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

10 days ago

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

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

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Post-Pandemic Metamorphosis: Never Going Back

12 days ago

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

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(Not) Living Large on Social Security

16 days ago

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

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

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Increasingly Chaotic Volatility Ahead–The New Normal Few Think Possible

19 days ago

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

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Systemic Risks Abound

23 days ago

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

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

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FOMO Is Loco

24 days ago

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

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

25 days ago

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

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

May 18, 2021

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

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Why Wage Inflation Will Accelerate

May 15, 2021

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

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

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The ‘Take This Job and Shove It’ Recession

May 13, 2021

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

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

Wages Share Income,

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Here’s How ‘Everything Bubbles’ Pop

May 10, 2021

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

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Hey Fed, Explain Again How Making Billionaires Richer Creates Jobs

May 8, 2021

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

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

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

April 28, 2021

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

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

April 23, 2021

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

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

April 20, 2021

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

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America’s Fatal Synergies

April 19, 2021

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

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What’s Taboo? Everything Except Greed

April 16, 2021

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

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The Middle Class Has Finally Been Suckered into the Casino

April 15, 2021

The Fed’s casino isn’t just rigged; it’s criminally unstable.
The decay of America’s middle class has been well documented and many commentators have explored the causal factors. The bottom line is that this decay isn’t random; the income of the middle class isn’t going to suddenly increase at 15 times the growth rate of the income of the top 0.1%. (see chart below)
The income of the top 0.1% grew 15 times faster than the incomes of the bottom 90% because that’s the only possible output of America’s distorted financial system. The same can be said of the rising asymmetry of wealth: the top 10% own 2.5 more wealth than the middle class (51% to 90%) and 34 times the wealth of the bottom 50% as a result of the asymmetric structure of our financial system.

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In

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The “Helicopter Parent” Fed and the Fatal Crash of Risk

April 14, 2021

All the risks generated by gambling with trillions of borrowed and leveraged dollars didn’t actually vanish; they were transferred by the Fed to the entire system.
The Federal Reserve is the nation’s Helicopter Parent, saving everyone from the consequences of their actions. We all know what happens when over-protective Helicopter Parents save their precious offspring from any opportunity to learn from mistakes and failures: they cripple their child’s ability to assess risk and learn from failure, guaranteeing fragility and catastrophically blind-to-risk decisions later in life. Helicopter Parents generate a perfection of moral hazard, defined as there is no incentive to hedge risk because one is protected from its consequences. Moral hazard perversely increases

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Is a Cultural Revolution Brewing in America?

April 13, 2021

The lesson of China’s Cultural Revolution in my view is that once the lid blows off, everything that was linear (predictable) goes non-linear (unpredictable).
There is a whiff of unease in the air as beneath the cheery veneer of free money for almost everyone, inequality and polarization are rapidly consuming what’s left of common ground in America.
Though there are many systemic differences between China and the U.S., humans in every nation are all still running Wetware 1.0 and so it is instructive to consider what can be learned from China’s Cultural Revolution 1966-1976.
China’s Cultural Revolution was remarkably different from the Party’s military-political victory of 1949. Where the political revolution was managed by the centralized hierarchy of the

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What’s Changed and What Hasn’t in a Tumultuous Year

April 5, 2021

Inequality is America’s Monster Id, and we’re continuing to fuel its future rampage daily.
What’s changed and what hasn’t in the past year? What hasn’t changed is easy:
1. Wealth / income inequality is still increasing. (see chart #1 below)
2. Wages / labor’s share of the economy is still plummeting as financial speculation’s share has soared. (see chart #2 below)

What’s changed is also obvious:
1. Money velocity has cratered. (see chart #3 below)
2. Federal borrowing / spending has skyrocketed, pushing federal debt to unprecedented levels. (see chart #4 below)
3. Speculation has reached the society-wide mania level. This is evidenced by record margin debt levels, record levels of financial assets compared to GDP and many other indicators. (see chart #5

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Our “Wealth”: Cloud Castles in the Sky

April 4, 2021

Buyers know there will always be a greater fool willing to pay more for an over-valued asset because the Fed has promised us it will always be the greater fool.I realize nobody wants to hear that most of their “wealth” is nothing more than wispy Cloud Castles in the Sky that will dissipate in the faintest zephyr, but there it is: that which was conjured out of thin air will return to thin air.

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I’ve assembled a few charts that reflect the illusion of financial wealth that has a death grip on the public psyche. Something for nothing is a powerful attractor, but it doesn’t offer a narrative that the delusionally self-important demand: I earned this by working hard and being smart. Oh, right, yeah, sure. It had nothing to do with currency being created out of

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The UFO/Fed Connection

April 2, 2021

Perhaps the aliens’ keen interest in Earth’s central bank magic and its potential for destruction results from a wager.
You’ve probably noticed the recent uptick in UFO sightings and video recordings from aircraft of the extraordinary flight paths of these unidentified objects.
Perhaps it’s not coincidence that UFO sightings are soaring at the same time as central banks pursue unprecedented monetary policies. Imagine having the power to destroy an entire planet’s economy with a weapon that leaves the inhabitants and physical structures intact but vaporizes all the money. This weapon would be a monetary neutron bomb that crippled the planet with intangible force, leaving everything tangible untouched.
As author Arthur C. Clarke famously observed, “Any

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Health, Wealth and What Kills Most of Us

March 29, 2021

If health is wealth, and it most certainly is the highest form of wealth, then we would be well-served to take charge of our health-wealth in terms of what behaviors we can sustainably modify.

