Endogenous Dissolution of Sovereign Debt Topologies: Domestic Retirement Capital Flight and Nonlinear Discontinuities in Risk-Free Discount Rates

Conventional macroeconomic assessments of sovereign debt sustainability predominantly focus on external, geopolitical factors—most notably the potential decline in foreign central bank accumulation (exemplified by Ray Dalio’s warnings regarding Chinese and Japanese demand curtailment). This monograph demonstrates that this exogenous framework overlooks the primary, non-linear failure mode of sovereign balance sheets: the endogenous, demographic flight of domestic private retirement capital. Synthesizing Nassim Nicholas Taleb’s critique of structural bond market fragility with our topological fencepost (Uekizan) formulation, we formalize the mathematical dynamics through which domestic demographic aging and persistent inflation-induced duration trauma systematically dismantle the domestic absorption buffer for long-dated sovereign debt. In an environment of compounding fiscal deficits and unanchored long-term issuance, domestic pensioners, defined-contribution plans (401(k)), and mutual funds exhibit an irreversible preference shift toward ultra-short cash equivalents, effectively abandoning the 10-to-30-year duration spectrum. We prove that this structural withdrawal of domestic "buyers of first resort" creates an irreconcilable boundary crisis during debt rollover auctions, triggering an endogenous liquidity trap and a catastrophic discontinuity in the risk-free discount rate. Furthermore, we establish the transmission mechanism connecting sovereign debt fragility to equity valuations, proving that record-high equity valuations anchored to compressed risk premia face an inevitable mathematical cliff when the foundational discount rate destabilizes. True systemic stability resides not in debt-monetized financial engineering, but in physical-layer thermodynamic efficiency and productive institutional real assets.