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Charles Hugh Smith

Charles Hugh Smith

At readers' request, I've prepared a biography. I am not confident this is the right length or has the desired information; the whole project veers uncomfortably close to PR. On the other hand, who wants to read a boring bio? I am reminded of the "Peanuts" comic character Lucy, who once issued this terse biographical summary: "A man was born, he lived, he died." All undoubtedly true, but somewhat lacking in narrative.

Articles by Charles Hugh Smith

Our Institutions Are Failing

5 days ago

Our institutional failure reminds me of the phantom legions of Rome’s final days.
The mainstream media and its well-paid army of “authorities” / pundits would have us believe the decline in our collective trust in our institutions is the result of fake news, i.e. false narratives and data presented as factual.
If only we could rid ourselves of fake news, all would be well, as our institutions are working just fine.
This mainstream narrative is itself false: our institutions are failing, and the cause isn’t fake news or Russian hacking–the cause is insider plundering and collusion, aided and abetted by a decline in transparency and accountability and the institutionalization of incompetence.
In other words, the

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Will AI “Change the World” Or Simply Boost Profits?

9 days ago

The real battle isn’t between a cartoonish vision or a dystopian nightmare–it’s between decentralized ownership and control of these technologies and centralized ownership and control.
The hype about artificial intelligence (AI) and its cousins Big Data and Machine Learning is ubiquitous, and largely unexamined. AI is going to change the world by freeing humankind from most of its labors, etc. etc. etc.
Let’s start by asking: who owns all this AI? This raises two other questions:who benefits as “software eats the world” (to use Marc Andreesen’s pithy phrase), and to what purpose is all this technology being applied?
The answers are painfully obvious: large global corporations, many of which function as

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We Are All Hostages of Corporate Profits

11 days ago

We’re in the endgame of financialization and globalization, and it won’t be pretty for all the hostages of corporate profits.
Though you won’t read about it in the mainstream corporate media, the nation is now hostage to outsized corporate profits.
The economy and society at large are now totally dependent on soaring corporate profits and the speculative bubbles they fuel, and this renders us all hostages: “Make a move to limit corporate profits or speculative bubbles, and your pension fund gets a bullet in the head.”
Not just pension funds, of course; tax revenues will also be taken out and shotas most of the state and federal income taxes are paid by high-earners and those skimming capital gains from stock options

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The USA Is Now a 3rd World Nation

12 days ago

I know it hurts, but the reality is painfully obvious: the USA is now a 3rd World nation.
Dividing the Earth’s nations into 1st, 2nd and 3rd world has fallen out of favor;apparently it offended sensibilities. It has been replaced by the politically correct developed and developing nations, a terminology which suggests all developing nations are on the pathway to developed-nation status.
What’s been lost in jettisoning the 1st, 2nd and 3rd world categories is the distinction between developing (2nd world) and dysfunctional states (3rd world), states we now label “failed states.”
But 3rd World implied something quite different from “failed state”: failed state refers to a failed government of a nation-state, i.e. a

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The Gathering Storm

15 days ago

July 4th is an appropriate day to borrow Winston Churchill’s the gathering storm to describe the existential crisis that will envelope America within the next decade. There is no single cause of the gathering storm; in complex systems, dynamics feed back into one another, and the sum of destabilizing disorder is greater than a simple sum of its parts.
Causal factors can be roughly broken into two categories: systemic and social/economic. The central illusion of those who focus solely on social, political and economic issues as the sources of destabilization is that tweaking the parameters of the status quo is all that’s needed to right the ship: if only Trump were impeached, if only GDP hits 4% annual growth rate, if

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Make Capital Cheap and Labor Costly, and Guess What Happens?

23 days ago

Employment expands in the Protected cartel-dominated sectors, and declines in every sector exposed to globalization, domestic competition and cheap capital.
If you want to understand why the global economy is failing the many while enriching the few, start with the basics: capital, labor and resources. What happens when central banks drop interest rates to near-zero? Capital becomes dirt-cheap. It becomes ludicrously easy to borrow money to buy whatever cheap capital can buy: stock buybacks, robots, automation tools, interest-sensitive assets such as housing, competitors or potential competitors, high-yield emerging-market bonds, and so on.
What happens when cartels take control of core domestic industries such as

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Dear High School Graduates: the Status Quo “Solutions” Enrich the Few at Your Expense

24 days ago

You deserve a realistic account of the economy you’re joining.
Dear high school graduates: please glance at these charts before buying into the conventional life-course being promoted by the status quo.
Here’s the summary: the status quo is pressuring you to accept its “solutions”: borrow mega-bucks to attend college, then buy a decaying bungalow or hastily constructed stucco box for $800,000 in a “desirable” city, pay sky-high income and property taxes on your earnings, and when the stress of all these crushing financial burdens ruins your health, well, we’ve got meds to “help” you–lots of meds at insane price points paid for by insurance– if you have “real” insurance without high deductibles, of course.
Here’s the

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Gresham’s Law and Bitcoin

28 days ago

Rather suddenly, the state issued fiat currency bolivar lost 99% of its purchasing power.
Gresham’s law holds that “bad money drives out good money,” meaning that given a choice of currencies (broadly speaking, “money” that serves as a store of value and a means of exchange), people use depreciating “bad” to buy goods and services and hoard “good” money that is appreciating or holding its value.
As this dynamic plays out, eventually there is little “good money” in circulation and the economy suffers accordingly.
Correspondent AK recently submitted an insightful discussion of Gresham’s law and bitcoin:
1: Discussions surrounding Bitcoin and Gresham’s law immediately devolve into a debate about historical formulation

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Here We Go Again: Our Double-Bubble Economy

June 17, 2018

The bubbles in assets are supported by the invisible bubble in greed, euphoria and credulity.

