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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

The Next Financial Crisis Won’t Be Caused by Fraud: This Time Will Be Different

4 days ago

Extreme levels of debt and overvaluation characterize the entire global economy, and are not limited to any one nation or sector.
Financial crises come in two flavors: fraud and credit-valuation over-reach.Fraud-based financial crises may differ in particulars, but they share many traits: perverse incentives are institutionalized; the perverse incentives reward figuring out how to evade oversight via fraud, embezzlement, masking risk, etc. which are soon commoditized; regulations are gutted by insider-funded lobbying; regulators fail to do their job in hopes of getting lucrative positions in the industry they’re supposed to be regulating; reports of systemic, commoditized fraud are ignored because everyone’s getting

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No Fix for Recession: Without a Financial Crisis, There’s No Central Bank Policy Fix

7 days ago

There are no extreme “fixes” to secular declines in sales, profits, employment, tax revenues and asset prices.
The saying “never let a crisis go to waste” embodies several truths worth pondering as the stock market nears new highs. One truth is that extreme policies that would raise objections in typical times can be swept into law in the “we have to do something” panic of a crisis.
Thus wily insiders await (or trigger) a crisis which creates an opportunity for them to rush their self-serving “fix” into law before anyone grasps the long-term consequences.
A second truth is that crises and solutions are generally symmetric: a moderate era enables moderate solutions, crisis eras demand extreme solutions. Nobody calls

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Assange and the Unforgivable Sin of Disemboweling Official Narratives

8 days ago

The entire global status quo is on the cusp of the S-Curve decline phase.
There is really only one unforgivable sin in the political realm, and that’s destroying the official narrative by revealing the facts of the matter. This is why whistleblowers who make public the secret machinery of the elaborately artful lies underpinning all official narratives are hounded to the ends of the Earth.
Employees of state entities such as Ellsberg, Manning and Snowden are bound by vows of secrecy and threatened by the promise of severe punishment.Outsiders such as Assange are even further beyond the pale because they can’t be accused of being traitors, as they never took the vows of secrecy required by the Deep State.
The single

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Blind Faith vs. the Bottom Line

9 days ago

There is more than a little “let them eat brioche” in the blind faith that the masses’ patience for pillage is infinite.
We’ve reached an interesting moment in history where we each have a simple choice: we either go with blind faith or we go with the bottom line, i.e. the facts of the matter. So far, 2019 is the year of Blind Faith, as the charts below illustrate: the bottom line no longer matters.
Let’s start with the Ray Dalio Effect, which strikes financiers who’ve exploited our rigged system to skim billions while creating zero goods and services or public good: discerning that the millions whose labor has created the actual goods, services and public good will eventually tear down his Bastille of ill-gotten

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Here’s What It’s Like To Be a Bear in a Rigged Market

11 days ago

Central bankers and media handlers must be laughing at how easy it is to slaughter the Bears and doubters with another fake-news round of trade-deal rumors and another Fed parrot being prompted to repeat some dovish mumbo-jumbo.
It’s not just tough being a Bear in a market rigged by trade deal rumors, Federal Reserve dovishness, a tsunami of Chinese liquidity and $270 billion in stock buy-backs in the first quarter–it’s impossible. Even “smarter than the average Bear” Yogi couldn’t beat the market, and so he ended up taking one for the Jellystone team so other Bears might live to fight another day:
Perhaps the best way to describe the impossibility of being a Bear in a rigged market is to employ an analogy. (Not that

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Trade Deal Follies: The U.S. Has Embraced the World’s Worst Negotiating Tactics

12 days ago

The world’s worst negotiating strategy is to make a crazy tulip-bubble stock market rally dependent on a trade deal that harms the interests of the U.S.
The world’s worst negotiating tactics, the equivalent of handing the other side a loaded gun while waving a squirt gun around, are:
1. Declare a de facto political deadline for a deal. Constantly tweet that a deal is imminent. This gives the other side unparalleled leverage: having backed yourself into a deadline corner, where any delay will be viewed as a political defeat, the other side knows it doesn’t have to concede anything to get a deal out of you. You’ll cave in to every one of their demands due to the fatal stupidity of creating an arbitrary deadline.
2.

