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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

Is a Cultural Revolution Brewing in America?

3 days ago

The lesson of China’s Cultural Revolution in my view is that once the lid blows off, everything that was linear (predictable) goes non-linear (unpredictable).
There is a whiff of unease in the air as beneath the cheery veneer of free money for almost everyone, inequality and polarization are rapidly consuming what’s left of common ground in America.
Though there are many systemic differences between China and the U.S., humans in every nation are all still running Wetware 1.0 and so it is instructive to consider what can be learned from China’s Cultural Revolution 1966-1976.
China’s Cultural Revolution was remarkably different from the Party’s military-political victory of 1949. Where the political revolution was managed by the centralized hierarchy of the

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What’s Changed and What Hasn’t in a Tumultuous Year

11 days ago

Inequality is America’s Monster Id, and we’re continuing to fuel its future rampage daily.
What’s changed and what hasn’t in the past year? What hasn’t changed is easy:
1. Wealth / income inequality is still increasing. (see chart #1 below)
2. Wages / labor’s share of the economy is still plummeting as financial speculation’s share has soared. (see chart #2 below)

What’s changed is also obvious:
1. Money velocity has cratered. (see chart #3 below)
2. Federal borrowing / spending has skyrocketed, pushing federal debt to unprecedented levels. (see chart #4 below)
3. Speculation has reached the society-wide mania level. This is evidenced by record margin debt levels, record levels of financial assets compared to GDP and many other indicators. (see chart #5

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Our “Wealth”: Cloud Castles in the Sky

12 days ago

Buyers know there will always be a greater fool willing to pay more for an over-valued asset because the Fed has promised us it will always be the greater fool.I realize nobody wants to hear that most of their “wealth” is nothing more than wispy Cloud Castles in the Sky that will dissipate in the faintest zephyr, but there it is: that which was conjured out of thin air will return to thin air.

I’ve assembled a few charts that reflect the illusion of financial wealth that has a death grip on the public psyche. Something for nothing is a powerful attractor, but it doesn’t offer a narrative that the delusionally self-important demand: I earned this by working hard and being smart. Oh, right, yeah, sure. It had nothing to do with currency being created out of

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The UFO/Fed Connection

14 days ago

Perhaps the aliens’ keen interest in Earth’s central bank magic and its potential for destruction results from a wager.
You’ve probably noticed the recent uptick in UFO sightings and video recordings from aircraft of the extraordinary flight paths of these unidentified objects.
Perhaps it’s not coincidence that UFO sightings are soaring at the same time as central banks pursue unprecedented monetary policies. Imagine having the power to destroy an entire planet’s economy with a weapon that leaves the inhabitants and physical structures intact but vaporizes all the money. This weapon would be a monetary neutron bomb that crippled the planet with intangible force, leaving everything tangible untouched.
As author Arthur C. Clarke famously observed, “Any

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Health, Wealth and What Kills Most of Us

18 days ago

If health is wealth, and it most certainly is the highest form of wealth, then we would be well-served to take charge of our health-wealth in terms of what behaviors we can sustainably modify.

Longtime correspondent J.F. (MD) recently shared a fascinating graphic ranking the leading causes of death in the U.S. (2016 data, pre-pandemic) compared to searches on Google and what the media reports. (see chart below) Note that this data isn’t a survey asking people to rank the leading causes of death, but it does reflect what health topics they were interested in finding more about via web searches.
The media coverage of each cause of death is also not a representation of what the media presents as the leading causes of death; it’s a reflection of the quantity of

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Stimulus Addiction Disorder: The Debt-Disposable Earnings Pyramid

March 15, 2021

One glance at this chart explains why the status quo is locked on “run to fail” and will implode in a spectacular collapse of the unsustainable debt super-nova..
For those who suspect the status quo is unsustainable but aren’t quite sure why, I’ve prepared a simple chart that explains the financial precariousness many sense. The chart depicts the two core elements of a debt-based, consumerist economy: disposable earnings, defined as the earnings left after paying for essentials which can then be used to service debt and debt.
In other words, if all the household earnings are spent on non-discretionary expenses (rent or mortgage, taxes, food, utilities, healthcare, etc.) then there is no money left to pay the interest and principal on a loan. Lenders consider this

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The Cannibalization Is Complete: Only Inedible Zombies Remain