Well, folks, here we go again: we have a double-bubble economy in housing and stocks, and a third difficult-to-chart bubble in greed, euphoria and credulity.
Feast your eyes on Housing Bubble #2, a.k.a. the Echo Bubble:

S&P/Case-Shiller 2000-2018 – Click to enlarge
Here’s the S&P 500 stock index (SPX): no bubble here, we’re told, just a typical 9-year long Bull Market that has soared from a low in 2009 of 666 to a recent high of 2802 in January of this year:

S&P 500 stock index 2009-2018(see more posts on S&P 500, ) – Click to enlarge
Here’s a view of the same bubble in the Dow Jones Industrial Average (DJIA):


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The Three Crises That Will Synchronize a Global Meltdown by 2025

June 9, 2018

We’re going to get a synchronized global dynamic, but it won’t be “growth” and stability, it will be DeGrowth and instability.
To understand the synchronized global meltdown that is on tap for the 2021-2025 period, we must first stipulate the relationship of “money” to energy:“money” is nothing more than a claim on future energy. If there’s no energy available to fuel the global economy, “money” will have little value.
The conventional economists assure us that energy is now a small part of the overall economy, so fluctuations in energy prices will have a limited effect on global prosperity. But what’s left of global prosperity when energy is unable to meet current demand at any price that consumers can afford?

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Does Anyone Else See a Giant Bear Flag in the S&P 500?

June 7, 2018

We all know the game is rigged, but strange things occasionally upset the “easy money bet.”

“Reality” is in the eye of the beholder, especially when it comes to technical analysis and economic tea leaves. It seems most stock market soothsayers are seeing a breakout of the downtrend that erupted in early February, and so the path to new all-time highs is clear.

Does anyone else see a giant bear flag pattern in the daily chart of the S&P 500? Maybe I’m the only one who sees a bearish signal instead of a bullish breakout.

What I see post-mini-crash is a bearish rising wedge which broke to the downside as rising wedges are wont to do.

What followed the rising wedge? A bear flag. As the name implies, Bear Flags

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Burrito Index Update: Burrito Cost Triples, Official Inflation Up 43 percent from 2001

June 2, 2018

Welcome to debt-serfdom, the only possible output of the soaring cost of living.
Long-time readers may recall the Burrito Index, my real-world measure of inflation. The Burrito Index: Consumer Prices Have Soared 160% Since 2001 (August 1, 2016). The Burrito Index tracks the cost of a regular burrito since 2001. Since we keep detailed records of expenses (a necessity if you’re a self-employed free-lance writer), I can track the cost of a regular burrito at our favorite taco truck with great accuracy: the cost of a regular burrito has gone up from $2.50 in 2001 to $5 in 2010 to $6.50 in 2016.
It’s time for an update: the cost of a regular burrito has now reached $7.50, triple the 2001 cost. That’s a 200% increase in 17

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How Systems Collapse

May 30, 2018

This is how systems collapse: faith in the visible surface of abundance reigns supreme, and the fragility of the buffers goes unnoticed.
I often discuss systems and systemic collapse, and I’ve drawn up a little diagram to illustrate a key dynamic in systemic collapse. The key concepts here are stability and buffers. Though complex systems are never static, but they can be stable: that is, they ebb and flow within relatively stable boundaries supported by reserves, i.e. buffers.
In ecosystems, this ebb and flow is expressed in feedback loops between the weather, environment and plant/animal species which inhabit the ecosystem. Ideal weather/food conditions may spark a rise in an insect population, for example, which

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America 2018: Dicier by the Day

May 29, 2018

Scrape all this putrid excrescence off and we’re left with a non-fantasy reality: everything is getting dicier by the day.
If we look beneath the cheery chatter of the financial media and the tiresomely repetitive Russian collusion narrative (that’s unraveling as the Ministry of Propaganda’s machinations are exposed), we find that America in 2018 is dicier by the day.
The more you know about the actual functioning of critical subsystems, the keener your awareness of the system’s fragility, reliance on artifice and an unceasing flow of “free money.” Keynesian economics boils down to a very simple premise: a slowing or stagnant economy can be goosed by distributing plenty of “free money” which can be freely blown on

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Sustainability Boils Down to Scale

