SocGen's Edwards: We are now just one recession away from Japanese-style outright deflation

Inevitable recession will wreak 'havoc'

Société Générale's bearish strategist Albert Edwards has said the Western world is slowly descending into outright deflation, much like Japan in the 1990s, pointing to most recent US inflation data surprising on the downside.

Permabear Edwards said this was clear evidence of the re-emergence of a deflationary trend, which when the "inevitable" recession comes will cause "havoc" throughout financial markets. He said: "If inflationary pressures are indeed ebbing in the US economy, this begs the question that if the third-longest cycle in US history cannot produce a cyclical uplift in wages and prices, what on earth will happen in the next recession! "Investors might give some thought to the fact that we are now just one recession away from Japanese-style outright deflation!" He added: "The macro underpinn...