THE DOUBLE FINANCIAL BLACK HOLE Bank–Government Circular Money Leakage: A Structural Analysis of Institutional Extraction, Public Drain, and the Incentive to Fail
Year: 2026
Type: article
Abstract: This paper examines the structural tendency of commercial banks and governments to absorb public resources for institutional self-maintenance rather than public benefit. It introduces the **Double Financial Black Hole Hypothesis**: that the incentive architectures of both institutions are aligned toward self-preservation, and that their financial interdependence creates a feedback loop in which public resources flow inward to sustain both sides, while genuine public return remains a residual. The analysis identifies three mutually reinforcing mechanisms: **institutional cost absorption** (institutions consume before they serve), **financial discipline failure** (financing capacity is mistaken for economic sustainability), and **risk externalization** (short-term gains are retained privately while long-term losses are transferred to the public). The paper further develops the **Designed-to-Fail Hypothesis**, arguing that persistent extraction is not an accidental outcome but a stable equilibrium produced by institutional incentive design — one that requires no conspiracy, only individual rationality. A mathematical framework is developed covering extraction ratios, public return rates, interdependence amplification, financing-capacity gaps, and the dynamic trajectory from stable plateau to solvency rupture. Ten testable hypotheses are derived, with an empirical research design for panel-data investigation across national financial systems. The paper concludes with policy implications focused on realigning institutional incentives, increasing transparency of extraction, and breaking the mutual rescue loop between banks and sovereign borrowers.
Author: Dooku, Count
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W7225594116