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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

A Most Peculiar Recession

2 days ago

So what are conventional pundits missing today? I would start with three dynamics.
Only old people experienced real recessions–those in 1973-74 and 1980-82. Recessions since then have been shorter and less systemic.
In the good old days, a recession laid waste to entire industries which never recovered their previous employment. People who were laid off couldn’t find another job. Major sectors of the economy dried up and blew away. Jobs were scarce and there was an oversupply of people looking for work.
We’re told consumer confidence is in the dumps and everyone expects the worst: recession! Oh Lordy. Interestingly, there isn’t much evidence of this near-panic behaviorally.
Everyone’s tightening their belts and battening down the hatches, but it’s not the

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Are Older Workers Propping Up the U.S. Economy?

3 days ago

Are 55 and older workers propping up the U.S. economy? The data is rather persuasive that the answer is yes.
The chart of U.S. employment ages 25 to 54 years of age and 55 and older reveals a startling change.
There are now 20 million more 55+ employed than there were in 2000, an equivalent of the entire workforce of Spain. This unprecedented demographic / employment transition is worth a closer look.
As the second chart shows, some of this increase is due to the rising population of Americans over 55 years of age–an increase of 42 million. In 2000, 30% of those 55 and older were employed. Today, over 37% are employed–a significant increase in the percentage of 55+ people who are working.
An increase of 20 million employees age 55 and older is so large that it’s

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Can We “Export Inflation?” Yes We Can, Yes We Are

10 days ago

A strong currency exports inflation to those nations which do not issue the currency.
Though it’s difficult to be confident of anything in the current flux, I am pretty confident of three things:
1) price is set on the margins
2) currencies are the foundation of every economy
3) the financial forecasts issued to calm the public do not reflect operative geopolitical goals.
Every national government has “global interests.” Governments naturally do whatever they can to boost dynamics favorable to the state and nation, and obstruct or hinder dynamics injurious to the state or nation.
As a general rule, nations have relatively few levers they can pull to influence global finance, trade, growth, currencies or the geopolitical balance of power.One such lever is the

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How Much of “Inflation” Is the Price Being Jacked Up Under the Excuse of “Inflation”?

11 days ago

The problem for global corporations feasting on “Inflation” profiteering is that the vast majority of consumers can’t afford another lavish vacation, overpriced vehicle or specious subscription.
A funny thing seems to be happening within “Inflation”: companies are using “inflation” as cover for outrageous price increases that have little to do with actual inflation. Consider a water or electric utility that is directly impacted by rising costs of natural gas / oil. To stay solvent, the utility must pass along their higher energy costs to consumers. OK, we get it: higher input costs such as energy and shipping are passed along to the consumer.
But what about auto and property insurance? Exactly what input costs justify jacking up auto insurance by 14% or property

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What Can The Beatles Teach Us about Management?

12 days ago

Own your work. Don’t give it away or let others profit at your expense. Leverage it when opportunities arise.
What can The Beatles teach us about management?Young readers may wonder why The Beatles still matter 52 years after the band broke up. It’s a fair question.
There are many answers, but perhaps the obvious one (beyond the music, of course) is the band was a cultural phenomenon that has no modern equivalent.
A less obvious answer is the unusual dynamics of the four lads: founder John Lennon, Paul McCartney, Paul’s younger mate George Harrison and drummer Ringo Starr (Richard Starkey) who was invited to join the band shortly before they rocketed to global fame.
Each had a distinct personality and a unique fan base. Though the songwriting team of

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There Won’t Be Any Winners Because The Status Quo Is Corrupt Everywhere

16 days ago

Systemic corruption on this vast scale optimizes failure and collapse.
Debating which nations will “win” as the global economy unravels is a popular but pointless parlor game.Since the status quo in every nation is deeply, profoundly, systemically corrupt, there won’t be any “winners,” there will only be losers.
Apologists love to say that corruption has always come hand-in-hand with power, and this is superficially true.Once a centralized hierarchy takes power, those seeking self-glorification and wealth seek power as a means to their self-enrichment and glorification.
Naturally, they use their power to reward those who helped them gain power and those helping them maintain power. So a small Texas contractor who contributed to Lyndon Johnson’s political career

