From the NTY article, this quote:

A “worrisome conclusion” is that market fears about negative economic shocks could by themselves “trigger an increase in interest rates that would drive a formerly sustainable country into a situation of unsustainability,” according to Mr. Ostry and his co-authors, Atish R. Ghosh, Jun I. Kim and Mahvash S. Qureshi.

Three economists from the IMF walk into a bar, order a round of Supply Shock on the rocks and asked each other what worrys them the most.

The first said I worry about Black Swans. I haven't seen any yet but know they exist and are very dangerous and a threat to sustainability.

The second said I don't worry about Black Swans, but I do worry about people who worry about them, because when enough worry, they become a self fulfilling threat to sustainability even if the swans don't exist.

The third said I worry most about too many people reading Dean Baker, because he knows that we know we already missed the biggest Black Swan of all and because of that, the current condition itself borders on the unsustainable. Yet we're sounding the alarm about another one that he knows does not exist rather than addressing the current one.

I've been watching him, and the only thing Baker drinks is Demand Shock on the rocks. Who are you going to believe, the Black Swan he found that we didn't, or the Black Swan we know is there but no one can see but us.

You know, I have some seriously mixed feelings about this situation the US is facing. At one hand, I can't but feel solidarity towards the American Joe Six-pack, who will end up paying for the broken dishes.

And I am quite pessimistic here: I believe people like Dean Baker, no matter how right they might be, are fighting a losing battle and the US Government will eventually fold to the pressure to cut deficits and debt.

At the other hand, there is something, for me, delightfully ironic in this.

Some 30 years ago Latin America went through a similar situation: "cut deficits, repay your debt, or something terrible's gonna happen", the very same IMF warned. "If you pay out, everything's gonna be fine", the IMF assured them.

And, well, pay the fools did. Over and over. They would start one year, find it politically impossible to continue, and back down a few months later, just to start again a year or two afterwards.

In February 1989, in order to pay, a more resolute and cynical Venezuelan Government confronted a national mutiny that cost the lives of at least 300 persons in three days of violent riots. Two failed coup d'états followed. Both main parties became political pariahs and seven years later, Chavez took power. And Venezuelan middle-class either took off or ceased to exist.

Now, mind you, I am not a Chavez supporter. But wouldn't it be at the same time sad and tragic but still poetically just that the scenario Peter Schiff and very specially Gerald Cilente so vividly depicted happened BECAUSE the US Government followed their (and the IMF's) "expert" advice?

Good luck, folks.

Insulated economists have little life experience. Those defaulting on debt, still have cheap credit offered to them, right up to the point where they don't. When you're borrowing money to make ends meet, the game will end, it's hard to know when.

I actually defaulted on a large revolving credit/overdraft (scam) it took 3 years for the judgment to come down. I had managed to live within my means before defaulting, the debt service was too much burden. So, I was able to stay current with my other obligations.

But, once the judgment came down it was a pain, but not crippling. It would be crippling if the US had to balance their budgets sometime in the near future. Printing money to forestall default is a game that will become tendentious to our creditors at some point--hence, it will become increasingly hard to borrow money--hence interest rates will rise not due to good, all boats rising inflation, but debt service. This will make balancing budgets increasingly difficult. Couple this exponential acceleration with our political intractability and we have a real nasty snare awaiting. You're simply whisting past the oncologists office, boasting I ain't whisting past the graveyard.

i like Mapqie's point better than Deans's- the IMF's paradigm to impose austerity while opening markets to capital movement explains their bias- in a simple, straightforward way, their program has been corrupted by corporate interest, rather than fostering middle class growth of sovereign countries- this explains their judgment bias, not incompetence or oversight in analysis