credit implosion

If it causes deflation then those savvings increase in real value. Of course if it's bad enough for banks to go down, then some or all of those savings might be lost. If it's really bad, the currency goes down, in which case those savings better be in a better currency or gold.

No real evidence of a dash to cash by consumers yet, but I note a few articles on companies sitting on piles of cash rather than hiring or investing in expansion.

FoFP

But not generally welcomed by the city who would rather they buy back their shares.

Also, what is the best way for Mr Average to survive such an implosion?

sPoNiX

It depends how pessimistic Mr. Average is. if he's moderately pessimistic then he gets out of debt and sells as many assets as he can comfortably live with, and spreads the cash around various banks, government bonds, and gold so that his cash survives and prospers in deflation and he's ready to buy up assets at the bottom. If he's very pessimistic he does the same and puts it all in Gold in a Swis bank account. If he's extremely pessimistic then he assumes the currency won't survive and therefore runs as much debt up as possible and buys gold, guns and food to get by for a while.

Personally I've bet we'll muddle through more like Japan than Argentina, but hey, I've been wrong before.

FoFP

You mean "can comfortably live without", presumably, but why sell assets at all, unless they're in hock, such as mortgaged houses?

At some point between moderately and very pessimistic, real assets are to be preferred to a crumbling currency, aren't they? Paid-for houses can at least be lived in, and can generate rental income in whatever currency emerges, even though it be Hawkwind CDs, heaven forbid.

I guess.

To pick 'em back up at a massive discount later. If it's good enough for Carnegie (bought steel mills at a 90% discount) then it's good enough for us.

Yes, provided their price hasn't been inflated from the credit bubble

Odds are very high that rents will track prices down. After all, what's a depression for if it's not to free up all that lovely loot going into house buying, or rent, to buying up all the excess Hawkwind CD's etc and thus curing the oversupply problems from the bubble?

FoFP

From the looks of it a few of us are savers? Japan didn't muddle through all that successfully, I think. Even now with an upturn there's lots of bad corporate debt. It seems to be harder to deal with than consumer debt. I tend to agree that if you're quite pessimistic then you can exchange your assets for gold futures (or 'safe have' currency like SFR)--if UK assets fall in value systematically then gold with rise against Sterling. Whether there's reason to be that pessimistic is another question.

Seb

In the sense that savers haven't, as far as I'm aware, lost any money, or been unable to get it out the bank when they want it, Japan has been more successful than Argentina.

True, but Argentina's dollar issues were at best a scandal and quite probably direct theft.

True, though the bailouts and makework programs have led to government debt beyond even Italian levels. They can easily be financed at a zero interest rate of course but trouble lies ahead.

There's also the problem in that rather than let the bad credit be either liquidated or defaulted, they've merely protected the sources of malivestment built up in the bubble and these continue destroying real wealth in the economy and prevent the resources being reallocated elsewhere and thus the healing of the economy.

Basically deflation would cure the problem, but the government is too afraid to let it run.

FoFP

Ronald Raygun:

As long as there's not a general breakdown of law and order, in which case someone with more guns or more powerful friends than you may take it away from you, and generally ignore what the Land Registry -- if it still exists -- says. Property is an abstraction which only exists as long as most people involved believe in it.

Unless the crisis creates mass emigration so that there are more houses than people left, in which case nobody will pay rent because they can just stay for free in one of the abandoned houses.