Epsilon Theory is Dr. Ben Hunt’s ongoing examination of the narrative machine driving human behavior, political policy and, ultimately, capital markets—an unconventional worldview best understood through the lenses of history, game theory and philosophy.
Short-form notes (longer than a Tweet, shorter than our usual tomes), responses to reader emails, and new voices. We’re committed to writing at least two posts every day.
Dr. Ben Hunt hosts the Epsilon Theory podcast with co-hosts and special guests from financial services, the financial media *gasp* and beyond. The Epsilon Theory podcast is the quickest way to get all of the unconventional perspective, historical context and narrative analysis you’ve come to expect from Epsilon Theory pumped directly into your head.
We’re growing our family of Epsilon Theory contributors to include a broad range of voices on an evolving range of subject matter. If you listen to the podcast, you’ll recognize some of the names as colleagues, partners and friends of Ben from Salient, any number of past lives, and the growing circle of outspoken truth-seekers in financial services and beyond.
Epsilon Theory author Dr. Ben Hunt is frequently quoted in print, radio and TV appearances.
Let’s talk. We actually read and respond to your emails. Questions, comments, theories, ideas—we’d love to hear from you.
Gresham’s Law: bad money drives good money out of circulation.
Hunt’s Law: fake news drives real news out of circulation.
I first came up with Hunt’s Law for an Epsilon Theory piece called “Fiat Money, Fiat News“. It’s worth your time to read, but out of respect for our TL;DR world, here’s the skinny:
Just as modern money is constructed out of nothing more than the confidence we have in the governments that print it, so is modern news increasingly constructed out of nothing more than the confidence we have in the Missionaries who proclaim it.
And just as counterfeit money drives good money out of circulation by encouraging holders of good money to hoard it rather than exchange it for what might be bad money, so does counterfeit news drive real news out of circulation by encouraging holders of real news to keep quiet rather than engage in an exchange with what might be fake news.
The money aspect of this was first codified in the 1500s by Thomas Gresham, an advisor to Queen Elizabeth I. The Queen was mighty vexed by the moribund English economy of the day, a distress that Gresham laid squarely at the feet of Elizabeth’s father, King Henry VIII. It seems that late in his reign, Henry had decided to start issuing silver coins with only half the silver content of his original silver coins. Once everyone got wise to the diminished actual silver content of the coins, the exchange of food or clothes or land or whatever for silver coins came to a screeching halt. Everyone wanted twice as many silver coins as before to make an exchange, because they weren’t sure whether they were getting the good old coins or the bad new coins. This was particularly problematic in the banking sector, where gold was the ultimate store of value. Rather than be forced by the Queen to exchange their good gold for suspect silver, bankers and anyone else with a gold coin either buried it in the backyard or, better yet, found a way to get their gold out of country entirely.
I thought of Gresham’s law the other day when the stories came out about Trump telling Gary Cohn to just “print more money” to solve our burgeoning budget deficit. He really is a Henry VIII cartoon, right?
And I thought of Hunt’s law this morning when Trump tweeted that only a handful of people had died in Puerto Rico from Hurricane Maria. JFC.
In the 1500s, the big problem was having your currency debased.
Today, the big problem is having your information debased.
To be clear, the debasement of information into Fiat News – the proclamation of opinion as fact – started waaaay before Trump. If you can’t see that EVERYONE in the mass media and mass political universe, on BOTH sides of the political aisle, isn’t engaged in the Fiat News debasement game … well, you’re blind. It’s just that Trump is really, really good at playing this game.
How does it end? Not well, I’m afraid, if history is any guide. Elizabeth I used the carrot and the stick of the State to force the general acceptance of the bad new coins over time. Want that government contract? Gotta play ball. Caught you taking your gold out of the country? Why you must be an Enemy of the People. Off with your head. Literally, not figuratively. Yep, the State has muscle and the State has time. We’ve got fear and greed. One guess how this plays out.