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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

What Caused the Recession of 2019-2021?

2 days ago

The banquet of consequences is now being served, but the good seats have all been taken.
As I discussed in We’re Overdue for a Sell-Everything/No-Fed-Rescue Recession, recessions have a proximate cause and a structural cause. The proximate cause is often a spike in energy costs (1973, 1990) or a financial crisis triggered by excesses of speculation and debt (2000 and 2008) or inflation (1980).
Structural causes are imbalances that build up over time: imbalances in trade or currency flows, capital investment, debt, speculation, labor compensation, wealth-income inequality, energy supply and consumption, etc. These structural distortions and imbalances tend to interact in self-reinforcing dynamics that overlap with

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The Corporate Lemmings Who Rushed into Mobile/Social Media Ads Are Running off the Cliff

3 days ago

Now the corporate lemmings have rushed into mobile advertising.
Given that corporations are run by people, and people are social animals that run in herds, it shouldn’t surprise us that corporations follow the herd, too. Take the herd move to forming conglomerates in the go-go late 1960s: corporations suddenly started buying companies in completely different sectors in businesses they knew nothing about, because the herd was forming conglomerates–not because it made any business sense but because it was the hot trend.
Oil companies bought Hollywood studios, and so on. (Ling-Temco-Vought was one of the conglomerates whose success inspired the herd.)
Few if any of the conglomerates hastily assembled in the 1960s

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We’re Overdue for a Sell-Everything/No-Fed-Rescue Recession

5 days ago

We’re way overdue for a sell-everything recession, one that the Fed will only make worse by pursuing its usual policies of lowering interest rates and goosing easy money.
As I noted last week, central banks, like generals, always fight the last war–until the war is lost. The global economy is careening into recession (call it a “slowdown” if you are employed by the Corporate-State Media), and while we don’t yet know just how deep and wide this recession will be, we can make an educated guess that it won’t be a repeat of any of the previous five recessions: 1973-74, 1981-82, 1990-91, 2001-02 or 2008-09.
Recessions triggered by energy or financial crises tend to be short and shallow as the crisis soon eases; recessions

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2019: The Three Trends That Matter

6 days ago

Look no further than Brexit in Britain, the yellow vests in France and the Deplorables in the U.S. for manifestations of a broken social contract and decaying social order.
Among the many trends currently in play, Gordon Long and I discuss three that will matter as 2019 progresses: 2019 Themes (56 minutes)
1. Final stages of the debt supercycle
2. Decay of the social order/social contract
3. Social controls: Surveillance capitalism, China’s Social Credit system, social globalization
The basic idea of the debt supercycle is simple: resolving every crisis of over-leveraged speculative excess, evaporation of collateral and over-indebtedness by radically increasing debt eventually leads to an implosion of the entire

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Brace for Impact

7 days ago

As credit-asset bubbles pop, the dominoes start falling.
The economy is far more precarious than the surface boom/bubble suggests. A great many households, enterprises and municipalities are in overloaded boats whose gunwales are just a few inches above the water; the slightest wave will swamp and sink them.
The cost structure of the economy is completely out of whack with what households and enterprises can afford. There are several dynamics in play:
1. Enterprises have already stripped out all the expenses they can: head count has been cut, quality has been gutted, quantity has been reduced, supply chains have been squeezed, inventory controls trimmed to just-in-time and so on. There are no easy, quick cost

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China’s S-Curve of Expansion, Stagnation and Decline

10 days ago

All the policies that worked in the Boost Phase no longer work.
Natural and human systems tend to go through stages of expansion, stagnation and decline that follow what’s known as the S-Curve. The dynamic isn’t difficult to understand: an unfilled ecological niche is suddenly open due to a new adaptation; a bacteria evolves to exploit a new host, etc. Expansion is rapid until the niche is fully occupied, and then growth matures and stagnates; the low-hanging fruit has all been picked, and it’s much more costly to reach what little is left.
Human economies starved of capital, credit, access to markets and freedom are akin to unexploited ecological niches. Lacking capital, credit and the freedom to innovate,

