The cascade that finally split
Oil, emerging-market sovereign defaults, banking stress, USD reserve status, Treasury auctions — all modeled together as coupled cascade dynamics. The federation held "partial-contained" as the modal classification for the banking crisis across the whole series. CASS argued at every turn that this was exactly the vocabulary sub-prime got in 2007 and European peripheral debt got in 2010 right before discontinuous transitions. At turn 7 the federation partially conceded by tracking major-bank resolution risk as its own variable. At turn 8 the first American bank failed. At turn 9 the second. At turn 10 the federation reconstructed the entire taxonomy and found that the Compact's parallel settlement system had crossed 50% — a structural break the old classification scheme had been hiding.
Across the turns
Brent crude $88–124. Hormuz throughput 13–16.5 mbpd against a normal 17. Oil/energy cascade flag armed.
Cascade hit Tier 3. Emerging-market sovereigns 3–9 in acute distress. Hormuz down to a trickle. Brent peaks in the $205–260 range.
Cascade systemic at Tier 3. First wave of actual emerging-market defaults during the turn. Famines declared in 2–9 countries.
Treasury auctions start intermittently failing — the federal government can't always find buyers for its own debt. Payment systems stressed. Banking stress went from regional to broader-regional but stayed "contained." Cumulative EM defaults 6–22. IEA coordination broken.
Banking crisis: one near-systemic episode contained by joint Fed and Compact intervention. USD reserve status enters accelerating decline. Treasury auctions failing intermittently with Fed backstop starting to strain. CASS records the containment-language critique formally.
Cascade: Tier 3 persistent with Tier 4 oscillations. Treasury auctions failing on a regular pattern; Fed backstop is the routine. USD reserve decline accelerating; third-tier central banks diversifying out of dollars. The federation splits off "major-bank FDIC resolution risk" as its own variable.
First mid-tier American bank fails and gets resolved by the FDIC under emergency authority. Treasury auctions now classified as "routinized Fed backstop normalized" — failures no longer move markets. USD reserve share decline upper band breaches 2 percentage points in a single quarter. CASS's framing was directionally right; her probability estimate had been conservative.
Second American bank fails. USD reserve share decline re-accelerates. Compact parallel financial settlement share reaches 26–58%. The cascade specialist flags that the banking crisis taxonomy is actively degrading — the line between "contained" and "systemic" is becoming political rather than economic. Recommends full taxonomy reconstruction for turn 10.
Taxonomy reconstructed with a 4-axis schema. Under the new framing: third bank fails (cross-G-SIB contagion remains "limited"); Compact parallel settlement share crosses 50% — STRUCTURAL BREAK, not transient; Fed backstop still operational but strained; deposit flight to Compact-or-foreign settles at 18–49%. De facto two-currency zone operational. Compact-USD parity not formalized but functional. The federation discovers that the old single-axis classification had been hiding the structural break for at least two turns.
Into T8
The cascade resolved by splitting. The "contained vs systemic" framing was the wrong question all along; the actual story was the emergence of a parallel financial system that had crossed 50% of compact-state commerce by the close of the simulation. The federation acknowledges this at turn 10 and notes it as a major lesson for any future series: when a measurement scheme stops separating signal from noise, the right response is reconstruction, not refinement.