Cash is King: Nobody cares about plumbing…until their toilet won’t flush. Plumbing is taken for granted, an afterthought. This is especially true in complex financial systems. Globalization was more about financial integration than economic trade. The US economy is closed. But the financial system is deeply connected. US international assets and liabilities total 3.7-times GDP, a rise from 2.9-times in 2008, 1.6-times in 2001, and 0.5-times in 1980. Growing international balance sheets add a layer of complexity to US policy – it is driving the broader global financial system, not confined to a narrow set of domestic objectives. The nuance of international balance sheets is why last month, Norway, with a surging current account surplus, had a larger currency depreciation than the UK, where policy is on a collision course with markets. Plumbing is centerstage – collateral, and risk management matter. Investment exposures intended to be risk mitigants have become sources of active risk. Take an international investor with USD assets swapped back to local currency. The FX hedge is not a risk mitigant when USD asset values decline sharply – the hedge is too big and becomes an active short US dollar position. A risk manager must either buy US dollars or increase margin collateral. The collateral of choice is sovereign debt. It is a terrific insurance policy for these situations – or was. Sovereign bonds that experience a 50% drawdown, as seen in the UK, are also an active risk, not an insurance policy. So, cash is King. And there is an interesting twist for digital asset markets. Collateral in the digital ecosystem runs on the most desirable cash of all right now – stablecoin, dominated by US dollar cash-equivalents. Digital’s recent financial stability is more by accident than design. No matter. Cash is King, and digital’s stability is hiding in place sight.