Hulbert’s 4 Big Lessons

Mark Hulbert is the founder and chief honcho of Hulbert Financial Digest. He’s been tracking investment newsletters for almost 3 decades. In addition, he is a columnist for Marketwatch, and a contributor to both the Sunday NYT business section and Barron’s.

I’ve long appreciated his rigorous approach to markets, analyzing data, and working off of specifics, rather than emotions.

Last week, he had a Barron’s column that was quite informative. He analyzed which strategies have worked over the years, and which have not. From that, Hulbert noted that several important investment lessons could be drawn.

Here are the highlights:

"Certain investment truths are timeless enough to transcend the year-to-year, or even decade-to-decade, cycles of the various financial markets:

Lesson #1: Returns in excess of 20% to 25% annualized are unsustainable.

Every newsletter Hulbert monitors that has ever gained more than 100% in any given year has suffered through other years in which it produced big losses. Clearly, regression to the mean is a powerful force in the investment advisory arena.

To be sure, Warren Buffett, chairman of Berkshire Hathaway, has
outperformed the best-performing newsletter and mutual funds. Since
1980, the net asset value of Berkshire Hathaway has grown at an
annualized rate of around 22%. But even Buffett has had weak years, under-performing in the late 1990s when Tech was king.

Lesson #2: There is more than one road to riches

Hulbert looks at these intractable investment questions:

• Is fundamental analysis better than technical analysis?

• Is successful market timing possible?

• Is buy-and-hold better than in-and-out trading?

After studying Newsletter writers for twenty-seven, he notes he is "no closer to answering these questions" than when he started. However, he did discover the following:

Over the last 27 years, the top performing newsletter advocates the long-term buying and holding of good quality stocks. No surprise, considering that 20 of the 27 years were a bull market.

But consider that the second-place newsletter involves a combination of both fundamental and technical analysis, as well as market timing. The average holding period of its recommended stocks is less than six months. And in third and fourth place are newsletters whose approaches are based exclusively on technical analysis.

Lesson #3: Discipline is the premier investment virtue.

What is the difference between success and failure? I believe the answer is discipline.

Discipline is what keeps us from reacting impulsively and emotionally to what happens in our portfolios. It is a willingness to stick to a strategy during those temporary times it may be out of synch with the market.

Lesson #4: Past performance is a helpful guide to picking an adviser — if it is measured over a long-enough period.

Consider what happened if you chose to follow the five newsletters in January 2000 which, had the best performance over the trailing 12 months. (Or, you could have bought the top performing mutual funds). Four of those five newsletters still exist today, and their average return over the last seven and one-half years has been minus 2.9% on an annualized basis. The fifth of these newsletters was discontinued in mid-2002; at that time, its return since January 2000 was minus 39.6% annualized.

The bottom line? In my opinion, the random walkers are close to being right when performance is measured over the shorter term. But they become wrong in important ways when returns are measured over the very long term.

Very interesting stuff. Thanks, Mark.


Getting More Out of Lessons
Barron’s, Tuesday, July 3, 2007

Print Friendly, PDF & Email

What's been said:

Discussions found on the web:
  1. Werner Merthens commented on Jul 15

    Very interesting indeed…

    It is always a good idea to check HFD, in order to verify a newsletter’s performance claims.

    Yet I am somewhat skeptical whether the ranking of the top performing newsletters is a validation for the methods they employ (fundamental, technical, etc.)

    I am thinking that it could be simple survivorship bias. For instance, let’s say there is a large number of technical analysis newsletters among the ones HFD monitors. It is conceivable that after year one a certain percentage of them has good results. After year there will be a certain number, albeit less than after year one, with excellent performance over 2 years.

    In the final year when results are tallied a number of them will have survived. It could be just pure chance. The number of surviving technical analysis newsletter could be just a function of the total number of technical analysis newsletters monitored.

  2. Eclectic commented on Jul 15

    He’s about the most objective, informed, responsible and balanced motor trucker I know.

  3. Woodshedder commented on Jul 15

    Werner Merthens-

    Over the long sample period that Hulbert uses (27 years) survivorship is not likely to be a factor, unless the TA newsletters were added to the survey just a year or so ago. I’m assuming that all of the newsletters have been around for similar lengths of time (~27 years), or that Hulbert has used newsletters that have ceased to exist in his calculations. I do not know for sure as I do not subscribe to Barrons and cannot check. I’m making the assumption that his calculations are robust.

    What I am more interested in terms of survivorship is the stat from lesson #1. Also, I would like to be able to see the data used to derive the stat. Alas, again, I’m a non-subscriber.

  4. RW commented on Jul 15

    Hulbert’s observations are really excellent but:

    “…regression to the mean is a powerful force…”

    It may sound like picking nits but calling regression to the mean a force implies it is causal and this could be a rather fundamental mistake or, at least, it could lead to some very bad decisions. It is far more likely that, rather than economic causes, regression towards the mean is a system behavior reflecting uncertainty of prediction.

    It’s in the same genre as the so-called “sophomore slump” in sports: If the rookie season was particularly good it is actually fairly likely the second season may not be as good; it’s just a label for an observed phenomenon and causal explanations are likely to be spurious.

    But over very long periods of time, well, that’s a good indicator that someone either has identified and appropriately weighted a few genuinely useful variables — or at least they are not unduly confounded by other variables they use — and probably also has a very disciplined approach; i.e., items #1 & #3 are likely to be closely related.

  5. Werner Merthens commented on Jul 15


    Even though I do not put much faith into technical analysis any more, I did not mean to pick on it in particular. Substitute technical analysis with fundamental analysis if you wish. You then have a fundamental analysis newsletter in the top position.

    It is quite possible in my opinion, but by no means certain, that it took top honors by chance alone, due to an effect known as survivorship bias. In other words the same argument still stands.

    The fact that one fundamental newsletter ‘won the competition’ does not prove conclusively that fundamental analysis is superior to other methods.

  6. Eclectic commented on Jul 15


    “…regression to the mean is a powerful force…”

    Very interesting observation you have there in your questioning of regression as being a force:

    I think you are right about the reference to human behavior.

    To my mind, regression to the mean occurs as a result of the recognition of a prior erroneous assumption of the mean, and indeed that can not be a force, either mechanical or philosophical, because a force can only exists as a present tense entity of causation.

    If there’s a force, it exists as the propensity of human psychological behavior to make erroneous conclusions… In that sense it’s very accurate to call it a force, because the force is what induces the behavioral change.

    Contrast that with real mechanical causation. For example: Catch and weigh rabbits. You may experience accurate observations that depict a digression from the mean, and unless the experimental measures were recorded inaccurately, there wouldn’t necessarily be a later regression to some previous mean. Rabbits may genetically be modified; they may eat better; something else in the environment may cause their mean weight to increase or decrease. All you can say is that they will statistically be found to have weights that a-d-h-e-r-e to the mean within statistical standard values, but not that that observed mean can’t change.

    This may be a bit esoteric, but my opinion of the definition of inflation is that it is: “the failed mutual recognition of a reorganization of currency unit value that was formerly and erroneously attributed to p-r-o-f-i-t.”

    You have an excellent observation. When you begin to attribute macroeconomic outcomes to philosophical and psychological rather than mechanical causations (as with Classical Theory), you’re on a track that wasn’t understood perfectly by either Adam Smith or John Maynard Keynes, and certainly not by any Monetarist central banker world-wide today.

    However, after saying all of that, my opinion is that regarding PE ratios, corporate profitability and other mean macroeconomic observations, regression of the causation of prior erroneously recognized shifts of the mean is at least inexorable, whether you consider it the primary force or in a sense the correcting force.

    I also like to think of this process as outbound and returning psychological w-a-v-e-s that ripple and reverberate, just like the waves of a pond when a rock is tossed in it.

