To what extent can an "everything bubble" deflate? Everything cannot go down in relative to everything else.
Trying to think this one though my tiny mind isn't at all straight forward, beyond saying that the velocity of money circulation logically declines in proportion to punter risk aversion. Risk averse punters and businesses won't likely grow their previously debt fuelled expenditure any more. Many will be incapable of paying existing debts off.
Marginally higher interest rates increase the relative attractiveness of cash in relation to other asset classes but fiat currency cash is no safe haven in an environment where many global banks are likely to totter an fall. Gold and other so called "tangibles" may rise but that does nothing to explain what will happen to everything else that has been thrown into the mix master.
cheers
