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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

Is 2021 an Echo of 1641?

8 days ago

If you don’t discern any of these dynamics in the present, what are you choosing not to see?
The reason why history rhymes is that humanity is still using Wetware 1.0 and so humans respond to scarcity, abundance and conflicts over them in the same manner.
I am struck by similarities between the conflict-torn mid-1600s and the present: global climate change (The Little Ice Age in the 1600s), political upheavals and wars which intertwined civil and imperial conflicts. Global Crisis: War, Climate Change and Catastrophe in the 17th Century is a fascinating overview of this complex era which disrupted regimes and empires from England to China.
Climate change (The Little Ice Age) generated scarcities of grain in a time of burgeoning human populations. As in the present

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2021: If It Wasn’t For Bad Luck, We Wouldn’t Have No Luck At All

11 days ago

If we have indeed begun a sustained “reversal of fortune”, it might be prudent to consider the possibility we’re only in the first inning of a sustained run of back luck.In our self-deluded hubris, we reckon we’ve moved beyond the influence of fortune, a.k.a. Lady Luck: our technologies are so powerful and our monetary policies so godlike that nothing as random as luck could ever crush our limitless expansion.
Thus does hubris beg for a comeuppance: the greater the hubris, the greater the reversal of fortune, the greater the confidence in our godlike powers, the greater the collapse of our prideful faith in technology and economic policies.
So we’ve enshrined our hubris-soaked happy story: the virus will naturally weaken, vaccines will conquer the Covid virus in

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The Tyranny Nobody Talks About

14 days ago

All the tricks to hide our unaffordable cost structure have reached marginal returns. Reality is about to intrude.
There is much talk of tyranny in the political realm, but little is said about the tyrannies in the economic realm, a primary one being the tyranny of high costs: high costs crush the economy from within and enslave those attempting to start enterprises or keep their businesses afloat.
Traditionally, costs are broken down into fixed costs such as rent and fees which don’t change regardless of whether business is good or bad, and operating costs such as payrolls, fuel, etc. which rise and fall with revenues.
To some degree, this division no longer matters, because the entire cost structure of our economy is tyrannically high: if rent, insurance, taxes

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The Coming War on Wealth and the Wealthy

16 days ago

Here’s looking at you, Federal Reserve–thanks for perfecting ‘legalized looting’ and neofeudalism in America.
The problem with pushing a pendulum to its maximum extreme on one end is that it will swing back to the other extreme minus a tiny bit of friction.
America has pushed wealth/income inequality, unfairness and legalized looting to the maximum extreme. Now it will experience the swing back to the other extreme. This will manifest in a number of ways, one of which is a self-organizing populist war on wealth and the wealthy.
To say the system is rigged to benefit the already-wealthy and powerful is a gross understatement. Take the tax code as an example–thousands of pages of arcane tax breaks and giveaways passed by a thoroughly corrupted Congress and

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2020 Was a Snack, 2021 Is the Main Course

18 days ago

One of the dishes at the banquet of consequences that will surprise a great many revelers is the systemic failure of the Federal Reserve’s one-size-fits-all “solution” to every spot of bother: print another trillion dollars and give it to rapacious financiers and corporations.
Though 2020 is widely perceived as “the worst year ever,” it was only a snack. The real banquet of consequences will be served in 2021. The reason 2020 was only a snack is that systems didn’t break down in 2020. The reason 2021 is the main course is that systems
will break down, and once broken, they cannot be restored.
I made the chart below to explain how systems fail and why they cannot be restored. Systems have numerous sources of potential fragility:
Systems can be tightly bound to

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2020 the “Worst Year Ever”–You’re Joking, Right?

24 days ago

So party on, because “the worst year ever” is ending and the rebound of financial markets, already the greatest in recorded history, will only become more fabulous.
Of the lavish banquet of absurdities laid out in 2020, one of the most delectable is Time magazine’s December 14 cover declaring that 2020 was the “worst year ever.” You’re joking, right? In history’s immense tapestry of human misery, it’s not even in the top 100 worst years.
Consider 1177 B.C., when many of the great civilizations of the Mediterranean Sea and Mideast collapsed, and the survivors struggled through a pre-modern Dark Ages. This book assembles what is known about this catastrophic era:  1177 B.C.: The Year Civilization Collapsed.
Then there’s 1644 A.D., when the Ming Dynasty was

