Monetary base is expanded but liquidity is siphoned out from the masses. So there is money inflation at the top and deflation of income at the bottom. This prevents prices in retail from skyrocketing as people can't really spend and merchants have to keep prices low - despite inadequate profit margins.
You seem to imply that corporate profit margins are low while they are at the highest level in history, which is the other side of the huge government and household deficits. Merchants can keep revenues and lower wages because the rest of the economy is taking money from the future.
For further reading: http://www.hussmanfunds.com/wmc/wmc130311.htm