Tuesday , July 27 2021
Home / Charles Hugh Smith
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

Have We Reached “Peak Self-Glorifying Billionaire”?

6 days ago

Perhaps we should update Marie Antoinette’s famous quip of cluelessness to: “Let them eat space tourism.”
As billionaires squander immense resources on self-glorifying space flights, the corporate media is nothing short of worshipful. Millions of average citizens, on the other hand, wish the self-glorifying billionaires had taken themselves and all the other parasitic, tax-avoiding, predatory billionaires with them on a one-way trip into space.
Have we reached Peak Self-Glorifying Billionaire? If so, where does the downhill slide take us? Let’s start with a bit of history. Correspondent Jim B. summarized historian Arnold Toynbee’s study of the rise and fall of civilizations thusly: “Civilizations fail when their elites change from an admired dynamic creative class

Read More »

Big Tech: “Our Terms Have Changed”

7 days ago

So go ahead and say whatever you want around all your networked devices, but don’t be surprised if bad things start happening.
I received another “Our Terms Have Changed” email from a Big Tech quasi-monopoly, and for a change I actually read this one. It was a revelation on multiple fronts. I’m reprinting it here for your reading pleasure: We wanted to let you know that we recently updated our Conditions of Use.
What hasn’t changed: Your use constitutes your agreement to our Conditions of Use.
We own all the content you create on our platform, devices and networks, and are free to monetize it by any means we choose.
We own all the data we collect on you, your devices, purchases, social networks, views, associations, beliefs and illicit viewing, your location

Read More »

How Breakdown Cascades Into Collapse

9 days ago

Maintaining the illusion of confidence, permanence and stability serves the interests of those benefiting from the bubbles and those who prefer the safety of the herd, even as the herd thunders toward the precipice.
The misconception that collapse is an all or nothing phenomenon is common: Either the system rights itself with a bit of money-printing and rah-rah or it collapses into post-industrial ruin and gangs are battling over the last stash of canned beans.
Neither scenario considers the fragility and resilience of the socio-economic system as a whole. It is both far more fragile than the believers in the permanence of the waste is growth model grasp and more resilient than the complete collapse prognosticators grasp.
The recent relatively mild logjams in

Read More »

Here’s Why America’s Labor-Shortage Will Drive Inflation Higher

12 days ago

Great swaths of the American workforce are already on strike or slipping away from the dead-end treadmill.
America’s labor shortage is complex and doesn’t lend itself to the simplistic expectations favored by media talking heads. The Wall Street cheerleaders extol the virtues of “getting America back to work” which is Wall-Street-speak for getting back to exploiting workers to maximize corporate profits.
Long-term demographics have combined with cultural changes and Covid-Lockdown epiphanies to completely re-order America’s labor force beneath the superficial surface of “re-opening.” No one post can do justice to such a complex topic, so I’ll touch on a few of the many inter-connected (and often mutually reinforcing) dynamics.
1. Boomers are leaving the workforce

Read More »

The $50 Trillion Plundered from Workers by America’s Aristocracy Is Trickling Back

15 days ago

As I often note here, when you push the pendulum to an extreme of wealth and income inequality, it will swing to the opposite extreme minus a tiny bit of friction.
The depth of America’s indoctrination can be measured by the unquestioned assumption that Capital should earn 15% every year, rain or shine, while workers are fated to lose ground every year, rain or shine. And if wages should ever start ticking upward even slightly, then the Billionaires’ Apologists are unleashed to shout that higher wages means higher inflation, which will kill the economic “recovery.”

Said another way: if wages stagnate so workers lose ground every year as inflation in essentials rises, that’s the way it should be. If wages rise so workers can keep up with inflation, then that will

Read More »

Housing Bubble #2: Ready to Pop?

