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Charles Hugh Smith

Charles Hugh Smith

At readers' request, I've prepared a biography. I am not confident this is the right length or has the desired information; the whole project veers uncomfortably close to PR. On the other hand, who wants to read a boring bio? I am reminded of the "Peanuts" comic character Lucy, who once issued this terse biographical summary: "A man was born, he lived, he died." All undoubtedly true, but somewhat lacking in narrative.

Articles by Charles Hugh Smith

No, The Fed Will Not “Save the Market”–Here’s Why

2 days ago

The greater the excesses, speculative euphoria and moral hazard, the greater the reversal.
A very convenient conviction is rising in the panicked financial netherworld that the Federal Reserve and its fellow dark lords will “save the market” from COVID-19 collapse. They won’t. I already explained why in The Fed Has Created a Monster Bubble It Can No Longer Control (February 16, 2020) but it bears repeating.
Contrary to naive expectations, the Fed’s primary job isn’t inflating stock market and housing bubbles, though punters are forgiven for assuming that, given the Fed has inflated three gargantuan bubbles in a row, each of which burst (1999-2000, 2007-08 and now 2019-2020).
The Fed’s real job is protecting the banking/financial sector from a richly deserved and

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When Will We Admit Covid-19 Is Unstoppable and Global Depression Is Inevitable?

4 days ago

Given the exquisite precariousness of the global financial system and economy, hopes for a brief and mild downturn are wildly unrealistic.
If we asked a panel of epidemiologists to imagine a virus optimized for rapid spread globally and high lethality, they’d likely include these characteristics:
1. Highly contagious, with an R0 of 3 or higher.
2. A novel virus, so there’s no immunity via previous exposure.
3. Those carrying the pathogen can infect others while asymptomatic, i.e. having no symptoms, for a prolonged period of time, i.e. 14 to 24 days.
4. Some carriers never become ill and so they have no idea they are infecting others.
5. The virus is extremely lethal to vulnerable subpopulations but not so lethal to the entire populace that it kills its hosts

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Covid-19: Global Retrenchment Will Obliterate Sales, Profits and Yes, Big Tech

7 days ago

If you think global demand will rebound as global debt and confidence implode, you better not be making consequential decisions based on Euphorestra-addled magical thinking.
Even before the Covid-19 pandemic, the global economy was slowing for two reasons: 1) everybody who can afford it already has it and 2) overcapacity. One word captures the end-of-the-cycle stagnation: saturation.
Everyone who can afford a smartphone (or can borrow to buy one) already has one. Everyone who can afford an auto loan already has a car.
Everyone who could afford an overpriced house already bought one. Everyone who can afford a tablet or laptop already has one. And so on.
This saturation isn’t just in the consumer market–the corporate market is equally saturated. Corporations

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The World Is Awash in Oil, False Assurances, Magical Thinking and Complacency as Global Demand Careens Toward a Cliff

10 days ago

This collapse of price will manifest in all sorts of markets that are based on debt-funded purchases of desires rather than a warily prudent priority on needs.
Since markets are supposed to discover the price of excesses and scarcities, it’s a mystery why everything that is in oversupply is still grossly overpriced as global demand slides off a cliff: oil, semiconductors, Uber rides, AirBNB listings and many other risk-on / global growth stories are still priced as if pre-Covid-19 demand was still guaranteed.
Punters are still buying semiconductor stocks based on out-of-touch projections that are the equivalent to counting the number of fairies on the head of a pin, ignoring the fundamental reality that very few people actually need a new mobile phone, vehicle,

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The Fed Has Created a Monster Bubble It Can No Longer Control

12 days ago

The Fed must now accept responsibility for what happens in the end-game of the Moral-Hazard Monster Bubble it created.
Contrary to popular opinion, the Federal Reserve didn’t set out to create a Monster Bubble that has escaped its control. Also contrary to popular opinion, the Fed will be unable to “never let stocks fall ever again–ever!” for the simple reason that the monster it has created– a monster mania of moral hazard in which all risk has vanished because the Fed will never let stocks fall ever again–ever!–is now beyond its control.
And that’s a problem for the Fed, which above all else needs control of interest rates, financial markets and the economy.
The problem is that bubbles always pop, and they pop regardless of what central banks do. This is