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The Japanification of the World

16 days ago

Zombification / Japanification is not success; it is only the last desperate defense of a failing, brittle status quo by doing more of what’s failed.
A recent theme in the financial media is the Japanification of Europe.Japanification refers to a set of economic and financial conditions that have come to characterize Japan’s economy over the past 28 years: persistent stagnation and deflation, a low-growth and low-inflation economy, very loose monetary policy, a central bank that is actively monetizing debt, i.e. creating currency out of thin air to buy government debt and a government which funds “bridges to nowhere” and other stimulus spending to keep the economy from crashing into outright contraction.
The

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Are the Rise of Social Media and the Decline of Social Mobility Related?

17 days ago

Social media offers hope of achieving higher online social status without having to succeed financially in a winner-take-most economy.
I’ve often addressed the decline of social mobility and the addictive nature of social media, and recently I’ve entertained the crazy notion that the two dynamics are related. Why Is Social Media So Toxic?
I have long held that the decline of social mobility–broad-based opportunities to get ahead financially and socially–is part of a larger dynamic I call social depression: the social decay resulting from economic stagnation and the decline of social mobility and financial security. America’s Social Depression Is Accelerating
Japan offers a real-world 29-year lab experiment in the

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The Hidden Cost of Losing Local Mom and Pop Businesses

19 days ago

What cannot be replaced by corporate chains is neighborhood character and variety.
There is much more to this article than first meets the eye: In a Tokyo neighborhood’s last sushi restaurant, a sense of loss
“Eiraku is the last surviving sushi bar in this cluttered neighborhood of steep cobblestoned hills and cherry trees unseen on most tourist maps of Tokyo. Caught between the rarified world of $300 omakase dinners and the brutal efficiency of chain-restaurant fish, mom-and-pop shops like it are fast disappearing.
Chef Masatoshi Fukutsuna and his wife, Mitsue, smile without a word. In the 35 years since they opened up shop, the couple has seen many of their friends move away for a job or family, only to return

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The Fed Guarantees No Recession for 10 Years, Permanent Uptrend for Stocks and Housing

21 days ago

Those who own stocks and housing now will continue getting richer, those who don’t will be priced out of these markets.
A classified Federal Reserve memo sheds new light on the Fed’s confidence in its control of the economy and the stock and housing markets. In effect, the Fed is guaranteeing that there will be no recession for another 10 years, and that stocks and housing will remain in a permanent uptrend.
Paraphrasing the memo, we have the tools to insure that stocks and housing do not just remain at a permanently high plateau but continue to move higher in a permanent uptrend.
I’ve marked up a chart of the S&P 500 and the Case-Shiller Housing Index to illustrate the Fed guarantee. As you can see, stocks and

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Apple’s Rotten Core

23 days ago

Entering commoditized, fiercely competitive low-margin services cannot substitute for the high-margin profits that will be lost as global recession and saturation erode iPhone sales.
Apple has always been equally an enterprise and a secular religion. The Apple Faithful do not tolerate heretics or critics, and non-believers “just don’t get it.”
So the first thing any critic must do is establish their credentials as a Believer:My first Mac model 0001 was the 21,447th made in week 32 of 1984 in Fremont, California. Now that we’ve established that, we can move on to my profound sense of anguished abandonment that Apple ceased producing the iPhone SE, the only form factor that works for me.
But Apple Faithful are

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Is the World Becoming Wealthier or Poorer?

24 days ago

There is nothing intrinsically profitable about either robotics or AI.
At the request of colleague/author Douglas Rushkoff (his latest book is Team Human), I’m publishing last week’s Musings Report, which was distributed only to subscribers and patrons of the site.)
The core assumption of Universal Basic Income (UBI) and other plans to redistribute wealth and income more broadly is that the world is becoming wealthier, and so the pool of income and wealth that can be taxed is always expanding.
This pool of available wealth and income is so vast, we’re assured, that taxing the super-wealthy will not really dent their wealth or the economy as a whole.
But what if the world is rapidly becoming poorer in every important

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When Are We Going to Tackle the For-Profit Monopolies Which Censored RussiaGate Skeptics?