March 13, 2021

Poor powerless Fed, poor starving cannibals, poor zombies turning to dust. That’s the American economy once the curtains are ripped away.
Setting aside the fictional flood of zombie movies for a moment, we find the real-world horror is the cannibalization of our economy, a cannibalization that is now complete. Every organic source of prosperity and productivity has been captured and consumed, hidden behind the convenient curtains of central bank intervention, “market forces” (hahaha), financialization and fiscal stimulus.
All that’s left now are zombies feeding off the offal of stimulus. Sadly for the cannibals who’ve feasted so well for decades, zombies are inedible. So now the cannibals are starving. Poor cannibals! Once the stimulus runs out, no more zombies.

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Too Busy Frontrunning Inflation, Nobody Sees the Deflationary Tsunami

March 8, 2021

Those looking up from their “free fish!” frolicking will see the tsunami too late to save themselves.
It’s an amazing sight to see the water recede from the bay, and watch the crowd frolic in the shallows, scooping up the flopping fish. In this case, the crowd doing the “so easy to catch, why not grab as much as we can?” scooping is frontrunning inflation, the universally expected result of the Great Reflation Trade.
You know the Great Reflation Trade: the world has saved up trillions, governments are spending trillions, it’s going to be the greatest boom since the stone masons partied at the Great Pyramid in Giza. It’s so obvious that everyone has jumped in the water to scoop up all the free fish (i.e. stock market gains). Only an idiot would hesitate to

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About That +6.8 percent GDP Forecast: Remember That GDP = Waste

March 2, 2021

Any economy stupid enough to rely on the insane distortions of GDP “growth” as its primary measure will richly deserve a Darwin Award when it inevitably collapses in a putrid heap of squandered resources and capital.
We’re told the gross domestic product (GDP) measures growth, but what it really measures is waste: capital, labor and resources that are squandered and then mislabeled “growth” for PR purposes. If we only manage what we measure, then we’re mismanaging our economy by promoting waste as the only metric we measure and incentivize.
Forecasts now predict a rousing 6.8% “growth” in 2021 GDP. In other words, the amount of resources and capital being squandered is going parabolic and we love it!
50 million autos and trucks stuck in traffic, burning millions

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What “Normal” Are We Returning To? The Depression Nobody Dares Acknowledge

March 1, 2021

Perhaps we need an honest national dialog about declining expectations, rising inequality, social depression and the failure of the status quo.
Even as the chirpy happy-talk of a return to normal floods the airwaves, what nobody dares acknowledge is that “normal” for a rising number of Americans is the social depression of downward mobility and social defeat.
Downward mobility is not a new trend–it’s simply accelerating. As this RAND Corporation report documents, (Trends in Income From 1975 to 2018) $50 trillion in earnings has been transferred to the Financial Aristocracy from the bottom 90% of American households over the past 45 years.
Time magazine’s article on the report is remarkably direct:The Top 1% of Americans Have Taken $50 Trillion From the Bottom 90%

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Oil and Debt: Why Our Financial System Is Unsustainable

February 25, 2021

How much energy, water and food will the “money” created out of thin air in the future buy?
Finance is often cloaked in arcane terminology and math, but the one dynamic that governs the future is actually very simple.
Here it is: all debt is borrowed against future supplies of affordable hydrocarbons (oil, coal and natural gas). Since global economic activity is ultimately dependent on a continued abundance of affordable energy, it follows that all money borrowed against future income is actually being borrowed against future supplies of affordable energy.
Many people believe that alternative “green” energy will soon replace most or all hydrocarbon energy sources, but the chart below shows why this belief is not realistic: all the “renewable” energy sources are

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What Poisoned America?

February 20, 2021

America’s financial system is nothing more than a toxic waste dump of speculation, fraud, collusion, corruption and rampant profiteering.
What Poisoned America? The list of suspects is long: systemic bias, special interests dominating politics, political polarization, globalization and the offshoring of productive capacity, over-regulation, the rise of rapacious cartels and monopolies, Big Tech’s gulag of the mind, the permanent adolescence of consumerism, permanent global war, to name a few.
The question boils down to this: what problems cannot be addressed by the status quo? Most of the ills listed above can be addressed with existing mechanisms of governance and adaptation. For example, consider systemic bias. The U.S. Armed Forces have demonstrably led the

