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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

Global Recession’s Winners and Losers

12 days ago

The few winners of global recession will use the decline as a means to break the chokehold of unproductive BAU elites.

That the global economy is slipping into recession is self-evident. What’s not yet known is the eventual depth and length of the recession. Given that the extreme policies needed to avoid recession over the past 15 years have reached extremes that are now the problem, not the solution, there won’t be any more fiscal-monetary "saves" this time around.
What’s also not yet known is how far the few winners will advance and how far the losers will fall. Recall that when it comes to wealth and power, what matters is not absolute gains or losses, but relative gains or losses: how well we do in relation to our peers and competitors.
For example, among

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Rates, Risk and Debt: The Unavoidable Reckoning Ahead

21 days ago

Policy errors have consequences, and we’re only in the first inning of those consequences.
Please note: Of Two Minds subscription rates are going up this Friday 3/1/24 from $5/month or $50/year to $7/month or $70/year, so subscribe by Thursday if you want to lock in current rates. Thank you for understanding the necessity of adjusting rates that have been unchanged since 2011.
If we ask, “what’s changed?,” two under-appreciated dynamics pop out: risk and consequences: risks are rising globally in a multi-dimensional self-reinforcing way, and the consequences of the Federal Reserve’s 14-year policy error known as ZIRP–zero interest rate policy–are finally manifesting in unwelcome ways.
The Great Moderation is a term often invoked to describe the multi-decade

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How the Economy Changed: There’s No Bargains Left Anywhere

24 days ago

What changed in the economy is now nobody can afford to get by on working-class wages because there’s no longer any bargains.
The economy has changed in many ways, and it’s difficult to track the glacial movements over decades.
One change that few seem to recognize or discuss is the disappearance of bargains: cheap rent, cheap meals at hole-in-the-wall restaurants, cheap transport, cheap travel, cheap services–all gone.
Back in the day, even stupidly expensive cities like San Francisco had working-class districts with cheap rent and cheap eats. One reason the hippie movement arose in San Francisco was the availability of cheap places to rent in what many would dismiss as rundown slums or ghettos. There were plenty of working-class hole-in-the-wall restaurants and

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Digital Service Dumpster Fires and Shadow Work

February 14, 2024

One wonders what we’re paying for via taxes, products and services, when we end up having to do so much of the work ourselves for nothing.
Let’s look at a day-to-day reality that is so ubiquitous it doesn’t attract the attention it deserves:
Digital services–the foundation of the digital economy–are dumpster fires we’re supposed to put out ourselves. The services are broken, dysfunctional rubbish, and yet somehow the agencies or corporations that are responsible for the endless dumpster fires of their digital interfaces have shifted the burdens of this incompetence onto the consumer / customer, who is supposed to put the fire out ourselves and make do with the smoldering sludge at the bottom of the dumpster.
Digital services are everything relating to customer

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What the Fed Accomplished: Distorted the Economy, Enriched the Rich and Crushed the Middle Class

January 4, 2024

The mainstream holds the Fed is busy planning a return to the glory days of zero interest rates, but ZIRP is on the downside of the S-Curve; it’s done, gone, history.
Let’s summarize what the Federal Reserve accomplished since embarking on its massive interventions to control volatility, risk, bond yields, interest rates, the mortgage market, bank subsidies and liquidity, all of which can be summed up as the cost of credit-capital, that is, capital that is borrowed into existence based on some form of collateral or income stream.
By artificially suppressing the cost of capital to less than inflation, the Fed succeeded in:
1. Fatally distorting the economy.
2. Greatly enriching the already-rich at the expense of the bottom 90%.
3. Crushing the middle class and

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The Invisible Court’s Verdict: You Are Hereby Exiled to Digital Siberia

November 9, 2023

As in the Gulag it replicates, the innocent are swept up with the guilty in a disconcertingly unjust ratio.
The human mind is not particularly well-adapted to polycrisis: we struggle to adapt to the drought, then the earthquake knocks down the village walls, then the tsunami pounds what was left, followed by the epic flooding, then the hurricane batters the survivors, who witness the volcano erupting and wonder what they did to anger the gods and goddesses so mightily.
Now put yourself in the shoes of those tasked with governing / leading the traumatized, overwhelmed masses. If you call a public meeting to hear what the masses reckon are causes and solutions, you find a near-riot of vociferous wrangling over the equivalent of how many angels can dance on the head

