Generational
Dynamics

Japan's Economy Returns To Deflation

Japan's Consumer Price Index (CPI) for August was -0.1%, the negative value indicating that Japan is returning to deflation. The last time that Japan's core inflation was negative was April 2013. Since then, the Bank of Japan has been easing monetary policy significantly in the hope of stimulating inflation, but to no avail. 

Japan began going into deflation after 1990, when there was a crash on the Tokyo Stock Exchange, and a crash in Tokyo's real estate bubble. At the peak of the bubble, Tokyo's real estate had a nominal value greater than all the real estate in the United States. It's amazing that after 25 years, deflation is continuing. Japan's prime minister Shinzo Abe said on Thursday that Japan's economy was no longer in deflation, so he must have been disappointed to wake up on Friday morning to the news that Japan was indeed still in deflation. 

As I wrote earlier this year in "11-Mar-15 World View -- Europe, America, China economies all continue in deflationary spiral", the global economy is in a deflationary spiral. 

Ever since 2003, when I started writing regularly about Generational Dynamics, 

I've repeatedly written that in this generational Crisis era, Generational Dynamics is predicting a deflationary spiral. 

Mainstream economists, on the other hand, have been predicting that inflation or even hyperinflation would begin "next year" every year since then. Mainstream economists have been dead wrong, and continue to be wrong, while Generational Dynamics is right. Barrons and Reuters

DYI Comment:  For the next 5 to 7 years as this debt bubble is worked off either through pay downs or debt defaults very low inflation or deflation will reign supreme.  Once that has occurred with all of the money printing that has transpired inflation will be the rule.  The 2020's will be known as the roaring 20's with high taxes, high inflation, and a labor shortage as Boomer's finally exit the work force in significant numbers.  Between now and the early 2020's a deflationary smash can't be ruled out.  As stocks and bonds(especially junk) are grossly over priced.  Real estate may not be smashed but a down turn in prices most likely will occur.

Now is not the time to be buying stocks and long bonds on a whole sale basis as the return of your principal is far more important than the return on your principal.  So when everyone else is losing their heads don't go and lose yours.  Better values lie ahead.

Updated Monthly

AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION -  9/1/15

Active Allocation Bands (excluding cash) 0% to 60%

85% - Cash -Short Term Bond Index - VBIRX

15% -Gold- Precious Metals & Mining - VGPMX

 0% -Lt. Bonds- Long Term Bond Index - VBLTX

 0% -Stocks- Total Stock Market Index - VTSAX

[See Disclaimer]

DYI