18 days ago

All debt-fueled speculative bubbles pop, even as cheerleaders claim otherwise.
The expansion of Housing Bubble #2 is clearly visible in these two charts of house valuations, courtesy of the St. Louis Federal Reserve database (FRED). The first is the Case-Shiller Index, which as you recall tracks the price of homes on an “apples to apples” basis, i.e. it tracks price movements for the same house over time. Note that this is an index chart where the index is set at 100 as of January 2000. It is not a chart of median housing prices.
The second chart is also a housing price index chart courtesy of the U.S. Federal Housing Finance Agency. (Shoutout to the USFHFA, never came across your work before.)
The red line marks where house prices would be if they had tracked the

Read More »

A Few Things About Reinforced Concrete High-Rise Condos

22 days ago

There is a downside to steel reinforcing bars: they rust.
The second most remarkable thing about the sudden collapse of the Florida condo building was the rush to assure everyone that this was a one-off catastrophe: all the factors fingered as causes were unique to this building, the implication being all other high-rise reinforced concrete condos without the exact same mix of causal factors were not in danger.
Before we accept this conveniently feel-good conclusion, there are a few things we should consider about reinforced concrete high-rise condos.

1. This may seem too obvious to be important, but concrete is a heavy material. Fill a 5-gallon bucket with wet concrete, let it cure (harden) and then pick the bucket up–if you can.
2. Conventional concrete is not

Read More »

Virus Z: A Thought Experiment

23 days ago

What’s striking about our thought experiment is how little reliable data we have about the transmissibility of our hypothetical Virus Z and the long-term consequences of its mutations.

Let’s run a thought experiment on a hypothetical virus we’ll call Virus Z, a run-of-the-mill respiratory variety not much different from other viruses which are 1) very small; 2) mutate rapidly and 3) infect human cells and modify the cellular machinery to produce more viral particles.
Like other viruses, Virus Z continually improves the odds of future replication via the natural selection of any mutations which improve its replication capabilities. Since viruses need host cells to replicate, the key advantages selected through mutation are evading hosts’ immune responses to

Read More »

The Systemic Risk No One Sees

26 days ago

The unraveling of social cohesion has consequences. Once social cohesion unravels, the nation unravels.

My recent posts have focused on the systemic financial risks created by Federal Reserve policies that have elevated moral hazard (risks can be taken without consequence) and speculation to levels so extreme that they threaten the stability of the entire financial system.
These risks are well known, though largely ignored in the current speculative frenzy.
But there is another systemic risk which few if any see: the collapse of social cohesion.
President Carter was prescient in his understanding that a nation’s greatest strength is its social cohesion, a cohesion that America’s unprecedented wealth / income / power inequalities has undermined. Consider this

Read More »

When Expedient “Saves” Become Permanent, Ruin Is Assured

27 days ago

The Fed’s “choice” is as illusory as the “wealth” the Fed has created with its perfection of moral hazard.

The belief that the Federal Reserve possesses god-like powers and wisdom would be comical if it wasn’t so deeply tragic, for the Fed doesn’t even have a plan, much less wisdom. All the Fed has is an incoherent jumble of expedient, panic-driven “saves” it cobbled together in the 2008-2009 Global Financial Meltdown that it had made inevitable.
The irony is the only thing that will still be rich when the whole rotten, corrupt, fragile financial system of illusory stability collapses in a heap of runaway instability. The irony is that the Fed’s leaky grab-bag of expedient “saves” was not designed to ensure systemic stability, though that was the PR cover story.

Read More »

America’s Social Order is Unraveling

June 28, 2021

The unraveling of America’s social order is accelerating, and denial will not save us from the consequences of the plundering of the social contract.
What kind of nation boasts a record-high stock market and an unraveling social order? Answer: a failed nation, a nation that has substituted artifice for realism for far too long, a nation that now depends on illusory phantoms of capital, prosperity and democracy to prop up a crumbling facade of “wealth” that the populace now understands is largely in the hands of a few families and corporations, most of which pay little to support the citizenry they dominate politically and financially.
The social order sounds abstract, but it is all too real. The social order has two primary components: social cohesion, the glue of

Read More »

It Always Ends The Same Way: Crisis, Crash, Collapse

June 24, 2021

Risk has not been extinguished, it is expanding geometrically beneath the false stability of a monstrously manipulated market.
One of the most under-appreciated investment insights is courtesy of Mike Tyson: “Everybody has a plan until they get punched in the mouth.” At this moment in history, the plan of most market participants is to place their full faith and trust in the status quo’s ability to keep asset prices lofting ever higher, essentially forever.
In other words, the vast majority of punters are convinced they will never suffer the indignity of getting punched in the mouth by a market crash. What makes this confidence so interesting is massively distorted markets always end the same way: crisis, crash and collapse.
The core dynamic here is distorted

Read More »

Front-Running the Crash

June 21, 2021

What if everyone in the market realizes it’s now the moment to front-run the crash?
We have a fine-sounding word for running with the herd: momentum. When the herd is running, those who buy what the herd is buying and sell what the herd is selling are trading momentum, which sounds so much more professional and high-brow than the noisy, dusty image of large mammals (and their trading machines) mindlessly running with the herd.