  7. Werner Merthens commented on Jul 15

    Hey Electric,

    I’d like to get me some of the stuff you are on. It must be great. What is it?

  8. Eclectic commented on Jul 15


    Read all my (serious) theoretical macroeconomic commentary on this blog… study it and understand it… and you’ll no longer feel your feet.

    Don’t look for it in any books… It’s not there.

  9. Lord commented on Jul 15

    I have always thought that believers in efficient markets should be able to design a criteria by which indices rise to the top, however they can only arrive at doing better than average due to reduced fees. While funds suffer survivorship bias, and better risk adjusted performance of some may be due to chance, it is revealing that even a choice of criteria over long periods can not demonstrate their unilateral superiority, only their averageness.

  10. Jim Meek commented on Jul 15

    Couldn’t post the following re “Hulbert’s 4 Big Lessons”
    (perhaps because it mentions “roulette”)?

    Twenty-seven years? That means starting in 1980 — almost at the end of the last real bear market, and the start of a period that has been nearly all bull market, with frantic Fed liquidity-flooding — real interest rates several percent negative — at any sign of weakness since Greenspan’s ascent in 1987. How can this be a real test of investment strategies?

    Moreover, in a game of with a large element of chance and a large number of players, it is not possible to definitively distinguish luck from skill. Some years ago, thinking to teach my children that in gambling only the house ever comes out ahead in the long run, I created a spreadsheet to simulate a roulette-like game, each row a player, each column a spin of the wheel, ran it again and again with hundreds of players — and found that on every simulation run, there was at least one “Mr. Lucky”, a row that would win again and again and still be way ahead in column 256. Of course that row was different every time — this was purely a game of chance — but people watching a part-skill-but-mostly-pure-chance real-life game with such results would be certain to acclaim “Mr. Lucky” a genius. Nassim Taleb has written well on this issue in some recent books.

    With so many investment funds and newsletters out there, the odds are nearly certain that some will have achieved consistent success by pure chance even over the long term.

  11. peter from oz commented on Jul 15

    a spreadsheet of your own making is like the models our CDO geniuses use it can’t take into account the aberrations of real life
    i’ll still stick to fundamentals and discipline and donate to the local mr lucky poorhouse when i can
    as leon levy said anyone can be a genius in a bull market
    rgds pcm

  12. Winston Munn commented on Jul 15

    “my opinion of the definition of inflation is that it is: ‘the failed mutual recognition of a reorganization of currency unit value that was formerly and erroneously attributed to p-r-o-f-i-t.'”

    Eclectic: I believe a functioning definition of inflation is critical.

    I like this definition: a rise in the tradeable units required for end use goods and services due to the competition created by ease of replacement of expended tradeable units.

  13. stormrunner commented on Jul 15

    I’m not an economist but according to Debt as Money in the debt money system total money must equal P/P+I being that credit is continuously being extended and the total monies required to pay back the extended debt far exceed the principle lent, the money supply must continuously be being expanded. Once all debts are paid in full there is no money left in the system. No permanent money supply period.
    They quote Fed Reserve Chairman Eccles to support this. According to the tutorial people must work to pay back debts from the pool of money which is only created upon lent principle being this is the only money in the economy. When banks restrict credit and the pool no longer expands people are scrambling to pay back interest from the only pool available the principle pool. Given the mechanics of this system, if this description is accurate we better pray hard for inflation. In this theory new debt is the cause of inflation but without new debt there is not enough money in the pool to pay the debt. This they claim explains why even responsible lenders get burnt in the credit contraction. Even thought before the mishap they may have been easily able to service debt during the contraction the money pool shrinks as money heads back to the banks and there is no money to keep people employed. So even though there are laws now not allowing banks to arbitrarily call in loans all they need to do to create massive deflation is stop lending to new players. Then with their reserves run around and buy everything for pennies on the dollar.

    I really hope I got this concept wrong. But they were pretty plain.

  14. Jane commented on Jul 15

    I just came across your blog, great info for both small and large investors.

  15. Eclectic commented on Jul 15


    Let me rephrase your observation with [my annotations]:

    Inflation is:

    “a rise in the tradable units required for end use goods and services [this is exactly where the failed mutual recognition of a reorganization of currency unit value occurs – you see, the return psychological wave I referenced before is the same recognition – it’s a ‘wave of recognition’]

    …due to the competition created by ease of replacement of expended tradable units [this ease of replacement you reference IS the result of a prior erroneous attribution of profit].”

    A review of my terminology developed from a lifetime of philosophical experimentation:

    -Money and Power are each the component expressions of the same philosophical entity, that of being a coercive or compelling force that facilitates economic exchange whether cooperatively or uncooperatively. They also share a relationship that is analogous to the relationship of matter and energy. Power is to money as energy is to matter… different forms of the same thing.

    -Profit is an erroneous philosophical concept, because it by necessity requires the mismatching of price and cost, and thus must function to misallocate economic resources. Every realization of profit thus causes the realization of an amount of anti-profit that is larger than profit, if only infinitesimally larger.

    -The real objective of all human economic endeavors is the reduction of the cost of goods and services marginally approaching philosophical infinity. Mankind misconceptualizes this objective to be rather the attainment of infinite riches via the profiting from economic exchanges. Mankind’s consciously sought out economic objective is merely a substitute for his real one… it’s his only means of subconsciously attaining his real objective. I realize this is profoundly counterintuitive, but don’t blame me… I didn’t invent it… I just discovered it.

    In seeking that real objective just referenced and defined, mankind can easily be duped into the erroneous conclusion that something gained that is attributed to the expression of profit is, in reality, only a reorganization of currency unit value.

    Now, you may say that you can prove to me that profit does exist and demonstrate any number of individuals or corporations that might evidence it, even Barringo I’m sure. I don’t doubt you based on the terms commonly understood in human culture.

    Ultimately what actually occurs in wealth creation is that we all combine our intellectual and mechanical labor to yield, via human productivity, a perpetual reduction in the costs of goods and services. The profit motive consciously drives this achievement, although profit is not its ultimate objective, if only understood subsconsciously.

    Assume the following experimental analogy:

    Think of why we use gasoline in an engine. We do it ultimately for motive power [tantamount to p-r-o-d-u-c-t-i-v-i-t-y], but its greatest expression of power is in the heat it produces [tantamount to p-r-o-f-i-t] which is not the primary objective, but merely a waste byproduct.

    Your philosophical light bulbs should begin to flash.

  16. Frankie commented on Jul 15

    There is only one BIG flaw in Hulbert’s approach: He doesn’t follow any of the most successful Trend Followers like Bill Dunn, Salem Abraham, John Henry, Jerry Parker and the likes.

    These guys have just trounced the market big time over the long-term.

    What I would really like to see are the audited results of the 200 most enduring traders/investors of the last, say, 10-15-20 years and find out who’s been and still is the top dog.

    Could be interesting.


  17. stormrunner commented on Jul 15

    Eclectic in some real abstract way I think I follow it.

    There reality is there is no such thing as money only the signiture on the dotted line pledging the signers resources to the pool enforced by the state, in essence a transfer of energy or labor, only the receiver of this power had nothing other than than this imaginary concept called money which is nothing but a paper receipt to trade for this bondage. Thus other than for some transaction fee why is it that high power money at a 10 to 1 reserve ratio is worth a 50% bondage premium, because were still stupid enough to allow it thats why. Its not the bondage thats the issue, nothings free, its the usury premium.

    Monetary reform before chaos anarchy or worse.

  18. m3 commented on Jul 16


    i agree with you on most of what you said except for the myth of profit.