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Gains Are Unreal, Losses Are Real

February 12, 2021

Why would anyone sell when further gains are guaranteed? Because the gains are unreal but the losses are real. When markets are soaring and your portfolio is rocketing higher, the gains seem unreal. Did I really make that much in one day, week, month? Wow! With the gains higher every time you look, it would be foolish to sell because look at the flood of media reports on “the Roaring 20s” that are predicted with such certitude that it’s essentially guaranteed, the reflation that’s lifting all boats globally, the Federal Reserve printing trillions to further inflate the market, and the millions of new traders scooping fantastic gains.
Why would anyone be idiotic enough to sell when the Bull Market is just getting started? Indeed. Sure, you sold to book those crazy

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What Collapsed the Middle Class?

February 11, 2021

The middle class has already collapsed, but thanks to debt and bubbles, this reality has been temporarily cloaked.
What collapsed the middle class? In many ways the answer echoes an Agatha Christie mystery: rather than there being one guilty party, a number of suspects participated in the collapse of the middle class.
Can we consolidate these dynamics into a few core causal factors? I’ve made the case in the pst few posts that yes, we can: many of these causes are part of a single dynamic, the decapitalization of the middle class and the decay of the ladder of social mobility which enabled tens of millions of workers to transform their wages into productive capital via saving and investment in their own human capital, their own enterprises and assets that earn

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The Top 10percent Is Doing Just Fine, The Middle Class Is Dying on the Vine

February 6, 2021

Please study these charts as a means of understanding the inevitability of economic stagnation and a revolt of the decapitalized middle class. I’ve been covering the decline of America’s middle class for over a decade with charts, data and commentary on the social depression that has accompanied the decline.
While there are many mutually reinforcing dynamics in this 45-year decline–demographics, global energy costs, financialization and globalization, to name a few– one term describes the accelerating erosion of America’s middle class: decapitalization.
To understand decapitalization, we need to start with the fundamentals of any economy between labor (wages) and capital and between investment and speculation. Although it’s tempting to oversimplify and demonize

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Silver Swans, Maginot Lines and the Unforeseen Risks of Collapse

February 1, 2021

Our Nobility’s assessment of risk and their war-gaming of vulnerabilities are fatally deficient.Many people have heard of Nassim Taleb’s black swan but fewer understand how few events qualify as black swans. Per Wikipedia, a black swan is an unpredictable or unforeseen event, typically one with extreme consequences, an event that is beyond what is normally expected of a situation and has potentially severe consequences. Black swan events are characterized by their extreme rarity, severe impact, and the widespread insistence they were obvious in hindsight.
Taleb’s black swan theory refers to unexpected events of large magnitude and consequence and their dominant role in history. Such events, considered extreme outliers, collectively play vastly larger roles than

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The Coming Revolt of the Middle Class

January 28, 2021

That’s how Neofeudal systems collapse: the tax donkeys and debt-serfs finally rebel and start demanding the $50 trillion river of capital take a new course.
The Great American Middle Class has stood meekly by while the New Nobility stripmined $50 trillion from the middle and working classes. As this RAND report documents, $50 trillion has been siphoned from labor and the lower 90% of the workforce to the New Nobility and their technocrat lackeys who own the vast majority of the capital:
Trends in Income From 1975 to 2018.

Why has the Great American Middle Class meekly accepted their new role as debt-serfs and powerless peasants in a Neofeudal Economy ruled by the New Nobility of Big Tech / monopolies / cartels / financiers? The basic answer is the New Nobility’s

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The Dangerously Diminishing Returns on Monetary and Fiscal Stimulus

January 21, 2021

Allow me to translate the risible claims of Jay Powell and Janet Yellen that their stimulus policies haven’t boosted wealth inequality to the moon: “Let them eat cake.”
The euphoria of ever greater monetary and fiscal stimulus overlooks the diminishing returns and higher risks generated by near-exponential increases in stimulus. I prepared a chart that graphically displays the extraordinary increases in stimulus and the declining results in the primary goals of economic policy: broad-based opportunity to get ahead and reducing systemically destabilizing wealth inequality.
Looking back on this era, the fatal irony that all this stimulus has rocket-boosted wealth and income inequality while gutting the bottom 90% will be glaringly obvious. It’s actually glaringly

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Is 2021 an Echo of 1641?