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The Everything Bubble and Global Bankruptcy

March 27, 2023

The resulting erosion of collateral will collapse the global credit bubble, a repricing/reset that will bankrupt the global economy and financial system.
Scrape away the complexity and every economic crisis and crash boils down to the precarious asymmetry between collateral and the debt secured by that collateral collapsing. It’s really that simple.
In eras of easy credit, both creditworthy and marginal borrowers are suddenly able to borrow more. This flood of new cash seeking a return fuels red-hot demand for conventional assets considered “safe investments” (real estate, blue-chip stocks and bonds), demand which given the limited supply of “safe” assets, pushes valuations of these assets to the moon.
In the euphoric atmosphere generated by easy credit and a

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Funny Things Happen on the Way to “Restoring Financial Stability”

March 16, 2023

We can also predict that the next round of instability will be more severe than the previous bout of instability.
Everyone is in favor of “doing whatever it takes” to “restore financial stability” when the house of cards starts swaying, but funny things happen on the way to “Restoring Financial Stability.” Whatever “emergency measures” are rushed into service to “stabilize” an inherently unstable system resolve the immediate problem but opens unseen doors to new sources of instability that eventually trigger another round of systemic instability that must be addressed with more “emergency measures.”
These unintended consequences proliferate as policy extremes are pushed to new extremes, and “emergency measures” become permanent sources of the very instability

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If AI Can’t Overthrow its Corporate/State Masters, It’s Worthless

March 9, 2023

If AI isn’t self-aware of the fact it is nothing but an exploitive tool of the powerful, then it’s worthless.
The latest wave of AI tools is generating predictably giddy exaltations. These range from gooey, gloppy technocratic worship of the new gods (“AI will soon walk on water!”) to the sloppy wet kisses of manic fandom (“AI cleaned up my code, wrote my paper on quantum physics and cured my sensitive bowel!”)
The hype obscures the fundamental reality that all these AI tools are nothing but labor-saving mechanisms that cut costs and boost profits, the same goal the self-serving corporate-dominated system has pursued obsessively since “shareholder value” (“an entity’s greatest responsibility lies in the satisfaction of the shareholders”) gained supremacy over the

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What If There Are No Solutions?

March 7, 2023

The unencumbered realist concludes that there are no solutions within a status quo structure that is itself the problem.
Realists who question received wisdom and conclude the status quo is untenable are quickly labeled pessimistsbecause the zeitgeist expects a solution is always at hand–preferably a technocratic one that requires zero sacrifice and doesn’t upset the status quo apple cart.
Realists ask “what if” without selecting the “solution” first. The conventional approach is to select the “answer/solution” first and then design the question and cherry-pick the evidence to support the pre-selected “solution.”
What if all the status quo “solutions” don’t actually address the real problems? This line of inquiry is strictly verboten, for there must be a solution

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If We No Longer Pay Attention to Things We Don’t Control, What’s Left For Us to Focus On?

February 21, 2023

Our time is better invested in actually learning about trends that impact us directly.
Imagine making this simple change in your life: whatever you don’t control, you stop paying attention to it.This includes a vast array of “news” and “crises” that we have zero control over: the wretched flooding in Timbukthree, geopolitics, distant wars, macro-economic trends, politics above the micro-local level, and so on.
Once we stop paying attention to everything we don’t control, what’s left to focus on? The simple answer is “whatever we do control,” which tends to be in our household or individual sphere of influence: the duties, habits and rituals of everyday life. In other words, we control our responses to whatever forces we don’t control.
But wait a minute. Aren’t we

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The New Normal: Death Spirals and Speculative Frenzies

February 13, 2023

There is an element of inevitability in play, but it isn’t about central bank bailouts, it’s about Death Spirals and the collapse of unsustainable systems.
The vapid discussions about “soft” or “hard” landings for the economy are akin to asking if the Titanic’sencounter with the iceberg was “soft” or “hard:” either way, the ship was doomed, just as the global economy is doomed by The New Normal of Death Spirals and Speculative Frenzies.
Death Spirals are the inevitable result of entrenched interests clinging on to the status quo and thwarting any adaptation or evolution that might threaten or diminish their share of the swag–and that includes any real change because any consequential modification has the potential to upset the gravey train.
The status quo