    -Profit is an erroneous philosophical concept, because it by necessity requires the mismatching of price and cost, and thus must function to misallocate economic resources. Every realization of profit thus causes the realization of an amount of anti-profit that is larger than profit, if only infinitesimally larger.

    profit is not a mismatch of price and cost, but the difference between cost and the eagerness for goods (aka time preferences).

    profit is a signal that certain goods provide a higher level of satisfaction to consumers than others.

    costs, as you describe them, do not factor into it as much as you think, because costs of production provide profit to someone else.

    it’s a cycle.

    at every stage of the production chain, there is a producer and a consumer.

    e.g. motorists consume gasoline, gasoline refiners consume crude oil, crude oil producers consume drilling rigs, rig makers consume steel, steel makers consume crude oil, etc.

    the profit is a result of each consumer’s eagerness for the producer’s product; it’s not a mismatch at all. one man’s cost is another man’s profit.

    in fact, if sustainable profit is made, then by definition it cannot be a misallocation of resources.

  19. Winston Munn commented on Jul 16


    You pretty much got it. If there were no debt, there would be no money in circulation.

  20. Winston Munn commented on Jul 16

    “-The real objective of all human economic endeavors is the reduction of the cost of goods and services marginally approaching philosophical infinity.”

    Eclectic: I think another way to state this would be to say that the goal of all human economic endeavors is to increase the affordability of goods and services, and that affordability can assume twin identies: a real reduction in unit costs, which is the true goal, or an increase in wealth, which is a misconceptualized goal.

    In previous posts I have described my opinion that monetary expansion of itself is not inflationary until that capital targets a goal and is infused into the economy.

    It makes sense to me that lowered risk premiums are an example of this type of targeted inflation, i.e., higher risk accepted due to the competition for assets related directly to the ease of replacement of expended trade units cause a higher price for failure. It would also explain why risk premiums have risen with the slight credit tightening of late.

  21. Eclectic commented on Jul 16

    Correcting [by alteration] something I wrote incorrectly:

    “In seeking that real objective just referenced and defined, mankind can easily be duped into [erroneously concluding that gains come from profits, whereas, in reality, the gains came only from a reorganization of currency unit value].”

    Again, this references my definition of inflation, which is a phantom source of wealth creation resulting from a nominal reorganization of currency unit value.

    Real economic gains that create true wealth, in the aggregate, can only come from human productivity gains, and these are ultimately expressed not as profits but as reductions in costs of goods and services.

    It’s the true engine of wealth creation.

    Stormrunner – I’m guessing you’ll eventually break out as a gold bug… zat riite?… It seems that your commentary runs to the conspiratorial, and that’s usually my first clue I’m fixin’ to see the shiny stuff pop up. Nothing wrong with that, mind you… I have no opinion on gold, plus or minus.

    BTW, part of what you write makes sense to me too, and that frightens me so badly I may not get any sleep tonight. Haha. Cheers.

    Winston – Traditional thought has to give you the nod. What I’m speaking about is the abstract basis for the philosophical expressions of money, profit, productivity and economy, and I’m quite confident it holds in all respects I’ve discussed.

    Should a person be able to accept my discovered principle that “the real objective of all human economic endeavor is the marginal reductions of the costs of goods and services towards zero,” they will be able to absorb my other theories without much problem. Otherwise, they’ll reject them.

    But let me say this. My principle holds. It’s written in the psychological nature of mankind no differently than it’s a fact that the planets orbit the sun.

    All new theories are the red-headed step-children of convention. I didn’t expect mine to be otherwise. Cheers.

  22. stormrunner commented on Jul 16


    You pretty much got it. If there were no debt, there would be no money in circulation.


    Thats the simplest part of the whole concept. The disturbing part is why are the creators of the currency, merely a medium with which to facilitate trade allowed such a premium, this eventually leads to a ruling class. Our constitution was not intended to do this. People here are speaking of inflation ie currency issuance ignoring the siphoning that is the system, I’m not talking about retail banking interest I’m talking about fractional reserve banking. The masses are held hostage to the issuers of the currency, the productive economy is in a constant state of debt to a cartel.

    “a rise in the tradable units required for end use goods and services [this is exactly where the failed mutual recognition of a reorganization of currency unit value occurs – you see, the return psychological wave I referenced before is the same recognition – it’s a ‘wave of recognition’]

    A wave of recognition? This infers some benign natural process. High powered money issuance causes excess supply leading to instant premium for the first users of the new currency while the end user gets fleeced. This is a scam, why speak of it as a only a natural process peeling off the scam layer. Debt free money would also have an inflation issue but less the usury. I’d be more inclined to accept the ‘wave of recognition’ in the Debt free environment. This type of abstract explanation of the “con” makes this man made siphoning process appear a natural function.
    If I’m wrong about this please elaborate it is the very purpose of my concern, if it is a con it can be exposed , once exposed it can be remedied. The incredulity of it all, seems its greatest asset.

  23. rebound commented on Jul 16

    Wow. One should lay off the bong on school nights. Please be sure to sober up before executing any trades tomorrow. Cheers!

    Here are a few notes on the dissertations posted in this thread:

    “If there were no debt, there would be no money in circulation.” Whaaat? But what if we were caveman capitalists … before the time of contracts? There was still money … be it meat, arrowheads, or whatever. You can still have a marketplace without debt. Debt is another layer of complexity.

    Also, it was said that “Profit is an erroneous philosophical concept, because it by necessity requires the mismatching of price and cost, and thus must function to misallocate economic resources. Every realization of profit thus causes the realization of an amount of anti-profit that is larger than profit, if only infinitesimally larger.” Whaaat? Love it or hate it, profit helps (as a catalyst) to properly allocate economic resources. Want to see nasty externalities from Hell? Go visit the old Eastern Block and look what happens to economies and the environment when something other than supply and demand attempts to allocate resources. Not pretty.

  24. Eclectic commented on Jul 16


    Explain profit to me. Assume I’m a wilderness traveler self-reliant with no human contact.

    Do I have an economy?

    What is profit?

    Can I function without profit?

    What is money?

    Can I obtain resources, and how do I allocate them?

    Rebound, I’m not talking about political economy as you are. I accept the tenants of capitalism and the conventional concepts of profit and resource allocation, and generally agree with you.

    You’re talking molecules. I’m talking sub-atomic particles and the psychological dynamics that put the atoms and then the molecules together.

    Winston, your twin identities discussion isn’t that far removed from what really happens. I’ll just say that the strength of all of humankind’s wealth creation has always come from ever advancing human productivity. It trumps profits and the conventional understanding of both wealth and riches.

    It obviates m-o-n-e-y. It does, Rebound, it really does. You can go down and argue with a stop sign near you, but it’s still going to be red and white and say the same thing when you’re finished.

  25. Winston Munn commented on Jul 16


    I was referencing specifically the present fiat money system when stating that without debt there is no currency.

  26. mhm commented on Jul 16

    I’m very late to this discussion but here’s my take:

    “””Explain profit to me. Assume I’m a wilderness traveler self-reliant with no human contact.”””

    Do I have an economy? Yes, you work out an arrow and spend it by targeting a monkey. [don’t argue you are a veggie]

    What is profit? You got a chewy monkey for the cost of a stick of wood and some handy work.

    Can I function without profit? You might but life could be short.

    What is money? You are in the wilderness without another human, so what’s the point… But assuming you are not hungry and could trade the monkey for cash, you could store it for later use. There you go: cash/money is nothing but stored profit.

  27. stormrunner commented on Jul 16

    My concepts are lifted from 3 sources.

    Money as Debt

    The Money Masters

    Fiat Empire

    Now I realize as in some of my previous posts some would get no further than a minute or two through these presentations then summarily dismiss them.

    With my limited knowledge I will attempt to summarize.

    I’m starting a new country it has a barter system economy which it has outgrown. I have been drafted to create a private banking system to facilitate trade within my closed system.

    Tenet 1, the currency I create will be, by government fiat or declaration accepted for the purposes of trade and taxation.
    Tenet 2, the repayment of all extended debt will be enforced.