We also have a fine-sounding phrase for anticipating where the herd is running: front-running. So when the herd is running into stocks, those who buy stocks just ahead of the herd are front-running the market.
When the Federal Reserve announces that’s it’s going to make billionaires even wealthier with some new financial spew, those betting

Read More »

The Sources of Rip-Your-Face-Off Inflation Few Dare Discuss

June 9, 2021

We’re getting a real-world economics lesson in rip-your-face-off increases in prices, and the tuition is about to go up–way up.

Inflation will be transitory, blah-blah-blah–I beg to differ, for these reasons. There are numerous structural sources of inflation, which I define as prices rise while the quality and quantity of goods and services remain the same or diminish. Since the word inflation is so loaded, let’s use the more neutral (and more accurate) term decline in purchasing power: an hour of your labor buys fewer goods and services of lesser quality than it did a decade ago or a generation ago.
While the conventional discussion focuses on monetary inflation, i.e. expansion of money supply, the real rip-your-face-off sources have nothing to do with money

Read More »

Post-Pandemic Metamorphosis: Never Going Back

June 7, 2021

People caught on that the returns on the frenzied hamster wheel of “normal” have been diminishing for decades, but everyone was too busy to notice.
The superficial “return to normal” narrative focuses solely on first order effects: now that people can dispense with masks and social distancing, they are resuming their pre-pandemic spending orgy with a vengeance, which augurs great profits for Corporate America and higher tax revenues. Yea for “return to normal.
“This superficial narrative ignores second-order effects of the pandemic. Recall that first order effects: every action has a consequence. Second order effects: every consequence has its own consequence. We can also think of these as direct (first order) and indirect (second order) effects.
The pandemic’s

Read More »

(Not) Living Large on Social Security

June 3, 2021

For about 1 in 4, Social Security provides at least 90 percent of their income.
How many retired workers are getting less than $1,000 per month in Social Security benefits? The question came up and I was curious enough to find the answer, and download the data into an Excel spreadsheet which I saved as a

PDF that you can review here. Note that this data is for the 46.5 million retired workers only, and does not include benefits paid to survivors, spouses, disabled, etc.
This led to a deep dive into the basic numbers of Social Security beneficiaries and expenses, which are summarized in the chart below. Here are the basics:
Population of the US: 331 million
Social Security beneficiaries: 69.8 million (21% of the population)
Retired workers: 46.5 million (14% of

Read More »

Increasingly Chaotic Volatility Ahead–The New Normal Few Think Possible

May 31, 2021

That the era of stability has ended and a new era of increasingly chaotic volatility has begun is not on anyone’s radar as a possibility.
The standard debate about the future of the economy is: which will we get, high inflation or a deflationary collapse of defaults and asset bubbles popping?
The debate goes round and round in widening circles of complexity as analysts delve into every nuance of the debate.
A recent conversation with my friend A.T. raised a third possibility few seem to consider: increasingly chaotic volatility will be the new normal, as wild swings between inflation and deflation will increase in amplitude and ferocity as the system destabilizes.
Increasingly chaotic volatility is a classic sign of a system that has lost equilibrium and is

Read More »

Systemic Risks Abound

May 27, 2021

If you wanted to design a system guaranteed to collapse in a putrid heap, you’d make moral hazard ubiquitous and you’d make the system 100% dependent on a hubris-soaked faux savior.

For the past 22 years, every time the stock market whimpered, wheezed or whined, the Federal Reserve rushed to soothe the spoiled crybaby. There are two consequential results of the Fed as savior:
1. The Fed has perfected moral hazard: everyone from the money manager betting billions to the punters gambling their stimmy money is absolutely confident I can’t lose because the Fed will always push the market higher.
What happens when participants are confident they can’t possibly lose? They make ever-riskier and ever-larger bets. The entire nation is in the grip of a moral hazard mania,

Read More »

