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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

A Stock Market Crash Scenario

2 days ago

Herds get spooked and run. That’s the crash scenario in a nutshell.
We have all been trained by a decade of central bank saves to expect any stock market swoon will soon be reversed by central bank sweet talk and/or rate cuts. As a result of such ever-present central bank willingness to intervene in the stock market, participants have been trained to believe a stock market crash is no longer possible: should the market drop 10%, or heaven forbid, 20% (i.e. into Bear Territory), the Federal Reserve and the other global central banks will save the day with direct purchases (The Plunge Protection Team), happy talk of future easing or, some unconventional quantitative easing measure or a rate cut–whatever it takes, in

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What Would It Take to Spark a Rural/Small-Town Revival?

4 days ago

Recent research supports the idea that this under-the-radar migration is already under way.
The decline of rural regions and small towns is a global phenomenon, and the causes are many but boil down to two primary dynamics:
1. Cities and megalopolises (aggregations of cities, suburbs and exurbs) attract capital, infrastructure, markets and talent, and these are the engines of job creation. People move to cities to find jobs.
The San Francisco Bay Area megalopolis of roughly 8 million people in 9 counties and 101 cities offers an example of this dynamic. The region added over 400,000 new jobs since the 2008-09 Global Financial Crisis and over 1 million additional residents since the early 2000s.
In effect, the region

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Is the Tech Bubble Bursting?

9 days ago

There are two other trends that don’t attract quite the media attention that soaring profits do.
Is the decade-long tech bubble finally popping? Tech bulls are overlooking the fundamental reality that the drivers of Big tech’s phenomenal growth–financialization and expansion into mobile telephony– are both losing momentum.
A third dynamic–Big Tech monetizing privately owned assets such as vehicles and homes– has also reached saturation and is now facing regulatory barriers.
Let’s start with market saturation: of the 5.3 billion adults on earth over 15 years of age, 5 billion now have a mobile phone and 4 billion have a smartphone: The end of mobile (Benedict Evans). As for teens between 10 and 15, only the truly

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A Quiet Revolution Is Brewing

11 days ago

Politics as practiced in a bygone era of stability no longer offers any solutions to these profound disruptions.
I recently read a fascinating history of the social, political and economic context of the American Revolution: The Radicalism of the American Revolution by Gordon Wood.
What is particularly striking is the critical role played by rapid social changes in the mid-1700s. Conventional histories focus on the political context, but more important were the changes in family and social relations, and the social impact of the economy moving from quasi-feudal forms of patronage that were ultimately personal relationships to impersonal market forces.
It was these social changes that nurtured the revolutionary zeal

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Why Being a Politician Is No Longer Fun

16 days ago

As a society, we are ill-prepared for the end of “politics is the solution.”
It’s fun to be a politician when there’s plenty of tax revenues and borrowed money to distribute, and when the goodies get bipartisan support. An economy that’s expanding all household incomes more or less equally is fun, fun, fun for politicians because more household income generates more income tax revenues and more spending that generates other taxes.
Despite the usual ideological squabbles, the general mood is upbeat: the horse-trading is about the relative share of the spoils each constituency will receive. Nobody gets everything they want, but everybody gets a good chunk and after an appropriate period of whining, resentment and

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Lesson of the S-Curve: Doing More of What’s Failed Will Fail Spectacularly

18 days ago

That nothing is truly “free” will be another lesson of the S-Curve.
I often refer to the S-Curve because Nature so often tracks this curve of ignition, rapid expansion, stagnation and decline.
One lesson of the S-Curve is that the human bias to keep doing more of what worked so well in the past leads to doing more of what failed even as results turn negative.
The dynamic in play is diminishing returns: the yield on the policy that worked so splendidly at first diminishes with time.
Credit offers a cogent real-world example. When credit becomes available in a credit-starved economy, it generates a rapid, sustained expansion as credit-worthy borrowers borrow and spend on new productive capacity, consumer goods,

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Forget “Money”: What Will Matter Are Water, Energy, Soil and Food–and a Shared National Purpose