    I start my bank; note I am a private citizen so a member of the government will assist me with running the enterprise.

    For the purposes of simplicity I’ll keep the numbers low and use existing units (dollars)

    A thousand dollars worth of something gold for instance is deposited in my vault it is cumbersome to divide up and trade.

    The country is somewhat large so I create 10 branches to each of these 10 branches I allocate $100, (high powered money) note at first this is merely a ledger entry.

    I coordinate with my government assistant to create a mint to print the necessary new currency

    At each branch a 10 to 1 reserve ratio is established so these branches each extend credit at interest to the tune of $900 keeping a $100 reserve using the newly printed money this initially expands the money supply ten fold.

    This money is then spent in the economy and a price level ensues.

    If I lend the money out a 5% interest, principle and interest payable in 1 year, there is not enough money in the economy to service the debt, $9000 extended + 5% of $9000 or $9450. Remember there is only $9000 in circulation.

    To remedy this situation I must constantly be lending and printing to ensure enough currency exits to service the debt the more I issue the more that is required.

    This is said to be a synopsis of the mechanics of the Federal Reserve – Fractional Reserve Banking System.

    Federal Reserve chairman quotes are inserted to support this description in the videos


    Even though currency is needed, it is manufactured out of thin air by a private system in the final analysis who do you think controls the supply me or my government helper.

    If all debts are repaid all monies are removed from the system but not to worry this can not happen because there is not enough money in the system to repay all debt. Also it would not be in my best interest to destroy my system.

    The banking system the only non productive component gets to keep all this interest which it can use during credit crunches engineered to cause deflation to keep run away inflation in check also to my benefit to acquire real assets at the deflated price level.

    The first receivers of the new currency created after the initial price level is set get to use it at the old price level which modifies the amount of money in the system creating Eclectic’s new ‘wave of recognition’ or inflation.

    After a time the currency itself isn’t even necessary anymore for the purchase of assets a signature on any convertible contract by anyone in my system with to promise to pay by the borrower represents new money. Ledger entries being all that is necessary.

    In this scenario it would seem the inflation has to be at least equal to the expected debt service of the newly created money ( no banks are lending at 2%)

    Disclaimer I am not, repeat, am not an economist or banker I am simply parroting what seems a reasonable description of the current system as conveyed by the above references.

    Their recommendation Lincoln’s Green backs.
    Note: similar system but completely government controlled the money is spent into existence instead of borrowed, inflation still exists but debt is constrained and public debt largely would not exist. Massive inflation necessary to support a war effort would not be popular unless we absolutely needed to be killing someone.

    System one: No conspiracy just a bad system. Also I am not a gold bug.

    System two: seems worthy of additional thought.

    I need someone to punch holes in this explanation.

    Thanks for your time

  28. Eclectic commented on Jul 16


    Okay, you’re no gold bug, but the conspiracy theme is still pungent in your writing. Why don’t you explain for us how you would improve the system?

    So far you’ve been mostly mouth and no do.

    I have to tell you… I got to this part of your piece, and you brought tears to my eyes with its understanding. I think you’ve been sandbaggin’ us:

    “The first receivers of the new currency created after the initial price level is set get to use it at the old price level which modifies the amount of money in the system creating Eclectic’s new ‘wave of recognition’ [of] inflation.” end quote.

    Actually, Stormrunner, it’s not so uniform a process as you make it seem. It’s in waves, yes, but the waves are uneven. The reason the waves are uneven is because human learning is not uniformly distributed.

    Let me explain it this way, and although I didn’t intend to do it with a gold-based currency, the logical flow works best that way.

    Suppose a ship laden with newfound gold hits the European continent with gold mined in the Americas. Suddenly prices go up because the owners of the gold are spendthrifty about bidding up the prices of goods and services.

    Other market participants do not realize the money supply has just been reorganized by its unit value expressed in species (gold). They are about to learn, but it’ll occur in an outbound wave from the source of new species use.

    Those providers of the goods and services react by mobilizing assets for production to meet this artificially induced demand and higher prices. Under a certain chain of economic events, a manufacturer of some wooden tool might have under these circumstances, if he’d been able, single-handedly cut down every tree on the entire European continent for wood stock, or another might have manufactured and stacked shovel pans for making shovels so high as to make the world look level. He might have dug every iron ore deposit he could have found to China before slowing down.

    If unrestrained free-market capitalism has a fault, this is it. It’s in the often-expressed misallocation of resources that comes from frantic markets that expose the economy to erratic decision-making.

    Witness today’s sub-prime debacle, which may or may not impact higher quality mortgages. I say higher quality tongue-in-cheek, because, in a manner similar to sub-primes, higher qualified mortgage buyers were likely under-qualified at point-of-mortgage closings. What I mean is; if sub-primes were stretched to affordability with failed qualification procedures, it’s very likely that other near-subs may have been stretched up higher into prime in the same way. Were it so, then the mark of additional housing price declines (I’m not saying there will be further declines – I don’t know) would likely result in greater equity short-falls among higher qualified mortgagees in any given crisis. Time will tell, and nobody can know at present whether that will happen or not.

    Back to my illustration:

    These manufacturers and providers of services themselves are lured into the erroneous conclusion that their asset prices are r-e-a-l, when in fact they ultimately (after the returning waves of recognition of the error are realized) will find their w-e-a-l-t-h regressing to the mean in relationship to all other asset prices. Thus they discover that the unit value of the currency, being a function of the total supply of species (gold), has simply reorganized itself to a new unit value.

    Much of the economic stimulus caused by this, and thought to result in the accumulation of real wealth, is found to be exactly what it is… a phantom of erroneous conclusions by market participants realizing their errors in u-n-e-v-e-n waves that ripple and reverberate.

    Late wave participants, late to the recognition, who have recklessly allocated resources erroneously to over-production will suffer immediate and substantial declines in the returns on equity of invested capital (denominated in species or in commodities) and will find that their effective point of marginal efficiency of production had occurred at far lower levels of inventory than they have accumulated.

    Down come the prices of production inventory in terms of species, but commodity prices (all things being equal) resume their prior somewhat stable relationship marked-to-market in units of other commodities, ex-species.

    Real wealth will have been created in this activity, but only in two forms: 1) – early participants will have possibly accumulated excess quantities of species and/or commodities grown larger by a rate greater than the eventual rate of devaluation of unit currency value (much of today’s stockholder wealth is a phantom in terms of world currency exchange rates), and they will have quite literally partially achieved mankind’s consciously expressed economic objective (marginally infinite riches accumulated via profiting from economic exchange), and thus effectively achieved mankind’s subconsciously expressed r-e-a-l objective (marginal costs of goods and services philosophically approaching zero), and 2) – all other participants will have expressed their assumed wealth merely as a reorganization of currency unit value (a phantom), marked-to-market against the wealth of others, but their truly expressed real wealth will reside in the marginal reductions of the costs of goods and services toward zero that result from the human p-r-o-d-u-c-t-i-v-i-t-y gains occurring during this cycle.

    Where is the wealth?… It’s in the reductions in the costs of goods and services expressed in the only true money species that ever can ultimately exist – not in gold, not in fiat, not in commodities (necessarily), but in the quantity of LABOR required for obtaining the goods and services needed in life.

    It’s because money, power AND labor (both mechanical and intellectual) are ALL components of the same philosophical entity… They all exist as the component expressions of the coercive or compelling force that is the philosophical m-o-n-e-y of our economic existence.

    Winston, I just above illustrated your twin identities within the context of my previously written personal definition of i-n-f-l-a-t-i-o-n.

    Stormrunner, down to the passage I quoted, you’ve just in your epistle, whether you knew it or not, illustrated the far-reaching vision of Alexander Hamilton over two centuries ago.

