Under most conditions the market should dictate how much HBD is sustainable, since if there is too much and it is insufficiently backed by value of the underlying token, its value would drop.

I disagree with that. The market will dictate that HBD debt is unsustainable by making both HIVE and HBD drop. Unless witnesses decide to hardfork so that HBDS can't get converted to hive anymore.

In that case they save HIVE by defaulting on debt which we are unable to repay.

Edit - The reason is that as HBD drops arbitrage starts taking place and hive drops. This is the negative feedback loop.