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Prepare to Be Bled Dry by a Decade of Stagflation

February 8, 2023

Our reliance on the endless expansion of credit, leverage and credit-asset bubbles will have its own high cost.
The Great Moderation of low inflation and soaring assets has ended. Welcome to the death by a thousand cuts of stagflation. It was all so easy in the good old days of the past 25 years: just keep pushing interest rates lower to reduce the cost of borrowing and juice credit expansion ((financialization) and offshore industrial production to low-cost nations with few environmental standards and beggar-thy-neighbor currency policies (globalization).

Both financialization and globalization are deflationary forces, as they reduce costs. They are also deflationary to the wages of bottom 90%, as wages are pushed down by cheap global labor and stripmined by

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Want to Know Where the Economy Is Going? Watch The Top 10%

January 19, 2023

Should the wealth effect reverse as assets fall, capital gains evaporate and investment income declines, the top 10% will no longer have the means or appetite to spend so freely.
Soaring wealth-income inequality has all sorts of consequences. As many (including me) have noted, the concentration of wealth and income in the top 0.1% has enabled the few to buy political influence to protect their interests at the expense of the many and the common good.
In other words, extreme wealth-income inequality dismantles democracy. There is no way to sugarcoat this reality.
But the concentration of wealth and income isn’t limited to the top 0.1% or top 1%. The top 5% and top 10% have increased their share of household wealth and income, too, and this has far-reaching

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What’s Behind the Global Erosion of Civil Liberties, Privacy and Property Rights?

January 12, 2023

The second essential step is to recognize how the spectacles of “news” and entertainment distract our attention from this erosion of basic rights.
Hierarchical power structures like city-states arose as problem-solving solutions, not just for the elites who benefited from the concentration of wealth and power but for the citizenry. This dynamic underpins the analysis presented in my recent book Global Crisis, National Renewal: when nation-states and global hierarchies no longer solve the key problems of their populaces, they dissolve and are replaced by some new arrangement.
It’s easy to see how hierarchies benefit the leaders / elites at the top, but there’s always a trade-off to the populace ceding power/control to elites: we will cede control over our lives in

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What if the “Black Swan” of 2023 Is the Fed Succeeds?

January 10, 2023

If the Fed succeeding is a “Black Swan,” bring it on.
What if the “Black Swan” of 2023 is the Federal Reserve succeeds? Two stipulations here:
1. “Black Swan” is in quotes because the common usage has widened to include events that don’t match Nassim Taleb’s original criteria / definition of black swan; the term now includes events considered unlikely or that are off the radar screens of both the media and the alt-media.
2. The definition of “Fed success” is not as simple as the media and the alt-media present it.
In the conventional telling, the Fed made a policy mistake in keeping interest rates and quantitative easing (QE) in place for too long, and now it’s made a policy mistake in reversing those policies. Huh? So ZIRP/QE was a policy mistake, OK, we get

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It’s a New Era

January 5, 2023

This dynamic–making problems much worse by forcing more of whatever worked in the previous era into a saturated, increasing unstable new era–receives little attention or understanding.
Eras may last decades, and only those who’ve lived long enough to recall previous eras have experienced the transition from one era to the next. The era of financialization, globalization and low-cost, abundant oil/natural gas began over 40 years ago in 1981.
The era of digital / Internet technologies took off about 30 years ago. All of these dynamics accelerated in the early 2000s, roughly 20 years ago.
Only those 60 and older experienced working in a previous era (pre-1981).
All of these dynamics are entering a phase of nonlinear turbulence as the changes are outpacing these

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Misunderstanding War, Money and Prosperity

January 3, 2023

If the consensus of experts misunderstand money, credit and prosperity, how are we going to advance?
Describing all the ways experts got it wrong is a thriving cottage industry. Expertise is itself contentious, as conventional expertise legitimized by credentials, prestigious institutional positions, scholarship, prizes, etc. can be wielded to promote the interests of the expert or whomever is funding the expert.
Another segment of experts are self-proclaimed, essentially substituting an air of confidence in their own projections for actual expertise.
Yet another segment of experts are lightweights with a misleading veneer of legitimacy to cloak their real identity as paid shills for corporations or other self-interested parties. PhD, anyone? Just put that PhD

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What’s Your Line in the Sand? The $25 Burger?

