n-Default Invariance in the [B][B]

1. Please note default invariance which is a universal property of the financial markets means we have a morphism across two domains, and where we move from greater structure to lesser structure we have a forgetful functor and where we move from lesser structure to more structure we have a free functor.

2. Yesterday, one of my colleagues whose immediate insights I very much respect challenged me to state something about the financial markets in categorical theory terms that is surprisingly inobvious. Not just fundamental crap, but something you could bet your mother's mortgage on.

3. OK. If default is invariant then since no central bank can ever hope to save entire countries, the following are rather obvious predictions from a categorical theory approach:

(1) Basel III definitions of risk free sovereign bonds will need to be changed as
(2) Countries default, and
(3) All asset classes will need to re-referenced against some mutually agreed to convention

(1) will occur within 1 to 2 years after (2). And as a matter of course, (2) will include the usual suspects, PIIGS and any other country borrowing in fiat without its own energy resources. Such countries only borrow to consume.

(3) is simply gold.

It all sounds so simple now. Happy?