Based on the current environment, contagion will happen in either or both of the 2 situations:
– global debt crisis (likelier of the 2)
– lack of USD outside the USA
Our abnormal and irrational optimism for all asset classes has been supported by Central Bank liquidity for the past decade, and not so much a fundamental improvement in microeconomics.
There is a cost to printing money to support liquidity: risk misallocation. We are now in the dying throes of this risk misallocation, with Central Banks warning for the past 2 years that they cannot continue to support this madness.
Those who have been shouting that “this time is different” are about to learn the timeless lesson of all market crashes, because if fools can make money, we all will soon be out of business.