Fundamental uncertainty paired with the liquidity constraint renders financial markets instable. Given these conditions, pre-determined, binding, non-negotiable legal commitments can hasten a financial crisis and in the extreme case the financial system’s demise. … It follows that law and finance stand in an uneasy, paradoxical relation to one another. Law lends credibility to financial instruments by casting the benevolent glow of coercive enforceability over them. But the actual enforcement of all legal commitments made in the past irrespective of changes in circumstances would inevitably bring down the financial system. If, however, the full force of law is relaxed or suspended to take account of such change, the credibility law lends to finance in the first place is undermined.