Next Stop: Deflation

Next Stop: Deflation

Published on 18/11/2014

The Yen currently trades circa 115 to the US$. At the end of 2011, the Yen was about 77 to the $. That is a decline of roughly 33%.
Yet, Japan’s inflation barely budged. Japan’s prime minister Shinzō Abe is not pleased.
On October 31, the Bank of Japan pledged “Unwavering Determination” to Get 2% Inflation.

What’s Next?

To quote Yogi Berra, “It’s tough to make predictions about the future.” Nonetheless, via email, SocGen’s Albert Edwards expects a “Tidal wave of westward deflation” and “The Yen @ 145 to the US$ by March.”

China has suffered a record 32 successive months of deflation at the producer price level. Do investors really think China can cope with a devaluation of the yen from here? They simply can’t tolerate this and they won’t. They will devalue.

Deflation Shock Wave Thesis:

1 Next phase of currency wars is underway

2 Japan will do whatever it takes to produce inflation

3 Yen sinks to 145

4 China devalues the Yen in response

5 Tidal wave of deflation heads West

6 US brands China currency manipulator

7 Gold soars

Protect Your Wealth NOW.

Albert Edwards & Mish’s Global Economic Trend Analysis

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