20 days ago

If you want to identify tomorrow’s superpowers, overlay maps of fresh water, energy, grain/cereal surpluses and arable land.
The status quo measures wealth with “money,” but “money” is not what’s valuable. “Money” (in quotes because the global economy operates on intrinsically valueless fiat currencies being “money”) is wealth only if it can purchase what’s actually valuable.
As the world slides into an era of scarcities, what will matter more than “money” are the essentials of survival: fresh water, energy, soil and the output of those three, food. The ability to secure these resources will separate nations that fail and those that survive.
In a world of abundance, it’s assumed every essential resource can be bought

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China’s Insurmountable Global Weakness: Its Currency

22 days ago

If China wants superpower status, it will have to issue its currency in size and let the global FX market discover its price.
Quick history quiz: in all of recorded history, how many superpowers pegged their currency to the currency of a rival superpower? Put another way: how many superpowers have made their own currency dependent on another superpower’s currency?
Only one: China. China pegs its currency, the yuan (RMB) to the U.S. dollar. It adjusts the peg a bit here and there, but the yuan’s value is set by the Chinese state, not by the market of buyers and sellers.
(Yes, various nations have used gold coins minted by rival powers (Spanish pieces of eight were money everywhere, for example) but we’re talking

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Technology Is Not Just Disruptive, It’s Disastrously Deflationary

23 days ago

Deflation eats credit-dependent, mass-consumption economies alive from the inside.
While AI (artificial intelligence) garners the headlines, the next wave of disruptive technologies extend far beyond AI: as the chart of technologies rapidly being adopted shows, this wave includes new materials and processes as well as the “usual suspects” of machine learning, natural language processing, data mining and so on.
While many voices seek to assure us these technologies won’t displace human workers, the reality is cutting labor inputs is the core driver. What few pundits seem to understand (perhaps because they’ve never experienced a truly competitive market?) is that the rush to incorporate these technologies into

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Two Intertwined Dynamics Are Transforming the Economy: Technology and Financialization

25 days ago

If you want to understand how the economy is being transformed, look at the intersection of Big Tech, financialization and the central state.
The two dynamics transforming the economy–technology and financialization–are intertwined yet widely viewed as unrelated. Critics and proponents of each largely ignore the other dynamic: critics of institutionalized fraud and other manifestations of financialization implicitly assume the economy will return to some golden age if we get rid of financialization’s skims and scams.
They are largely blind to the reality that the speed with which technology is transforming the economy is increasing: there is no golden era to return to. The economy they long for (strong unions, full

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The Normalization and Institutionalization of Fraud

27 days ago

Normalizing and institutionalizing fraud undermines the foundations of the economy and the financial system.
I am indebted to Manoj Samanta (twitter: @flation_debate) for the insightful concept the commoditization of fraud. The first step in the commoditization of fraud is to normalize fraud as Business as Usual (BAU) to the point that it’s no longer viewed as “wrong,” destructive or an aberration of evil-doers but as an accepted way to maximize gain and offload risk onto others.
The last step in the process is to institutionalize fraud within central banking and government policies.
How is selling shares in a money-losing corporation at outlandish valuations not the commoditization of fraud? The fraud has been

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Downward Mobility Matters More Than Liberal-Conservative Labels

28 days ago

The real heresy here is the American economy is now rigged for downward mobility.
In the conventional narrative, one’s economic class is overshadowed by one’s political belief structure: liberal, conservative, libertarian, etc. In terms of economic class, the conventional narrative divides people into their ideological beliefs about economic ideologies: free market capitalism, socialism, etc.
Economic class is one of the few remaining heresies in America: in the conventional narrative, it doesn’t exist or is meaningless due to the tremendous social mobility of the American populace: the working class stiff is one wise decision way from middle class status, and the middle class worker is one wise investment away from

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The Economy Has Fundamentally Changed in the 21st Century–and Not for the Better