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China’s Fatal Dilemma

18 days ago

Ending the limited quarantine and falsely proclaiming China safe for visitors and business travelers will only re-introduce the virus to workplaces and infect foreigners.
China faces an inescapably fatal dilemma: to save its economy from collapse, China’s leadership must end the quarantines soon and declare China “safe for travel and open for business” to the rest of the world.
But since 5+ million people left Wuhan to go home for New Years, dispersing throughout China, the virus has likely spread to small cities, towns and remote villages with few if any coronavirus test kits and few medical facilities to administer the tests multiple times to confirm the diagnosis.
(It can take multiple tests to confirm the diagnosis, as the first test can be positive and the

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Controlling the Narrative Is Not the Same as Controlling the Virus

19 days ago

Are these claims even remotely plausible for a highly contagious virus that spreads easily between humans while carriers show no symptoms?
It’s clear that the narrative about the coronavirus is being carefully managed globally to minimize the impact on global sentiment and markets. Authorities are well aware of the global economy’s extreme fragility, and so Job One for authorities everywhere is to scrub the news flow of anything that doesn’t support the implicit official narrative:
1. The coronavirus is only an issue in China; it’s contained outside China.
2. The coronavirus will soon be contained in China, and global business will quickly return to normal.
In pushing this narrative, authorities around the world share the same goal: limit the damage to consumer

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Pandemic, Lies and Videos

22 days ago

Will we wonder, what were we thinking? and marvel anew at the madness of crowds?
When we look back on this moment from the vantage of history, what will we think? Will we think how obvious it was that the coronavirus deaths in China were in the tens of thousands rather than the hundreds claimed by authorities?
Will we think how obvious it was that the virus would spread around the globe, wreaking havoc on the global economy and social order, even as the authorities claimed only a handful of cases had arisen outside China?
Will we be amazed at the delusional confidence that the U.S. economy would be untouched by the virus as stock markets quickly soared to new all-time highs while the world’s largest economy ground to a halt in a desperate attempt to close the barn

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Brace for Impact: Global Pandemic Already Baked In

25 days ago

If we accept what is known about the virus, then logic, science and probabilities all suggest we brace for impact.
Here’s a summary of what is known or credibly estimated about the 2019-nCoV virus as of January 31, 2019:
1. A statistical study from highly credentialed Chinese academics estimates the virus has an RO (R-naught) of slightly over 4, meaning every carrier infects four other people on average.
This is very high. Run-of-the-mill flu viruses average about 1.3 (i.e. each carrier infects 1.3 other people while contagious).
Chris Martenson (PhD) goes over the study in some detail in this video.
Let’s say the study over-estimates the contagiousness due to insufficient data, etc. Even an RO of 3 means the number of infected people rises geometrically

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Second-Order Effects: The Unexpectedly Slippery Path to Dow 10,000

28 days ago

Dow 30,000 is “unsinkable,” just like the Titanic.
A recent Barrons cover celebrating the euphoric inevitability of Dow 30,000 captured the mainstream zeitgeist perfectly: Corporate America is firing on all cylinders, the Federal Reserve’s god-like powers will push stocks higher regardless of any other reality, blah blah blah.
While the financial media looked elsewhere for its amusement, the coronavirus epidemic in China just poured fentanyl in the Dow 30,000 punchbowl. The mainstream continues to guzzle down the punch, oblivious to the fentanyl, confident that the coronavirus will quickly fade and China will soon return to its winning role of growth chariot pulling the global economy to ever greater heights.
The media’s focus is solely on the first-order

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Could the Coronavirus Epidemic Be the Tipping Point in the Supply Chain Leaving China?

January 30, 2020

Everyone expecting a quick resolution to the epidemic and a rapid return to pre-epidemic conditions would be well-served by looking beyond first-order effects.
While the media naturally focuses on the immediate effects of the coronavirus epidemic, the possible second-order effects receive little attention: first order, every action has a consequence. Second order, every consequence has its own consequence.
So the media’s focus is the first-order consequences: the number of infected people and fatalities, government responses such as quarantines, and so on.
The general expectation is these first-order consequences will dissipate shortly and life will return to its pre-epidemic status with virtually no significant changes.
Second-order effects caution: not so

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The Future of What’s Called “Capitalism”