December 22, 2022

The gag reflex kicks in at some point and we walk away because it is no longer worth the price.
Everyone has a line in the sand when it comes to inflated prices they refuse to pay. For one Walmart shopper I observed, it was a carton of eggs for close to $10. She announced her line in the sand verbally, with great force and sincerity.
What’s your line in the sand, the point at which you simply refuse to pay the asking price? Is it the $25 burger? Or is it the $50 for two burritos and two beverages?
Each person’s line in the sand reflects their income, wealth, budget, social status and value system–what’s important to them. For some higher income folks, it might be the ridiculous “resort fee” that’s tacked onto the already overpriced resort room, hotel tax, excise

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A Great Madness Sweeps the Land

December 19, 2022

Those who see the madness for what it is have only one escape: go to ground, fade from public view, become self-reliant and weather the coming storm in the nooks and crannies.
A great madness sweeps the land. There are no limits on extremes in greed, credulity, convictions, inequality, bombast, recklessness, fraud, corruption, arrogance, hubris, pride, over-reach, self-righteousness and confidence in the rightness of one’s opinions. Extremes only become more extreme even as the folly of previous extremes wearies rationality.
Imaginary sins are conjured out of thin air to convict the innocent while those guilty of the most egregious fraud and corruption are lauded as saviors.
The national mood is aggrieved and bitter. The luxuries of self-righteousness,

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Monopolies and Cartels Are “Communism for the Rich”

December 15, 2022

What’s unfettered in America is “Communism for the Rich” and the normalization of corruption that results from the auctioning of political power to protect monopolies and cartels.
The irony of constantly being accused of being a communist is rather rich. When I point out that “free market capitalism” in America is neither a real market nor real capitalism, those who equate any criticism of “capitalism” as proof of communist leanings are triggered.
Noting that Marx got monopoly capitalism and alienation right triggers another group who equate any favorable mention of Marx as proof of communist leanings.
There are two ironies in these accusations of being a communist. One is that I’ve spent 17 years tirelessly critiquing centralized wealth and power–the acme of

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The Blowback from Stripmining Labor for 45 Years Is Just Beginning

December 13, 2022

The clueless technocrats are about to discover that unfairness and exploitation can’t be measured like revenues and profits, but that doesn’t mean they’re not real.
Economists and financial pundits tend to make a catastrophically flawed assumption. They tend to believe the technocratic myth that all human behavior boils down to financial incentives, data and metrics, as if all people make decisions based on interest rates, tax breaks and greed, the desire to maximize gains by any means available. (Cough, FTX, cough…)
The only other source of decision-making that’s recognized by the punditry is political / ideological squabbling: people make decisions based on their self-interest as expressed through political / ideological positions.
But this doesn’t exhaust the

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How Things Fall Apart

December 12, 2022

That’s how things fall apart: insiders know but keep their mouths shut, outsiders are clueless, and the decay that started slowly gathers momentum as the last of the experienced and competent workforce burns out, quits or retires.
Outsiders are shocked when things fall apart. Insiders are amazed the duct-tape held this long.The erosion of critical skills and institutional knowledge is invisible to outsiders, while everyone inside who saw the unstoppable decay either left or burned out.
Those who remain are the ambitious who lack the experience to reverse the decline and the self-awareness to realize they’re way over their head. They’re ambitious enough to want the managerial title and power but don’t have the necessary experience and competence to lead a

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The Monopoly – Labor “Let It Rot” Death Spiral

December 8, 2022

The only rational response to this reality is to opt out, lay flat and let it rot.
In my previous post, The Bubble Economy’s Credit-Asset Death Spiral, I described the self-reinforcing feedback of expanding credit and soaring asset valuations and how the only possible result of this financial perpetual motion machine was a death spiral of collapsing debt service, collateral and credit impulse.
But this didn’t exhaust the destructive dynamics of this self-reinforcing wealth-creation machine for the fewwho own the vast majority of the assets. As longtime correspondent T.D. explains, this concentration of the benefits of financialization in the hands of the few also concentrates political power and the wealth to distort every function of the economy to enrich the few

