Why Common Knowledge Changes The World

For those paying attention, there have been plenty of signs indicating that financial asset prices are dangerously overvalued and that the decade-long economic expansion is reversing towards recession.

But the mainstream – until just recently – has refused to see this.

Over most of 2019, investors have remained willing to push stocks, bonds and real estate to record prices. And the Federal Reserve, the Trump administration and the media have boasted about America’s “strong economy” on a weekly basis.

But suddenly, the herd has become skittish.

It’s not panicking (yet). But a lot of the predominant investor euphoria and complacency has vanished, along with more than a $trillion in market value as stocks have slid from their July highs.


Well, it’s a matter of private knowledge becoming common knowledge. An understanding that until recently was shared only by a small percentage of people is now starting to be adopted by the masses.

This is a very powerful transformation that often leads to swift changes in the status quo. Ben Hunt of Epsilon Theory explains this phenomenon very well:

The core dynamic of the Common Knowledge Game is this: how does private knowledge become not public knowledge but common knowledge? Common knowledge is something that we all believe everyone else believes. Common knowledge is usually also public knowledge, but it doesn’t have to be. It may still be private information, locked inside our own heads. But so long as we believe that everyone else believes this trapped piece of private information, that’s enough for it to become common knowledge.

The reason this dynamic the transformation of private knowledge into common knowledge is so important is that the social behavior of individuals does not change on the basis of private knowledge, no matter how pervasive it might be. Even if everyone in the world believes a certain piece of private information, no one will alter their behavior. Behavior changes ONLY when we believe that everyone else believes the information. THAT’S what changes behavior. And when that transition to common knowledge happens, behavior changes fast.

The classic example of this is the fable of The Emperor’s New Clothes. Everyone in the teeming crowd possesses the same private information the Emperor is walking around as naked as a jaybird. But no one’s behavior changes just because the private information is ubiquitous. Nor would behavior change just because a couple of people whisper their doubts to each other, creating pockets of public knowledge that the Emperor is naked. No, the only thing that changes behavior is when the little girl (what game theory would call a Missionary) announces the Emperor’s nudity loudly enough so that the entire crowd believes that everyone else in the crowd heard the news. That’s when behavior changes.


Hunt uses this private-to-common knowledge transition to explain the sudden fall of previously ‘untouchable’ power brokers such as Harvey Weinstein and Jeffrey Epstein. For decades, these abusers could get away with their crimes because the sins were only recognized by a social minitory. But once the world became aware, there was no way push them back into the shadows.

Recession Risk Suddenly Becoming 'Common Knowledge'

In the case of today's financial markets, few people have been willing to challenge their faith in the current expansion (now the longest in history). The ten-year ride has been easy, comfortable and dependably profitable.

They’ve been able to ignore reams of charts and data over the years warning that the lofty asset valuations weren’t supported by underlying fundamentals. What do those doomers know anyways? Just look at how well my FANG stocks keep doing!

But this week, two developments occurred that were too obvious for the complacent masses to ignore.

First, the US Treasury yield curve achieved full inversion. On Wednesday, the yield on the 10-year Treasury fell below the yield on the two-year for the first time since 2007.

Why is this a big enough deal to spook the majority of investors?

Because an inverted yield curve has preceded every US recession since 1955:

And this isn’t the only serious recession indicator received this week. Those thinking the US economy is too strong to succumb to slowing economic growth need look only as far as Europe, where Germany, by far the largest economy in the EU, just announced that it experienced negative growth in Q2:

If Germany and the rest of the EU slide into recession – along with other major countries like Brazil, Mexico, the UK, South Korea and Russia, which are all facing similar risk – will there be enough demand to keep the US out of one as well?

More and more folks are beginning to have serious doubts. As they should.

This newly-accepted “common knowledge” regarding recession risk goes far in explaining why the recent interest rate cut by the Federal Reserve failed to goose the financial markets higher as hoped. Finally, a critical mass of investors is beginning to realize that more cheap debt can’t solve the problems facing a global economy already drowning in debt.

