Why Financial Systems Cannot Be Made Reversible

This paper challenges the fundamental economic assumption of reversibility, arguing that financial systems are structurally irreversible historical machines. We demonstrate that financial operations generate permanent fixations in legal, social, and material domains that cannot be undone by policy interventions such as bailouts or debt restructuring. By analyzing economic entropy—driven by contract proliferation and evolved expectations—we show that financial time possesses an intrinsic arrow. Consequently, financial crises are redefined not as equilibrium deviations, but as the inevitable exposure of accumulated irreversible commitments exceeding future structural capacity.