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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

There’s No Bottom Until Frenzied Speculation Turns to Dust

9 days ago

Only when speculative sizzle attracts no buyers / marks will the bottom be in.
There hasn’t been a truly organic bottom in stocks in decades. Fifteen years of relentless central bank manipulation since the 2008-09 Global Financial Meltdown has persuaded punters that central banks will always save us should the market turn down because relentless central bank suppression of interest rates and expansion of liquidity (a.k.a. free money for financiers) are now necessary and thus predictably permanent.
Central banks have rescued punters from every market drop. This has pushed moral hazard to near-infinity: since we know the Fed et al. will rescue us, no matter how stupid or venal or risky our bets, then why not increase the leverage, risk and fraud at every turn?

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FTX: The Dominoes of Financial Fraud Have Yet to Fall

10 days ago

Once assets are revealed as worth far less than claimed, insolvency is the inevitable result.
If you haven’t plowed through dozens of post-collapse commentaries on FTX, I’m saving you the trouble: here’s a distillation of what matters going forward. If you’re seeking a forensic accounting of FTX, others have done this work already. If you’re seeking an ideological diatribe, you won’t find that here, either.
What you will find is insight into the real innovation of FTX: FTX compressed the entire playbook and history of financial fraud into one brief cycle of the credulous bamboozled, Charles Ponzi bested and creative accounting being revealed for what it really is, fraud.
All financial frauds share the same set of tools. The toolbox of financial fraud, whether it

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Where Crypto Went Wrong

15 days ago

You want to fix the world with finance? Then fix this: wages’ share of a financialized, globalized, speculative-bubble dependent economy have been falling for decades. Fix this and you really will change the world. Anything less changes nothing.
Let’s start by stipulating my perspective on cryptocurrencies is neither positive nor negative in the usual context of “to the moon” or “worthless,” nor does it track any of the conventional narratives (decentralized finance will conquer the world, etc.)
I’ve thought a lot about “money” and its role in the economic-social order, and its role in the extreme asymmetries of wealth-power-income inequalities that are dismantling the social order in broad daylight. I’ve also thought a lot about work and its role in social

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Asymmetries, Distortions and Denial

16 days ago

When bubbles pop, it’s natural selection at its most unforgiving: “adapt or die,” and those who ignore or discount consequential asymmetries will have a very difficult time navigating the triage.
After years of relative stability, it seems asymmetries, distortions and denial are playing out in unexpectedly destabilizing ways. These complex and often opaque dynamics are interacting with each other and reinforcing each other in difficult to predict ways.
No wonder instability is the new stability.
Asymmetry comes in many forms. Advantages and disadvantages, weaknesses and strengths–these terms describe asymmetry in terms of adaptive / selective pluses or minuses and in relative superiority or inferiority.
Asymmetric dominance is not always an adaptive advantage, as

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What Does Liberation Mean in the Real World?

October 31, 2022

Liberation in the real world is the result of self-reliance and investing in our own well-being.
Liberation has many contexts. It can mean being freed from imprisonment or servitude, freedom from gnawing want or oppression, or being liberated from prisons of the mind.
Note that the first form of liberation is external / material, the second is internal / psychological / spiritual. Many confuse the two, blaming an oppressive system for their unhappiness rather than their internal acquiescence to the system’s narratives and values.
For many, liberation depends on the actions of others. If only we had different leaders, a different financial financial system, a different energy system, a different constellation of media, and so on–if only the powers that control our

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The End of the “Growth” Road

October 27, 2022

Everyone caught by surprise that the infinite road actually has an end will face a bewildering transition.
The End of the “Growth” Road is upon us, though the consensus continues to hold fast to the endearing fantasy of infinite expansion of consumption.
This fantasy has been supported for decades by the financial expansion of debt, which enabled more spending which pushed consumption, earnings, taxes, etc. higher.
All the financial games are fun but “growth” boils down to an expansion of material consumption: more copper mined and turned into wire which is turned into new wind turbines, housing, vehicles, appliances, etc.
There are three problems with the infinite expansion of consumption “growth” paradigm.
1. Everyone in developed economies already has

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Now That Housing Is Rolling Over, Is That Fixer-Upper a Deal?

