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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

Our Strange Attraction to Self-Destructive Behaviors, Choices and Incentives

17 hours ago

Self-destruction isn’t a bug, it’s a feature of our socio-economic system.
The gravitational pull of self-destructive behaviors, choices and incentives is scale-invariant, meaning that we can discern the strange attraction to self-destruction in the entire scale of human experience, from individuals to families to groups to entire societies.
The proliferation of self-destructive behaviors, choices and incentives in our socio-economic system is profoundly troubling. Exhibit 1 is the opioid epidemic (charts below). How did we reach this level of individual and social self-destruction?
There are culprits aplenty: a “healthcare” (sickcare) system that incentivizes maximizing profits by whatever means are available (for

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What Do We Know About Syria? Next to Nothing

5 days ago

Anyone accepting “facts” or narratives from any interested party is being played.
About the only “fact” the public knows with any verifiable certainty about Syria is that much of that nation is in ruins. Virtually everything else presented as “fact” is propaganda intended to serve one of the competing narratives or discredit one or more competing narratives.
Consider a partial list of “interested parties” spinning their own narratives about events in Syria: (in no particular order)
1. The government of Syria
2. non-state groups in Syria
3. Turkey
4. Saudi Arabia
5. Iran
6. Jordan
7. The government of Iraq
8. non-state groups in Iraq
9. The Kurds
10. Hamas
11. Israel
12. Lebanon
13. The Gulf States
14. Russia
15.

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Why Trade Wars Ignite and Why They’re Spreading

9 days ago

The monetary distortions, imbalances and perverse incentives are finally bearing fruit: trade wars.
What ignites trade wars? The oft-cited sources include unfair trade practices and big trade deficits. But since these have been in place for decades, they don’t explain why trade wars are igniting now.
To truly understand why trade wars are igniting and spreading, we need to start with financial repression, a catch-all for all the monetary stimulus programs launched after the Global Financial Meltdown/Crisis of 2008/09.

These include zero interest rate policy (ZIRP), quantitative easing (QE), central bank purchases of government and corporate bonds and stocks and measures to backstop lenders and increase liquidity.

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The Genie’s Out of the Bottle: Eight Defining Trends Are Reversing

11 days ago

Though the Powers That Be will attempt to placate or suppress the Revolt of the Powerless, the genies of political disunity and social disorder cannot be put back in the bottle.
The saying “the worm has turned” refers to the moment when the downtrodden have finally had enough, and turn on their powerful oppressors.The worms have finally turned against the privileged elites — who have benefited so greatly from globalization, corruption, central bank stimulus and the profiteering of state-enforced cartels. It doesn’t matter as much as the punditry assumes whether they are turning Left or Right; the important thing is that the powerless have finally started challenging their privileged overlords.
Though the Powers That

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Why Systems Fail

16 days ago

Since failing systems are incapable of structural reform, collapse is the only way forward.
Systems fail for a wide range of reasons, but I’d like to focus on two that are easy to understand but hard to pin down.

Federal Government, 2005 – 2018 – Click to enlarge

1. Systems are accretions of structures and modifications laid down over time.Each layer adds complexity which is viewed at the time as a solution.
This benefits insiders, as their job security arises from the need to manage the added complexity. The new layer may also benefit an outside constituency that quickly becomes dependent on the new layer for income. (Think defense contractors, consultants, non-profits, etc.)
In short order, insiders and

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Were Trade Wars Inevitable?

17 days ago

Trade in which mobile capital is the comparative advantage is a system of Neocolonial exploitation of developing-world nations.