May 15, 2019

The net result is we have an economy that’s supposedly expanding smartly while our well-being and financial security are collapsing.
Gross Domestic Product (GDP) and other metrics of economic activity don’t measure either broad-based prosperity or well-being. Elites skimming financialization profits by expanding corporate debt and issuing more loans to commoners while spending more on their lifestyles boosts GDP quite nicely while the security and well-being of the bottom 90% plummets.
Under the hood of “recovery” and a higher GDP, life has gotten harder and more insecure for the bottom 90%. The key is not to look just at wages (trending up, we’re assured) or inflation (near-zero, we’re assured) but at aspects of

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Burnout Nation

May 14, 2019

The economic and financial stresses will exceed the workforce’s carrying capacity in the next recession.
A number of recent surveys reflect a widespread sense of financial stress and symptoms of poor health in America’s workers, particularly the younger generations. There’s no real mystery as to the cause of this economic anxiety:
— competition for secure, well-paid jobs that were once considered the birthright of the middle class is increasingly fierce;
— the pay and predictability of the jobs that are available are low;
— high-paying jobs are extraordinarily demanding, forcing workers to sacrifice everything else to keep the big-bucks position;
— the much-lauded gig economy is tracking the Pareto Distribution, as

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Unrealistically Great Expectations

May 12, 2019

Our expectations have continued ever higher even as the pie is shrinking..
Let’s see if we can tie together four social dynamics: the elite college admissions scandal, the decline in social mobility, the rising sense of entitlement and the unrealistically ‘great expectations’ of many Americans.
As many have noted, the nation’s financial and status rewards are increasingly flowing to the top 5%, what many call a winner-take-all or winner-take-most economy.
This is the primary source of widening wealth and income inequality: wealth and income are disproportionately accruing to the top slice of earners and owners of productive capital.
This concentration manifests in a broad-based decline in social mobility: it’s

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The Great Unraveling Begins: Distraction, Lies, Infighting, Betrayal

May 11, 2019

The good news is renewal becomes possible when the entire rotten status quo collapses in a putrid heap.
There are two basic pathways to systemic collapse: external shocks or internal decay. The two are not mutually exclusive, of course; it can be argued that the most common path is internal decay weakens the empire/state and an external shock pushes the rotted structure off the cliff.
As Dave of the X22 Report and I discuss in The World Is About To Change & It’s Going To Be Glorious, we are in the early stages of terminal internal decay.There are a number of dynamics shared by decaying empires/states:
1. The ruling elites lose the moral imperative to sacrifice for the good of the empire/state. Instead they use the

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What Would It Take to Spark a Rural/Small-Town Revival?

May 7, 2019

There are many historical models in which the spending/investing of wealthy families drives the expansion of local economies.
The increase in farm debt while farm income declines is putting unbearable financial pressure on American farmers, who must be differentiated from giant agri-business corporations. This is placing immense pressure on farmers, pressure which manifests in rising suicide rates.
If this isn’t the nadir of rural America, it’s certainly close.
This decline of financial viability and sharp rise in stress isn’t limited to rural America. The decline of rural regions and small towns is a global phenomenon, and the causes are many but boil down to two primary dynamics:
1. Cities and megalopolises

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Good Riddance to a “Nothing-Burger” Trade Deal

May 6, 2019

China has expanded its domestic debt to fund its growth, much of which qualifies as malinvestment, creating financial vulnerabilities its government is anxious to mask.
As I noted in Trade Deal Follies: The U.S. Has Embraced the World’s Worst Negotiating Tactics (April 8, 2019), the trade deal was a Nothing-Burger for the U.S. Without any consequences for violating trade deals, China violates all trade deals, starting with the WTO. (As an example, China has never reported its state subsidies to Huawei to the WTO as required by that treaty.)
The only trade deal that wouldn’t be a Nothing-Burger for the U.S. is one that explicitly gives the U.S. the sole power to decide if the deal has been violated and impose the

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Income Inequality and the Decline of the Middle Class in Two Charts

