The timing of the paper could unfortunately not be better, given the evolution of the spread on French bonds… The central mechanism in the paper: The strength of the effect of the subjective probability of default on the actual probability of default. The main implication, put roughly: spreads can jump a lot in response to even small bad news about the likely evolution of debt. The other implication, nerdier, and more paradoxical: Higher macro of fiscal uncertainty weakens the effect of the subjective probability on the actual probability and makes jumps and multiple equilibria less likely. @GonHuertas gives a more precise, visually beautiful, explanation. Look at it. I shall use the occasion however to reflect on something else, namely the frustration and the pleasure in doing research. This paper was started six years ago… At the time, it looked like a straightforward challenge: Characterize the solution to a simple, although nonlinear, equation: The evolution of debt depends on the interest rate, which depends on the risk of default, and thus in turn on the evolution of debt. For much of the six years, I banged my head against the wall, thinking I had the solution until it collapsed, trying again and again. The project became known at home as "the wall". Then, @GonHuertas who was my RA at the time, and @Pmbruera, then an MIT student, took pity on me and came to the rescue. And we did succeed. Frustration, then elation. This is why I have loved doing research for the last N years.