We propose that dorsal anterior cingulate cortex (dACC), anterior insula (AI) and adjacent caudolateral orbitofrontal cortex (clOFC), project to lateral habenula (LHb) and D2 loop of ventral striatum (VS), forming a functional adversity processing circuit, directed towards inhibitory avoidance and self-control. This circuit learns what is bad or harmful to us, evaluates and predicts risks - to stop us from selecting and going/moving for the bad or suboptimal choices that decrease our well-being and survival chances. Proposed role of dACC is to generate a WARNING signal when things are going (or might end) bad or wrong to prevent negative consequences: pain, harm, loss or failure. The AI signals about bad, low, noxious and aversive qualities, which might make us sick or cause discomfort. These cortical adversity processing regions activate directly and indirectly (via D2 loop of VS) the LHb, which then inhibits dopamine and serotonin release (and is reciprocally inhibited by VTA/SNc, DRN) to avoid choosing and doing things leading to harm or loss, but also to make us feel worse, even down when overstimulated. We propose that dopamine attenuates output of the adversity processing circuit, thus decreasing inhibitory avoidance and self-control, while serotonin attenuates dACC, AI, clOFC, D1 loop of VS, LHb, amygdala and pain pathway. Thus, by reciprocal inhibition, by causing dopamine and serotonin suppression - and by being suppressed by them, the adversity processing circuit competes with reward processing circuit for control of choice behaviour and affective states. We propose stimulating effect of dopamine and calming inhibitory effect of serotonin on the active avoidance circuit involving amygdala, linked to threat processing, anger, fear, self-defense and violence. We describe causes and roles of dopamine and serotonin signaling in health and in mental dysfunctions. We add new idea on ventral ACC role in signaling that we are doing well and inducing serotonin, when we gain/reach safety, comfort, valuable resources (social or biological rewards), affection and achieve goals.