FOMO Is Loco

May 26, 2021

We can also posit a general rule that those who inherit wealth and succumb to FOMO are eventually less wealthy while those who are wealthy and take a pass on FOMO / hoarding at the top of the manic frenzy increase their wealth.Judging by the panic buying of everything from homes to yachts to lumber futures, it seems the world has run out of everything except newly issued central bank trillions, and so the logical response is FOMO (fear of missing out) and hoarding: buy everything you can get your hands on today lest it become unavailable or more expensive tomorrow.
FOMO is wonderful for sellers and profiteers who can jack up prices and enjoy bidding wars during the panic buying.
FOMO and hoarding are instinctual behaviors to shortages, perceived and real. There’s

Read More »

Fed to Treasury Dealers and Congress: We Can’t Count On You, We’re Taking Charge

May 25, 2021

The Fed sees itself as trapped by the incompetence and greed of the other players and by its own policy extremes that were little more than expedient “saves” of a system that is unraveling due to its fragility and brittleness.
There are two standard-issue narratives about the Federal Reserve’s agenda: the Fed’s official narrative is that the Fed’s mandate is to keep inflation under control while promoting full employment. The unofficial mandate that’s obvious to all is to prop up assets, especially the stock market, which has become the Fed’s preferred signifier of prosperity and the rightness/goodness of Fed policies.
The other narrative results from “following the money”: the Fed is owned by private-sector banks, and so behind the curtain of happy-talk (full

Read More »

Sickcare is the Knife in the Heart of Employment–and the Economy

May 18, 2021

We need to change the incentives of the entire system, not just healthcare, but if we don’t start with healthcare, that financial cancer will drag us into national insolvency all by itself.
American Healthcare is a growth industry in the same way cancer is a growth industry: both keep growing until they kill the host, which in the case of healthcare is the U.S. economy.
While a great many individuals in the system care about improving the health of their patients, the healthcare system itself only cares about one thing: maximizing profits by any means available, including sending many patients to an early grave via medications which corporations declared “safe” and rigged the political-regulatory-research systems to comply.
I call this maximizing profits by any

Read More »

Why Wage Inflation Will Accelerate

May 15, 2021

The Fed has created trillions out of thin air to boost the speculative wealth of Wall Street, but it can’t print experienced workers willing to work for low wages.

The Federal Reserve is reassuring us daily that inflation is temporary, but allow me to assure you that wage inflation is just getting started and will accelerate rapidly. As I noted yesterday, the Fed can create currency out of thin and funnel it to financiers, but the Fed can’t create experienced, motivated workers out of thin air or entrepreneurs with the chops to launch and sustain real-world enterprises.
Let’s start with a funny little thing called competition, which has been pushing wages down for the past 50 years. Globalization means you’re competing with every other worker on the planet for

Read More »

The ‘Take This Job and Shove It’ Recession

May 13, 2021

So hey there Corporate America, the Fed and your neofeudal cronies: take this job and shove it. This time it really is different, but not in the way the Wall Street shucksters are claiming.

Conventional economists, politicos and pundits are completely clueless about the unraveling that’s gathering momentum beneath the superficial surface of “reflation” because they don’t yet grasp we’re entering an unprecedented new type of recession: a ‘Take This Job and Shove It’ recession which is unlike any previous downturn.
Long-time readers know I’ve addressed the emergent class structure and systemic decay of the socio-economic order for many years. Just as a quick refresher, here are a few of the dozens of essays I’ve written on these topics:

Wages Share Income,

Read More »

Here’s How ‘Everything Bubbles’ Pop

May 10, 2021

But weirdly, and irrationally, bubbles pop anyway.
At long last, the moment you’ve been hoping for has arrived: you’re pitching your screenplay to a producer. Your agent is cautious but you’re confident nobody else has concocted a story as outlandish as yours. Your agent gives you the nod and you’re off and running:
Writer: Two guys start a cryptocurrency as a joke to parody the crypto craze, and they name it KittyCoin. It goes nowhere but then the greatest speculative bubble of all time takes off, it’s the dot-com and housing bubble times 100 but in everything, and within a couple months the entire economy is dependent on this bubble, and the bubble is dependent on KittyCoin, which has shot up 15,000 percent in a few weeks. A celebrity CEO who’s been promoting

Read More »