With this loss of faith in the Fed’s omnipotence, the continued ability to maintain today’s near-record asset prices gets thrown seriously into question.

What Other Knowledge Is Suddenly Becoming 'Common'?

Doubt breeds more doubts.

And there are many strings of ‘conventional’ wisdom that are unravelling fast when pulled on.

Rotten Apple?

Take Apple, as an example. For years, it has been celebrated as an engine of technological innovation. And its stock has been a bulletproof juggernaut; marching higher every year since 2009.

But Apple hasn’t released a game-changing product since the iPhone, which debuted back in 2006. And now, with global smartphone saturation and slowing economies, iPhone sales have dropped for the past 3 consecutive quarters.

The company is coasting on its bygone success. Without another truly transformative product launch (sorry, air pods and smart watches aren’t going to cut it), overall revenues will continue shrinking.

Investors, whose shares currently support Apple’s nearly $1 trillion market cap, haven’t all gotten the memo yet. But when enough of them do, expect this long-time darling stock to drop hard.

Low inflation?

The world's central banks have justified their years of intervention as being necessary because inflation is "too low".

But is it really?

Anyone who needs to eat, pay for a roof over their head, visit the doctor, educate their kids, or drive anywhere knows that the true cost of living is increasing at a far faster rate than the government’s official <2% calculation.

Ben Hunt, the progenitor of our above Common Knowledge Theory, predicts this as the next smokescreen to dissipate:

There’s a lot of ubiquitous private information about powerful people and powerful ideas trapped in the crowd today, just waiting for a Missionary to release it as common knowledge. The more powerful the person or the idea to be brought low, the bigger the Missionary (and platform) required. But nothing’s too big, and once the common knowledge is created, behavior changes fast. My pick for the big idea that gets taken down? The idea that inflation is dead. We all know it’s not true. We all know in our own heads that everything is more expensive today, from rent to transportation to food to iPhones. But it’s not common knowledge. Each of us may believe that inflation walks among us, but none of us believes that everyone else believes that inflation is here.

Not yet. But we’re only one big Missionary statement away.

Trouble In China?

Many pundits see the raging trade war between the US and China as a pitched match between equal adversaries.

But those who have visited and done business inside the country for many years see China in a far weaker position than is customarily appreciated or portrayed.

Jim Rickards explains how China is much more of a paper tiger than realized. It’s Achilles Heel of social unrest is being exacerbated by the trade war (see: Hong Kong protests) in ways that the communist government can’t easily quell.

Permanent loss of trade is happening as manufacturing switches to other countries, at a time when capital outflows are increasing and Chinese stocks and real estate prices are falling. Meanwhile, the debt bomb inside China is staggering relative to the US, and it’s finally nearing its explosion point.

An implosion of China’s economy, perhaps coupled with serious social distemper, is a new – previously unthinkable – factor the world is suddenly realizing it needs to take into account.

Time Is Short

As Ben Hunt instructs:
Behavior changes ONLY when we believe that everyone else believes the information. THAT’S what changes behavior. And when that transition to common knowledge happens, behavior changes fast.
Amidst the market volatility this week, we issued an advisory to take action.

We reminded readers that market tops are processes. They occur over a long time.

But market corrections are events. They tend to happen suddenly and violently. If you’re not positioned for them in advance, there’s usually no time to react once they’re underway.

With the risks of recession quickly becoming common knowledge amongst the mainstream, we declare the time for planning is over. It’s now time to act, to get your advanced positioning in place. Because events are going to start happening fast, as Ben Hunt warns.

Specifically, we urge you to strongly consider taking the following steps in your portfolio (each one below links to a helpful primer with guidance):

  1. Moving to cash
  2. Adding gold & silver
  3. Hedging against a market downturn
  4. Investing for cash flow
  5. Developing resilience beyond your money
We're loud advocates of taking these steps while working with a professional financial advisor who understands and appreciates the risks that are in play. There aren’t many out there who do, but their assistance in helping you make well-informed decisions can be extremely valuable.

Earlier this week we showed exactly how valuable this can be, providing an example of how one such advisor protected (and grew) client accounts while the S&P 500 dropped -5.4% from its July highs.