January 25, 2020

The psychotic instability will resolve itself when the illusory officially sanctioned “capitalism” implodes.
Whatever definition of capitalism you use, the current system isn’t it so let’s call it “capitalism” in quotes to indicate it’s called “capitalism” but isn’t actually classical capitalism.
Try a few conventional definitions on for size:
Capitalism allocates capital to its most productive uses. Does the current system actually do this? You must be joking.
Capitalism is based on private labor and capital freely choosing where to invest time/assets. Does the current system actually do this? You must be joking.
Capitalism enables comparative advantages which enrich everyone. Does the current system actually do this? You must be joking.
The core dynamics of

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Calling Things by Their Real Names

January 22, 2020

One does not need money to convey one’s thoughts, but what money does allow is the drowning out of speech of those without money by those with a lot of money.
In last week’s explanation of why the Federal Reserve is evil, I invoked the principle of calling things by their real names, a concept that drew an insightful commentary from longtime correspondent Chad D.:
Thank you, Charles, for calling out the Fed for their evil ways. We have to properly name things before we can properly address them. I would add that the Fed’s endless creation of “money” to hand out to connected bankers (not all bankers) is just one facet of the evil. The evil also manifests itself as extraordinary political-economical power in a system that allows legalized bribery disguised as free

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Instability Rising: Why 2020 Will Be Different

January 16, 2020

In 2020, increasing monetary and fiscal stimulus will be the equivalent of spraying gasoline on a fire to extinguish it.
Economically, the 11 years since the Global Financial Crisis of 2008-09 have been one relatively coherent era of modest growth, rising wealth/income inequality and coordinated central bank stimulus every time a crisis threatened to disrupt the domestic or global economy.
This era will draw to a close in 2020 and a new era of destabilization and uncertainty begins.
Why will all the policies that have worked so well for 11 years stop working in 2020?
All the monetary/fiscal policies of the past decade were simply extreme versions of tried-and-true policies that central banks and governments have used for the past 75 years to restore growth in a

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Just a Friendly Heads-Up, Bulls: The Fed Just Slashed its Balance Sheet

January 14, 2020

Perhaps even PhD economists notice that manic-mania bubbles always burst–always.
Just a friendly heads-up to all the Bulls bowing and murmuring prayers to the Golden Idol of the Federal Reserve: the Fed just slashed its balance sheet–yes, reduced its assets. After panic-printing $410 billion in a few months, a $24 billion decline isn’t much, but it does suggest the Fed might finally be worrying about the reckless, insane bubble it inflated:
August 28, 2019: $3.760 trillion
December 25, 2019: $4.165 trillion
January 1, 2020: $4.173 trillion
January 9, 2020: $4.149 trillion
There are two noteworthy items here. One is of course the panic-printing of $410 billion between September 1, 2019 and January 1, 2020 as the Fed’s assets zoomed from $3.760 trillion to $4.173

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The Fed Can’t Reverse the Decline of Financialization and Globalization

January 10, 2020

The global economy and financial system are both running on the last toxic fumes of financialization and globalization.
For two generations, globalization and financialization have been the two engines of global growth and soaring assets. Globalization can mean many things, but its beating heart is the arbitraging of the labor of the powerless, and commodity, environmental and tax costs by the powerful to increase their profits and wealth.
In other words, globalization is the result of those at the top of the wealth-power pyramid shifting capital around the world to exploit lower costs of labor, commodities, environmental regulations and taxes.

This manifests as offshoring of jobs, the stripmining of forests, minerals, etc., the degradation of local ecosystems,

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Is This “The Top”?

January 6, 2020

Parabolic moves end when the confidence that the parabolic move can’t end becomes the consensus.
The consensus seems to be that the stock market is on its way to much higher levels, and soon. The near-term targets for the S&P 500 (SPX, currently around 3,235) range from 3,500 to 4,000, with longer-term targets reaching “the sky’s the limit.”
The consensus reasoning goes like this:
— Central banks can print a lot more money
— Stocks rise when central banks print more money.
The history of the 2009-2019 era strongly supports this simple cause-effect, and so just about everyone is on the same side of the boat, the “don’t fight the Fed” side of ever-higher stock multiples and ever-higher prices.
Simply put: sales and profits no longer matter, the only thing that

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The Two Charts You Need to Ignore or Rationalize Away in 2020 (Unless You’re a Bear)

January 3, 2020

If you believe you’ve front-run the herd, you’re now in mid-air along with the rest of the herd that has thundered off the cliff.
We’re awash in financial charts, but only a few crystallize an entire year. Here are the two charts that sum up everything you need to know about the stock market in 2020.
Put another way–these are the two charts you need to ignore or rationalize away–unless you’re a Bear, of course, in which case you’ll want to tape a printed copy next to your wall of curled Post-It notes for future reference.
These charts show that all the potential gains from a thee-year advance (2019-2021) in P-E multiples and stock valuations have already been front-run in a mere three months. This is a key dynamic in the diminishing returns on Federal Reserve