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What’s Truly Important? The Global Revaluation Is Accelerating

17 days ago

How much gold will you trade for a few eggs? It depends on how hungry you are.
Two ideas will help us understand the rest of this tumultuous decade: core-periphery and the revaluation of what’s truly important: systemic adaptability, transparency, accountability, risk, capital and resources. I recently discussed the core-periphery model in a blog post, Crash Is King:
“Crashes reveal what’s core and what’s periphery because the core controls the destiny of the periphery. In systems terminology, the initial conditions set the parameters of options and the efficacy of various choices. The core’s initial conditions are considerably more constructive than the initial conditions of the periphery.
In network terms, the critical connections between nodes run through the

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Why the Labor Shortage Isn’t Going Away

23 days ago

It’s getting hard to fill toxic low-pay jobs, and that’s not going to change.
The nature of work and the labor market are changing in ways few discern or perhaps are willing to discern because these changes are disrupting the exploitive system they want to remain unchanged. But refusing to discern change doesn’t stop change. It just leaves us unprepared to deal with fast-changing realities.
There are multiple systemic reasons why work and the labor force are changing: demographics, the rigged economy, extremes of inequality, limits of technology and “garbage in, garbage out” lifestyle / health issues.
Demographics. Take a glance at the chart below showing how the population of the U.S. changed between 2010 and 2020. (Chart courtesy of @Econimica). America’s

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The Real Policy Error Is Expanding Debt and Calling It “Growth”

24 days ago

Waste is not growth, and neither are the unlimited expansion of debt and speculative bubbles.
The financial punditry is whipping itself into a frenzy about a Federal Reserve “policy error,” which is code for “if the music finally stops, we’re doomed!” In other words, any policy which reduces the flow of juice sluicing through the sewage pipes of the financial system (credit, leverage and liquidity–the essential mechanisms of financialization and globalization) endangers the entire rickety, rotten structure of phantom wealth that’s enriched the few at the expense of the many.
The entire notion that central bank policy makes or breaks the economy is the original Policy Error #1.That is to say, whatever policy a central bank pursues is a policy error because every

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The Only Real Solution Is Default

25 days ago

The destruction of ‘phantom wealth’ via default has always been the only way to clear the financial system of unpayable debt burdens and extremes of rentier / wealth dominance.
The notion that the world could always borrow more money as long as interest rates were near-zero was never sustainable. It was always an unsustainable artifice that we could keep borrowing ever larger sums from the future as long as the interest payments kept dropping.
The only real solution to over-indebtedness since the beginning of finance is default. There are pretty names for variations on default that sound much less gut-wrenching–debt jubilees, refinancing, etc.– but the bottom line is the debts that can’t be paid won’t be paid and whomever owns the debt as an asset absorbs the

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US Dollar Strength: “Unintended Consequences” Or “The Empire Strikes Back”?

July 14, 2022

How unintended can these consequences be? My guess: not very.
A great many people got the U.S. dollar trade wrong. The conventional view held that “printing money”, i.e. expanding the supply of money, would automatically devalue the currency.
It isn’t quite so simple, it seems. It depends on where the newly issued money ends up, whether the economy is expanding along with the money supply, the relative perception of the currency’s stability / safety, the returns being offered in interest and capital gains for those holding assets denominated in the currency and in the broadest sense, the stability, transparency and adaptability of the nation / entity issuing the currency.
As I keep noting, there are rather high bars to establishing a truly global currency:
1) The

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Calm Before the Tempest?

July 13, 2022

Is it beyond conception that the core actually strengthens for a length of time before the unraveling reaches it?
Let’s start by stipulating the obvious: no one knows the future, and most of the guesses–oops, I mean forecasts–will be wrong. Arguing about the forecasts now won’t make any difference as to which ones are correct and which ones are wrong. Time alone will tell.
That said, here’s a scenario that fits the dynamics I see as most consequential: Core-Periphery and the demise of the waste is growth / financialization / globalization model as the reigning model of how the global economy should work.
Core-periphery dynamics are pretty simple: unraveling starts on the periphery and seeps toward the core. The core actually strengthens in the process as capital