So if you have similar goals for your money — if, you place a higher priority on return OF capital vs return ON capital during this time of heightened risk — then we sure hope you’ve already positioned your portfolio wisely for the future you see coming.

If not — and we know from the emails we receive that many of you still have not — it’s not too late. But it may be very soon. Time looks to be getting very, very short.

Put your plan into action. If you don’t have your plan finalized yet, meet with a good professional advisor asap. And if you’re having trouble finding a good one, consider scheduling a portfolio review with the advisor endorsed by Peak Prosperity (it’s completely free)

Just don’t delay.

Sentiment is finally breaking as critical but previously-private knowledge is quickly becoming “common”.

Once it breaks fully, the ride downward will likely be very sharp, quick and brutal for everyone caught unprepared.

This is a companion discussion topic for the original entry at https://peakprosperity.com/when-common-knowledge-changes-the-world/

I am seeing widespread skepticism about the Epstein “suicide” as a catalyst for many to move into the camp that would previously have been derided as “conspiracy theorizing.” You would have to be brain dead to fail to at least suspect murder.
There also seems to be a dawning of a common knowledge that official investigations and the authoritative publications of the elite (NYT, WaPo, WSJ) may not always be truthful. The breaking of this confidence could be abrupt and dramatic also.

Reports by MSM that the investigation has proven Epstein committed suicide has got me wondering one thing. Will we ever find out who murdered him? :wink:

I read Ben Hunt’s writing the minute it is released. Sometimes I read his pieces 2x or more to let them really sink in.
The good news, for me, is that he’s booked to come on our podcast as a Featured Voices guest. I’m really looking forward to that.
This idea of “common knowledge” is one such idea that jumped from his brain into mine. It’s rattled around in there ever since and it’s got a wonderful way of explaining/framing things.
For example, it’s still private knowledge that something really doesn’t add up about the official story of 9/11. Fused and melted concrete in the basement of building 6?
That even has melted and fused gun steel (i.e. hardened, high temp alloys) embedded within it from the ATF weapons stored in the basement?
Where even the placard explains that the “fire temperatures were so intense that concrete melted like lava around anything in its path.”

Weird, right? Especially because building 6 wasn’t hit by any planes so there wasn’t any of that magic, super-high temperature jet fuel to confuse the matter (spoiler alert, jet fuel cannot get even remotely hot enough to cause such an artifact.)
Doubly weird because the best studies of concrete at high temperatures were conducted by Oak Ridge National Laboratories. Here’s what they say about things:

