After a decade of zero rates and QE post-2008, the financial system can no longer function without continuous stimulus. Attempts to tighten policy, as seen with the 2018 repo crisis, immediately cause breakdowns, forcing central banks to reverse course and indicating a permanent state of intervention.

A generation of investors has only known a market where the Federal Reserve intervenes to prevent crises. This creates a deep-seated belief in a 'Fed put' that won't dissipate until the Fed is forced to let a significant event unfold without a bailout, which is unlikely in the near term.

By not allowing small market downturns and deleveraging events to occur naturally, policymakers prevent the system from clearing excesses. These short-term fixes on deteriorating fundamentals create a more fragile market, increasing the potential for a severe, uncontrollable crash down the line.

Former RBI Governor Raghuram Rajan points to a historical pattern preceding every major financial crisis: a U-shape in monetary policy. An extended period of easy money builds up risk, and the subsequent tightening phase triggers the collapse. This framework helps identify periods of heightened systemic vulnerability.

Official interventions to prevent short-term economic pain, like managing oil prices or backstopping banks, stop market forces from curbing inflation. This allows the problem to worsen, ultimately requiring a much more severe policy response later, similar to the lead-up to the dot-com bust.

Policies designed to suppress market volatility create a fragile stability. The underlying risk doesn't disappear; it transmutes into social and political polarization, driven by wealth inequality. This social unrest is a leading indicator of future market instability.

Investors no longer react to underlying economic health but to the anticipated actions of the Federal Reserve. Bad news signals that the Fed will likely inject money into the system to prevent a crash, making asset prices go up. This creates a perverse incentive structure.

Forward guidance is like an antibiotic: essential in a crisis but harmful when overused in normal times. It conditions market participants to ignore incoming data and take on excessive risk, leading to 'superbugs' like the mismanagement seen at Silicon Valley Bank.

The money printing that saved the economy in 2008 and 2020 is no longer as effective. Each crisis requires a larger 'dose' of stimulus for a smaller effect, creating an addiction to artificial liquidity that makes the entire financial system progressively more fragile.