True, living quality doesn't go down after a mortgagee sale, it just realizes the change in wealth of the "owner" of the house who didn't really own it.
They then rent for less than their mortgage so end up better off [at current rental, interest rate and house price levels].
But if they were living in the house, with the mortgage ballooning and no job, then it's under the hedge for them when the mortgagee sale finally catches up with the 100% loan to a sub-prime job-free high-risk borrower.
<Of course the lenders can. They stop accepting that country's currency and then the country gets collectively poor if it depends on imports >
Not really a problem. Suppose NZ government does bust and says to Japanese credits, "Sorry, no more money. Bad luck. Bye."
Meanwhile, some NZ company is selling iron sand to a Japanese iron smelter. The Japanese iron smelter will still buy the iron sand because it's the cheapest available [which is why they were buying it in the first place]. The Japanese company pays the NZ company in yen or US$. The employees of the iron sands company get paid and the shareholders do too and they pay taxes on that income.
So the NZ government will have income [but no debt], the companies and people have income and all is hunky dory.
If the Japanese government gets stroppy and says "Nobody is allowed to send anything to NZ or buy anything from them" then the iron sand exporter will ship to China, India, Korea, USA, Argentina, South Africa, Pakistan, England, Germany or any number of places. They'll get a very slightly lower price, but not significantly lower because markets don't leave big gaps lying around.
Then the Japanese company will have to buy more expensive iron sand from somewhere else and the exporters to NZ will have to get other customers somewhere else, neither of which is good for Japan.
No worries.
Mqurice |
