Choosing MCR and MSSR is a surprisingly complex issue. Like abit said, 10% MSSR didn't protect BitUSD from GS last December.
The MSSR did not work because BSIP 42 introduced price manipulation and the MSSR was offset by fake price feeds.
I understand you. It's easier to blame others than to find the real reason or solution.
bitSILVER, bitGOLD and bitBTC always had 10% MSSR and never applied BSIP42 but GSed long ago. This fact doesn't support the assumption that a higher MSSR will prevent undercollateralization from happening.
Actually the assets got into undercollateralized situation simply due to
1. lack of incentives for borrowers to keep shorting (lack of desire to put more collateral, because putting more collateral would mean the potential to lose more in a downtrend, thus they chose to "stop loss"), and
2. lack of incentives for debt asset holders to settle when CR is low (because settling when price is dropping simply means loss, we assume most of debt asset holders tend to hold stabler assets, although some of them may don't know about GS or don't care, anyway finally they chose to take no action before GS).
If we can find a proper way to incentivize the involved parties, we'll solve the problem.
Higher MSSR is not an incentive for borrowers who decided to stop loss (aka so-called "bad borrowers" although I don't like to label people), although it may be an incentive for borrowers who have enough funds to add collateral.
GS is actually an incentive for borrowers who decided to stop loss, but not an incentive for borrowers who have enough funds to add collateral.
I will give everyone another option to think about on the GS issue:
When collateral reaches 1:1 simply force settle that debt based on percentages. If there are 1000 smart coins issued, 10 is being force settled; each holder would see 1% of their smart coin force settled by the blockchain. This avoids GS alltogether and good debt stays in the system.
This is also an option if our only goal is to avoid undercollateralization (btw technically 1% is not guaranteed that all undercollateralized positions will be settled, also technically we can increase the percentage when it's the case).
IMHO this option does more harm than good, because we have other goals which IMHO are more important, one of them is to give debt asset holders as much freedom as possible to decide by themselves, because we assume they're risk haters. On the other hand, debt position holders are risk lovers, so it's fine to have more aggressive rules on them, e.g. margin calls and force settlements. Please see discussions in
https://github.com/bitshares/bsips/issues/179.
Also it would be a crisis for businesses built on top of BitAssets because they have no easy way to convert the collateral back to BitAsset when collateral price bounced back up. Imagine that if someone deposit bitUSD to an exchange but later can only withdraw some BTS and some BitUSD. In short, don't remove coins from users' balance, otherwise users will leave.
Alternatively, perhaps we should give asset holders an option on whether *automatically* settle a part of their holdings when feed price is closed to GS price, which may slightly improve the situation, but is not that hard.