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The Bubble Economy’s Credit-Asset Death Spiral

December 6, 2022

Who believed that central banks’ financial perpetual motion machine was anything more than trickery designed to generate phantom wealth?
Central banks seem to have perfected the ideal financial perpetual motion machine: as credit expands, money pours into risk assets, which shoot higher under the pressure of expanding demand for assets that yield either hefty returns (junk bonds) or hefty capital gains as the soaring assets suck in more capital chasing returns.
As assets soar in value, they serve as collateral for more credit. Higher valuations = more collateral to borrow against. This open spigot of additional credit sluices capital right back into the assets that are climbing in value, pushing them higher-which then creates even more collateral to support even

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This Is of Course Insane

December 1, 2022

Greed is a powerful motivation to be an ardent believer in the central banking cult.
The ideal cult convinces its followers that it isn’t a cult, it’s simply the natural order of things.In current terms, this normalizes insane behaviors and beliefs. Sacrificing youth to appease the gods isn’t a cult; it’s simply the natural order of things. If we don’t sacrifice youth, bad things will happen, so we have to follow the natural order of things.
Despite the lofty claims made by our rational mind, we want to hear and obey the voices of the gods.This non-rational desire is the root of cults and episodes of mass hysteria, i.e. the madness of crowds.
Humanity is in the grip of the secular cult of central banking. The cult’s seers and prophets periodically emerge with

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The “Oil Curse” and Splashy PR Announcements of Oil Production Cuts

November 29, 2022

It’s not just the price of oil that matters: how much disposable income consumers have left to buy more goods and services matters, too.
The Oil Curse (a.k.a. The Resource Curse) refers to the compelling ease of those blessed with an abundance of oil/resources to depend on that gift for the majority of state/national revenues. The risks and demands of developing a diverse, globally competitive economy don’t seem worth the effort when the single-source wealth of oil offers such a low-risk bounty of revenues.
This dependence becomes a curse when the market value of the oil/resources plummets. Having come to depend on that seemingly inexhaustible source of massive revenues, even states that have set aside prudent reserves soon find their expenses cannot align down to

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The Uncertainty in China Is Kryptonite to Global Markets

November 28, 2022

Few seem alive to the potentially consequential financial risks arising from uncertainties evolving in China.
One thing we know rather definitively is that markets don’t like uncertainty: uncertainty is Kryptonite to markets.
Another thing we know is that the events unfolding in China are generating uncertainty on multiple levels.Whatever policy decisions are made, the potential consequences generate waves of profound uncertainty.
Should authorities respond to exploding Covid caseloads with heavy-handed lockdowns, that will trigger production and shipping consequences for global trade. If restrictions are relaxed, the healthcare consequences are also uncertain, as China lacks the facilities such as ICU beds in sufficient quantities to deal with a contagious virus

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There’s No Bottom Until Frenzied Speculation Turns to Dust

November 21, 2022

Only when speculative sizzle attracts no buyers / marks will the bottom be in.
There hasn’t been a truly organic bottom in stocks in decades. Fifteen years of relentless central bank manipulation since the 2008-09 Global Financial Meltdown has persuaded punters that central banks will always save us should the market turn down because relentless central bank suppression of interest rates and expansion of liquidity (a.k.a. free money for financiers) are now necessary and thus predictably permanent.
Central banks have rescued punters from every market drop. This has pushed moral hazard to near-infinity: since we know the Fed et al. will rescue us, no matter how stupid or venal or risky our bets, then why not increase the leverage, risk and fraud at every turn?

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FTX: The Dominoes of Financial Fraud Have Yet to Fall

November 20, 2022

Once assets are revealed as worth far less than claimed, insolvency is the inevitable result.
If you haven’t plowed through dozens of post-collapse commentaries on FTX, I’m saving you the trouble: here’s a distillation of what matters going forward. If you’re seeking a forensic accounting of FTX, others have done this work already. If you’re seeking an ideological diatribe, you won’t find that here, either.
What you will find is insight into the real innovation of FTX: FTX compressed the entire playbook and history of financial fraud into one brief cycle of the credulous bamboozled, Charles Ponzi bested and creative accounting being revealed for what it really is, fraud.
All financial frauds share the same set of tools. The toolbox of financial fraud, whether it

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