26 days ago

We either take down Facebook and Google and turn them into tightly regulated transparent public utilities available to all or they will destroy what little is left of American democracy.
The RussiaGate Narrative has been revealed as a Big Con (a.k.a. Nothing-Burger), but what’s dangerously real is the censorship that’s being carried out by the for-profit monopolies Facebook and Google on behalf of the status quo’s Big Con.
This site got a taste of Facebook-Google-Big-Media’s Orwellian Authoritarian-Totalitarian censorship back in 2016 when a shadowy fake-news site called PropOrNot aggregated every major alt-media site that had published anything remotely skeptical of the coronation of Hillary Clinton as president and

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The Media, Mueller, the Big Con and the Democratization of Narrative

27 days ago

Falling for a con is painful. The first reaction is to deny being conned, of course. The second is to blame skeptics for being correct in their skepticism.
Here’s the fundamental “story” of the Mueller Investigation: elites don’t like “the little people” democratizing public narratives. The elites–who reckon their right to rule is self-evident–want to set the narrative and the context, because that’s the foundation of power: once you get the citizenry to agree on your narrative and context, you secure two valuable things: 1) political legitimacy and 2) their obedience.
Elite anxiety over the “the little people” democratizing narratives is not a new phenomenon. Elites have demanded control of any media outlet that

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Politics Has Failed, Now Central Banks Are Failing

28 days ago

With each passing day, we get closer to the shift in the tide that will sweep away this self-serving delusion of the ruling elites like a crumbling sand castle.
Those living in revolutionary times are rarely aware of the tumult ahead: in 1766, a mere decade before the Declaration of Independence, virtually no one was calling for American independence. Indeed, in 1771, a mere 5 years before the rebellion was declared, the voices promoting independence were few and far between.
The shift from a pre-revolutionary era to a revolutionary era took less than a year. Perhaps no one exemplified the rapidity and totality of radicalization more than Benjamin Franklin, who went from an avowed Loyalist bent on reform to a

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Which Nations Will Crumble and Which Few Will Prosper in the Next 25 Years?

March 23, 2019

Adaptability and flexibility will be the core survival traits going forward.
What will separate the many nations that will crumble in the next 25 years and those few that will survive and even prosper while the status quo dissolves around them? As I explain in my recent book Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic, the factors that will matter are not necessarily cultural or financial; being hard-working and wealthy won’t be enough to save nations from coming apart at the seams.
Here are the factors that will matter in the next 25 years:
1. The ability to engage and survive non-linear change, which is rapid, unpredictable and systemic, as opposed to linear change which is

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While the Nation Fragments Socially, the Financial Aristocracy Rules Unimpeded

March 21, 2019

America’s aristocracy is not formalized, and that’s the secret of its success.
If there is one central irony in American history, it is this: the citizenry that broke free of the chains of British Monarchy, the citizenry that reckoned everyone was equal before the law, the citizenry that vowed never to be ruled by an aristocracy that controlled the government and finance as a means of self-enrichment, is now so distracted by social fragmentation that the citizenry is blind to their servitude to a new and formidably informal financial aristocracy.
From this juncture, ironies abound: the so-called Socialist demands for Medicare for All, “free” college for all and Universal Basic Income (UBI) are encouraged (or perhaps

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The Coming Crisis the Fed Can’t Fix: Credit Exhaustion

March 18, 2019

Thus will end the central banks’ bombastic hubris and the public’s faith in central banks’ godlike powers.
Having fixed the liquidity crisis of 2008-09 and kept a perversely unequal “recovery” staggering forward for a decade, central banks now believe there is no crisis they can’t defeat: Liquidity crisis? Flood the global financial system with liquidity. Interest rates above zero? Create trillions out of thin air and use the “free money” to buy bonds. Mortgage and housing markets shaky? Create another trillion and use it buy up mortgages.
And so on. Every economic-financial crisis can be fixed by creating trillions of out thin air, except the one we’re entering–the exhaustion of credit. Central banks, like generals,

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What Sort of “Democracy” Do We Have If Everyone’s Goal Is Maximizing Their Government Swag?

