For the US specifically (I&#x27;m an Australian), I&#x27;m not entirely sure. I must admit I&#x27;m a few months out of date information-wise as I stopped reading the news about half a year ago. It was just too damn depressing to watch these trends unfolding and no-one seeming to give a crap.<p>On the hopeful side, countries like the US, Ireland and Iceland who &#x27;took their medicine&#x27; during the GFC (sustained heavy property price declines or significant bank collapses), will be closer to fundamental values already. So they may have less distance to fall, even though there will probably be some overshoot. Also, OPEC flooding the world market with oil (to try and kill the US shale oil industry in the crib) and the likelihood that China will run down its foreign currency reserves to pay for stimulus (depreciating the US dollar) will mean US export industries (excluding oil and natural gas) become very competitive indeed.<p>Countries like China, Australia, Canada and the UK on the other hand, who staved off significant property market corrections during the GFC (especially Australia), are in for a very bad time (<a href="http:&#x2F;&#x2F;www.economist.com&#x2F;blogs&#x2F;dailychart&#x2F;2011&#x2F;11&#x2F;global-house-prices" rel="nofollow">http:&#x2F;&#x2F;www.economist.com&#x2F;blogs&#x2F;dailychart&#x2F;2011&#x2F;11&#x2F;global-hou...</a> ). Like worse than 1920s depression bad time (closer to 1890s depression).<p>On government response, it&#x27;s hard to predict. Frankly, in both the US and Australia, our legislatures are now controlled by even crazier and stupider politicians than during the GFC, so I don&#x27;t hold out much hope for sensible fiscal responses. There&#x27;s also less room to move fiscally, as we used up most of our powder during the GFC and won&#x27;t be able to fire as strong a shot this time around. The thing that truly worries me is that government underwriting of financial system liabilities will therefore be less credible, so there is an increased probability of bank-runs causing a complete financial system collapse.<p>Our central banks also have less room for more traditional responses (i.e. reducing the cash rate), as they&#x27;ll be starting from a much lower initial rate (and so will hit the zero lower bound much quicker). QE will therefore be deployed more rapidly and in greater quantity. Even though the Fed Reserve may have appeared confident re: QE, I&#x27;ll bet they were privately shitting themselves because QE was (and still is) uncharted and risky territory. This time around they&#x27;ll have to go much harder and earlier. At this point, I really have no clue what could happen.<p>On the bright-side, at least we&#x27;ll be able to settle the question of whether theorised &#x27;liquidity traps&#x27; truly exist...<p>All this is just my best guess. A more positive but still plausible theory is that China will manage their economy into a &#x27;slow-melt&#x27;, and will experience a long period of economic stagnation similar to what Japan has gone through in the last two decades. In this scenario, the damage might be contained and the US could come out relatively unscathed. I think Australia&#x27;s screwed either way though...