October 26, 2022

So-called “cosmetic work” can cost tens of thousands of dollars.
Now that housing is finally rolling over due to rising mortgage rates and bubble valuations, many of those who have been priced out of the market are hoping to take advantage of lower prices. In many cases, the most affordable segment is fixer-uppers, homes that are distressed for any number of reasons: a lack of maintenance; construction or drainage deficiencies; obsolete or defective foundations, water or termite damage, etc.
Longtime correspondent Daniel C. is familiar with my building experience, and so he asked a question that will benefit many potential homebuyers: “What advice would you give to someone with next to no homebuilding skills, but willing to learn, regarding getting into a

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A Lesson in Markets and Bureaucracies: The Very Instructive History of Rat Farms

October 22, 2022

In effect, authorities created two rat farms, both unintended: the sewers, and the private-sector rat-farms.
The history of Rat Farms offers a valuable lesson in how markets and bureaucracies work.
The story of how the colonial authorities in Hanoi came to establish two kinds of rat farms is highly instructive.
The first rat farm was unintentional. French colonial authorities decided to modernize the French Quarter of Hanoi (where Westerners lived) by constructing a modern sewer system, the overall goal being to establish “a little Paris in the East.”
Their understanding of sewers was limited to the first-order effects: sewers safely collected and disposed of human waste.
They did not anticipate the second-order effect: the sewer was Rat Paradise, as “the pipes

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What Everybody Knows No Longer Matters

October 18, 2022

What nobody yet knows (or the few insiders who do know are keeping to themselves) is what will matter.
Being a doom-and-gloom Bear stops being fun when the Bear Bar gets crowded. When everyone has moved to our side of the boat, the grizzled Bears get nervous, especially when they peer over at the Bull side of the boat and see a handful of dispirited Bulls ignoring the guy yelling at the bartender to “back up the truck.”
The problem old-timers see is what everyone knows no longer matters. Markets do a cliff-dive not when all the bad news has been beaten into everyone’s heads for months on end but when the bad news has yet to percolate through the euphoria.
Bull markets start when the Bullish news dwindles to signal-noise and buyers have given up or are going short

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What If Everyone’s Wrong (Just Long Enough to Blow Up Their Account)?

October 15, 2022

Trying to restore a system that is spiraling away from equilibrium with new extremes of obsolete, misguided policies only accelerates the swings from apparent stability to cascading chaos.
The conventional view of the market is there are two sides to every trade and one is right and the other is wrong.The punters who correctly read the tea leaves and who were right scored gains on their trade and those punters whose forecast was wrong lost their bet.
But what if this market isn’t binary, but rather a crushing machine that pulverizes every forecast and position in a disorderly process in which every forecast/position is crushed to rubble and then the market moves on to another forecast/position and crushes that, and so on until every forecast/position has been

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Everything’s Fixed–Except What’s Broken

October 13, 2022

Everything’s fixed except what’s no longer profitable to plunder. Underfunded, ignored, mismanaged by incompetents, it breaks.

Everything’s fixed–except what’s broken. Hmm. Maybe we need to read that again.

Everything’s fixed means it’s been "fixed" like a game or match has been fixed–rigged to benefit insiders while the unwary onlookers and punters have been led to believe that it’s "fair and open." That con job is the critical cover to cloak the fix/rigging.

If a market or regulatory system can’t be rigged to benefit insiders, then it’s broken because if it isn’t profitable for insiders, it’s neglected until it breaks.

It’s rather ironic, isn’t it? If you want a system to semi-function as advertised, it has be rigged to benefit insiders, as only

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‘Quiet Quitting’ Isn’t Just About Jobs; It’s About a Crumbling Economy

October 10, 2022

The unraveling of hyper-Globalization and hyper-Financialization will generate consequences few conventional analysts and pundits anticipate.
TikTok videos on ‘Quiet Quitting’–doing the minimum at work, giving nothing extra to the employer– have gone viral, and The Wall Street Journal quickly picked up the thread:
If Your Co-Workers Are ‘Quiet Quitting,’ Here’s What That MeansSome Gen Z professionals are saying no to hustle culture; ‘I’m not going to go extra.’
The movement away from putting career first and sacrificing to get ahead financially is global:From the Great Resignation to Lying Flat, Workers Are Opting OutIn China, the U.S., Japan, and Germany, younger generations are rethinking the pursuit of wealth.
Here are a few excerpts from the WSJ article:

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Devil’s Advocates are Investors’ Best Friends

October 4, 2022

If those on the opposite side of the trade are viewed as threats rather than friends, it’s time to revise the analysis.
Of the many self-generated dangers investors face, few are more dangerous than confirmation bias, the comfort we experience seeking out views that confirm our own positions and our resistance to studying opposing views.
Confirmation bias is both self-evident and complex. We all understand the psychologically soothing feeling when others heartily agree with us, and the frustration, anxiety and sense of being threatened we experience when our core positions are challenged.
But there’s more to it than just that. Taking a position with conviction empowers us, for by publicly espousing a forecast, prediction or position, we’re implicitly saying, “When