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Why Nations Fail

July 12, 2022

The irony is that the suppression of dissent is the suppression of competing ideas that generate systemic stability via rapid adaptation.
Nations that appear stable may fail once they’re under pressure.What do I mean by “under pressure”? Pressure can come from many sources: invasion, civil war, prolonged scarcities of essentials, natural disasters, financial crises, droughts, pandemics and social disorder triggered by inequality and corruption.
Pressure diminishes the availability of resources, and exacerbates inequalities as political favoritism divides “winners” (elites protected and enriched by state intervention) at the expense of the “losers,” i.e. the commoners, who bear the brunt of job losses, financial risks, scarcities and deprivations.
There are two

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You Know What Would Be Really Irritating? A Crazy Rally to New Highs

July 8, 2022

It would be very irritating to have a rally suck in all the bears salivating for a crash from a bear-market rally peak and then decimate the shorts with a rally that soars rather than collapses to new lows.
As a contrarian, I’m always squinting at the consensus and wondering if it is really that easy to be right.Now that everyone is bearish for reasons we all know–global recession, a hot war, energy scarcities and stagflation– I’m thinking, you know what would be really irritating? A bat-dung crazy rally to new highs in U.S. equities.
Irritating, indeed, because few are positioned for this eventuality due to odds of it happening appearing to be near-zero. What’s odds-on is all the assets that bubbled up in the Everything Bubble sagging back to pre-bubble levels,

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The One Solution to All Our Problems

July 6, 2022

Pick one, America: national security of the essential material foundation of everything, the industrial base, or “global markets,” maximizing greed / corporate profits.
Sorry about the clickbait title. We all know there isn’t “one solution” to anything as complex as a socio-economic-cultural-political system.
But this is based on looking at all the problems from one very shaky perspective: that the foundations of any solutions are rock-solid and all we need to do is apply some ideological or financial fix and away we go.
From another, much more practical perspective, if you don’t keep the foundation–the industrial base–glued together, then all the high-minded ideological or financial fixes will all be completely, utterly meaningless. When the generator breaks down

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The Most Valuable Form of Money Nobody’s Seen–Yet

July 4, 2022

What is “money”? “Money” is a claim on the essentials of life. Ration cards are claims on essentials.
Many people expect “money” will soon be tied to commodities. Agreed. It’s called a ration cardthat grants the holder the right to buy a specific quantity of essential goods at a specified price.
This right is a form of “money” directly tied to the value of commodities.

Ration cards are the only fair way to distribute essentials in times of chronic scarcity. Markets work fine when there’s a substitute for whatever is scarce, but there are no substitutes for electricity, food, fuel or fresh water, the FEW essentials (Food, energy, water).
Leaving the distribution of scarce, no-substitutes essentials up to the market leads to the rich eating very well indeed and the

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Why the Housing Bubble Bust Is Baked In

July 1, 2022

Putting this all together, it’s clear that the source of the current housing bubble is the explosion of financial speculation fueled by central bank policies.
Those benefiting from speculative bubbles have powerful incentives to deny the bubble can bust.Rationalizations abound as bubbles inflate, and the continued ascent of speculative bets seems to “prove” the rationalizations are correct.
But bubbles arise from speculative excesses, and once these reach extremes and reverse, bubbles burstand all the self-serving rationalizations are revealed as rationalizations.
Let’s start with some caveats I’ve already covered in Is Housing a Bubble That’s About to Crash? (May 2, 2022):
1. Housing is local, so there may be locales where prices are still rising due to

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Our No-Win “Kobayashi Maru” Economy

June 25, 2022

It’s time to reprogram the conditions of the economy to serve the many rather than the few.
Star Trek’s Kobayashi Maru training exercise tests officer candidates’ response to a no-win scenario:any attempt to rescue the crippled ship’s crew results in the destruction of the candidate’s ship, while standing by and taking no action results in the loss of the Kobayashi Maru’s crew.
Captain Kirk famously defeated this no-win scenario by reprogramming the simulation to “change the conditions of the test.” This can be viewed as either cheating or as creative problem-solving via “thinking outside the box.”
The Kobayashi Maru is a very apt description of both the U.S. and the global economies, which are currently running a real-world no-win scenario called “Profits,

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The Difference Between a Forecast and a Guess

