IMF chief economist: It is not hard to imagine a sharp global slowdown, or even a devastating financial crisis"

Look, I'd pontificate, but you know the drill. We're screwed. Get ready.

You can't expect the International Monetary Fund to come out and say the world is headed for a global financial crash. And it isn't saying that.

But what it is saying, in its own careful way, is that the risk of such a calamity is increasing.

The most difficult risk is that of a "disorderly adjustment" of what finance officials call the global imbalances. This is a way of saying the global economy is skewed and it cannot keep on this way.

On one side is the huge and growing build-up of U.S. borrowings from the rest of the world to finance its unsustainable trade and budget deficits, and on the other, countries such as China and Japan ringing up huge trade surpluses with the United States and lending their surplus funds back to the U.S. to finance its deficits.

This cannot go on forever because the cost of servicing that debt would become too high, and well before that, the foreign investors in U.S. securities would become extremely nervous about continuing to add to their already high holdings of U.S. dollar assets.

The big question is whether these global imbalances can be corrected in an orderly way or whether there will be a disorderly adjustment instead.

Kenneth Rogoff, the former chief economist of the IMF, warns that the U.S. "is now soaking up roughly two-thirds of all global net saving, a situation without historical precedent." This year, the U.S. is expected to borrow $800 billion (U.S.), or about $2.2 billion a day.

As he argues, though, "this borrowing binge might end smoothly," but world financial leaders are right to be worried about "a more precipitous realignment that would likely set off a massive dollar depreciation and possibly much worse. Indeed, if policymakers continue to sit on their hands, it is not hard to imagine a sharp global slowdown, or even a devastating financial crisis."