    Afterward you launched off into a discussion and an understanding of fiat that I don’t necessarily fully accept, except that a reckless central bank can often fail in what I consider its primary objective (forget all that business said by the Fed about dual responsibilities – it’s not possible to accomplish them – structurally impossible), and that objective is the integrity of whatever species it uses for a money supply, whether gold or other precious metals.

    The reason for that single objective being required is because they CAN NOT STIMULATE an economy. They can only facilitate orderly economic exchange.

    Attempts at stimulating are no differently received than that wave of erroneous conclusions drawn in my example of how market participants react to an undiscovered new quantity of gold.

    The species simply readjusts its unit value in reverberating uneven waves of recognition.

  29. Winston Munn commented on Jul 16

    O.K. Eclectic – this one I grasp and concur completely that wealth is represented by the quantity of labor necessary. Good show.

    Onto to fiat currency. In my view, the deception of our current reserve banking/fiat currency is that the debt required for its creation – being a future unrealized increase in money supply – can only be repaid by increased productivity. Therefore, productivity is unable to create real wealth.

    In fact, this fiat system is the antithesis of productivity, as real wealth creation (more good/services for less labor) is inherently in the hands of the money creator via the decision to spend with no trade off of labor.

    This is why I call inflation not an economic phenomenon but simply a debasement of money. It is easier to see with a hard currency such as gold coin, but the principle is the same.

    A monarchy uses gold coins as currency. The king is dissatisfied with his wealth, so he orders a new coin – all gold coins are brought to him, melted down, and new coins with 1/2 the amount of gold are issued with the proclamation that these are of the same value as the old 100% gold coins.

    But what has happened and what will happen next? The king has just increased his wealth by an amount equal to 1/2 the entire country’s wealth simply by fiat, in essence by stealing 1/2 the gold in the kingdom. Now with this new wealth, the king goes on a buying spree – and you end up with the reorganization of unit value about which Eclectic observed – and as he also so well explained, the reorganiztion occurs sequentially, not as a sudden global phenomenon.

    Housing prices rise, commodity prices rise, food costs rise, stock prices rise…

    But what happens to the working class? As prices rise, their productivity increases can only maintain their current standards -there can be no wealth creation.

  30. Eclectic commented on Jul 16

    Minor correction [by addition]:

    Meant to say:

    “… and that objective is to maintain the integrity of whatever species is used for a money supply, whether gold or other precious metals, [or other commodities exchanged as money, or especially fiat money].”

    Too, let’s examine what I mean by how it is possible to attempt to consciously achieve philosophical marginal infinity in the accumulation of riches from economic exchange, and how such an achievement can cause the effective realization of the subconsciously expressed r-e-a-l objective of reducing the costs of goods and services marginally toward zero.

    I’ll give you two examples:

    -Bill Gates

    -Warren Buffett

    …Effectively, those two gentlemen experience a world in which their costs of goods and services long ago approached zero in so practical a manner as to have almost reached theoretical negative i-n-f-i-n-i-t-y (I mean infinitely close to zero).

    They have achieved Valhalla and long ago also reached a point of realizing the practical results of having human productivity reach positive infinity.

    Remember that in the natural world, Inherent Commodities are commodities that are both universally owned and priceless; they are not capable of being priced or exchanged and include: atmosphere, gravity, tides, solar energy, and other powers, compounds, functions and forces… none of which can be titled. Only commodities capable of being titled can be exchanged as commodity money.

    Now, you’ll have to stretch philosophically, but it follows therefore from this that: if Inherent Commodities are both universally owned and yet have no exchange value, then were human productivity to achieve philosophical I-n-f-I-n-I-t-y (remember, these theories are abstractions of reality), then its price (labor, intellectual or mechanical) would likewise also be obviated, and thus become not exchangeable.

    Therefore the only true ultimate source of money used in the economy of mankind (that coercive or compelling force that is money; its components being: labor, power and conventional m-o-n-e-y, fiat or real commodity money) would also lose its exchange value… It would simply disappear into the ether of mankind’s psychology and philosophy no differently than the value of Inherent Commodities already has disappeared there.

    Inherent Commodities have always existed as the pre-existent elements of attained infinite productivity in terms of human perception. Real human productivity is simply striving philosophically to get there as well.

    Back to Gates and Buffett:

    Even still… their nominal wealth will be eroded over time with yet f-u-r-t-h-e-r reductions toward philosophical zero in the costs of goods and services, as human productivity marches inexorably toward positive infinity. And it will continue to march… always has… always will. It is the true engine of wealth creation.

    Remember, human productivity is not an arbiter of the availability of goods and services in a given time or era… it is merely a *real arbiter of costs in real time present value.*

    In other words, human productivity transcends time, regardless of humanity’s experience within that same occurrence of time.


  31. Winston Munn commented on Jul 16


    Suppose theoretical Nirvana is reached, and goods/services reach near zero. Who is left to supply labor? If everyone were in the Gates/Buffet category, who would have the incentive to produce?

    Seems the end result would be that each person would have to create/supply his own goods and services (hunter/gatherers) or the physically strong would dominate the weaker (servitude/slavery).

    It occurs to me that it is profit (meaning the desire for increased personal gratification or reduced personal labor or the fear of loss of one or both) that creates the incentive for productivity.

  32. Eclectic commented on Jul 17


    About 100 years ago, Albert Einstein proposed a thought experiment (paraphrz):

    “Suppose you could run along next to a beam of light. What would you see and experience?”

    From that original thought experiment, he ultimately derived his “Theory of Relativity” which put 250 years of Isaac Newton’s theories in a sock, even though Newton’s explanation of the motions of planetary physics holds for our practical purposes intact.

    Newton himself had stayed up nights, holed up with fig newtons, water and crackers, in his dank dorm room at Oxford, alone, self-possessed, and invented the entire science of calculus just so he could explain planetary physics… and then he filed it away for 20 years to keep it a secret! and then he partially forgot it!… and then he invented that part of it again!… just to prove to a friend that he had proved planetary motion correctly!… That was one tapped-out psycho-morphed dude, you reckon?

    Einstein actually expressed an apology (tongue-in-cheek I’m sure) to Newton for f’ing up his science, and then as a mere addendum to “Relativity” he also stumbled onto an understanding that matter and energy are the same damn thing!

    “Sum-bitch!” he must’ve said… and expressed it as E = M x [C square] and revolutionized the world, even as it laughed at him at first and naysayed his theory.

    All from a thought experiment.

    Winston, a process does not have to reach its theoretical completion in order to study and learn from what happens during that process, no more than Einstein could run nose-to-nose with light. That was his theoretical basis for his thought experiment and in pursuing it he even discovered that it was not even theoretically possible to reach the speed of light… and that’s where he stumbled onto the notion that it was because that is the point where matter and energy flip-flop as the same existence, expressed in different forms.

    See, Winston, theoretically (and in a real practical sense), y-o-u already ARE a Gates or a Buffett, and you’re suffering a sort of abject poverty in relationship to those who will live in a few dozens or a few hundreds of years.

    Asking me who would work in my, as you term it: “my Nervana,” would be tantamount to a caveman coming into our modern world and asking us the same question.

    What I’m talking about is the marginal progression of an experience that has a theoretical termination in infinity.

  33. stormrunner commented on Jul 17

    I have to tell you… I got to this part of your piece, and you brought tears to my eyes with its understanding. I think you’ve been sandbaggin’ us:

    Eclectic and Winston first off much gratitude for your lenghty analysis I know this requires much effort. I have made no effort to misrepresent my credentials —I have none. I’ve been following the sites and blogs listed in my previous posts for the last two years, prior to that I did not know what fiat was. After watching the Fed blow two gigantic bubbles, I searched for reasons fearing my and my families standard of living was being erroded as if by script. The ideas and comments expressed are not my own just my best attempt to summarize the premise, these are google videos the are meant to inflame, as they are presented free to educate the public and popularize monetary reform. They are quite lenghty. The conceptual one is “Money as Debt” it is the shortest –40 min. I have searched for months for individuals who could lay to rest the accuracy of the message. This material is being presented to the public as defacto truth. My hope is that you will view minimally “Money as Debt” with an asessment of them not of me, my writing is just my understanding of the lesson. Though it makes sense to me I am in now way qualified to recommend it as truth but believe I could add your opinions to my own critical thinking to do so.