June 22, 2022

Every forecast or guess has one refreshing quality: one will be right and the rest will be wrong.
What’s the difference between a forecast and a guess? On one level, the answer is “none”: the future is unknown and even the most informed forecast is still a guess. The evidence for this is the remarkable number of informed forecasts that prove to be as completely off-base as the wildest guesses.
On another level, there is a big difference between an informed forecast and a guess–if the informed forecast has the consequential system dynamics right. The world is complicated and discerning the consequential dynamics in the tangle of complexity is difficult.
Context and perspective matter. So do incentives. To take one example of many, war planners in the Vietnam era

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Could Retail “Bagholders” Spark a Rally “Smart Money” Will Be Forced to Chase?

June 17, 2022

There would be some deliciously karmic justice in the “dumb money” driving a rally that forced the “smart money” to cover their shorts and chase the rally that shouldn’t even be happening.
Being cursed with contrarianism, as soon as a trade gets crowded and the consensus is one way, I start looking for whatever is considered so unlikely that it’s essentially “impossible.” Sorry, I can’t help myself.
The crowded trades are 1) long the Commodity Super-Cycle and 2) long hurricane-force recessionfor all the persuasive reasons we all know: global scarcities, geopolitical tensions, soaring US dollar and interest rates, de-risking, crazy-stupid levels of debt and speculation, etc.
The consensus holds that “Smart Money” rotated out of tech stocks and other over-valued

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What Happens When the Workforce No Longer Wants to Work?

June 15, 2022

Workers are voting with their feet, and that’s difficult to control. When values and expectations change, everything else eventually changes, too.
What happens when the workforce no longer wants to work? We’re about to find out. As with all cultural sea changes, macro statistics don’t tell the full story. The sea change is better illuminated by anecdotal evidence: workers constantly quitting to take better jobs; zero loyalty to corporate employers; workers cutting hours from full-time to part-time; workers going out for lunch and never coming back; workers giving up on selling sugar-water for the rest of their lives (echoing Steve Jobs’ famous challenge to John Scully: “Do you want to sell sugared water for the rest of your life? Or do you want to come with me

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There’s No Stopping a Recessionary Reckoning

June 9, 2022

If there was only one causal factor nudging the economy into recession, it might be a mild, brief recession. But with all five conditions in confluence, this recession will be unlike any other.
Recessions reliably arise from the confluence of these conditions. Note that any one condition can trigger a recession, but no one condition guarantees a recession. Severe, long-lasting recessions occur when multiple conditions arise at the same time.
1. The business cycle. The business cycle reflects human nature interacting with finance: as credit loosens, people borrow more to spend and invest, and this generates a self-reinforcing virtuous cycle of expansion.
Profits expand, speculation is rewarded and the positive vibes notch up to euphoric confidence in future

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“Pay-to-Play” for the Rest of Us

June 6, 2022

The more kafkaesque quagmires you’ve slogged through, the more you hope “pay-to-play for the rest of us” beomes ubiquitous.
You know how “pay-to-play” works: contribute a couple of million dollars to key political players, and then get your tax break, subsidy, no-bid contract, etc., slipped into some nook or cranny of the legislative process that few (if any) will notice because the legislation is hundreds of pages long or a “gut and replace” magic wand was wielded at the last minute.
As the essential systems of everyday life break down and become increasingly dysfunctional, I predict the rise of what I’m calling “pay-to-play” for the rest of us: if you pay for expedited service, concierge service, etc., you will get the kind of service everyone used to get, i.e.

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Who’s Going to Fix What’s Broken?

June 4, 2022

When nobody cares that systems have broken down and there is no will or interest in fixing essential systems, there is no happy ending.
Who fixes systems when they break down? The answer appears to be: nobody. Here are three everyday examples from my own life, breakdowns which may be random and rare but which the odds suggest are systemic. Let’s assume I’m not an unlucky one in a million but just another recipient of systemic breakdown.
1. U.S. Mail forwarding six month late. Millions of Americans move every year, and the US Postal Service, like other large-scale systems serving the public, has a system that automates change of address forms online. My previous experience is that mail forwarding might be a week or two late but it’s been reliable.
In 2021–not so

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Why America Decays: The Tyranny of Self-Interest