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The Fed’s “Not-QE” and the $33 Trillion Stock Market in Three Charts

January 2, 2020

One day the stock market ‘falcon’ will no longer hear the Fed ‘falconer’, and the Pavlovian magical thinking will break down as the market goes bidless.
The past decade has shown that when the Federal Reserve creates trillions of dollars out of thin air (QE), U.S. stocks rise accordingly. The correlation is very nearly perfect.
This has given rise to the belief that buyers of stocks will always be rewarded because “the Fed has our backs.” The evidence for this belief is the near-perfect correlation of Fed money-printing and stocks soaring.
This near-universal belief in the omnipotent Fed raises an interesting question: how much actual control does the Fed have on the U.S. stock market? One way to approach this question is to plot the size (to scale) of the

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The Hour Is Getting Late

December 31, 2019

After 11 years of “the Fed is the market” expansion, the Fed has now reduced its bloated balance sheet by 6.7%. This is normal, right?
So here we are in Year 11 of the longest economic expansion/ stock market bubble in recent history, and by any measure, the hour is getting late, to quote Mr. Dylan:
So let us not talk falsely now
the hour is getting late
Bob Dylan, “All Along the Watchtower”
The question is: what would happen if we stop talking falsely? What would happen if we started talking about end-of-cycle rumblings, extreme disconnects between stocks and the real economy, the fact that “the Fed is the market” for 11 years running, that diminishing returns are setting in, as the Fed had to panic-print $400 billion in a few weeks to keep this sucker from going

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Is Social Media the New Tobacco?

December 28, 2019

If we set out to design a highly addictive platform that optimized the most toxic, destructive aspects of human nature, we’d eventually come up with social media.
Social problems arise when initially harmless addictions explode in popularity, and economic problems arise when the long-term costs of the addictions start adding up. Political problems arise when the addictions are so immensely profitable that the companies skimming the profits can buy political influence to protect their toxic products from scrutiny and regulation.
That describes both the tobacco industry before its political protection was stripped away and social media today, as the social media giants hasten to buy political influence to protect their immensely profitable monopolies from scrutiny

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Welcome to the Era of Intensifying Chaos and New Weapons of Conflict

December 25, 2019

Geopolitics has moved from a slow-moving, relatively predictable chess match to rapidly evolving 3-D chess in which the rules keep changing in unpredictable ways.
A declining standard of living in the developed world, declining growth for the developed world and geopolitical jockeying for control of resources make for a highly combustible mix awaiting a spark: welcome to the era of intensifying chaos and the rapid advance of new weapons of conflict as ruling elites attempt to stamp out dissent and global powers pursue supremacy by whatever means are available.
Gordon Long and I discuss these dynamics in a new video The New Weapons of Conflict (28:30) that explores the drivers of increasing global chaos and a permanent state of intensifying conflict in both

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Our Fragmentation Accelerates

December 22, 2019

As our fragmentation accelerates, shared economic interests are ignored in favor of divisive warring camps that share no common interests.
That our society and economy are fragmenting is self-evident. This fragmentation is accelerating rapidly, as middle ground vanishes and competing camps harden their positions to solidify the loyalty of the “tribe.” All or nothing, either-or binaries are the order of the day: you’re either 100% with us or 100% against us, you’re either part of the solution or part of the problem.
As fragmentation accelerates, “tribes” splinter into warring groups who compete for members of once-broad-based movements.
Moderation is no longer tolerated as it smacks of mixed loyalties or (most dangerous) independent analysis and action.
What’s

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Skyrocketing Costs Will Pop All the Bubbles

December 20, 2019

The reckoning is coming, and everyone who counted on “eternal growth of borrowing” to stave off the reckoning is in for a big surprise.
We’ve used a simple trick to keep the status quo from imploding for the past 11 years: borrow whatever it takes to keep paying the skyrocketing costs for housing, healthcare, college, childcare, government, permanent wars and so on.
The trick has worked because central banks pushed interest rates to zero, lowering the costs of borrowing more as costs continued spiraling higher.
But that trick has been used up. The next step–negative interest rates–has failed to spark the “growth” required to pay for insanely overpriced housing, healthcare, college, childcare, government, etc.