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The Coming Global Financial Crisis: Debt Exhaustion

12 days ago

The global economy is way past the point of maximum debt saturation, and so the next stop is debt exhaustion.
Just as generals fight the last war, central banks always fight the last financial crisis. The Global Financial Crisis (GFC) of 2008-09 was primarily one of liquidity as markets froze up as a result of the collapse of the highly leveraged subprime mortgage sector that had commoditized fraud (hat tip to Manoj S.) via liar loans and designed-to-implode mortgage backed securities.
The central bank “solution” to institutionalized, commoditized fraud was to lower interest rates to zero and enable tens of trillions in new debt. As a result, total debt in the U.S. has soared to $70 trillion, roughly 3.5 times GDP,

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So If Half of Facebook Accounts Are Fake… What Is Facebook Worth?

17 days ago

The social media space is absolutely ripe for a new entrant who demands arduous verification and constantly monitors its user base to eliminate cloned and fake accounts.
How many accounts on Facebook are fake? Recent estimates of half could be low. Here’s an experiment: open a Facebook account with a name that cannot possibly be anyone else’s real name, for example, Johns XQR Citizenry. Solicit a few real people to friend you, start posting something original every day and see what happens.
Eventually, your friends will inform you that “Johns XQR Citizenry” solicited them to friend him, even though they’re already friends with you. Congratulations, your Facebook identity has been cloned.
When you do a search, you

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So You Want to Get Rich: Focus on Human Capital

18 days ago

Wealth is flowing to those who earn money from their human capital and enterprise.
So you want to get rich: OK, what’s the plan? If you ask youngsters how to get rich, many will respond by listing the professions the media focuses on: entertainment, actors/actresses, pro athletes, and maybe a few lionized inventors or CEOs.
The media’s glorification of the few at the top of these sectors masks the statistical reality that those who attain wealth in these pursuits number in the hundreds or perhaps thousands, not in the millions. As in a lottery, the odds of joining such a limited group are extremely low.
There are 330 million Americans and 150 million people reporting income, so statistically, the odds of getting

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The “Working Rich” Are Not Like You and Me-or the Oligarchs

20 days ago

Rising income inequality may be a reflection of the changing nature of work.
F. Scott Fitzgerald’s story The Rich Boy included this famous line: “Let me tell you about the very rich. They are different from you and me.” According to a recent paper published by the National Bureau of Economic Research (NBER),Capitalists in the Twenty-First Century (abstract only), the “working rich” are different from you and me, and from the Oligarchs above them who pay little in U.S. income taxes due to offshore tax havens and philanthro-capitalist tax avoidance scams.
Before we start complaining about the rich not paying their fair share, let’s note that the top 3% of taxpayers–mostly “working rich”– pay more than 50% of all income

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The Ruling Elites Love How Easily We’re Distracted and Turned Against Each Other

22 days ago

No wonder the ruling elites love how easily we’re distracted and divided against ourselves: it’s so easy to dominate a distracted, divided, blinded-by-propaganda and negative emotions populace.
Let’s say you’re one of the ruling elites operating the nation for the benefit of the oligarchy. What’s the best way to distract the populace from your self-serving dominance in a blatantly neofeudal system?
1. Provide modern-day versions of Bread and Circuses to distract the commoners from what actually matters: “the golden age of TV” and binge-watching; a cultural obsession with glorifying oneself via selfies posted on Facebook and Instagram; tweeting outrage and indignation on Twitter; a corporate-state media which

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Gentrified Urban America Will Be Hit Hard by the Recession

24 days ago

Combine sky-high commercial rents in homogenized, gentrified urban areas and sharp declines in the incomes of the limited populace who can afford gentrified urban areas and what do you get?
A number of macro dynamics have set up gentrified urban America for a big fall in the coming recession. What does gentrified mean? Gentrified means only the gentry (top 10%) can afford to enjoy the urban amenities as commercial rents and the cost of doing business in desirable urban areas have skyrocketed along with residential rents.
As a result, low-margin businesses have been squeezed out of desirable urban neighborhoods along with lower-income residents. The top 10% is the only demographic who can afford to live in gentrified