January 14, 2021

If you don’t discern any of these dynamics in the present, what are you choosing not to see?
The reason why history rhymes is that humanity is still using Wetware 1.0 and so humans respond to scarcity, abundance and conflicts over them in the same manner.
I am struck by similarities between the conflict-torn mid-1600s and the present: global climate change (The Little Ice Age in the 1600s), political upheavals and wars which intertwined civil and imperial conflicts. Global Crisis: War, Climate Change and Catastrophe in the 17th Century is a fascinating overview of this complex era which disrupted regimes and empires from England to China.
Climate change (The Little Ice Age) generated scarcities of grain in a time of burgeoning human populations. As in the present

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2021: If It Wasn’t For Bad Luck, We Wouldn’t Have No Luck At All

January 11, 2021

If we have indeed begun a sustained “reversal of fortune”, it might be prudent to consider the possibility we’re only in the first inning of a sustained run of back luck.In our self-deluded hubris, we reckon we’ve moved beyond the influence of fortune, a.k.a. Lady Luck: our technologies are so powerful and our monetary policies so godlike that nothing as random as luck could ever crush our limitless expansion.
Thus does hubris beg for a comeuppance: the greater the hubris, the greater the reversal of fortune, the greater the confidence in our godlike powers, the greater the collapse of our prideful faith in technology and economic policies.
So we’ve enshrined our hubris-soaked happy story: the virus will naturally weaken, vaccines will conquer the Covid virus in

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The Tyranny Nobody Talks About

January 8, 2021

All the tricks to hide our unaffordable cost structure have reached marginal returns. Reality is about to intrude.
There is much talk of tyranny in the political realm, but little is said about the tyrannies in the economic realm, a primary one being the tyranny of high costs: high costs crush the economy from within and enslave those attempting to start enterprises or keep their businesses afloat.
Traditionally, costs are broken down into fixed costs such as rent and fees which don’t change regardless of whether business is good or bad, and operating costs such as payrolls, fuel, etc. which rise and fall with revenues.
To some degree, this division no longer matters, because the entire cost structure of our economy is tyrannically high: if rent, insurance, taxes

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The Coming War on Wealth and the Wealthy

January 6, 2021

Here’s looking at you, Federal Reserve–thanks for perfecting ‘legalized looting’ and neofeudalism in America.
The problem with pushing a pendulum to its maximum extreme on one end is that it will swing back to the other extreme minus a tiny bit of friction.
America has pushed wealth/income inequality, unfairness and legalized looting to the maximum extreme. Now it will experience the swing back to the other extreme. This will manifest in a number of ways, one of which is a self-organizing populist war on wealth and the wealthy.
To say the system is rigged to benefit the already-wealthy and powerful is a gross understatement. Take the tax code as an example–thousands of pages of arcane tax breaks and giveaways passed by a thoroughly corrupted Congress and

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2020 Was a Snack, 2021 Is the Main Course

January 4, 2021

One of the dishes at the banquet of consequences that will surprise a great many revelers is the systemic failure of the Federal Reserve’s one-size-fits-all “solution” to every spot of bother: print another trillion dollars and give it to rapacious financiers and corporations.
Though 2020 is widely perceived as “the worst year ever,” it was only a snack. The real banquet of consequences will be served in 2021. The reason 2020 was only a snack is that systems didn’t break down in 2020. The reason 2021 is the main course is that systems
will break down, and once broken, they cannot be restored.
I made the chart below to explain how systems fail and why they cannot be restored. Systems have numerous sources of potential fragility:
Systems can be tightly bound to

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2020 the “Worst Year Ever”–You’re Joking, Right?

December 29, 2020

So party on, because “the worst year ever” is ending and the rebound of financial markets, already the greatest in recorded history, will only become more fabulous.
Of the lavish banquet of absurdities laid out in 2020, one of the most delectable is Time magazine’s December 14 cover declaring that 2020 was the “worst year ever.” You’re joking, right? In history’s immense tapestry of human misery, it’s not even in the top 100 worst years.
Consider 1177 B.C., when many of the great civilizations of the Mediterranean Sea and Mideast collapsed, and the survivors struggled through a pre-modern Dark Ages. This book assembles what is known about this catastrophic era:  1177 B.C.: The Year Civilization Collapsed.
Then there’s 1644 A.D., when the Ming Dynasty was