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Big Media: Selling the Narrative and Crushing Dissent for Fun and Profit

December 21, 2020

The profit-maximizing Big Tech / Big Media Totalitarian regime hasn’t just strangled free speech and civil liberties; it’s also strangled democracy.
The U.S. has entered an extremely dangerous time, and the danger has nothing to do with the Covid virus. Indeed, the danger long preceded the pandemic, which has served to highlight how far down the road to ruin we have come.
The danger we are ill-prepared to deal with is the consolidation of the private-sector media and its unification of content into one Approved Narrative which is for sale to the highest bidders. This is the perfection of for-profit Totalitarianism in which dissent is crushed, dissenters punished and billions of dollars are reaped in managing the data and content flow of the one Approved

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When Social Capital Becomes More Valuable Than Financial Capital

December 20, 2020

This devaluation of financial wealth–and its transformation to a dangerous liability– will reach extremes equal to the current extremes of wealth-income inequality.
Financial capital–money–is the Ring that rules them all. But could this power fall from grace? Continuing this week’s discussion of the idea that that extremes lead to reversions, let’s consider the bedrock presumption of the global economy, which is that money is the most valuable thing in the Universe because the owner of money can buy anything, as everything is for sale. The only question is the price.
Reversion to the mean is a statistical dynamic but it is also a human social dynamic: for example, once the social / financial / political pendulum reaches Gilded Age extremes of wealth/income

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Can 20 Years of Deflation Be Compressed into Two Years? We’re About to Find Out

December 17, 2020

Extremes become more extreme right up until they reverse, a reversal no one believes possible here in the waning days of 2020.
The absolutely last thing anyone expects is a collapse of all the asset bubbles, i.e. a deflation of assets that reverses the full 20 years of bubble-utopia since 2000. The consensus is universal: assets will continue to loft ever higher, forever and ever, because the Fed has our back, i.e. central banks will create trillions out of thin air without any consequence other than assets lofting ever higher.
This research paper from the San Francisco Federal Reserve begs to differ. Here is an excerpt from Longer-Run Economic Consequences of Pandemics (San Francisco Federal Reserve)
“Measured by deviations in a benchmark economic statistic,

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One Little Problem with the “All-Electric” Auto Fleet: What Do We Do with all the “Waste” Gasoline?

December 15, 2020

Regardless of what happens with vaccines and Covid-19, debt and energy–inextricably bound as debt funds consumption– will destabilize the global economy in a self-reinforcing feedback.
Back in the early days of the oil industry (1880s and 1890s), the product that the industry could sell at a profit was kerosene for lighting and heating. Since there was no automobile industry yet, gasoline was a waste product that was dumped into streams.
Why couldn’t the refiners produce only kerosene? Why did they end up with “worthless” gasoline?
The answer is a barrel of oil produces a variety of products. While there is some “wiggle room” to produce more diesel and less gasoline, etc., it isn’t possible to turn a barrel of oil into only one product.
John D. Rockefeller became

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2021 is Already Optimized for Failure

December 1, 2020

One sure way to identify a system “optimized for failure” is if all the insiders are absolutely confident the system is “optimized for my success”.
I often discuss optimization here because it offers an insightful window into how systems become fragile and break down. When we optimize something, we’re aiming to get the most bang for our buck: maximize our efficiency, profit, productivity, etc., while minimizing our costs.
To maximize our goal, whatever it is–profits, power, whatever– we strip away redundancy and buffers because these add costs and don’t boost our desired output. They create resilience, i.e. the ability to survive disruptions, but the logic of optimization is relentless: get rid of all extraneous costs, because resilience doesn’t boost the bottom

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A Dimly Lit Thanksgiving

November 27, 2020

Our overweening faith and confidence in our wealth and power make this a dimly lit Thanksgiving.
A public expression of gratitude by victorious sports stars, lottery winners, etc. is now the convention in America: coaches, teammates, family and mentors (or agents) are recognized as an expression of the winners’ humility and gratitude for everyone that contributed to the success.
As sincere as each individual’s gratitude may be, there’s something forced and phony about this public ritual of virtue-signaling that has transformed it into an empty cliche. There are various drivers of this ritual–we like our heroes to be humble–but it may also be the result of our increasingly winner take most economy: as the winners are boosted into the orbit of wealth and

