On the Ms. Exponential vs Ms. Hyperbolic vignette
I believe the money pump works like this:

At $T=0$ borrow a hundred dollars from Henry the hyperbolic discounter for the full time period $t$. The interest rate should be zero because their discount rate over loans of that period is $1$. For simplicity, make it a zero coupon loan, with the payment due at maturity and assume you both agree their is no credit risk. Now step forward one period to $T=\epsilon$. Offer to sell the loan back to Henry. His discount rate is now $\frac{1}{1-\epsilon} &lt; 1$ so the interest rate is lower than what he would charge on a new loan so the price must be above par. Call the price $100 + \psi_1$. Do the sale, tear up the loan, and pocket $\psi_1$. Ask for a new loan of a hundred dollars, again at zero coupon, now at interest rate $\frac{1}{1-\epsilon}$ per period. Step forward another period to $T = 2 \epsilon$. Again, $\frac{1}{1-2\epsilon} &lt; \frac{1}{1-\epsilon}$ so you can sell this obligation too for more than par ($1 + \psi_2$). Do the sale , tear up the loan, and pocket $\psi_2$. Rinse, lather, and repeat until they don't have a hundred bucks to lend you. 

Update:
Hopefully this is a simpler example. What you do is in each period buy T (T$\geq$2) period a bond from Henry the Hyperbolic discounter. You also sell back to Henry the bond you purchased in the previous period. You will be willing to do this as long as the time period is short enough that the profit on the transaction is high enough to make up for your own discount rate. 

Consider a 2 year bond with the preferences above. The 2 year discount rate is $\frac{1}{3}$ which is less than the 1 year discount rate $\frac{1}{2}$. 

Eddy the exponential discounter is willing to lend the cash to Henry because is profits on that loan are high enough to compensate him, even though his rate of time preference for both 1 and 2 year loans is higher than Henry's.