A good summary of the degradation reactions that occur in Portland cement concrete is provided in Ref. 4. Upon first heating, substantial water evaporation occurs from the larger pores close to the concrete surface. Then, from 100°C onward, the evaporation proceeds at a faster rate with water being expelled from concrete near the surface as a result of above-atmospheric vapor pressure (i.e., steam flow). At 120°C the expulsion of water physically bound in the smaller pores, or chemically combined, initiates and continues up to about 500°C where the process is essentially complete. From 30°C to 300°C, in conjunction with evaporation, dehydration of the hardened cement paste occurs (first stage) with the maximum rate of dehydration occurring at about 180°C. In the temperature range from 450°C to 550°C there is decomposition of the portlandite [i.e., Ca(OH)2 → CaO + H2O) (Ref. 12)]. At 570°C the α → β inversion of quartz takes place with the transformation being endothermic and reversible. A further process of decomposition of the hardened cement paste takes place between 600°C and 700°C with the decomposition of the calcium-silicatehydrate phases and formation of β-C2S. Between 600°C and 900°C the limestone begins to undergo decarbonation (i.e., CaCO3 → CaO + CO2). The rate of decomposition and the temperature at which it occurs are not only dependent on temperature and pressure, but also by the content of SiO2 present in the limestone. Above 1200°C and up to 1300°C, some components of the concrete begin to melt. Above 1300°C to 1400°C concrete exists in the form of a melt. Apparently liquifaction of the concrete commences with melting of the hardened cement paste followed by melting of the aggregates. https://info.ornl.gov/sites/publications/files/Pub1043.pdf
I pasted that whole section because I love the science of it all. Concrete goes through many complex changes as it is heated, first driving off the bound water, expanding, weakening, spalling and crumbling, but then finally melting and refusing. It doesn't take that last step until you get above 1200 degrees Centigrade. I would very politely and gently suggest that it is very widely held private knowledge among fire inspectors that basement fires do not ever get anywhere close to such a temperature. Ever. They are poorly oxygenated as a matter of course which means theoretical max temps are never approached let alone achieved. Regardless, the usual things you find in office buildings cannot achieve those temps under ideal conditions. Which means it is widely help private knowledge among all sorts of scientifically and professionally minded people that something else besides the official explanation of a very hot office fire has to be entertained and explored if one has any desire to get closer to the truth. And all the evidence you need to arrive at this conclusion is on public display at the 9/11 museum. It's right there to be seen by as many private 'eyes' as care to go. For some reason there's no concern that its display might result in an outbreak of common knowledge. I go into all this simply to raise the question; what else is hiding in plain sight, safely tucked away in your private knowledge, but which is not yet common knowledge? I submit the following are all waiting to erupt into common view:
  • The US justice system is corrupt through and through
  • Markets are rigged
  • Food companies purposely hook people on foods that make them ill
  • Chemicals, such as neonicotinoids, are not fully tested before their deployment and that quite often damaging test results are kept hidden in corporate vaults.
  • The US and its military are not actually concerned about human rights or democracy and instead is a modern version of the British redcoats mainly protecting trade and other business interests.
I think part of the reason that such damaging revelations remain as private knowledge is because moving them into common knowledge requires the destruction of closely held belief systems. Again, nature has provided strong protections to maintaining existing belief systems. Maybe it's just too hard or expensive to alter them? Whatever the reason, the more central the belief system the more carefully it's guarded, all the way to the point that you can put hard data, solid evidence right into a public display case with confidence knowing that it will not cause, by itself, any movement towards belief-shattering common knowledge. The beliefs being guarded are huge; things like:
  • Faith in authority
  • A belief in the fundamental goodness of people
  • Believing that your country is being both moral and good
  • Bedrock knowledge that the justice system is blind and fair
It's faaaar easier to live day to day walking around believing these things are true. To lose faith in these things means you squint at every package label of food wondering what sorts of admitted or hidden toxins might be lurking within. It means questioning every news release, such as everything surrounding the Epstein "suicide" (in quotes because it has been reported that 'multiple bones in his neck were broken, among which was the hyoid' ... yeah, right, got it...ummmm...wait...back up...which other bones?) It means googling your medical symptoms because you don't fully trust the doctor's opinion and doubting the prescriptions given. I get it. All of that is definitely not as easy as trusting the basic systems that govern and support our lives. The biggest fallacy of them all, the biggest belief system that is increasingly under attack in both private and common knowledge, is the idea of perpetual exponential economic growth. The climate scientists are distraught with their private knowledge. The public is catching on. The keepers of the system are busy deflecting attention and delaying the inevitable. But it won't matter. Eventually the reality catches up. Private knowledge becomes common knowledge and then everything changes all at once. All of which brings me to my conclusions; Think for yourself. Make up your own mind. Be secure in your ability to think for yourself. And my motto: I'd rather be a year early than a day late.

The German GDP chart is a prime example. They were at -0.1% in late 2018. It turned around for two more quarters before going negative again. This one may be the real tipping point, or might not. How could you tell last time that it was going to turn around? The same thing is true of the yield curve inversions. Though the yield curve inverted before every prior recession, the real question is has it ever inverted and not been followed by a recession? If the red circles on the yield curve graph show the inversions, look at the huge variability between when they occur and when the recessions start.
I’m not saying that it isn’t prudent to be prepared. I’m just saying that there is no magic advance indicator.

Anyone who wants to look at the purely scientific issues around 9/11 should go to https://www.ae911truth.org/ They are professional architects and engineers who document and explain the issues like melted concrete.

