This expresses it perfectly. And given the web of interdependencies among the counterparties, every counterparty should be assumed to be overly exposed to a sy

This expresses it perfectly. And given the web of interdependencies among the counterparties, every counterparty should be assumed to be overly exposed to a systemic risk that everybody is currently discounting. If that risk happens, it will be difficult to predict who will be affected, and it will be impossible to unwind the deals in a hurry. We have had a number of financial crises that have required external intervention to keep the whole system from melting down. Most famously, 2008. And they show how quickly a solid counterparty that everyone trusts becomes a source of contagion that poses a risk to everyone touching them. If we have a long planning horizon, what kinds of shocks should we be prepared for? Well here are a few sample scenarios. 1. Russia collapses, leading to nukes floating around to bad hands. 2. China finally invades Taiwan, threatening everything that needs computer chips. 3. A US government shutdown finally results in non-payment of Treasuries, causing a "risk-free" investment to have to be priced for risk. 4. A repeat of the 1859 Carrington Event happens, with damages in the trillions of dollars. No seriously, https://www.space.com/the-carrington-event https://www.space.com/the-carrington-event shows how plausible this is. The financial system treats all of these as unthinkable and therefore impossible. But between all of them, over a period of decades, the risk of SOMETHING on this order of magnitude happening is significant. It is a problem that the entire financial system fails to appreciate that there IS a risk, let alone fails to do anything to mitigate it. Indeed, quite the opposite, the 2008 bailout has let the financial system believe that the government will always bail them out. And so has become complacent about their role in creating various minor financial crises. But there is no guarantee that the government will always be in a position to do that. The result has been a normalization of deviance that has to end badly at some point. See https://www.ostusa.com/blog/normalization-of-deviance-definition-examples-and-solutions/ https://www.ostusa.com/blog/normalization-of-deviance-defini... if you're not familiar with the phrase "normalization of deviance".