We’ve reached the end of the line on lowering

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OK Boomer, OK Fed

December 20, 2019

Eventually the younger generations will connect all the economic injustices implicit in ‘OK Boomer’ with the Fed.
Much of the cluelessness and economic inequality behind the OK Boomer meme is the result of Federal Reserve policies that have favored those who already own the assets (Boomers) that the Fed has relentlessly pumped higher, to the extreme disadvantage of younger generations who were not given the opportunity to buy assets cheap and ride the Fed wave higher.
OK Fed: you’ve destroyed price discovery, driven housing out of reach of all but the wealthy and hollowed out the economy, all the while patting yourselves on the back for being so smart and fabulous.
OK Fed: you’ve waged generational war without even acknowledging how disastrous your policies have

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The “Trade Deal”: A Pathetic Parody, Credibility Squandered

December 17, 2019

Anyone who thinks this bogus “deal” has resolved any of the issues or uncertainties deserves to be fired immediately.
Here’s a late-night TV parody of a trade deal: The agreement won’t be signed by both parties, though each might sign their own version of it, and the terms of the deal will never ever be revealed to the public, which includes everyone doing any business in the nations doing the “deal.”
How is this “deal” not a pathetic parody of a real deal? A real deal is signed by both parties and is made public, so the business community can make informed decisions.
The leaders who sign the agreement have to sell their respective nations on the benefits of the deal and explain the horse-trading that is part and parcel of any voluntary agreement.
But nope, this

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A “Market” That Needs $1 Trillion in Panic-Money-Printing by the Fed to Stave Off Implosion Is Not a Market

December 16, 2019

It was all fun and games enriching the super-wealthy but now the karmic cost of the Fed’s manipulation and propaganda is about to come due.
A “market” that needs $1 trillion in panic-money-printing by the Fed to stave off a karmic-overdue implosion is not a market: a legitimate market enables price discovery. What is price discovery? The decisions and actions of buyers and sellers set the price of everything: assets, goods, services, risk and the price of borrowing money, i.e. interest rates and the availability of credit.
The U.S.
has not had legitimate market in 12 years. What we call “the market” is a crude simulation that obscures the Federal Reserve’s Socialism for the Super-Wealthy: the vast majority of the income-producing assets are owned by the

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Why “This Sucker Is Going Down”

December 12, 2019

Once the contagion starts spreading, loose money won’t put the fires out.
As the nation’s political and economic leaders struggled to contain the 2008 financial meltdown, President George W. Bush famously summed the situation up: “If money doesn’t loosen up, this sucker will go down.”
Eleven years into the loose money recovery, this sucker is finally going down for reasons that have little to do with tight money and everything to do with the inconvenient fact that none of the structural problems have been addressed, much less actually fixed.
We live in a bizarre world dominated by magical-thinking, a world in which the Federal Reserve creating more dollars out of thin air is supposedly the solution to everything, while all the knotty structural

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The Taxonomy of Collapse

December 10, 2019

The higher up the wealth-power pyramid the observer is, the more prone they are to a magical-thinking belief that the empire is forever, even as it is crumbling around them.
How great nations and empires arise, mature, decay and collapse has long been of interest for a self-evident reason: if we can discern a template or process, we can predict when the great nations and empires of today will slide into the dustbin of history.
One of the justly famous attempts to lay out the stages of expansion, zenith, decline and collapse is Sir John Glubb’s 1978 The Fate of Empires. Succinct and deeply informed, Glubb’s essay lists these stages:
The Age of Pioneers (outburst or Boost Phase)
The Age of Conquests
The Age of Commerce
The Age of Affluence
The Age of Intellect

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Costs Are Spiraling Out of Control

December 6, 2019

And how do we pay for these spiraling out of control costs? By borrowing more, of course.
If we had to choose one “big picture” reason why the vast majority of households are losing ground, it would be: the costs of essentials are spiraling out of control. I’ve often covered the dynamics of stagnating income for the bottom 90%, and real-world inflation, i.e. a decline in purchasing power.
But neither of these dynamics fully describes the relentless upward spiral of the cost basis of our economy, that is, the cost of big-ticket essentials: housing, education and healthcare.
The costs of education are spiraling out of control, stripping households of income as an entire generation is transformed into debt-serfs by student loan debt.

Wages aren’t keeping up –

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