    It will take me some time to disseminate both of your replies but it would appear that Winston agrees somewhat with the inequity of the debt based system while Elcelctic you are in the this is a natural progression of the economy camp provided the central bank is responsable.
    Stormrunner, down to the passage I quoted, you’ve just in your epistle, whether you knew it or not, illustrated the far-reaching vision of Alexander Hamilton over two centuries ago. (this is a great compliment to extend to a novice thank you)

    According to the Money Masters, also link privided, Alexander Hamilton is presented as a tyrant and a tool of the European Central banks essentially undermining the wishes of the constitution. This btw does not detract from his briliance the authors mentioned hold that a world led by banking and corporatism was the ultimate goal, we’re nearly there– just my opinion. Maybe these guys are rewriting history. Boy would I love to sit down with you two and rewatch these. I need to hear the parts about thats crap or thats correct. I believe you would enjoy the perspective even if you considered them subversive

    As for my suggestions again I’m not qualified.

    But the options appear to be one, a full
    Gold Standard, doesn’t seem practical, I don’t need gold. I’d like more stuff but I don’t need gold. I know I could acquire more stuff with it but if widgets were the legal tender I’d be happy with more of them.

    Number two a different mechanism to control the widget that is the legal tender. These videos are explicit about the dangers inherent in Debt Based system regardless of the medium. They therefore recommend a system similiar to Lincoln’s Greenbacks which were spent into the economy rather than borrowed into. Maybe a gold based widget that is spent into the economy is the answer. It would have scarcity in its favor and value already built into it via aquisition cost and no point of origin usary attached to it. It would still need to have paper and digital representation to be practical.
    I think this is what Ron Paul is working toward but he does not eloborate least not that I could find I assume this based on his ties to the three links.

    Again thanks for your time as sure you can imagine, the difficulty in finding people to have any kind of logical discussion about this topic. These last two bubbles appear to have spooked the nation. If the principles are right maybe its time to get behind the man trying to enact the reform.
    I’m still trying to grasp the principles.

  34. Eclectic commented on Jul 17


    -A chewy monkey in the hand is worth two in the bush, but given sufficient time I can learn how to get the two in the bush as well.

    -I can not profit from my chewy monkey, since I compose both sides of the arrow/handiwork/chewey monkey market.

    Thus cost exactly equals price. Consequently profit is an erroneous concept. It can not occur without the misallocation of resources.

    If I were to price my chewy monkey too highly to myself, it is the equivalent of constructing more arrows and handiwork than is needed per unit of chewy monkey. Consequently any chewy monkey profits in your terms could only come with a corresponding equivalent of a sacrifice of wasted arrow/handiwork – in a sense no differently than were I to place that item on an alter and sacrifice it to some deity.

    – No, if I merely allocate sufficient arrow/handiwork resources for the purpose of matching it in value of a chewy monkey, then price and cost will be matched perfectly. My chewy monkey thus being at least temporarily one chewy monkey less than I’ll need in the future, my analogous profit is in fact a form of productivity of labor gain in chewy monkey science.

    -“Can I function without chewy monkey profit?” you ask, and then you answer that “You might but life could be short.”

    No, actually all I need is the productivity from sticks, arrows and handiwork and intellectual learning, and my chewy monkey costs will march continuously and marginally toward zero.

    I need not waste arrow/handiwork (anti-profit)… nor do I need to deprive myself of sufficient arrow/handiwork for realizing the necessary productivity gained in chewy monkey science (also anti-profit).

    Doing either deprives me of human productivity, and thus my sacrifice in either case is the corresponding labor lost to the opportunity costs of deprived productivity gains.

    Think not?… Then what portion of the labor required to satisfy your needs for food, clothing, utilities and other core necessities of life do you provide?

    Chasing chewy monkeys is a labor intensive thing, and you won’t have much time for these other extravagances and luxuries.

  35. Eclectic commented on Jul 17


    -No Hamilton, no industrial revolution, no dominance of the U.S. in the world economy.

    -Gold Standard, worse than not practical. The economy is like a football stadium expandable into infinity, in which many wish to participate as spectators. Each spectator must have a ticket. Often the physical supply of gold can not grow as fast as the number of particpants would need it to for each spectator to obtain a ticket, whether that spectator could afford the ticket or not.

    No industrial, urbanized, labor specialized society could ever EVER survive a money supply denominated in precious metal species.

  36. Winston Munn commented on Jul 17


    Thanks for the discussion. It makes me consider that at the point of the speed of light squared, where energy and matter flip-flop, the same might be said of the absolute point of economics, where theoretical zero is reached, that at that point money and power flip-flop, and goods/services are then only provided due to the enslavement of the weak by the powerful.

  37. Eclectic commented on Jul 17


    You should remember from my theories regarding my introduced: Perceived Liquidity Substitution Hypothesis…

    … that I have likened the Event Horizon of theoretical physics to what I consider the enigma of macroeconomics, that being the mystical point in which some macro event causes a profound increase in aggregate market participants’ Coefficient of Perceived Liquidy:

    The Perceived Liquidity Substitution Hypothesis

    (I) The sum total of all money in an economy is held in only two forms; (i) perceived liquidity, and (ii) deferred liquidity, and market participants hold these forms subjectively and interchangeably.

    (II) Perceived liquidity is always greater than conventionally held nominal liquidity measured at the same time, regardless of economic state.

    (III) Perceived liquidity is at the steady state equal to nominal liquidity multiplied times a hypothetical terminal low coefficient of perceived liquidity that is always greater than 1 (one).

    (IV) Perceived liquidity is at all times substitutable for nominal liquidity transactional demand at a rate of substitution that is always greater than zero, and the rate of substitution varies in direct proportion to variations in the coefficient of perceived liquidity.

    (V) Upon an upset to the steady state the coefficient of perceived liquidity will increase to some higher but not unlimited value, and the increase will be proportional to the severity and speed of the upset.

    (VI) An increased coefficient of perceived liquidity can not resume its former steady state value until economic conditions resume the steady state.

    It’s the point in which Classical Theory (MV = PQ) breaks down and monetary policy loses its linear capacity to modulate economic output.

    Keynes tried to explain this empirically. I’ve explained it philosophically and psychologically.

    Monetarists would simply ignore it… they may as well attempt to ignore their heads. It’s real… it happens just like I’ve described it.

  38. stormrunner commented on Jul 17

    at that point money and power flip-flop, and goods/services are then only provided due to the enslavement of the weak by the powerful.

    Winston, Ecelctic’s a hard sell

    What is your opinion of of option two I don’t care about the medium.

    #2: a different mechanism to control the widget that is the legal tender. These videos are explicit about the dangers inherent in Debt Based system regardless of the medium. They therefore recommend a system similiar to Lincoln’s Greenbacks which were spent into the economy rather than borrowed into.

    Caveat: still subject to the nutural forces of inflation due the fact that it can / would be expanded.

    Benefit: Due to the fact that the money is not borrowed into creation there is no usury during the issuance process, once in circulation most other aspects are the same except now there can be money without debt. This is really a simple suggestion why do we not address this?