June 1, 2022

Only those societies which still have a functional public interest / common good will survive; those ruled by the tyranny of self-interest will fall.
I’ve discussed the moral rot consuming the American Project in blog posts and my books. This moral rot–perhaps better described as civic decay–is so pervasive and ubiquitous that we are forgiven for assuming “this is the way it’s always been.”
This inability to discern the rot is the result of the gradualness of the decay. There are many analogies: the slowly boiled frog, the way in which weight gain creeps up on us, and so on. This is the result of humanity’s finely tuned knack to habituate to any new environment and normalize what would have been intolerable in the recent past.
We adapt to changing expectations,

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Livelihoods in a Degrowth Economy

May 30, 2022

The sooner we start preparing for degrowth, the better off we’ll be. A Chinese proverb captures this succinctly: By the time you’re thirsty, it’s too late to dig a well.
Let’s consider livelihood options in an unsustainable economy of extremes that are unraveling, an economy that is being forced to transition to Degrowth.
Nassim Taleb’s book Antifragile explains the differences between fragile systems (systems that cannot survive instability), resilient systems (systems that can survive instability and stay the same) and antifragile systems (systems that adapt and emerge stronger).
The ideal way of life is antifragile: resilient enough to survive adversity and adaptable enough to evolve solutions to whatever comes our way.
The key antifragile traits are

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Checking In On Five Long-Term Cycles

May 17, 2022

The decline phase of S-Curves can be gradual or a cliff-dive.
Way back in 2007 I charted five long-wave cycles that I reckoned consequential:
1. Public debt (accumulating federal deficits)
2. Inflation
3. Oil (energy)
4. Interest rates
5. Speculative fever
Fifteen years ago, my chart look-ahead was about three years, to 2010, with the basic idea being that these long-term cycles had already turned or were about to turn. Looking back, I should have added a few other long cycles: demographics, for example.
I have two takeaways looking at this chart 15 years later. You probably have similar takeaways.
1. I underestimated the status quo’s ability to kick the can down the road for a decade. The motivation to kick the can down the road was never in doubt; what was in

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Curveballs in the Housing Bubble Bust

May 16, 2022

All these curveballs will further fragment the housing market.
Oh for the good old days of a nice, clean housing bubble and bust as in 2004-2011: subprime lending expanded the pool of buyers, liar loans and loose credit created speculative leverage, the Federal Reserve provided excessive liquidity and the watchdogs of the industry were either induced (ahem) to look away or dozed off in a haze of gross incompetence.
The bubble burst was also straightforward: unsustainable debt, leverage, fraud and speculation all unwound in 2009-2011. The cause was obvious and the effect easily predictable.
Alas, today’s housing bubble and bust has these curveballs:
1. A stupid amount of cash sloshing around the world.
2. Who has the cash and an interest in using it to buy houses.

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Herd on the Street

May 15, 2022

The casino has become complex and there are no easy answers or predictable paths.
The Wall Street herd had it easy from 2009 to 2021. Life was simple and life was good: markets were easy to predict. As long as the Federal Reserve kept interest rates near-zero and increased its balance sheet to buy Treasury bonds, the stock market rose.

As long as the Fed increased its balance sheet to buy mortgage-backed securities, housing rose.
If the Fed tried to reduce its balance sheet, the market would quiver and shake and throw a tantrum, and the Fed would go back to keeping interest rates near-zero and increase its balance sheet.
To make money all one had to do was buy the dips.
Alas, life is not so simple these days, and the herd doesn’t know quite which way

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What Happens When Complexity Unravels?

May 10, 2022

Those glancing at the appearances will be assured all is well and it will all sort itself out. Those who look behind the screen will move away as fast as they can.
When finances tighten, there are two choices: cut expenses or increase revenues. Monopolies, cartels and governments can increase revenues by increasing taxes or the price of goods and services because users / customers / taxpayers have no alternative. The rest of us have to cut expenses.
Making lasting cuts in expenses generally requires reducing sources of expense, and within institutions and enterprises, complexity is one systemic source of expense.
But reducing complexity is difficult, so it’s rarely pursued unless the only remaining choice is bankruptcy / collapse.
The problem is there are many

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