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Our Frustrations Run Far Deeper Than Covid Lockdowns

November 24, 2020

The reality is the roulette wheel is rigged and only chumps believe it’s a fair game.It’s easy to lay America’s visible frustrations at the feet of Covid lockdowns or political polarization, but this conveniently ignores the real driver: systemic unfairness. The status quo has been increasingly rigged to benefit insiders and elites as the powers of central banks and governments have picked the winners (cronies, insiders, cartels and monopolies) and shifted the losses and risks onto the losers (the rest of us).
We now live in the world the 19th-century French economist Frederic Bastiat so aptly described:
“When plunder becomes a way of life for a group of men in a society, over the course of timethey create for themselves a legal system that authorizes it and a

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Why I’m Hopeful About 2021

November 24, 2020

What we need is not a return to the corrupt, tottering kleptocracy of 2019, but a re-democratization of capital, agency and money.
I’m hopeful about 2021, and no, it’s not because of the vaccines or the end of lockdowns or anything related to Covid. The status quo is cheering the fantasy that we’ll soon return to the debt-soaked glory days of 2019 when everything was peachy.
The problem with this “brand” of magical thinking is that stripped of self-serving PR, the world of 2019 was an autocratic kleptocracy stripmining the planet to enrich the few at the expense of the many. Viewed through this lens, what’s hopeful isn’t returning to an autocratic kleptocracy but moving beyond it. The most hopeful thing in my mind is that the Status Quo is devolving from its

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Vaccines–Too Little, Too Late?

November 22, 2020

Trust in institutions, authorities and Big Pharma is scraping the bottom of the barrel, and rushing these vaccines into mass use with extremely high expectations of efficacy is setting up the potential for a devastating loss of trust in the vaccines should they fail to live up to the claims of 100% safety and 95% effectiveness.

We’re being assured by Pfizer and Moderna that their Covid vaccines are 95% effective and are safe enough to be injected into hundreds of millions of people. Before accepting these extremely consequential claims, let’s look at the actual testing process and results.
In the Pfizer trial, half of the 44,000 volunteers received the vaccine and the other half got a placebo shot. Then the researchers waited around to see how many of the

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U.S. Healthcare Is Unraveling

November 19, 2020

The confidence that there will always be facilities and professionals to care for us is no longer realistic.
I’ve covered the systemic problems of U.S. healthcare for over a decade, and as a result I’ve attracted numerous healthcare professionals as correspondents. I’ve been corresponding with some for almost 15 years, and this correspondence has given me a sobering education in the realities of our fully financialized (and thus hollowed-out) healthcare system. I’ve shared many of the professionals’ insights over the years, for example:
Can “Sickcare” Survive the Pandemic?
(April 14, 2020)
Like the rest of the financialization machine, sickcare was never sustainable.
The hollowing out of financialization has been accelerating for over a decade. In effect, there

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Don’t Blame Covid: The Economy is Imploding from Over-Capacity and Corrupt Cartels

November 17, 2020

Now that the bubble has burst, the hope is that removing the pin will magically restore the burst bubble. Sorry, it doesn’t work that way.
Here’s the fantasy: if we stop the shutdowns, the economy will naturally bounce back to its oh-so wunnerful perfection of Q3 2019. This is a double-dose of magical thinking and denial. The U.S. economy was unraveling in 2019 from 11 long years of Fed-induced over-capacity in almost everything (except integrity, competition, transparency and social cohesion) and the bone-crushing burden of corrupt, greedy cartels that have the nation by the throat.
The reality nobody dares mention is that thanks to 20 years of the Federal Reserve’s easy money, there’s rampant over-capacity everywhere you look: there’s too many cafes, bistros,

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Prepare for Winter

November 16, 2020

Realism must precede optimism or the optimism will collapse as the tsunami of reality comes ashore. It’s time to prepare materially and psychologically for a winter unlike any other in our lifetimes.
Here’s the view from 30,000 feet:
1. The stock market and the general zeitgeist of optimism have soared based on expectations that the real-world economy and efforts to suppress Covid would also track a V-shaped recovery.
While GDP did make a V-shaped recovery, GDP (gross domestic product) is a measure of flows and consumption, not a measure of the socio-economic “balance sheet.” GDP measures the money flowing through accounts but not the “assets” of a functioning society: functional institutions and infrastructure and the well-being and security of the citizenry.