Were trade wars inevitable? The answer is yes, due to the imbalances and distortions generated by financialization and central bank stimulus. Gordon Long and I peel the trade-war onion in a new video program, Were Trade Wars Inevitable? (27:48)
Let’s stipulate right off the bat that trade is not necessarily win-win–the winners (corporations, financiers and the financial sector) have skimmed the majority of the gains, leaving the losers with a few pennies of dubious value.
Consumers’ got a nickel in savings and a disastrous decline in quality, while corporations reaped 95 cents of

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Playing for All the Marbles

19 days ago

Global Plunge Protection Teams must be ordering take-out food; every night is a long one now.
The current stocks/bonds game is for all the marbles, by which I mean the status quo now depends on valuations and interest rates remaining near their current levels for the system to function.
If interest rates soar and/or stocks plummet, the game is over: pension funds collapse, tax revenues drop, debt based on high asset valuations defaults, employment craters and the much-lauded “wealth effect” reverses into a “negative wealth effect” (i.e. everyone looking at their IRA or 401K statement feels poorer every month).
Let’s scan a few relevant charts to understand why this game is for all the marbles. Given the systemic

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The Problem with a State-Cartel Economy: Prices Rise, Wages Don’t

23 days ago

The vise will tighten until something breaks. It could be the currency, it could be the political status quo, it could be the credit/debt system–or all three.
The problem with an economy dominated by state-enforced cartels and quasi-monopolies is that prices rise (since cartels can push higher costs onto the consumer) but wages don’t (since cartels can either dominate local labor markets or engage in global wage arbitrage: offshore jobs, move to lower-wage states, etc.)
Think about the major expenses of the typical household: Internet, telephony, cable and other digital services: cartels. Airlines: cartel. Healthcare insurance, providers and Big Pharma: cartels. Defense weaponry: cartel. Higher education and student

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What If All the Cheap Stuff Goes Away?

24 days ago

Nothing stays the same in dynamic systems, and it’s inevitable that the current glut of low costs / cheap stuff will give way to scarcities that cannot be filled at current low prices.
One of the books I just finished reading is The Fate of Rome: Climate, Disease, and the End of an Empire. The thesis of the book is fascinating to those of us interested in the rise and fall of empires: Rome expanded for many reasons, but one that is overlooked was the good fortune of an era of moderate weather from around 200 BC to 150 AD: rain was relatively plentiful/ regular and temperatures were relatively warm.
Then one of Earth’s numerous periods of cooling–a mini ice age–replaced the moderate weather, pressuring agricultural

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15 Years of War: To Whose Benefit?

27 days ago

As for Iraq, the implicit gain was supposed to be access to Iraqi oil.
Setting aside the 12 years of "no fly zone" air combat operations above Iraq from 1991 to 2003, the U.S. has been at war for almost 17 years in Afghanistan and 15 years in Iraq. (If the word "war" is too upsetting, then substitute "continuing combat operations".)
Since the burdens and costs of these combat operations are borne solely by the volunteers of the U.S. Armed Forces, the American populace pays little to no attention to the wars unless a household has a family member in uniform who is in theatre.
Permanent combat operations are now a barely audible background noise in America, something we’ve habituated to: the human costs are

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Decrypting the Appointment of John Bolton

March 26, 2018

So perhaps the dominant wing of the Deep State is finally willing to cut a deal with Trump.
To many observers, the appointment of John Bolton as national security advisor is the functional equivalent of appointing the Anti-Christ–or maybe worse. Indeed, these observers would, when comparing the two, find grudging favor with the Anti-Christ.
Bolton is a founding member of the neoliberal, neoconservative, neo-colonial interventionist Globalist wing of the Deep State. The antipathy he inspires is partly due to the enjoyment he takes in wielding power. (Note that the Anti-Christ is not a victim–he enjoys being the Anti-Christ.)
This wing of the Deep State, unquestionably in charge until the election of Donald Trump,

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Should Facebook and Google Pay Users When They Sell Data Collected from Users?

March 24, 2018

Let’s imagine a model in which the marketers of data distribute some of their immense profits to the users who created and thus “own” the data being sold for a premium.
It’s not exactly news that Facebook, Google and other “free” services reap billions of dollars in profits by selling data mined/collected from their millions of users. As we know, If you’re not paying for it, you’re not the customer; you’re the product being sold, also phrased as if the service is free, you are the product.
Correspondent GFB recently asked, why aren’t Facebook et al. sharing a slice of the profits reaped from users’ data with the users who create the data?Given the enormous data processing capabilities of these tech giants, it’s

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Solutions Only Arise Outside the Status Quo