March 15, 2019

The “marketplace” of individuals and entities all seeking to maximize their share of the central-state swag doesn’t make a democracy.
A democratic republic is a government in which power flows from citizens to their elected representatives. The American revolutionaries did not make a big distinction between republic and democracy, for in the context of the late 1700s, the dominant political structure was monarchy, and democracy meant the people have the final say via elections.
As Gordon Wood explains in his seminal book The Radicalism of the American Revolution, the upper-class revolutionaries had their doubts about the rabble’s ability to pursue the common good above their own narrow self interests. This ability to

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How States/Empires Collapse in Four Easy Steps

March 14, 2019

The promises cannot be met, and so society decays into warring elites and competing constituencies.
There is a grand, majestic tragedy in the inevitable collapse of once-thriving states and empires: it all seemed so permanent at its peak, so godlike in its power, and then slowly but surely, too many grandiose, unrealistic promises were made to too many elites and constituencies, and then as growth decays to stagnation, the only way to maintain the status quo is to appear to meet all the promises by creating money out of thin air, i.e. debauching the currency.
This political expediency works most wonderfully for a time: people don’t realize the silver content of their coinage is being cut to near-zero, or there’s

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Here’s The Problem: The Pie Is Shrinking

March 12, 2019

At that point, the only way to enable debt-serfs to service their debts is too give them free money, i.e. Universal Basic Income (UBI).
Scrape away the churn and distraction and the problem is simple: the pie of prosperity is shrinking, and the “fixes” are failing. The status quo arrangement is based on the endless expansion of “growth” and debt, which is the monetary fuel of more, more, more of everything: money, energy, resources, goods, services, jobs, wealth and income, all of which make up the elixir of prosperity.
Prosperity is shorthand for a positive return on investment (ROI), a.k.a. primary surplus. Prosperity is the result of there being a surplus which can be distributed after capital, resources and labor

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The Source of Killer Inflation: Services

March 11, 2019

The soaring cost of services is driven by a number of factors.
What will the future bring: fire (inflation) or ice (deflation)? The short answer: both, but in very different doses. Goods that are tradeable and exposed to technologically driven commodification will decline in price (deflation) while untradeable services that are difficult to commoditize will increase in price (inflation), generating a self-reinforcing feedback loop of wage-price inflation.
Gordon Long and I discuss these trends in our latest program The Supply-Demand Services Problem (YouTube).
The big difference between goods that drop in price (TVs, etc.) and services that are exploding higher (healthcare, childcare, elderly care, higher education,

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What If Politics Can’t Fix What’s Broken?

March 9, 2019

This is the politics of decline and collapse.
The unspoken assumption of the modern era is that politics can fix whatever is broken: whatever is broken in society or the economy can be fixed by some political policy or political process– becoming more inclusionary, seeking non-partisan middle ground, etc.
What if this assumption is flat-out wrong? What is politics is incapable of fixing what’s broken? What if politics merely fosters an illusion of solutions, a paper-thin veneer of faux progress? What if politics isn’t a tool that’s capable of fixing what’s broken? What if all politics is able to do is generate delusions of grandeur and unresolvable conflicts? What if politics is ultimately little more than a fatal

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The Fed’s “Wealth Effect” Has Enriched the Haves at the Expense of the Young

March 5, 2019

The Fed is the mortal enemy of the young generations, and thus of the nation itself.
“The wealth effect” generated by rising stock and housing prices has long been a core goal of the Federal Reserve and other central banks. As Lance Roberts noted in his recent commentary So, The Fed Doesn’t Target The Market, Eh?(Zero Hedge), Ben Bernanke added a “third mandate” to the Fed – the creation of the “wealth effect”–in 2010, the reasoning being that higher asset prices “will boost consumer wealth and help increase confidence” which will then lead to higher spending and all the wonderfulness of endless economic expansion.
But as Chris Hamilton explains in his recent essay Economic Doom Loop Well Underway, “the wealth

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What Killed the Middle Class?