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“The Great Reset” Already Happened

November 14, 2020

Put another way: the elites have cannibalized the system so thoroughly that there’s nothing left to steal, exploit or cannibalize.
The global elites’ techno-fantasy of a completely centralized future, The Great Reset, is addressed as a future project. Too bad it already happened in 2008-09. The lackeys and toadies tasked with spewing the PR are 12 years too late, and so are the critics listening to the PR with foreboding.
Simply put, events outran our understanding of them. The future already manifested while we were trying to cram the present arrangement into an obsolete conceptual framework.
In broad-brush, the post-World War II era ended around 1970. The legitimate prosperity of 1946-1970 was based on cheap oil controlled by the U.S. and the hegemony of the

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Everything You Don’t Want to Know About Covid Vaccines (Because You Can’t Be Bullish Anymore)

November 12, 2020

In such a highly polarized, politicized environment, is such a scrupulously objective study even possible?
Now that we’ve had the happy-talk about Pfizer’s messenger-RNA (mRNA) vaccine (and noted that Pfizer’s CEO sold the majority of his shares in the company immediately after the happy-talk), let’s dig into messenger-RNA (mRNA) vaccines which are fast approaching regulatory approval.
Some people have concluded vaccines are not safe, regardless of their source or mechanisms. These people will never take any Covid vaccine.
Others will also decline a vaccine because they’ve concluded Covid is overblown.
Fair enough. But many other people conclude Covid is dangerous, partly because so little is known about its long-term effects (Long-Covid, Long-Haulers). Covid’s

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No Wonder the Super-Rich Love Inflation

November 10, 2020

Asset inflation benefits the super-rich more than anyone else because they own the vast majority of these assets.
With the reflation euphoria running full blast, maybe central banks will finally get all that inflation they’ve been pining for. So let’s ask cui bono–who will benefit from inflation?
The Super-Rich love inflation and the money-printing that generates it.
Longtime correspondent Michael M. explains the dynamic behind billionaires’ adoration of inflation:
“Why does a game of Monopoly work? Because there is a zero-boundary for every player’s net worth.
If you were given endless credit (so negative net worth is allowed without limit), the game becomes pointless.
Is there also an upper bound at Monopoly?
Well, the bank at Monopoly can run out of money, I

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Forget GOAT, Look at GBOAT: The Greatest Bubble Of All Time

November 9, 2020

So enjoy the GBOAT (greatest bubble of all time) but watch the clock.
Sports fans debate who qualifies as GOAT–the greatest of all time: in hoops, Kobe, Jordan, Kareem, Magic; in boxing, Ali, and so forth.
What we have today is GBOAT–the greatest bubble of all time That it’s GOAT is beyond doubt, as the charts below reveal.
Bubbles have a few unique characteristics which cannot be captured by financial metrics. The most important such characteristic is that mainstream financial managers don’t see it as a bubble. For those who do admit valuations may be a bit stretched (heh), these professionals shrug and say that since the music’s still playing, they have to keep dancing, i.e. yes there may be a bubble but it won’t pop anytime soon.
The other characteristic of

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Here’s Our Historical Analogy Menu: Rome, the USSR or Revolutionary France

November 7, 2020

The core dynamic is ultimately the loss of social cohesion within the ruling elites and in the social order at large.
There’s a definite end of days feeling to the euphoria that the world didn’t end on November 3. And what better way to celebrate the victory of what passes for normalcy with a manic stock market rally?
It’s as if everyone knows there is no returning to the good old days of a well-oiled Imperial machine chewing through any and all obstacles, and this realization is so frightening that the need to pretend everything is fine, just fine, overwhelms the last remaining ties to reality.
And since there’s a brief intermission between gladiator battles while the Coliseum attendants remove the fallen heroes from the last entertainment, let’s play the

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What We Don’t Elect Matters Most: Central Banking and the Permanent Government

November 5, 2020

We’re Number One in wealth, income and power inequality, yea for the Fed and the Empire!
If we avert our eyes from the electoral battle on the blood-soaked sand of the Coliseum and look behind the screen, we find the powers that matter are not elected: our owned by a few big banks Federal Reserve, run by a handful of technocrats, and the immense National Security State, a.k.a. the Permanent Government. These entities operate the Empire which hosts the electoral games for the entertainment and distraction of the public.
The governance machinery controlled by elected representatives is tightly constrained in what it can and cannot do.
It can’t do anything to stop the debasement of the nation’s currency, which is totally controlled by the Politburo of the Fed, nor