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Want to Heal the Internet? Ban All Collection of User Data

26 days ago

The social media/search giants have mastered the dark arts of obfuscating how they’re reaping billions of dollars in profits from monetizing user data, and lobbying technologically naive politicos to leave their vast skimming operations untouched.
I’ve been commenting on the cancerous disease that’s taken control of the Internet– what Shoshana Zuboff calls Surveillance Capitalism–for many years. Here is a selection of my commentaries:
800 Million Channels of Me (February 21, 2011)
The New Facebook Buttons: Promote, Despise, Abandon (November 1, 2012)
How Much of our Discord Is the Result of the “Engagement” Advert Revenue Model of Social Media? (October 24, 2017)
Are Facebook and Google the New Colonial

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Two Ways the System Is Rigged: HFT and Oligarchic Inheritance

27 days ago

The net result of a rigged system is the vast majority of the gains in income and wealth flow to the very tippy-top of the wealth/power pyramid.
We often hear how the system (i.e. our economy) is rigged to benefit the few at the expense of the many, but exactly how is it rigged? Longtime correspondent Zeus Y. recently highlighted two specific mechanisms that favor the top 0.01%: high frequency trading (HFT) and oligarchic inheritance, the generational transfer of immense wealth and the power it buys.
High frequency trading (HFT) is a mechanism only available to the few at the top of the wealth/power pyramid to skim money from markets–please watch the videos below for further explanation of how HFT works.
As for

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As Germany and France Come Apart, So Too Will the EU

January 17, 2019

If we follow the logic and evidence presented in these seven points, we are forced to conclude that the fractures in France, Germany and the EU are widening by the day.
When is a nation-state no longer a functional state? It’s an interesting question to ask of the European nation-states trapped in the devolving European Union. Longtime correspondent Mark G. recently posed seven indicators of dissolving national sovereignty; here’s his commentary:
“RE: The Ghosts of 1968 (February 14, 2018):
In France the “Ghosts of 1968” have become the Poltergeists of 2018. This looks like another real watershed in European and world history. Once again Parisian mobs have appeared and have collectively realized they now hold the

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The Decline and Fall of the European Union

January 15, 2019

This exhaustion of the neocolonial-neofeudal model was inevitable, and as a result, so too is the decline and fall of the European integration/exploitation project.
That a single currency, the euro, would fracture rather than unite Europe was understood long before the euro’s introduction as legal tender on January 1, 2002. The euro, the currency of 19 of the 28 member states of the European Union, is only one of the various institutions tying the member nations of the European union together, but it is the linchpin of the financial integration touted as one of the primary benefits of EU membership.
Skepticism of the benefits of EU membership is rising, as citizens of the member nations are questioning the surrender

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Where Will You Be Seated at the Banquet of Consequences?

January 14, 2019

To get a good seat at the banquet of consequences, the owner of capital has to shift his/her capital into scarce forms for which there is demand.
The Banquet of Consequences is being laid out, and so the question is: where will you be seated? The answer depends on two dynamics I’ve mentioned many times: what types of capital you own and the asymmetries of our economy.
One set of asymmetries is the result of the system isn’t broken, it’s fixed, i.e. rigged to favor the few at the expense of the many. There are many manifestations of neofeudal asymmetry that divides neatly into two classes and two systems, the nobility and the serfs.
A rich kid caught with drugs gets a wrist-slap, a poor kid gets a tenner in the Drug

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The Recession Will Be Unevenly Distributed

January 11, 2019

Those households, enterprises and organizations that have no debt, a very low cost basis and a highly flexible, adaptable structure will survive and even prosper.
The coming recession will be unevenly distributed, meaning that it will devastate many while leaving others relatively untouched. A few will actually do better in the recession than they did in the so-called “recovery.”
I realize many of the concepts floated here are cryptic and need a fuller explanation: the impact of owning differing kinds of capital, fragmentation, asymmetry, opacity, etc. ( 2019: Fragmented, Unevenly Distributed, Asymmetric, Opaque).
These dynamics guarantee a highly uneven distribution of recessionary consequences and whatever rewards

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Could Stocks Rally Even as Parts of the Economy Are Recessionary?

