Mainer,
Here's where part of his inflation comes from: California. That machine is in California. Everything in California is simply more expensive, like in Switzerland. Ever been there? It's as if the whole country is a giant cartel - they meet annually to set high prices that people cannot afford. The same thing seems to happen in California!
It's a real problem in this state, and it's not a place to be running a business anymore. For the longest time wages were increasing high due to cost of living (housing). Now that the market has collapsed and we have foreclosures everywhere the wages need to come down, along with everything else (this 601, too). California needs its own market correction. We need to let the mortgage crisis run its course so housing prices can go lower. That's part of the key to lowering all other costs to what they should be.
This place is getting crowded, regulated, and stays too expensive. There's a lot to like here, but just as much to dislike.