What if a pension system goes insolvent in a major economy?
A pension-system insolvency is a credit-led risk-off: HY spreads widen, financials and crypto-beta (SOL/ETH) soften, but the modeled move is contained absent contagion. Rhymes with the euro-periphery 2010-12 crisis (Greece/Spain bailouts) and the US Detroit/Puerto Rico pension defaults - sharp local credit stress that stayed mostly idiosyncratic. Transmission: the sponsor sovereign/state's bonds and its banks are the epicenter. Forward angle: the real tail is a forced asset fire-sale (the 2022 UK LDI template) that converts a slow insolvency into an acute liquidity event - watch for that, not the headline.
Every number ships with its receipt — the odds, the range, the precedents, and a public grade at Reality Check. The statistical machinery that produces it is proprietary.
The butterfly cascade
How this trigger trickles across markets, left → right — the root shock, its first‑order moves, then the ripple effects. Drag any node; tap a market for its real price history.
Resolution timeline — how this probability is moving
Our model's odds (electric blue) over time vs the market's (Polymarket, amber), from the past toward the 3–10 years horizon. Each dot is a real macro event that nudged the probability — green pushed it up, red pushed it down. Tap a dot for the source. Loading the probability audit trail…
What it would mean
If this plays out, it is a risk-off shock. A pension-system insolvency crisis hits a major state or country. The trigger decomposes into signed root‑shocks — Credit spreads ▲ · Risk appetite ▼ — which propagate through our causal graph to the markets below.