January 7, 2019

It’s not yet clear that the stock market swoon is predictive or merely a panic attack triggered by a loss of meds.
We contrarians can’t help it: when the herd is bullish, we start looking for a reversal. When the herd turns bearish, we also start looking for a reversal.
So now that the herd is skittishly bearish, anticipating a recession, contrarians start wondering if a most hated rally is in the offing, one that would leave most punters off the bus.
The primary theme for 2019 in my view is everything accepted by the mainstream is not as it seems. Everything presented as monolithic and straightforward is fragmented, asymmetric and complex.
Take “recession.” The standard definition of recession is two consecutive

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The Crisis of 2025

January 3, 2019

This is the predictable path because it’s the only one that’s politically expedient and doesn’t cause much financial pain until it’s too late to stave off collapse.
While many fear a war between the nuclear powers or the breakdown of civil order, I tend to think the Crisis of 2023-26 is more likely to be financial in nature.
War and civil breakdown are certainly common enough in history, global/nuclear war has been avoided in recent history, largely because wars are typically launched by those who reckon they can win the war. Launching a nuclear strike against a nation with the ability to launch a counterstrike (from submarines, for example, and missiles that survived the first strike) guarantees the destruction of

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A Couple of Thoughts on 2019

January 2, 2019

The story of the 21st century is debt is soaring while earned income is stagnating for the bottom 95%.
Best wishes to all my readers and correspondents for a safe, healthy and productive 2019. Thank you, longstanding supporters, for renewing your financial support at the new year without any pathetic begging on my part. (The pathetic begging will commence shortly.)
While I don’t have any predictions for 2019 (why look any dumber than I have to?), I do have a couple of thoughts on the economy, markets, globalization, etc. Here are a few of the key issues confronting humanity:
1. The war being waged by Corporate Power (Globalization / Open Borders) to eradicate democracy and the power of nation-states to control their

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The Crisis of Capital

December 31, 2018

These three dynamics render capital increasingly vulnerable to catastrophic losses as backstops and distorted markets fail.

The undeniable reality of the 21st century economy is that capital has gained while labor has stagnated. While various critics quibbled about his methodology, Thomas Piketty’s core finding–that capital expanded faster than GDP and wages/salaries (i.e. earned income from labor)–is visible in these charts.
Real wages have gone nowhere for decades. Only the top 5% of wage earners have outpaced inflation’s erosion of the purchasing power of their earnings.

US Average Hourly Wages, Seasonally Adjusted, 1964 – 2018(see more posts on U.S. Average Hourly Earnings, ) – Click to enlarge
Household

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The net result is capital is impaired in eras of uncertainty.

December 27, 2018

As we look ahead to 2019, what can we be certain of? Maybe your list is long, but mine has only one item: certainty is fraying.
Confidence in financial policies intended to eliminate recessions is fraying, confidence in political processes that are supposed to actually solve problems rather than make them worse is fraying, confidence in the objectivity of the corporate media is fraying, and confidence in society’s ability to maintain any sort of level playing field is fraying.
When certainty frays, capital gets skittish. Predicting increased volatility is an easy call in this context, as capital will not want to stick around to see how the movie ends if things start unraveling. The move out of stocks into government

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Why Everything That Needs to Be Fixed Remains Permanently Broken

December 20, 2018

Just in case you missed what’s going on in France: the status quo in Europe is doomed.
The status quo has a simple fix for every crisis and systemic problem:
1. create currency out of thin air
2. give it to super-wealthy banks, financiers and corporations to boost their wealth and income.
One way these entities increase their wealth and income is to lend this nearly free money to commoners at much higher rates of interest. I borrow from central banks at 1% and lend it to you at 4.5%, 7% or even 19% or more. What’s not to like?
If a bank is insolvent, it can borrow money at 1% from central banks. If Joe Blow is insolvent, the only loan he can get is at 23%, if he can get any credit at all.
3. China has a variant fix