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Big Media: Selling the Narrative and Crushing Dissent for Fun and Profit

December 21, 2020

The profit-maximizing Big Tech / Big Media Totalitarian regime hasn’t just strangled free speech and civil liberties; it’s also strangled democracy.
The U.S. has entered an extremely dangerous time, and the danger has nothing to do with the Covid virus. Indeed, the danger long preceded the pandemic, which has served to highlight how far down the road to ruin we have come.
The danger we are ill-prepared to deal with is the consolidation of the private-sector media and its unification of content into one Approved Narrative which is for sale to the highest bidders. This is the perfection of for-profit Totalitarianism in which dissent is crushed, dissenters punished and billions of dollars are reaped in managing the data and content flow of the one Approved

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When Social Capital Becomes More Valuable Than Financial Capital

December 20, 2020

This devaluation of financial wealth–and its transformation to a dangerous liability– will reach extremes equal to the current extremes of wealth-income inequality.
Financial capital–money–is the Ring that rules them all. But could this power fall from grace? Continuing this week’s discussion of the idea that that extremes lead to reversions, let’s consider the bedrock presumption of the global economy, which is that money is the most valuable thing in the Universe because the owner of money can buy anything, as everything is for sale. The only question is the price.
Reversion to the mean is a statistical dynamic but it is also a human social dynamic: for example, once the social / financial / political pendulum reaches Gilded Age extremes of wealth/income

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Can 20 Years of Deflation Be Compressed into Two Years? We’re About to Find Out

December 17, 2020

Extremes become more extreme right up until they reverse, a reversal no one believes possible here in the waning days of 2020.
The absolutely last thing anyone expects is a collapse of all the asset bubbles, i.e. a deflation of assets that reverses the full 20 years of bubble-utopia since 2000. The consensus is universal: assets will continue to loft ever higher, forever and ever, because the Fed has our back, i.e. central banks will create trillions out of thin air without any consequence other than assets lofting ever higher.
This research paper from the San Francisco Federal Reserve begs to differ. Here is an excerpt from Longer-Run Economic Consequences of Pandemics (San Francisco Federal Reserve)
“Measured by deviations in a benchmark economic statistic,

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One Little Problem with the “All-Electric” Auto Fleet: What Do We Do with all the “Waste” Gasoline?

December 15, 2020

Regardless of what happens with vaccines and Covid-19, debt and energy–inextricably bound as debt funds consumption– will destabilize the global economy in a self-reinforcing feedback.
Back in the early days of the oil industry (1880s and 1890s), the product that the industry could sell at a profit was kerosene for lighting and heating. Since there was no automobile industry yet, gasoline was a waste product that was dumped into streams.
Why couldn’t the refiners produce only kerosene? Why did they end up with “worthless” gasoline?
The answer is a barrel of oil produces a variety of products. While there is some “wiggle room” to produce more diesel and less gasoline, etc., it isn’t possible to turn a barrel of oil into only one product.
John D. Rockefeller became

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2021 is Already Optimized for Failure

December 1, 2020

One sure way to identify a system “optimized for failure” is if all the insiders are absolutely confident the system is “optimized for my success”.
I often discuss optimization here because it offers an insightful window into how systems become fragile and break down. When we optimize something, we’re aiming to get the most bang for our buck: maximize our efficiency, profit, productivity, etc., while minimizing our costs.
To maximize our goal, whatever it is–profits, power, whatever– we strip away redundancy and buffers because these add costs and don’t boost our desired output. They create resilience, i.e. the ability to survive disruptions, but the logic of optimization is relentless: get rid of all extraneous costs, because resilience doesn’t boost the bottom

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A Dimly Lit Thanksgiving

November 27, 2020

Our overweening faith and confidence in our wealth and power make this a dimly lit Thanksgiving.
A public expression of gratitude by victorious sports stars, lottery winners, etc. is now the convention in America: coaches, teammates, family and mentors (or agents) are recognized as an expression of the winners’ humility and gratitude for everyone that contributed to the success.
As sincere as each individual’s gratitude may be, there’s something forced and phony about this public ritual of virtue-signaling that has transformed it into an empty cliche. There are various drivers of this ritual–we like our heroes to be humble–but it may also be the result of our increasingly winner take most economy: as the winners are boosted into the orbit of wealth and

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