March 4, 2019

Rounding up the usual suspects won’t restore a vibrant middle class.
What killed the middle class? The answer may well echo an Agatha Christie mystery: rather than there being one guilty party, it may be that each of the suspects participated in the demise of the middle class.
If you doubt the middle class has expired, please consider the evidence:
The Middle Class Is Shrinking Everywhere — In Chicago It’s Almost Gone
Wealth concentration returning to ‘levels last seen during the Roaring Twenties,’ according to new research
People tend to self-report viewing themselves as middle class, but by the standards of previous eras, they lack the basics of middle class prosperity. I laid out 12 core characteristics of classic

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The Doomsday Scenario for the Stock and Housing Bubbles

March 1, 2019

It was always folly to believe that inflating asset bubbles could solve the structural problems of a post-industrial economy.
The Doomsday Scenario for the stock and housing bubbles is simple: the Fed’s magic fails. When dropping interest rates to zero and flooding the financial sector with loose money fail to ignite the economy and reflate the deflating bubbles, punters will realize the Fed’s magic only worked the first three times: three bubbles and the game is over.
So what happens when punters realize there won’t be a fourth bubble? They sell. Bids disappear because who’s dumb enough to bet (with Japan and Europe as lessons) that more liquidity and negative interest rates will magically work when zero interest

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Now that Housing Bubble #2 Is Bursting…How Low Will It Go?

February 26, 2019

Unless the Fed is going to start buying millions of homes outright, prices are going to fall to what buyers can afford.
There are two generalities that can be applied to all asset bubbles:
1. Bubbles inflate for longer and reach higher levels than most pre-bubble analysts expected
2. All bubbles burst, despite mantra-like claims that “this time it’s different”
The bubble burst tends to follow a symmetrical reversal of very similar time durations and magnitudes as the initial rise. If the bubble took four years to inflate and rose by X, the retrace tends to take about the same length of time and tends to retrace much or all of X.
If we look at the chart of the Case-Shiller Housing Index below, this symmetry is visible

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Homeless Encampments and Luxury Apartments: Our Long Strange Boom

February 23, 2019

The cold truth is homelessness and soaring rents are the only possible outputs of central bank policies that inflate asset bubbles.
It’s been a long, strange economic boom since the nadir of the Global Financial Meltdown in 2009. A 10-year long boom that saw the S&P 500 rise from 666 in early 2009 to 2,780 and GDP rise by 43% has been slightly more uneven for most participants.
First and most importantly, household income hasn’t risen by the same percentages as assets, GDP or costs of big-ticket expenses such as rent, healthcare and college tuition. The broadest measure of income, median household income, has registered a 23% increase in the past decade, roughly half of GDP gains and a mere fraction of stock market

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Credit Exhaustion Is Global

February 20, 2019

Europe is awash in credit exhaustion, and so is China.
The signs are everywhere: credit exhaustion is global, and that means the global growth story is over: revenues and profits are all sliding as lending dries up and defaults pile up.
What is credit exhaustion? Qualified buyers don’t want to borrow more, leaving only the unqualified or speculators seeking to save a marginal bet gone bad with one more loan (which will soon be in default).
Lenders are faced with a lose-lose choice: either stop lending to unqualified borrowers and speculators, and lose the loan-origination fees, or issue the loans and take the immense losses when the punters and gamblers default.
Europe is awash in credit exhaustion, and so is

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What Happens When More QE Fails to Reverse the Recession?

February 17, 2019

The smart money is liquidating assets, paying off debt and moving capital into collateral that isn’t impaired by debt or speculative valuations.
The Federal Reserve’s sudden return to “accommodative” dovishness in response to the stock market’s swoon telegraphs its intent to fire up QE once the recession kicks into gear. QE (quantitative easing) are monetary policies designed to ease borrowing and the issuance of credit, and to prop up assets such as stocks and real estate.
The basic idea is that the Fed creates currency out of thin air and uses the new money to buy Treasury bonds and other assets. This injects fresh money into the financial system and lowers the yield on Treasury bonds, as the Fed will buy bonds at

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