May 25, 2018

Only small scale systems can sustainably impose “skin in the game”– consequences, accountability and oversight.
Several conversations I had at the recent Peak Prosperity conference in Sonoma, CA sparked an insight into why societies and economies thrive or fail: It All Boils Down to Scale. In a conversation with a Peak Prosperity member who goes by MemeMonkey, MemeMonkey pointed out that social / economic organizations that function well at small scales (i.e. localized) fail when scaled up and centralized (i.e. globalized).
I was immediately struck by the impact of scale on markets (Capitalism) and the state (Socialism), an ideological spectrum I’ve written about recently.
Both markets and governance function well at

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The Next Recession Will Be Devastatingly Non-Linear

May 23, 2018

The acceleration of non-linear consequences will surprise the brainwashed, loving-their-servitude mainstream media.
Linear correlations are intuitive: if GDP declines 2% in the next recession, and employment declines 2%, we get it: the scale and size of the decline aligns. In a linear correlation, we’d expect sales to drop by about 2%, businesses closing their doors to increase by about 2%, profits to notch down by about 2%, lending contracts by around 2% and so on.
But the effects of the next recession won’t be linear–they will be non-linear, and far more devastating than whatever modest GDP decline is registered. To paraphrase William Gibson’s insightful observation that “The future is already here — it’s just not

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U.S. Healthcare Isn’t Broken–It’s Fixed

May 18, 2018

Healthcare/sickcare will bankrupt the nation by itself.

If you want to understand why the U.S. healthcare system is bankrupt, financially, morally and politically, then start with this representative anecdote from a U.S. physician. I received this report from correspondent J.F. on the topic of direct advertising of pharmaceutical products to the public (patients).
As background information, pharmaceutical companies were not allowed to advertise directly to consumers (patients) in the good old days. Now, as we all know, half the adverts on TV are for pharmaceutical products, and many of the remaining half are advertising lawsuits relating to pharmaceutical products that harmed or injured the patients who received

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A Funny Thing Happened on the Way to Market Complacency / Euphoria

May 15, 2018

Fortunately for Bulls, none of this matters.
A relatively reliable measure of complacency/euphoria in the stock market just hit levels last seen in late January, just before stocks reversed in a massive meltdown, surprising all the complacent/euphoric Bulls.
The measure is the put-call ratio in equities. Since this time is different, and the market is guaranteed to roar to new all-time highs, we can ignore this (of course).

CBOE Options Equity Put/Call Ratio, Dec 2017 – May 2018 – Click to enlarge

Two of the more reliable technical patterns are falling/rising wedges, also known as descending/ascending wedges or triangles. Ascending wedges are bearish, descending wedges are bullish.
The VIX index, one measure

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How Safe Are We? Our Blindness to Systemic Dangers

May 13, 2018

How do we explain our obsession with relatively low risk dangers and our collective blindness to manufactured/marketed scourges that kill tens of thousands of people annually?
If you’ve bought a new vehicle recently, you may have noticed some “safety features” that strike many as Nanny State over-reach. You can’t change radio stations, for example, if the vehicle is in reverse. Who knows who or what you’ll run over in reverse if you were allowed to change radio stations while in reverse gear?
How many injuries can be traced to people changing radio stations while in reverse?
A friend recently told us that the California Legislature is considering a law that makes it legal for parents to let their children walk to

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Taking the Pulse of a Weakening Economy

May 5, 2018

Corporate buybacks provide the key analogy for the economy as a whole.
Central banks have been running a grand experiment for 9 years, and now we’re about to find out if it succeeds or fails. For 9 unprecedented years, central banks have pushed the pedal of monetary stimulus to the metal: near-zero interest rates, monumental purchases of bonds, mortgage-backed securities, stocks and corporate bonds, injecting trillions of dollars, yuan, yen and euros into the global financial system, all in the name of promoting a “synchronized global recovery” that in many nations remains the weakest post-World War II recovery on record.
The two goals of this unprecedented stimulus were 1) bringing consumption forward and 2)

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What Lies Beyond Capitalism and Socialism?

May 4, 2018

The status quo, in all its various forms, is dominated by incentives that strengthen the centralization of wealth and power.
As longtime readers know, my work aims to 1) explain why the status quo — the socio-economic-political system we inhabit — is unsustainable, divisive, and doomed to collapse under its own weight and 2) sketch out an alternative Mode of Production/way of living that is sustainable, consumes far less resources while providing for the needs of the human populace — not just for our material daily bread but for positive social roles, purpose, hope, meaning and opportunity, needs that are by and large ignored or marginalized in the current system.
One cognitive/emotional roadblock I encounter is the

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

April 25, 2018

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

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What Do We Know About Syria? Next to Nothing

April 21, 2018

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

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Why Trade Wars Ignite and Why They’re Spreading

April 17, 2018

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

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

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

April 15, 2018

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

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Why Systems Fail

April 10, 2018

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

Federal Government, 2005 – 2018 – Click to enlarge

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

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Were Trade Wars Inevitable?

April 9, 2018

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

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

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Playing for All the Marbles

April 7, 2018

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

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

April 3, 2018

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

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What If All the Cheap Stuff Goes Away?

April 2, 2018

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

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