Longtime correspondent J.F. (MD) recently shared a fascinating graphic ranking the leading causes of death in the U.S. (2016 data, pre-pandemic) compared to searches on Google and what the media reports. (see chart below) Note that this data isn’t a survey asking people to rank the leading causes of death, but it does reflect what health topics they were interested in finding more about via web searches.
The media coverage of each cause of death is also not a representation of what the media presents as the leading causes of death; it’s a reflection of the quantity of

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Stimulus Addiction Disorder: The Debt-Disposable Earnings Pyramid

March 15, 2021

One glance at this chart explains why the status quo is locked on “run to fail” and will implode in a spectacular collapse of the unsustainable debt super-nova..
For those who suspect the status quo is unsustainable but aren’t quite sure why, I’ve prepared a simple chart that explains the financial precariousness many sense. The chart depicts the two core elements of a debt-based, consumerist economy: disposable earnings, defined as the earnings left after paying for essentials which can then be used to service debt and debt.
In other words, if all the household earnings are spent on non-discretionary expenses (rent or mortgage, taxes, food, utilities, healthcare, etc.) then there is no money left to pay the interest and principal on a loan. Lenders consider this

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The Cannibalization Is Complete: Only Inedible Zombies Remain

March 13, 2021

Poor powerless Fed, poor starving cannibals, poor zombies turning to dust. That’s the American economy once the curtains are ripped away.
Setting aside the fictional flood of zombie movies for a moment, we find the real-world horror is the cannibalization of our economy, a cannibalization that is now complete. Every organic source of prosperity and productivity has been captured and consumed, hidden behind the convenient curtains of central bank intervention, “market forces” (hahaha), financialization and fiscal stimulus.
All that’s left now are zombies feeding off the offal of stimulus. Sadly for the cannibals who’ve feasted so well for decades, zombies are inedible. So now the cannibals are starving. Poor cannibals! Once the stimulus runs out, no more zombies.

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Too Busy Frontrunning Inflation, Nobody Sees the Deflationary Tsunami

March 8, 2021

Those looking up from their “free fish!” frolicking will see the tsunami too late to save themselves.
It’s an amazing sight to see the water recede from the bay, and watch the crowd frolic in the shallows, scooping up the flopping fish. In this case, the crowd doing the “so easy to catch, why not grab as much as we can?” scooping is frontrunning inflation, the universally expected result of the Great Reflation Trade.
You know the Great Reflation Trade: the world has saved up trillions, governments are spending trillions, it’s going to be the greatest boom since the stone masons partied at the Great Pyramid in Giza. It’s so obvious that everyone has jumped in the water to scoop up all the free fish (i.e. stock market gains). Only an idiot would hesitate to

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About That +6.8 percent GDP Forecast: Remember That GDP = Waste

March 2, 2021

Any economy stupid enough to rely on the insane distortions of GDP “growth” as its primary measure will richly deserve a Darwin Award when it inevitably collapses in a putrid heap of squandered resources and capital.
We’re told the gross domestic product (GDP) measures growth, but what it really measures is waste: capital, labor and resources that are squandered and then mislabeled “growth” for PR purposes. If we only manage what we measure, then we’re mismanaging our economy by promoting waste as the only metric we measure and incentivize.
Forecasts now predict a rousing 6.8% “growth” in 2021 GDP. In other words, the amount of resources and capital being squandered is going parabolic and we love it!
50 million autos and trucks stuck in traffic, burning millions

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What “Normal” Are We Returning To? The Depression Nobody Dares Acknowledge

March 1, 2021

Perhaps we need an honest national dialog about declining expectations, rising inequality, social depression and the failure of the status quo.
Even as the chirpy happy-talk of a return to normal floods the airwaves, what nobody dares acknowledge is that “normal” for a rising number of Americans is the social depression of downward mobility and social defeat.
Downward mobility is not a new trend–it’s simply accelerating. As this RAND Corporation report documents, (Trends in Income From 1975 to 2018) $50 trillion in earnings has been transferred to the Financial Aristocracy from the bottom 90% of American households over the past 45 years.
Time magazine’s article on the report is remarkably direct:The Top 1% of Americans Have Taken $50 Trillion From the Bottom 90%

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Oil and Debt: Why Our Financial System Is Unsustainable

February 25, 2021

How much energy, water and food will the “money” created out of thin air in the future buy?
Finance is often cloaked in arcane terminology and math, but the one dynamic that governs the future is actually very simple.
Here it is: all debt is borrowed against future supplies of affordable hydrocarbons (oil, coal and natural gas). Since global economic activity is ultimately dependent on a continued abundance of affordable energy, it follows that all money borrowed against future income is actually being borrowed against future supplies of affordable energy.
Many people believe that alternative “green” energy will soon replace most or all hydrocarbon energy sources, but the chart below shows why this belief is not realistic: all the “renewable” energy sources are

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