(2017-01-04) Hunt Fiat Money Fiat News

Ben Hunt Epsilon Theory on Fiat Money, Fiat News. Kurosawa’s Rashomon is the defining movie of an Epsilon Theory world, where Narrative dominates and Truth with a capital T is nowhere to be found. The bandit, the wronged woman, the dead samurai, and the woodcutter witness all testify at trial, and the only certainty, as unsatisfying as it may be, is that we the jury will never know what truly happened in that forest. Such is life. Such is history.

Gresham’s Law: bad money drives good money out of circulation. Hunt’s Law: fake news drives real news out of circulation.

was this Washington Post article fake news? This may surprise regular Epsilon Theory readers, but no, I don’t think it was. It was fiat news, which is to “real news” what fiat currencies like dollars and euros and yen are to “real money” like a gold coin. Fake news is something different. Fake news is counterfeit news, which is to fiat news what counterfeit bank notes are to fiat currencies.

My view: both Russia and the Washington Post deserve as much tarring and as much criticism as humanly possible. My view: both Russia and the Washington Post are bad actors. My view: both Russia and the Washington Post present a danger to a well-functioning American democracy. But they present different dangers, with different dynamics, with different strategic interactions, and with different likely policy responses, because they operate on different dimensions of Information Theory. Oh yeah, one more … my view: there are lots of Russias and there are lots of Washington Posts out there.

Russia is in the counterfeit news business. They are trying to influence our political process to their sovereign benefit

The Washington Post is in the fiat news business. They are trying to influence our political process to their institutional benefit, just like the Wall Street Journal and every other mainstream media institution is in the fiat news business. The Washington Post is never a foe to a status quo American regime, regardless of which party is in the White House, as the regime bestows on them the authority to issue fiat news.

definition of fiat news, or what I (and the Fed) have called “strategic communication policy” in the past: “Once you start thinking about what’s happening in markets and the world as an inextricable weave of fundamental events and political efforts to shape our interpretation of those events to achieve a political end, you start to see stalking horses everywhere.

And it’s not just actual programs or actual market behaviors like the Chinese purchase of U.S. Treasuries. When words are used for strategic effect rather than a genuine transmission of information you create a virtual stalking horse. This, of course, describes every use of words by every politician and every central banker.

I understand why politicians and bankers have completely abandoned authenticity, an uncommon quality even in the best of times. The Great Recession was a near-death experience for the global economy, and slamming a syringe of adrenaline into the patient’s heart — which was basically what QE 1 did — doesn’t happen without long-term side-effects. To switch the metaphor around a bit, this was a war to preserve the System, and as Aeschylus said 2,500 years ago, the first casualty of war is truth

while I am happy to condone the use of emergency powers to win a war and save the world, I am not at all comfortable with their continued use once the crisis is over

So where does it all go from here? I’ll take a cue from the history of fiat money and its counterfeits and hazard three predictions. After all, prices and news are both just signals when seen through the lens of Information Theory, and the same dynamics and “laws” should apply to both.

Today fiat money completely and utterly dominates all global commerce and exchange. Why? Because it supports the existential aims of government: taxation (sovereignty), price control (stability), and liquidity provision (growth).

Fiat news serves exactly the same existential aims of government, just in a less overt (but more powerful for being hidden) fashion.

Second, while counterfeit news will continue to suffer the same official opprobrium and punishment as counterfeit money has endured over the centuries, we’re going to see a lot more of it in the years to come

In the same way that it’s easier to counterfeit fiat paper than gold or silver coins, so is it easier to counterfeit fiat news

what Russia has shown is how easy and cheap it is to counterfeit news for yuuuge sovereign benefit when ALL news is constructed and slanted to some degree.

Third, Gresham’s Law applies to news as well as money, meaning that fake news drives real news out of circulation

Even though we’re awash in news, just like Elizabethan England was awash in coinage, the exchange value of ALL news has been diminished regardless of its “truth-content”

Facebook’s Dec. 15 announcement on combating fake news... In practice this means that four established fiat news institutions — Associated Press, ABC News, the Washington Post, and the Tampa Bay Times (Politifact) — together with a smaller media company, Snopes.com, will share the responsibility for determining what stories are “disputed” and dropped into the memory hole of a lower ranking in News Feed.

My sense is that these fact checkers can do a pretty good job of identifying counterfeit news (for example that’s why Snopes.com was started, albeit in an urban legend and email hoax context), but will fail miserably at policing fiat news

Not that Facebook cares about the distinction, of course, as they will become the preeminent fiat news provider themselves when all is said and done.

my concern isn’t that Facebook prevents me from maintaining privacy with regard to other Facebook users. My concern is that Facebook prevents me from maintaining privacy with regard to Facebook and other regime institutions, both corporate and governmental, so that the fiat news I receive is curated and distributed to successfully elicit a specific response from me.

I love gridlock. I love the checks and balances embedded in our political machinery, because it prevents government from doing as much as it otherwise would to interfere with and upend my life. There’s no gridlock at Facebook or Amazon or Google, and this is where you’ll find the road to smiley-face authoritarianism

I think it’s possible to use new technologies to track and analyze the dynamic of fiat news dissemination, i.e., the Narrative, within the discrete social system of capital markets.