May 4, 2019

Now look at the middle quintiles–the middle class: their income has gone nowhere in the past decade.
These two charts of average incomes of U.S. households by quintile (bottom 20%, middle 60% (20%+20%+20%) and top 20%) have both good news and bad news. (Charts are from the non-partisan Congressional Budget Office — CBO).
These charts depict 1) household income before transfers (means-tested government benefits) and taxes, in other words, pre-tax earned income, income from capital gains and interest, unemployment insurance, etc., and 2) income after federal transfers and taxes.
This is a much more accurate view of household income, as this is what gets deposited in households’ accounts.
The typical chart of average

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The Accelerating Decay of the Middle Class

May 3, 2019

Ironically, their ample compensation allows them to avoid the poor-quality services they’ve designed for everyone below them.
If we define middle class by the security of household income and what that income can buy rather than by an income level, what do we conclude? We have little choice but to conclude the middle class is decaying, both in the percentage of the workforce that qualifies as “middle class” according to traditional standards and in the quality of life of those who do qualify.
There’s a longstanding way to understand the middle class quality of life: it’s supposed to be superior to the indignities of being poor. If you’ve been poor (and I’ve been down to my last $100), even for short periods, you know

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The Erosion of Everyday Life

May 1, 2019

Working hard and doing what you’re told is no longer yielding the promised American Dream of security, agency and liberty.
Volume One of Fernand Braudel’s oft-recommended (by me) trilogy Civilization & Capitalism, 15th to 18th Century is titled The Structures of Everyday Life. The book describes how life slowly became better and freer as the roots of modern capitalism and liberty spread in western Europe, slowly destabilizing and obsoleting the sclerotic tyrannies of feudalism.
Today I want to discuss the erosion of everyday life as a manifestation of the endgame of the current version of state capitalism, more precisely neofeudal state-cartel financialization, which combines financial predation of the home (core)

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There Are Two Little Problems with “Taxing the Rich” to Pay for “Free Everything”

April 30, 2019

No super-wealthy individual or household is going to pay billions in additional taxes when $10 to $20 million will purchase political adjustments.
The 2020 election cycle has begun, and a popular campaign promise is “free everything” paid for by new taxes on the super-wealthy. Who doesn’t like free stuff? Who will vote for whomever offers them free stuff? No wonder it’s a popular campaign promise.
As even the most self-absorbed American voter has a latent street-savvy awareness that nothing is truly free, the other popular campaign promise is to “tax the rich” to pay for the proposed “free” programs. Proposals to “Tax the rich” feed off the growing awareness that the financial wealth created since 2000 has largely

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Push Them Hard Enough and the Productive Class Will Opt Out of Servitude

April 27, 2019

People love their big paychecks, but they also value their sanity.
One of the most astonishing manifestations of disconnected-from-reality hubris is public authorities’ sublime confidence that employers and entrepreneurs will continue starting and operating enterprises no matter how difficult and costly it becomes to keep the doors open, much less net a profit.
The average employee / state dependent reckons that the small business owner / entrepreneur is killing it financially, banking a small fortune in pure profit every month, and that they’re doing what they love so they’ll continue doing it no matter what. In other words, they’re all wealthy Tax Donkeys who can easily afford higher taxes and fees and will

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The Feedback Loop of Doom: When Mobile Creatives and Capital Abandon Unaffordable, Dysfunctional Cities

April 26, 2019

When the 4% who generate the jobs and tax revenues have had enough and leave, the effects quickly impact the 64%.
At the end of any trend, everyone’s a true believer: this trend is so enduring, so broad-based, so based on unchanging fundamentals that it will never ever reverse.
One such trend is the white-hot growth of housing, employment, tax revenues, etc. in major urban magnets for global capital and talent: you know the usual suspects: Dallas, Atlanta, Seattle, Portland OR, Denver, Los Angeles, the San Francisco Bay Area, New York City and so on.
What these urban regions offer are strong job markets, a very desirable dynamic.
For example, over 400,000 jobs have been added to the San Francisco Bay Area in the past

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If “Getting Ahead” Depends on Asset Bubbles, It’s Not “Getting Ahead,” It’s Gambling

