The Structural Impossibility of Global Financial Stability

This paper is Part I of a two-paper sequence. Part I (this paper): Theorem — The Structural Impossibility of Global Financial Stability Part II (companion paper): Explanation — The Structural Necessity of Financial Crises Abstract Financial crises are commonly interpreted as episodic deviations caused by regulatory failures, distorted incentives, or inappropriate model assumptions. Such interpretations, however, rest on an implicit premise: that long-run financial stability is, in principle, attainable under sufficiently well-designed institutions and policy frameworks. This paper challenges that premise. I show that in any financial system that simultaneously exhibits (i) intertemporal credit creation, (ii) leverage amplification, (iii) asynchronous information, and (iv) global balance-sheet and market coupling, persistent global financial stability cannot exist as a long-run equilibrium. Under these structural conditions, systemic instability is not an anomaly but a necessary logical outcome of the system’s configuration. Stability, when observed, represents only a transient state in which underlying structural tensions have not yet fully materialized. Accordingly, financial crises should not be understood as accidental departures from a stable norm, but as the endogenous realization of the financial system’s intrinsic structural dynamics.