Is the Russian economy really in the dire straits that your reference claims or is it typical Washington Post fake news? The article says “Russia has also tried to build up its government cash reserves, which has left little money for stimulus.” It seems like that would provide more money for stimulus in the future when they really need it. Unlike the US, Russia is not mired in debt. Thanks to US sanctions they have been forced to make their economy mush more self contained than they used to be and, I think, more that most other countries. They are energy self sufficient and don’t rely on money losing fracking to do it. Farm output has grown enough to make them a food exporter.
I’d love to see an analysis of their economy from an unbiased source.
I believe that when our ability to sanction anyone we don’t like evaporates, which it must someday, investment will flow into Russia in droves.

“That even has melted and fused gun steel (i.e. hardened, high temp alloys) embedded within it from the ATF weapons stored in the basement?”
All of the building use NatGas for heating & domestic hot water. When those building collapsed NatGas lines were ruptured and ignited. Most large buildings also have genset to provide power for lighting and to run the elevations, Usually these are fueled using large diesel storage tanks with a few thousand gallons of diesel. These are typically stored at ground level or in the basement.
I think your are reaching way out there to make a case that does not really exist. The real conspiracy is that the FBI Was warned by at least one flight school & never bothered to investigate. Nor did the CIA or NSA do its job. FBI, CIA, & NSA are keystone cops, never doing anything but demanding big $$$ to do nothing. At best they are blackmail artists to keep politicians and large companies under their grip. The FBI has been blackmailing politicians since its inception with J Edar Hoover casting nets to ensnare everyone it deems a threat to the agency or its agendas.

ALL hydrocarbons can not melt steel Take a propane torch and try melting a paper clip. Let us know how that goes.
Magic jet fuel is a good.one. You need to add magic bullets, magic hangman’s noose, magic Koch brother climate science, magic smoking is good for your digestion science, magic money and economy.

It takes a lot of effort to keep the voices of the “missionaries” from being heard. Just look at the push back against Tulsi Gabbard’s questioning endless wars in the Middle East.

https://www.hortidaily.com/article/6040206/russia-agrokultura-group-to-expand-again/ just aan example. It’s probably the beginning. In the Netherlands it will take billions of investements in windmills and PV (plus Russian gaz).

I think your are reaching way out there to make a case that does not really exist.
Oh, goodness, we're miles apart on this one. My conclusions are rooted in materials science, and quite a lot of it. Perhaps it's all the chemistry (Inorganic, Organic, and Biochem) and physics in my background. This is just material science. If you happen to have other data or results at your disposal, I am all ears and have a wide open mind. I've also put a fair amount into it and would be both delighted and surprised if you had some new data to add and I would happily consider it. To me the materials science angle is the most robust, easily defended and explored angle. Trundling off into what the FBI did or did not do is actually very far down my list of oddities to explore, resting as it does on trying to back-interpret the motivations of gigantic bureaucracies. Seems easier and more direct to point out things that I can grasp scientifically as being highly improbable, if not impossible.  

but on different grounds.
These grounds are simply that after the 9/11 Commission of Inquiry has done its work — and I will assume that it did the best it could with what it was given — both of the co-chairmen co-authored a book in which they said that the Commission had been set up to fail. I heard and saw one of them say this on a Canadian TV show.
The Commission’s legal counsel agreed with them. One of the Commissioners resigned during the course of the Inquiry, complaining about the obstructive and uncooperative behaviour of the White House and government departments and the like.
It is an extraordinary thing for these government appointees to have criticised their own government in such strong terms, and yet few paid them any attention.

In " science " it’s been called " a new paradigm."