    Imagine paper money printed for the sole purpose of providing for public infrastructure, common defense,domestic tranquility (legal system whatever) you know those things the founders considered in the realm of the public domain. Then spent into existence creating in effect a real store of value, rather than a note of bondage to a cartel of private banks.
    There would still be banks available to store people’s accumulated wealth ready to lend to new entreprenuers there just would be these vast stores of accumulated paper looking for profit in that which is already efficient rather than generateing new oppurtunities.


    “So far you’ve been mostly mouth and no do.”

    I believe I’ve suggested the Debt free idea multiple times now without a direct response.

    The authors are emphatic we must return the power to issue the currency to the people!!

    Please copmment.

  39. stormrunner commented on Jul 17


    There would still be banks available to store people’s accumulated wealth ready to lend to new entreprenuers there just would -not- be these vast stores of accumulated paper looking for profit in that which is already efficient rather than generateing new oppurtunities.

  40. Winston Munn commented on Jul 17


    I am not attempting a challenge to your theory, only taking it to what seems to me its logical conclusion.

    Consider this: this total economic cycle in your concept is circular rather than linear. The starting point is when power is money. We progess to the point where money becomes power. When we reach the end – at zero – we are back where we began with power as money.

    Another way to view this would be that economics is an evolutionary circle, but at the 180 degree mark it becomes deevolutionary.

  41. Winston Munn commented on Jul 17


    In the matters you ask about, I am a constitutionalist. Money is a trade unit composed of: a) current labor (wages) or past labor (savings), whereas debt is a commitment of future labor. As you can see, these are separate claims and thus cannot be made to represent the same things, as it is impossible to “save” debt.

    Therefore, whatever the unit of trade, it must be exchangeable to purchase current labor, meaning it must be perceived to hold an equal value to labor performed.

  42. Eclectic commented on Jul 17


    I don’t know how you’re employing your remarks… related to my hypothesis, perhaps?… If so, you need to reread my entire remarks for context, as I’ll suggest to Stormrunner below as well. I discovered the principles of the hypothesis accidentally after I’d worked out philosophically what m-o-n-e-y is.

    The hypothesis is not, per-se, about the relationship of power to money, but they are indeed inseparable components of the same entity, as are all of the other elements I describe in the dialog referenced below, including perhaps the most important component… labor, mechanical or intellectual.

    Stay with me Stormrunner, I’ll have some more comments soon.

    It’s just that it’s like you’d want somebody to attend a f’ing night class for a week just to consume all your material.

    I’m game so I’ve done the 47 f’ing minutes already. It’s entertaining and 90% is a description of the reality that very few people understand. It’s because of my concept of “Monetary Obedience” which you can read about here:

    …actually, you should read everything I wrote in this, including the extensive dialog with DavidB, Algernon and my1ambition, if not others I may have overlooked.

    Lincoln Greenbacks won’t work any better than the current system. Thinking that any governmental authority could be altruistic enough to limit the growth of a non-debit central monetary authority (“ex-deb Fed,” or whatever you’d want to call it) presents a degree of naivety at least equal to the naivety the producers of the 47 min piece assume of the public now.

    Some more from me later… stay tuned. I have to finish my f’ing sack lunch first!

  43. stormrunner commented on Jul 17

    Thanks for your reply looking forward to more.

    This link will detail their game the “monetary reform act” it was endorsed by Milton Friedman –again these are the experts I’m parroting, to the layman makes much sense. I get the naivety part maybe the act is written with this in mind.

    Permanent money,
    Interest Free,
    Sure misallocation, inflation, we get that anyway with the issuance interest added.

    Again thanks for the rebuttal these guys make a hell of a case. Ron Pauls trying to ride this all the way to the primarys. Are they naive or do you suspect something more nefarious?

  44. Winston Munn commented on Jul 17

    “I don’t know how you’re employing your remarks… related to my hypothesis, perhaps?… ”

    Eclectic: What I am attempting to do is simply describe my understanding of the logical (to me) conclusions to which your ideas lead. In other words, I am agreeing and simply pointing out my impressions of the impact – hopefully, if my logic is flawed or I have misunderstood your concept you will point out my errors.

    47 minutes?!?!?! That’s ain’t f#$%ing nuthin’ compared to the 4 hours trying to figure all this Sh%t out!

    I feel like a community college in an MIT world.

  45. mhm commented on Jul 17

    This is a good discussion.

    There was a reason I used the monkey example and it took me some time to find the article. But here it is. The whole article is a good read and adds another edge to this discussion.

    Simian economics, Jun 23rd 2005

    First, the researchers had to introduce their monkeys to the idea of a cash economy. They did this by giving them small metal discs while showing them food. The monkeys quickly learned that humans valued these inedible discs so much that they were willing to trade them for scrumptious pieces of apple, grapes and jelly.

    Once the price had been established, though, it was changed. The size of the apple portions was doubled, effectively halving the price of apple. At the same time, the number of discs a monkey was given to spend fell from 12 to nine. The result was that apple consumption went up in exactly the way that price theory (as applied to humans) would predict. Indeed, averaged over the course of ten sessions it was within 1% of the theory’s prediction.

  46. stormrunner commented on Jul 17

    Winston, I believe Eclectic was referring to the run time of “Money as Debt”

    …meaning it must be perceived to hold an equal value to labor performed.

    means you don’t endorse paper, correct?

  47. Winston Munn commented on Jul 17

    “Winston, I believe Eclectic was referring to the run time of “Money as Debt”

    …meaning it must be perceived to hold an equal value to labor performed.

    means you don’t endorse paper, correct?”


    Then this is a perception problem, as money as debt must use labor value today for goods/services but with a future productivity penalty (interest).

    If the interest rate is 5%, and I buy $1 in goods today I am actually paying $1.05 – I am trading future productivity for the expediency of buying today.

    Paper has many good uses – but as money is not amongst those.

  48. Winston Munn commented on Jul 17

    MHM: Welcome to the “Carlos Castaneda” school of economic research.

  49. Winston Munn commented on Jul 17

    Quoting Eclectic: “-The real objective of all human economic endeavors is the reduction of the cost of goods and services marginally approaching philosophical infinity.”

    Or another way to state this objective might be “to restore the Garden of Eden”?

  50. stormrunner commented on Jul 17


    just to clarify when referring to “Money as Debt” in ” ..” I mean the 47 min video @

    ——If the interest rate is 5%, and I buy $1 in goods today I am actually paying $1.05 – I am trading future productivity for the expediency of buying today.

    So far I’m in complete agreement with you this is what I’ve been referring to as “issuance usary”

    Eclectic’s review so far….
    47 f’ing minutes already. It’s entertaining and 90% is a description of the reality that very few people understand.

    You might find it entertaining also.

    There seems to be some 10% he doesn’t like,
    Trusts the government less than the banks. I understand this, but being that the banks issue the currency they run the country and we can’t vote them out. Waiting to here why this reform is a bad idea.

    And maybe how you guys feel about what direction reform should head in.

    In the case of you, Winston I’m gonna guess 100% Gold Standard, No fractional reserve banking, no how, with the elimination of the Federal Reserve. Hopefully not presumptuous of me.
    Strict constitutionalist, gold standard, got it.

  51. Eclectic commented on Jul 17


    Garden of Eden – not far from the idea, without the spiritual overtones. Adam and Eve existed in a world in which e-v-e-r-y-t-h-i-n-g pre-existed as Inherent Commodities in their perceptions… and what did they do?… went and f’ed it all up!

    Also, in review, yes I think there is a sense of money-power-money, or rather tangible-intangible-tangible buried in my hypothesis, and it’s because of the philosophical and psychological nature of money that both Classicists and Keynesians overlooked.

    mhm – Interesting… I’ve often wondered just how intellectually demanding it would be to conceptualize money. I’ve never doubted that apes can do it, but I don’t know about lower forms. However, apes use lengthy straws to fish out termites from nests… they shorten the straws if needed, and thus they may interpret the discs in some proportional way… merely as tools rather than as conceptualized money. But then again… who could say that they don’t also conceptualize tools as commodity money?