April 25, 2019

Given that the economy is now totally and completely dependent on inflating asset bubbles, it makes no sense to invest for the long-term.
Beneath the endlessly hyped expansion in gross domestic product (GDP) of the past two decades, the economy has changed dramatically. The American Dream boils down to social and economic mobility, a.k.a. getting ahead through hard work, merit and wise investments in oneself and one’s family.
The opportunities for this mobility in the post World War 2 era broadened as civil rights and equal rights expanded. The 1970s saw a disruption of working-class mobility as high-paying factory jobs disappeared, leaving services jobs that paid less or required more training, i.e. a college

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How Empires Fall: Moral Decay

April 23, 2019

There is a name for this institutionalized, commoditized fraud: moral decay.
Moral decay is an interesting phenomenon: we spot it easily in our partisan-politics opponents and BAU (business as usual) government/private-sector dealings (are those $3,000 Pentagon hammers now $5,000 each or $10,000 each? It’s hard to keep current…), and we’re suitably indignant when non-partisan corruption is discovered in supposed meritocracies such as the college admissions process.
But we’re less adept, it seems, at discerning systemic moral decay, which infects the very foundations of the economy and society.

Consider America’s favorite pastime, corrosive partisan politics. This distemper is often traced back to (surprise!) extreme

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America’s Forced Financial Flight: Fleeing Unaffordable and Dysfunctional Cities

April 22, 2019

The forced flight from unaffordable and dysfunctional urban regions is as yet a trickle, but watch what happens when a recession causes widespread layoffs in high-wage sectors.
For hundreds of years, rural poverty has driven people to urban areas: cities offer paying work and abundant opportunities to get ahead, and these financial incentives have transformed the human populace from largely rural to largely urban in the developed world.
Now a new set of financial pressures are forcing a migration of urban residents out of cities which are increasingly unaffordable and dysfunctional.As highly paid skilled workers and global capital have flooded into high-job-growth regions, living costs and the costs of doing business

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The Next Financial Crisis Won’t Be Caused by Fraud: This Time Will Be Different

April 18, 2019

Extreme levels of debt and overvaluation characterize the entire global economy, and are not limited to any one nation or sector.
Financial crises come in two flavors: fraud and credit-valuation over-reach.Fraud-based financial crises may differ in particulars, but they share many traits: perverse incentives are institutionalized; the perverse incentives reward figuring out how to evade oversight via fraud, embezzlement, masking risk, etc. which are soon commoditized; regulations are gutted by insider-funded lobbying; regulators fail to do their job in hopes of getting lucrative positions in the industry they’re supposed to be regulating; reports of systemic, commoditized fraud are ignored because everyone’s getting

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No Fix for Recession: Without a Financial Crisis, There’s No Central Bank Policy Fix

April 15, 2019

There are no extreme “fixes” to secular declines in sales, profits, employment, tax revenues and asset prices.
The saying “never let a crisis go to waste” embodies several truths worth pondering as the stock market nears new highs. One truth is that extreme policies that would raise objections in typical times can be swept into law in the “we have to do something” panic of a crisis.
Thus wily insiders await (or trigger) a crisis which creates an opportunity for them to rush their self-serving “fix” into law before anyone grasps the long-term consequences.
A second truth is that crises and solutions are generally symmetric: a moderate era enables moderate solutions, crisis eras demand extreme solutions. Nobody calls

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Assange and the Unforgivable Sin of Disemboweling Official Narratives

April 14, 2019

The entire global status quo is on the cusp of the S-Curve decline phase.
There is really only one unforgivable sin in the political realm, and that’s destroying the official narrative by revealing the facts of the matter. This is why whistleblowers who make public the secret machinery of the elaborately artful lies underpinning all official narratives are hounded to the ends of the Earth.
Employees of state entities such as Ellsberg, Manning and Snowden are bound by vows of secrecy and threatened by the promise of severe punishment.Outsiders such as Assange are even further beyond the pale because they can’t be accused of being traitors, as they never took the vows of secrecy required by the Deep State.
The single

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