Sorry Chris,
My guess is that you have not physically inspected the building & probably don’t have access to all of the reports created by various inspectors insurance companies. I presume if there was foul play (ie building was deliberately destroyed) that the insurance companies would have presented this information in order to avoid paying out hundred of millions to bullions, in insurance claims.
You cannot possible provide connection unless you have access to all of the information available. I don’t believe you are applying a scientific analysis needed to come to valid conclusion.
“I’ve also put a fair amount into it and would be both delighted and surprised if you had some new data to add and I would happily consider it.”
I don’t have any data. I am just very skeptical that the gov’t would deliberately destroyed a building to cover up evidence when it could have done the same with much less destruction. ie there is no reason to blow up a safe, when you already have the combinati0n.
The whole affair of WTC 7 collapse is because a reporter mis-understood an emergency responder radio call “Pull Building 7” The radio call was “Pull out of Building 7 because its collapsing”: Warning Emergency responders to evacuate from the area near WTC 7 before it collapses on them. I am sure the radio call was difficult to hear as probably the responder issuing the warning, was on a handheld radio and likely in a noise location.
If you recall the scene during the aftermath, those building fires burned for about a month. I was working in New York at the time and could see the smoke pouring out from about 25 miles away from the Tappen Zee bridge (Near white plains, NY) for weeks.
Its possible if the temperatures were hot enough that steam could have supplied the oxygen needed for the fire. Obviously if these fire were burning for weeks it had to be getting an external source of oxygen to burn for that long. No way would any chemical oxidizer (ie thermite) would have burned for weeks. It would have been spent in a matter of minutes to seconds.

excellent and spot on. I had a personal “aha” moment yesterday along these lines. A doctor was trying to convince me to permit them to vaccinate my daughter to the schedule. Having done my own research and being privy to info that just doesn’t seem to be readily available I declined. My comment to the doctor was “look, trust has been lost, I didn’t do that, you didn’t do that, but here we stand”. That really does sum it up for me, I have to question everything because I just don’t know how to trust an overtly corrupt and, in many ways, insane system and narrative. Dangerous times…

i didn’t read any speculation from Chris pertaining to motives or “who done it”; just, his interpretation of the physical evidence we’re not supposed to know about in relation to the official conspiracy theory.

I did not physically inspect the WTC after 911, but I did inspect the damage in several Northridge CA steel frame buildings after the city’s 7.0 earthquake in 1994. There were weld failures everywhere, but not one building collapsed, much less collapsed symmetrically at free fall, due to the large factor of safety used in their design, which the WTC also used. I got involved with several civil engineers (I’m more diversified) that were analyzing these failures since I had access to the state-of-the-art finite element program ANSYS. They came up with a novel non-intuitive design modification described here:
The smoking gun for the WTC 7 demolition was it’s symmetric collapse at free fall acceleration. The only way that could happen is for the entire solid steel structure to be converted to the structural equivalent of air in a millisecond. That has never happened during real office fires (NIST concluded that it did during 911) but always happens during controlled demolitions.
As far as the fires go, thermite can burn underwater and in a vacuum since it has its own oxidizer, just like solid fuel rockets. There is a peer reviewed scientific paper of the analysis of the unburned nano-thermite found in the dust. That thermite was actually more energetic than known military grade ones. Tons of molten steel was pulled out of the basement for months. Its thermal inertia is what produced all of that steam.
The government would never blow up the WTC? Get real. Look up Operation Northwoods on the web. The PDF of that declassified top secret document shows how the Pentagon brass planned to blow up a passenger aircraft over Cuba in order to justify the invasion back in the 60s. They even described how they would switch an actual passenger plane with a dummy. Sound familiar? Luckily JFK killed that plan. I could go on and on and on…

Tech guy,
Your explanation is completely sufficient for me. Clearly, insurance company investigators would have proven foul play in order to prevent a large claim payout. Also, because no one has all the data on the incident, no one could ever know anything conclusive about the matter. Except of course the official story - which can be believed fully without “access to all the information available”. Especially if one were to personally witness smoke from 25 miles away - for weeks. Thank you for putting the whole matter to bed for me and showing me how limited my thinking has been all this time.

The discussion on common knowledge and private knowledge reminded me of this classic human behaviour video, which graphically shows the exact same process. The key here is to achnowledge the importance of being the second followers, or to relate to this article being the second round of people vocalising to make the private knowledge, common knowledge.
When change comes, it comes fast, and it is a comin’!