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Loonshots and Collapse

September 28, 2022

The momentum of franchise success and centralization of power are fatal.
Loonshots are like moonshots, only crazier and trickier to commercialize. Author Safi Bahcall titled his book on how to nurture change-the-world innovations Loonshots: How to Nurture the Crazy Ideas That Win Wars, Cure Diseases, and Transform Industries.
But as Bahcall persuasively argues, loonshot innovations aren’t enough. You also need to nurture franchises that commercialize the innovations into products and services that pay the bills and fund the search for loonshot.
Bahcall identifies two kinds of loonshots: product and system. One of his examples: the 747 Jumbojet was a product innovation, the SABRE airline reservation software was a system innovation. Both are essential.
The book has

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The End of Cheap Food

September 18, 2022

Global food production rests on soil and rain. Robots don’t change that.
Of all the modern-day miracles, the least appreciated is the incredible abundance of low cost food in the U.S. and other developed countries.The era of cheap food is ending, for a variety of mutually reinforcing reasons.
We’ve become so dependent on industrial-scale agriculture fueled by diesel that we’ve forgotten that when it comes to producing food, “every little bit helps”–even small backyards / greenhouses can provide meaningful quantities of food and satisfaction.
Virtually every temperate terroir/micro-climate is suitable for raising some plants, herbs, trees and animals. (Terroir includes everything about a specific place: the soil type, the climate variations, sun exposure, the

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The Fourth Turn, Turn, Turn

September 15, 2022

The cycles of The Fourth Turning, Fischer and Turchin are all in alignment at this point in history..
The 1997 book The Fourth Turning: An American Prophecy proposed a cyclical pattern of four 20-year generations which culminate in a national crisis every 80 years.The book identifies these dates as Fourth Turnings: 1781 (Revolutionary War), 1861 (Civil War) and 1941 (global war). add 80 years and voila, 2021.
I use the term Fourth Turning generically to describe an existential crisis that decisively changes the course of national identity and history.
In other words, we don’t have to accept the book’s theory of generational dynamics to accept an 80-year cycle.
There are other causal dynamics in play that also tend to cycle: the credit (Kondratieff) cycle, for

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Why This Recession Is Different

September 13, 2022

All of these are structural dynamics that won’t go away in a few months or years.
Let’s explore what’s different now compared to recessions of the past 60 years.
1. Deglobalization is inflationary. Offshoring production to low-cost countries imported deflation (product prices remained flat or declined) and boosted corporate profits.
Deglobalization will increase costs and pressure profits.
Just as cleaning up the environmental damage of rampant industrialization imposed costs on the U.S. economy in the 1970s that generated stagflation (inflation and stagnant growth), reshoring essential supply chains will impose costs, pushing prices higher.
Everything costs more in developed economies due to their high wages and social costs (pensions, healthcare, disability,

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The EU’s Crisis Is Global

September 9, 2022

The EU’s crisis isn’t limited to energy. It is a manifestation of the global breakdown of Neocolonialism, Financialization and Globalization.
The European Union (EU) was seen as the culmination of a centuries-long process of integration that would finally put an end to the ceaseless conflicts that had led to disastrous wars in the 20th century that had knocked Europe from global preeminence.
Wary of the predations of the U.S. and rising Asian powers, European nations sought the economic and diplomatic strength of a confederation that would be greater than the sum of its parts, a union that would restore Europe’s rightful place as a global power.
This worthy goal was undermined by the destructive dynamics of the past forty years: Neocolonialism, Financialization

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Why Some Cities May No Longer Be Viable

September 8, 2022

Any city whose lifeblood ultimately depends on hyper-globalization and hyper-financializationwill no longer be viable.
The human migration from the countryside to cities has been an enduring feature of civilization.Cities concentrate wealth, productivity and power, and so they’re magnets to talent and capital, offering newcomers the greatest opportunities.
Cities are efficient, packing population, productivity and wealth creation into small areas.Slums and sweatshops are immensely profitable, and cramming people into centers of manufacturing is far more efficient than scattering people and production across a landscape.
Cities generally arose on coastal harbors, navigable rivers or the confluence of overland trade routes, as these hubs enabled profitable trade and

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The Global Energy Crunch

September 6, 2022

If we insist on doing the transition the hard, slow, costly way rather than the easy, fast, cheap way, it’s going to be a needlessly arduous, soul-crushing slog.
Let’s cover a few common-sense points and ask a few questions about the Global Energy Crunch.Let’s start with the high-tech, super-costly solutions that many promote as the surefire source of abundant, affordable energy: thorium reactors, mini/modular-reactors, clean coal plants and fusion.
Every one of these may turn out to be a solution, but in the here and now they take many years to build and huge sums of money. Full-scale functioning examples of these technologies do not yet exist. Various prototypes are in development, but the timelines are long and uncertain.
For example, one modular nuclear

