keep posting.