The mechanism
Risk is specifically allocated before it is created
The deployed risk book comes into existence in two stages, and only after the risk has been bought at a defined maturity.
Monetary expansion is the creation of new liquid supply against Bond capital already committed to carrying risk.
Stage one · risk is bought
A holder stakes liquid kUSD into a dated Bond. The Bond is created with balanced risk-free and risky
halves, B₁ and B₂, and the stake leaves circulation.
Stage two · supply expands
New kUSD is minted against the committed risk capital, and risky assets are purchased into the deployed book.
The Reserve is not spent to create the risk portfolio
Risk-bearing assets are created only when holders have first committed capital to carry that risk as Bonds. The liquid holder occupies a senior position as a Reserve-capital provider, while the bond market provides the junior, risk-bearing capital beneath it.
Bond creation is therefore the point of monetary expansion. Every Bond staked creates 50% new deployed assets onto the balance sheet, so total supply grows through the bond market as well as the Reserve. Expansion is bounded by demand for that risk, not by issuer discretion.
| A holder stakes liquid kUSD into a dated Bond |
|---|
| Bond opens in two balanced halves, only one of which carries deployed risk. The stake leaves circulation |
| New kUSD minted against the committed risk capital |
|---|
| Risky assets purchased into the deployed book |
| Partial tender | Reserve assets returned to liquid holders at par, always |
|---|---|
| Full liquidation | The specified terminal path, ranked before distress |
| Balance sheet | Permanently visible, so the capacity to contract is legible |