One Merrill Lynch report reckons that a 5% fall in house prices could see defaults rise to double digit rates, which would be enough to hurt some investors who’ve bought seemingly-safe A-rated paper, the analysts recko.
Although the M.W. article focusses on potentially grave scenarios for investors, double digit defaults on housing payments could see millions of people suddeenly without housing and thrust into comepetition for increasingly scarce and already pricey rental units. Of course, many won't be eligible for bankruptcy, thanks to Obama and other corporate congressional shills who eliminated that possibility. Those who don't retain housing will not retain work, even if jobs were otherwise abundant. Either some form of welfare emerges (increasing the tax burden to the housed), or millions of homeless people are left to fend for themselves on the streets where many will end up in jail (increasing the tax burden for the housed even more than welfare). The scenario could spiral out of control, or it could resolve with action, but either way there could be suffering up and down the hierarchy of wealth, especially considering the grave ramifications for investors.
Is China ready for U.S. economic decline? It would seem not if the U.S. responds to the already sagging U.S. dollar with protectionism, which could sink a Chinese economy completely dependent on U.S. consumption of its exports. With massive protests, unrest, and workers leaving the repressive Chinese Communist Party by the droves, a destabilized Chinese economy could even see another revolution which would send both expected and unexpected shock waves throughout the globe.
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