March 22, 2018

Solutions are only possible outside these ossified, self-serving centralized hierarchies.
Correspondent Dan F. asked me to reprint some posts on solutions to the systemic problems I’ve outlined for years, most recently in How Much Longer Can We Get Away With It? and Checking In on the Four Intersecting Cycles. I appreciate the request, because it’s all too easy to dwell on what’s broken rather than on the difficult task of fixing what’s broken.
I’ve laid out a variety of solutions to structural problems in my many books, and I’ll attempt a brief synthesis in this post.
1. The dynamics of stagnation are built into the system. Centralized systems optimize specific solutions to a specific set of problems that prompted

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Is Profit-Maximizing Data-Mining Undermining Democracy?

March 21, 2018

If targeting political extremes generates the most profit, then that’s what these corporations will pursue.
As many of you know, oftwominds.com was falsely labeled propaganda by the propaganda operation known as ProporNot back in 2016. The Washington Post saw fit to promote ProporNot’s propaganda operation because it aligned with the newspaper’s view that any site that wasn’t pro-status quo was propaganda; the possibility of reasoned dissent has vanished into a void of warring accusations of propaganda and “fake news” –which is of course propaganda in action.
Now we discover that profit-maximizing data-mining (i.e. Facebook and Google) can–gasp–be used for selling ideologies, narratives and candidates just like dog

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Checking In on the Four Intersecting Cycles

March 18, 2018

If you think this is a robust, resilient, stable system, please check your Ibogaine / Hopium / Delusionol intake.

Correspondent James D. recently asked for an update on the four intersecting cycles I’ve been writing about for the past 10 years. Here’s the chart I prepared back in 2008 of four long-term cycles:
1. Generational (political/social)
2. Price inflation/wage stagnation (economic)
3. Credit/debt expansion/contraction (financial)
4. Relative affordability of energy (resources)

Intersection of Four Long-Term Cycles, 1900 – 2020 – Click to enlarge

Here are four of the many dozens of essays I’ve written on these topics over the past decade:
Long Cycles: Cheaper Goods, Costlier Capital, Income Disparity

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How Much Longer Can We Get Away With It?

March 18, 2018

Alas, fakery isn’t actually a solution to fiscal/financial crisis..

This chart of “debt securities and loans”–i.e. total debt in the U.S. economy–is also a chart of the creation and distribution of new money, as the issuance of new debt is the mechanism in our financial system for creating (or “emitting” in economic jargon) new currency: when a bank issues a new home mortgage, for example, the loan amount is new currency created out of the magical air of fractional reserve banking.

Debt Securities and Loans, 1960 – 2018 – Click to enlarge

Central banks also create new currency at will, and emitting newly created money is how they’ve bought $21 trillion in assets such as bonds, mortgages and stocks since

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There is No “Free Trade”–There Is Only the Darwinian Game of Trade

March 15, 2018

Rising income and wealth inequality is causally linked to globalization and the expansion of Darwinian trade and capital flows.
Stripped of lofty-sounding abstractions such as comparative advantage, trade boils down to four Darwinian goals:
1. Find foreign markets to absorb excess production, i.e. where excess production can be dumped.
2. Extract foreign resources at low prices.
3. Deny geopolitical rivals access to these resources.
4. Open foreign markets to domestic capital and credit so domestic capital can buy up all the productive assets and resources, a dynamic I explained last week in Forget “Free Trade”–It’s All About Capital Flows.
All the blather about “free trade” is window dressing and propaganda. Nobody

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Forget “Free Trade”–It’s All About Capital Flows

March 11, 2018

In a world dominated by mobile capital, mobile capital is the comparative advantage.
Defenders and critics of “free trade” and globalization tend to present the issue as either/or: it’s inherently good or bad. In the real world, it’s not that simple. The confusion starts with defining free trade (and by extension, globalization).
In the classical definition of free trade espoused by 18th century British economist David Ricardo, trade is generally thought of as goods being shipped from one nation to another to take advantage of what Ricardo termed comparative advantage: nations would benefit by exporting whatever they produced efficiently and importing what they did not produce efficiently. While Ricardo’s concept of