    On first blush it appeals to me, until I dig into it and discover that many of its provisions would just be troublesome substitutes for problems we already have now with the Federal Reserve and Congress, or because of its seeming over-reliance on Classical Theory, the, I suppose, unintended parent of trickle-down, supply-side hocus pocus economics.

    For example:

    The emergency alteration provisions for events including but not limited I’m sure to just war are too likely to be politically subjective. Hurricane Katrina?… Would that have lifted the 3% mandate?… Would it have been a worthy reason?… Could central planners withstand the political pressure to lift it?

    3% constant growth of money won’t hold, due to monetarist, paternalistic attitudes of central “planners” and a too-assumptive reliance on Classical Theory, which Keynes took apart piece-by-piece in his “General Theory”:

    Monetarists have too high a regard for the relative stability assumed between the relationship of money (M) and its velocity (V). I’ve advanced that debate further with my theories that you can read, already referenced.

    Money growth targets might be inconsistent with black market economic activity involving USD in the U.S. and worldwide, and with failures or lags of BLS employment/wage/population data to depict the true nature of money supply needs.

    Section 10 could convert taxpayers effectively to shareholders and kill or dramatically reduce valuable public works. All you have to do now is observe the migration of cap-ex off shore to prove this to yourself. American citizens will gladly saw a tree limb out from under themselves if they can be duped into believing it’s in their own best interests.

    Section 14 could unintentionally limit the capacity of, a tradesman for example or a merchant, to react to circumstances and build credit inventory for project completion. Why, I even run a tab at my friendly corner grocery store for convenience and pay it off monthly. It might violate Section 10, forcing me to carry good federal funds for purchase settlement and limiting my convenience and the owner’s business. How about the derivatives markets?… Don’t they in a sense carry credit creation and wrap it into a contractual promise to bear risks? Much of what Mr. Bernanke has complained of in speeches and testimony recently has been directed generally at this industry.

    Section 14 might eliminate that entire industry, or severely restrict it to an observation of absolute settlement counterparty liquidity, something at least opaque now, and maybe darkly opaque.

    Section 16 is dreamy utopia I’m afraid.

    This all indeed has a libertarian appeal, but its utility could only come from a level of cooperation in our country that, were the cooperation evident presently, might solve many of the problems we already have now with the financial system, internal revenue, programs and policies.

    Lastly… The banking industry is likely to see this as a threat. I don’t mean necessarily entirely in the sense of self-interest implied in the 47 min piece you referenced, but likely due to a real fear as well associated with the risks of implementation. I even think the implementation could be dicey. They possess a powerful lobby and carry a lot of influence into government at all levels. Too, the banking system, when responsibly operated and carefully monitored has served the country admirably in the modern era.

  52. Eclectic commented on Jul 18

    Early quote of the day (paraphrz, approx 6:01 AM E.S.T.)–Kernen & Quintanilla (CNBC)

    (Overture, Kernen): “[9 percent]- No… uh… it’s *not* [just] *down* *9* percent.”

    (Retort, Quintanilla): “…..No, uh… that’s: ‘[We really mean] IT’S *worth* [just] *N-I-N-E* *percent*.’ ”

    [in ref: the “higher” quality of two hedge funds reported to be worth “nearly nothing.”]

  53. Eclectic commented on Jul 18

    Correcting earlier statement [by replacement]:

    “…It might violate Section [14], forcing me to carry good federal funds for purchase settlement….”

    I’d used “10” earlier in error.

  54. Eclectic commented on Jul 18

    Here’s another question, Stormrunner:

    Suppose I’m a modestly wealthy farmer in terms of assets, but I’m cash flow poor.

    This is the condition of many farmers.

    I learn that a local farm equipment dealer has an excellent clearance sale on just the right piece of equipment that I need right now… terms: 10% down and balance due 30 days.

    I’ve barely got the 10%, but not even close to the full purchase price now. I’ll likely have it when a crop comes in to be harvested in about 2 weeks.

    However it’s the last piece of equipment at that price and the dealer has another bidder in the wings. I’ve got only until the end of the day to take it or leave it.

    I’ve had some late payments to my creditors and they’ve put me on restriction. The dealer knows me and trusts me and will still sell it with those terms on just a handshake. He’s not interested in adding to the cost by offering me financing and he knows my credit is tight at present. Too, it’s one-of-a-kind close-out merchandise and his own lender won’t finance it, to me, on general policy.

    Even if I negotiate a loan somewhere else, I can’t get it done in time to close the dealer’s offer.

    Section 14 would make the dealer’s acceptance of my 30 day credit for 90% net due illegal and block that commerce.

    If you say no it doesn’t, merely on such short 30 day terms (billing cycle), then extend the circumstances to 90 or 120 days, and it clearly violates it.

    No, I’ve thought more about this potential legislation (Lincoln Greenbacks related), and I think my overall impression is that it is the equivalent of a sort of “consolidation loan” program for the American public, one that would depend on a more efficient replacement financial system to both: 1)- Operate successfully going forward, and 2)- pay off the consolidation.

    Also, it’s just as liable to erroneous subjective decision making as the current Fed/Congressional/Executive operations in my opinion.

  55. stormrunner commented on Jul 18

    Suffice to say I believe you agree with the mechanics of the existing system as illustrated, correct? You take issue with the repair aspect. Would you recommend the functional description of the system as educational or is it to, flawed. I would like to know whether it is accurate enough to recommend viewing, as an educational tool due to its lay explanation of some extremely complicated concepts.

    As to altruism, should the people allow a private cartel to profit from the issuance of that which does not belong to them merely because the process necessitates it?

    Eclectic it would appear that the last 10% troubling you is in fact quite valid and is the reason I pointed you at the proposed solution, the implications of which I have not the experience to disseminate. Can the legislation be fixed? Look we need monetary reform, were at .04 of the 1913 dollar. How long before the monetary unit requires a serious reorganization or even replacement, the Amero and its effect on the constitution scare me to death, a collapse of the dollar will bring this out of the shadows. This could very well create an environment that supersedes our law, this problem needs to be addressed before the dollar is debased to its theoretical limit, if there is one, we must be getting close?

    …..No industrial, urbanized, labor specialized society could ever EVER survive a money supply denominated in precious metal species. (though constitutionalists would take issue, I agree, again it’s the issuance usury that in essence that creates the uber riche, super class which effectively usurp the process.)

    According to my reading no fiat currency has ever lasted more than ~35 years,

    Two hundred years after the founders insisted for states at least, no issuance of Bills of Credit, (See Constitutional scholar, writer, and lawyer Edwin Vieira) its time to amend the constitution with a workable draft and lay this to rest.

    What would it take to fix this legislation, is the concept viable “Debt Free Money” send them your concerns.
    Email at:

    What could it hurt you’ve already critiqued it cut/paste gone..

    You have thankfully given me a base from which to explore further. Not being inclined to be a yes man, scouring cyberspace for an opposing view, I have the utmost respect for your taking the time to break this down. No one else in the blogoshere has had the” good will” to explore these concerns as I have requested. I’m sure you noticed when viewing the video there is much content out there purported to be truth, truth is relative even for the players. I would “in your own good time of course” encourage you to view the “The Money Masters”, audience members the likes of Milton Friedman, I suspect puts it in good company even if the perspective is in disagreement with your own view of history.
    The historical perspective presented is highly subversive, if true, this is a revelation, if twisted a record which needs to be set straight. I believe in the coming months that these types of questions based on this type of source will become more frequent. If you believe all is well it would be prudent to know what your contemporaries are espousing. I look forward to your review of the “The Money Masters”

  56. Eclectic commented on Jul 18


    Enjoyed the intellectual dialog, but I’m done. Bored. Moving on.

Posted Under