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The System Is Busy Cannibalizing Itself

September 5, 2022

As the word suggests, cannibalism won’t end well for those consumed by the infinitely insatiable few.
Cannibalize is an interesting word. It is a remarkably graphic way to describe the self-inflicted destruction of a system by stripping previously functional subsystems to sustain the illusion of system functionality.
Here are some examples.
An Air Force which routinely posts photos of its impressive fleet of 100 aircraft has been cannibalizing parts from 80 aircraft to keep 20 flying. This maintains the useful illusion that all 100 aircraft are available for combat when only 20% are functional, and most of those only minimally so.
An enterprise maintains a substantial cash position even as it loses money every quarter by quietly selling off its most valuable

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Make Sure You Download the Latest Ministry of Propaganda Updates

August 30, 2022

While it’s fun to sort all the propaganda into various boxes, we would do well to look for what all the marketers / MoP players seek to mystify.
It’s time once again to check for Ministry of Propaganda updates, which like Windows and iOS is constantly being updated to counter new threats and enhance the user experience (heh).
Much like the other operating systems that underpin our daily lives, the core functions of the MoP don’t change much.My chart from 2007 remains an instructive summary of MoP operations, with the only changes being Mr. Buffett is now buying oil companies and social media corporations are now major media players.
The core mission of the Ministry of Propaganda isn’t just to push a desirable narrative–it’s to mystify the underlying dynamics of a

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What’s Worse Than Inflation? Depression + Inflation

August 26, 2022

If “markets” controlled by the rich are allowed to distribute essentials, the result will be civil disorder and the overthrow of regimes.
What’s worse than inflation? Depression + Inflation. And that’s where we’re heading. As I explained yesterday in The Fed Can’t Stop Supply-Side Inflation, central banks are trying to reduce inflation by crushing demand. This works in eras of abundance, but not in eras of scarcity in which supply constraints drive inflation.
If the FEW essentials–food, energy and fresh water–are supply-constrained, monetary tightening won’t reduce inflation. Jacking up interest rates to crush demand won’t increase supplies, it only exacerbates the destabilizing inequality of who gets their fill (the rich) and who doesn’t (everyone else).

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The Fed Can’t Stop Supply-Side Inflation

August 24, 2022

The Fed and other central banks have zero control of supply-driven inflation, period.
America’s financial punditry is bewitched by four fatal fantasies:
1. Inflation is demand-driven. If the Federal Reserve (or other central banks) reduce demand with monetary tools like raising interest rates, inflation will cool.
2. Substitution of high-cost goods with lower-cost goods reduces inflation, and substitution is infinite: there’s always cheaper chicken if beef gets too pricey.
3. Higher prices will lead suppliers to increase production, which will increase supply and reduce prices.
4. The Federal Reserve has control of all these inflation-reducing dynamics via interest rates and its balance sheet (buying or selling various durations of Treasury bonds).
All of these

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The Real Story of America Abandoning the Gold Standard

August 23, 2022

Even currencies maintaining convertibility to gold are still subject to bond yields, interest rates, trade and capital flows.
It’s widely held that all of our financial woes are the result of abandoning the discipline of the gold standard in 1971. The premise here is that if the U.S. had maintained the gold standard, the excesses of the fiat currencies regime could not have arisen.
The real story is the U.S. was hemorrhaging gold in the 1960s at such a rate that America’s entire gold reserves would have disappeared by 1976 – 1978. Other nations converted their dollars into gold as a furious pace, draining America’s gold reserves. Once your gold is gone, you can’t have a gold standard. (see chart below.)
The point here is the U.S. was only a few years away from

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A Tale of Two Recessions: One Excellent, One Tumultuous

August 13, 2022

Events may show that there are no winners, only survivors and those who failed to adapt.
Some recessions are brief, necessary cleansings in which extremes of leverage and speculation are unwound via painful defaults, reductions of risk and bear markets.
Some are reactions to exogenous shocks such as war or pandemic. The uncertainty triggers a mass reduction of risk which recedes once the worst is known and priced in.
Far less frequently, structural recessions are lengthy, tumultuous upheavals that can set the stage for excellent long-term expansion or unraveling and collapse. In these structural recessions, 10% to 20% of the workforce loses their jobs as entire sectors are obsoleted and jobs that depend on excesses of debt and speculation go away.
In the U.S.

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A Most Peculiar Recession

August 11, 2022

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?

August 10, 2022

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

August 3, 2022

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”?

August 2, 2022

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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