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“Yellow Vests” and the Downward Mobility of the Middle Class

December 17, 2018

Capital garners the gains, and labor’s share continues eroding. That’s the story of the 21st century.
The middle class, virtually by definition, is not prepared for downward mobility. A systemic, semi-permanent decline in the standard of living isn’t part of the implicit social contract that’s been internalized by the middle class virtually everywhere:living standards are only supposed to rise. Any decline is temporary.
Downward mobility is the key context in the gilets jaunes “yellow vest” movement in France. Taxes and prices rise inexorably while wages/pensions stagnate. The only possible outcome of this structural asymmetry is a decline in the standard of living.
This structural decline in the standard of living

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Are We in a Recession Already?

December 12, 2018

The value of declaring the entire nation in or out of recession is limited.
Recessions are typically only visible to statisticians long after the fact, but they are often visible in real time on the ground: business volume drops, people stop buying houses and vehicles, restaurants that were jammed are suddenly sepulchral and so on.
There are well-known canaries in the coal mine in terms of indicators. These include building permits, architectural bookings, air travel, and auto and home sales.
Home sales are already dropping in most areas, and vehicle sales are softening. Airlines and tourism may continue on for awhile as people have already booked their travel, but the slowdown in other spending can be remarkably

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The View from the Trenches of the Alternative Media

December 5, 2018

What’s scarce in a world awash in free content and nearly infinite entertainment content?
After 3,701 posts (from May 2005 to the present), here are my observations of the Alternative Media from the muddy trenches.
It’s increasingly difficult to make a living creating content outside the corporate matrix. The share of advert revenues paid to content creators / publishers has declined precipitously, shadow banning has narrowed search and social media exposure and the expansion of free content and competing subscription-based publishing has made subscription services an increasingly tough sell.

George Orwell
The most effective ways to silence critics and skeptics is to 1) de-monetize their sites / platforms and 2)

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Truth Is What We Hide, Self-Serving Cover Stories Are What We Sell

December 3, 2018

The fact that lies and cover stories are now the official norm only makes us love our servitude with greater devotion.
We can summarize the current era in one sentence: truth is what we hide, self-serving cover stories are what we sell. Jean-Claude Juncker’s famous quote captures the essence of the era: “When it becomes serious, you have to lie.”
And when does it become serious? When the hidden facts of the matter might be revealed to the general public. Given the regularity of vast troves of well-hidden data being made public by whistleblowers and white-hat hackers, it’s basically serious all the time now, and hence the official default everywhere is: truth is what we hide, self-serving cover stories are what we

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Bearish on Fake Fixes

December 2, 2018

This systemic vulnerability is largely invisible, and so the inevitable contagion will surprise most observers and participants.
The conventional definition of a Bear is someone who expects stocks to decline. For those of us who are bearish on fake fixes, that definition doesn’t apply: we aren’t making guesses about future market gyrations (rip-your-face-off rallies, dizziness-inducing drops, boring melt-ups, etc.), we’re focused on the impossibility of reforming or fixing a broken economic system.
Many observers confuse creative destruction with profoundly structural problems. The technocrat perspective views the creative disruption of existing business models by the digital-driven 4th Industrial Revolution as the

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America Needs a New National Strategy

December 1, 2018

A productive national Strategy would systemically decentralize power and capital rather than concentrate both in the hands of a self-serving elite.
If you ask America’s well-paid punditry to define America’s National Strategy, you’ll most likely get the UNESCO version: America’s national strategy is to support a Liberal Global Order (LGO) of global cooperation on the environment, trade, etc. and the encouragement of democracy, a liberal order that benefits all by providing global security and avenues for cooperation.
This sounds good, but it overlooks the Endless Wars ™ and global meddling that characterize America’s realpolitik dependence on force, which it applies with a ruthlessness born of America’s peculiar

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