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The Death of Buy and Hold: We’re All Traders Now

March 9, 2018

The percentage of household assets invested in stocks fell from almost 40% in 1969 to a mere 13% in 1982, after thirteen years of grinding losses.
The conventional wisdom of financial advisors–to save money and invest it in stocks and bonds “for the long haul”–a “buy and hold” strategy that has functioned as the default setting of financial planning for the past 60 years–may well be disastrously wrong for the next decade.
This “buy and hold” strategy is based on a very large and unspoken assumption: that every asset bubble that pops will be replaced by an even bigger (and therefore more profitable) bubble if we just wait a few years.
The last time this conventional wisdom came into serious question was in the

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Never Mind Volatility: Systemic Risk Is Rising

March 7, 2018

So who’s holding the hot potato of systemic risk now? Everyone.
One of the greatest con jobs of the past 9 years is the status quo’s equivalence of risk and volatility: risk = volatility: so if volatility is low, then risk is low. Wrong: volatility once reflected specific short-term aspects of risk, but measures of volatility such as the VIX have been hijacked to generate the illusion that risk is low.
But even an unmanipulated VIX doesn’t reflect the true measure of systemic risk, a topic Gordon Long and I discuss in our latest program, The Game of Risk Transfer.
The financial industry has reaped enormous “guaranteed” gains by betting against volatility. As volatility steadily declined over the past two years,

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Our Fragmented Labor Markets Defy Outdated Conventions

March 3, 2018

There are hundreds of extraordinarily diverse labor markets in the U.S. economy, and it takes a much more granulated approach to make any sense of this highly fragmented and dynamic marketplace.
Conventional economists/media pundits typically view the labor market as monolithic, i.e. as one unified market. The reality is the labor market is highly fragmented. Thus it’s little wonder that conventional measures are giving mixed signals on employment, wage inflation, etc.

Here is a typical chart of the labor market: the annual rate of change in hourly earnings, going back to the late 1960s. I’ve annotated the chart to show that hourly earning rose sharply in the inflationary 1970s, but since then have only popped

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Career Advice to 20-Somethings: Create Value as a Mobile Creative

March 2, 2018

Finding work that fits who you are is rarely easy, especially if you don’t fit into the mainstream, and usually it requires a lot of compromises, hard work and dead-ends. But that’s the process.
Establishing a satisfying career is difficult in today’s economy, doubly so for those who find life within hierarchical institutions (corporate America and government) unrewarding, and triply so for those burdened with student loan debt and college educations/diplomas of uncertain market value or those re-entering the job market with skills that have been marginalized.
Given that I wrote a book entitled Get a Job, Build a Real Career, and Defy a Bewildering Economy, it’s unsurprising that I get emails from young people asking

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Venezuela’s New Cryptocurrency: Just Another Form of Control Fraud

February 25, 2018

If a currency can’t be converted on demand into the underlying commodity, it’s not “backed by oil,” it’s just another form of control fraud.

The broke and broken country of Venezuela appears to be the first nation-state to issue a cryptocurrency token (the petro) as a means of escaping the financial black hole that’s consuming its economy: Maduro Launches Oil-Backed Crypto “For The Welfare Of Venezuela”.
For context, here is a chart of the black market (i.e. real-world) value of the Venezuela’s fiat currency, the bolivar: a 100,000 bolivar note is worth somewhere around 40 cents USD (US dollar), i.e. near zero. (Venezuela maintains a fantasy-official USD/bolivar exchange rate that has no relation to the actual

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The End of (Artificial) Stability

February 23, 2018

The central banks’/states’ power to maintain a permanent bull market in stocks and bonds is eroding.
There is nothing natural about the stability of the past 9 years. The bullish trends in risk assets are artificial constructs of central bank/state policies. As these policies are reduced or lose their effectiveness, the era of artificial stability is coming to a close.
The 9-year run of Bull-trend stability is ending as a result of a confluence of macro dynamics:
1. Central banks are under pressure to reduce, end or reverse their unprecedented monetary stimulus, and the consequences are unpredictable, given the market’s reliance on the certainty that “central banks have our back” is ending.
2. Interest rates / bond