Hey Fed, Explain Again How Making Billionaires Richer Creates Jobs

May 8, 2021

Despite their hollow bleatings about ‘doing all we can to achieve full employment’,
the Fed’s policies has been Kryptonite to employment, labor and the bottom 90%–and most especially
to the bottom 50%, the working poor that one might imagine most deserve a leg up.
As wealth and income inequality soar to new heights thanks to the Federal Reserve’s policies
of zero interest rates, money-printing and financial stimulus, the Fed says its goal is to create
more jobs. Really? OK, let’s look at how the Fed’s doing with that.
I’ve assembled a chart deck to display the consequences of Fed policies on debt, wealth
inequality and employment. Recall what Fed policies actually do:

1.Zero interest rate policy (ZIRP) destroyed the low-risk return on savings and money

Read More »

What’s Yours Is Now Mine: America’s Era of Accelerating Expropriation

April 28, 2021

The takeaway here is obvious: earn as little money as possible and invest your surplus labor in assets that can’t be expropriated.
Expropriation: dispossessing the populace of property and property rights, via the legal and financial over-reach of monetary and political authorities.
All expropriations are pernicious, but the most destructive is the expropriation of labor’s value while the excessive gains of unproductive speculation accrue to the elite that owns most of the nation’s wealth.
In a nation in which the leadership has finely honed the art and artifice of legalized looting and financial legerdemain, it’s not surprising that the expropriation of labor’s value takes many forms. For the self-employed and small business proprietor, the list is practically

Read More »

The Only Way to Get Ahead Now Is Crazy-Risky Speculation

April 23, 2021

It’s all so pathetic, isn’t it? The only way left to get ahead in America is to leverage up the riskiest gambles.
It’s painfully obvious that the only way left to get ahead in America is crazy-risky speculation, but nobody seems to even notice this stark and stunning reality. Why are people piling into crazy-risky bets on speculative vehicles like Gamestop and Dogecoin? The obvious answer is because others have reaped a decade or two of wages in a few weeks, and skimming a couple hundred thousand dollars in a few weeks or months is the only way an average wage earner is going to be able to buy a house, fund a retirement account, afford to have a family, etc.
Look at the reality of wage stagnation: I made $12 an hour in 1986, and I wasn’t some highly paid

Read More »

If You Don’t See Any Risk, Ask Who Will “Buy the Dip” in a Freefall?

April 20, 2021

Nobody thinks a euphoric rally could ever go bidless, but as Greenspan belatedly admitted, liquidity is not guaranteed.
The current market melt-up is taken as nearly risk-free because the Fed has our back, i.e. the Federal Reserve will intervene long before any market decline does any damage.
It’s assumed the Fed or its proxies, i.e. the Plunge Protection Team, will be the buyer in any freefall sell-off: no matter how many punters are selling, the PPT will keep buying with its presumably unlimited billions.
If this looks risk-free, ask who else will be “buying the dip” in a freefall? Former Fed Chair Alan Greenspan answered this question in his post-2008 crash essay Never Saw It Coming: Why the Financial Crisis Took Economists By Surprise (Dec. 2013 Foreign

Read More »

America’s Fatal Synergies

April 19, 2021

America’s financial system and state are themselves the problems, yet neither system is capable of recognizing this or unwinding their fatal synergies. why do some systems/states emerge from crises stronger while similar systems/states collapse? Put another way: take two very similar political-social-economic systems/nation-states and two very similar crises, and why does one system not just survive but emerge better adapted while the other system/state fails?
The answer lies in what author Geoffrey Parker termed Fatal Synergies and Benign Synergies in his book Global Crisis: War, Climate Change, & Catastrophe in the Seventeenth Century. Synergy results from “interactions that produce a combined effect greater than the sum of their separate effects.” In other

Read More »

What’s Taboo? Everything Except Greed

April 16, 2021

OK, now I get it. Take a couple tabs of Euphorestra and Hopium, and stick to talking about making money in the market. Greed won’t offend anyone. So I started to tell my buddy about my new screenplay idea: “There’s a global pandemic, and when they rush a bunch of vaccines to market, then….”
“Stop right there–even talking about vaccines will get you renditioned to a hellhole in one of the ‘stans.” “But it’s just fiction.”
“You can argue with your guard in the hellhole, just before they haul you off to be waterboarded.”
“Jeez, has everything really gotten that crazy? OK, never mind. Anyway, I’m working on a little nostalgic story about the good old days when we plinked cans with our .22 rifles…”
“Don’t mention guns. Doesn’t matter who you talk to, somebody will get

Read More »