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Our Imperial Presidency

November 4, 2020

Regardless of who holds the office, America’s Imperial Project and its Imperial Presidency are due for a grand reckoning.
While elections and party politics generate the emotions and headlines, the truly consequential change in American governance has been the ascendancy of the Imperial Presidency over the past 75 years, since the end of World War II.
As commander-in-chief of the armed forces, the Constitution grants the President extraordinary but temporary powers in wartime. With the power to declare war granted solely to Congress, this dangerous (in the Founders’ view) expansion of Executive power was tolerated because it was temporary and necessary in the fast-moving emergency of war.
Congress has declared war a total of five times, while U.S. armed forces

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ALICE Doesn’t Work Here Anymore

October 30, 2020

What the political class and the Financial Nobility don’t yet grasp is that ALICE will never go back to her insecure, low-wage job, ever.
Meet ALICE: Asset Limited, Income Constrained, Employed, at least she was employed until the pandemic presented impossible choices between taking care of her children and their education, and her aging parents, and keeping her demanding, low-wage job.
Though it doesn’t fit in with the cute mythology of “capitalism” that apologists love to promote, ALICE wasn’t working to get ahead–she was working to barely survive in an economy where wages have stagnated for decades and recently lost ground at an alarming rate as costs for everything from rent to childcare to utilities have soared while her hours have been cut.
This is the

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Flying Blind: Clueless about Risk, We’re Speeding Toward Systemic Failure

October 29, 2020

For all these reasons, the risks of systemic collapse are much higher than commonly anticipated.
There’s an irony in discussing risk: since we all have an instinctive reaction to visible risk, we think we understand it. But alas, we don’t, especially when the risk is invisible and systemic.
We even misjudge extremely visible risk. People routinely die rushing to save someone who foolishly waded into fast-moving water a few yards above a waterfall. The rescue is clearly suicidal and doomed but they try anyway, doubling the tragedy by losing their own life.
We’re prone to ignore risks that we’ve taken and gotten away with before: boat’s overloaded and seas are rising? Hey, we’ve done this a hundred times and nothing bad ever happened.
We overestimate our level of

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How Systems Collapse: Reaping What We’ve Sown

October 27, 2020

Don’t expect healthcare or any other hollowed-out, heavily optimized system to function as it once did.
A great many Americans will be shocked when our healthcare systems start failing because they believed the PR that “we have the finest healthcare system in the world.” The ability to deliver the finest care to a few does not translate into an ability to deliver the finest care to the many, nor does it mean the system is robust enough to withstand a tsunami.
As I have endeavored to explain in recent posts, systems optimized for narrow envelopes fail when they slip outside that envelope. One analogy is an airliner that is optimized in terms of fuel efficiency to fly above 30,000 feet at around 540 miles per hour.
The optimized envelope allows for somewhat

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Next Up: Global Depression

October 25, 2020

The belief that central banks printing currency can “buy/fix” everything that’s broken, lost or scarce is the ultimate in denial, fantasy and magical thinking.
Let’s revisit the pandemic projection chart I prepared on February 2, 2020, nine days after authorities publicly acknowledged the Covid virus outbreak in China. Wave 2 shown on the chart is now underway with a vengeance and next up is Global Depression.

This projection was based on two well-known dynamics:
1. History offers a basic template for viral pandemics in which the initial wave dies back in summer and then re-ignites in a second larger Wave 2 in autumn and winter.
2. Humanity’s default responses to novel crises: denial, fantasy, magical thinking and manipulating data to support a simplistic,

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Everything is Staged

October 22, 2020

All the staging is a means to an end, and everyone in America is nothing more than a means to an end: close the sale so the few can continue exploiting the many.
You know how realtors stage a house to increase its marketability: first, they remove all evidence that people actually live there. (Of course a vacant house is ideal for staging because there’s none of the messy real-life stuff to deal with.)
All the clutter of everyday life must be moved elsewhere so the house can look like a bloodless furniture showroom. In other words, fake.
Then various tricks /cues are employed to activate the sense of “home”: induce the “smell of fresh bread” in the kitchen, adorn rooms with vases of fresh flowers, and have a few fake “family” photos set on bookshelves.
We all

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