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Our Approaching Winter of Discontent

February 20, 2018

The tragedy is so few act when the collapse is predictably inevitable, but not yet manifesting in daily life.
That chill you feel in the financial weather presages an unprecedented–and for most people, unexpectedly severe–winter of discontent. Rather than sugarcoat what’s coming, let’s speak plainly for a change: none of the promises that have been made to you will be kept.
This includes explicit promises to provide income security and healthcare entitlements, etc., and implicit promises that don’t need to be stated: a currency that holds its value, high-functioning public infrastructure, etc.
Nearly “free” (to you) healthcare: no.
Generous public pensions: no.
Social Security with an equivalent purchasing power to

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What Just Changed?

February 15, 2018

The illusion that risk can be limited delivered three asset bubbles in less than 20 years.
Has anything actually changed in the past two weeks? The conventional bullish answer is no, nothing’s changed; the global economy is growing virtually everywhere, inflation is near-zero, credit is abundant, commodities will remain cheap for the foreseeable future, assets are not in bubbles, and the global financial system is in a state of sustainable wonderfulness.
As for that spot of bother, the recent 10% decline in stocks: ho-hum, nothing to see here, just a typical “healthy correction” in a never-ending bull market, the result of flawed volatility instruments and too many punters picking up dimes in front of the

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Three Crazy Things We Now Accept as “Normal”

February 11, 2018

How can central banks “retrain” participants while maintaining their extreme policies of stimulus?
Human habituate very easily to new circumstances, even extreme ones. What we accept as “normal” now may have been considered bizarre, extreme or unstable a few short years ago.
Three economic examples come to mind:
1. Near-zero interest rates. If someone had announced to a room of economists and financial journalists in 2006 that interest rates would be near-zero for the foreseeable future, few would have considered it possible or healthy. Yet now the Federal Reserve and other central banks have kept interest rates/bond yields near-zero for almost nine years.
The Fed has raised rates a mere .75% in three cautious

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Before You “Buy the Dip,” Look at This One Chart

February 10, 2018

Hello reverse wealth effect.
There’s a place for fancy technical interpretations, but sometimes a basic chart tells us quite a lot. Here is a basic chart of the Dow Jones Industrial Average, the DJIA. It displays basic information: price candlesticks, volume, the 50-week and 200-week moving averages, RSI (relative strength), MACD (moving average convergence-divergence), stochastics and the MACD histogram. These kinds of charts are free (in this case, from StockCharts.com).

Dow Jones Industrial Average Index, Nov 2015 – Feb 2018 – Click to enlarge

This is an ugly chart.It’s ugly because the decline to date is still far above support levels (the 50-week and 200-week moving averages) and the indicators have only

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Is the 9-Year Long Dead Cat Bounce Finally Ending?

February 6, 2018

Ignoring or downplaying these fundamental forces has greatly increased the fragility of the status quo.
The term dead cat bounce is market lingo for a “recovery” after markets decline due to fundamental reversals. Markets tend to bounce back after sharp declines as participants (human and digital) who have been trained to “buy the dips” once again buy the decline, and the financial media rushes to reassure everyone that nothing has actually changed, everything is still peachy-keen wonderfulness.
I submit that the past 9 years of market “recovery” is nothing but an oversized dead cat bounce that is finally ending. Here is a chart that depicts the final blow-off top phase of the over-extended dead cat bounce:

Dow

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Is Congress Finally Pushing Back Against Security Agencies’ Over-Reach?

February 5, 2018

The last time the U.S. Congress pushed back against the Imperial Presidency and the over-reach of the nation’s Security Agencies was 43 years ago, in 1975.
The last time the U.S. Congress pushed back against the Imperial Presidency and the over-reach of the nation’s Security Agencies was 43 years ago, in 1975. In response to the criminal over-reach of the Imperial Presidency (Watergate) and to the criminal over-reach of the security agencies (FBI, CIA, et al.), the Church Committee finally resusitated the constitutional powers of the Congress to serve the interests of the citizenry rather than the interests of political elites and the rogue agencies of the federal government.
The erosion of congressional power (or

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