Tuesday , September 17 2019
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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 Black Swan Is a Drone

2 days ago

What was “possible” yesterday is now a low-cost proven capability, and the consequences are far from predictable.
Predictably, the mainstream media is serving up heaping portions of reassurances that the drone attacks on Saudi oil facilities are no big deal and full production will resume shortly. The obvious goal is to placate global markets fearful of an energy disruption that could tip a precarious global economy into recession.
The real impact isn’t on short-term oil prices, it’s on asymmetric warfare: the coordinated drone attack on Saudi oil facilities is a Black Swan event that is reverberating around the world, awakening copycats and exposing the impossibility of defending against low-cost drones of the sort anyone can buy.
(Some published estimates place

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What a Relief that the U.S. and Global Economies Are Booming

2 days ago

Doing more of what’s failed for ten years will finally fail spectacularly..
It was a huge relief to see the charts of the Baltic Dry Index (BDI) and the U.S. retail sector ETF (RTH): both have soared to the moon, signaling that both the U.S. and global economies are booming: the BDI is widely regarded as a proxy for global shipping, which is a proxy for global trade and economic activity.

Batic Dry Index, 2018-2019 – Click to enlarge
Amazon is 18% of the RTH basket of retail stocks, but the rest are conventional bricks and mortar chains with online sales: Walmart, Home Depot, Lowes, Costco, CVS, etc.
The American consumer must be ready, willing and able to spend freely since the retail sector is hitting new heights.

U.S. Consumer Spending, 2019 – Click to

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The Inevitable Bursting of Our Bubble Economy

3 days ago

All of America’s bubbles will pop, and sooner rather than later.
Financial bubbles manifest three dynamics: the one we’re most familiar with is human greed, the desire to exploit a windfall and catch a work-free ride to riches.
The second dynamic gets much less attention: financial manias arise when there is no other more productive, profitable use for capital, and these periods occur when there is an abundance of credit available to inflate the bubbles.
Humans respond to the incentives the system presents: if dealing illegal drugs can net $20,000 a month compared to $2,000 a month from a regular job, then a certain percentage of the work force is going to pursue that asymmetry.
In our current economy, corporations have sunk $2.5 trillion in buying back their own

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These Are Not Signs of a Healthy Market

10 days ago

If these three charts reflect a “normal” “healthy” Bull market, then why are they so uncommon?
The implicit narrative of the latest rally in stocks is that this is just another normal rally in the ongoing 10-year long Bull market. Nice, but do these three charts look “normal” to you? Let’s take a quick glance at a daily chart of the S&P 500 (SPX), a weekly chart of TLT, the exchange-traded fund of the US Treasury 20-year bond, and silver.
In other words, let’s look at three different assets: stocks, bonds and one of the precious metals.
Even the most cursory glance reveals there is nothing normal about any of these charts. The recent action in the SPX is anything but normal: yet another announcement of yet another (low-level nothing-burger) trade meeting opens a

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Will Everything Change in 2020-2025 or Will Nothing Change?

12 days ago

Any domino-like expanding crisis will unfold in a status quo lacking any coherent response.
Longtime readers know I’ve often referenced The Fourth Turning, the book that makes the case for an 80-year cycle of existential crisis in U.S. history.
The first crisis was the constitutional process (1781) following the end of the Revolutionary War, whether the states could agree on a federal structure; the 2nd crisis was the Civil War (1861) and the 3rd crisis was global war– World War II (1941).
According to this proposition, we’re fast approaching an existential crisis that could upend the status quo in a fundamental fashion.
While there is a great deal of historical evidence for cycles, predicting a major transition based on previous cycles is obviously a guess

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Labor Day Reflections on Retirement and Working for 49 Years

16 days ago

What happens when these monstrous speculative bubbles pop?
Let’s start by stipulating that if I’d taken a gummit job right out of college, I could have retired 19 years ago. Instead, I’ve been self-employed for most of the 49 years I’ve been working, and I’m still grinding it out at 65.
By the standards of the FIRE movement (financial independence, retire early), I’ve blown it. The basic idea of FIRE is to live frugally and save up a hefty nestegg to fund an early comfortable retirement. As near as I can make out, the nestegg should be around $2.6 million–or if inflation kicks in, maybe it’ll be $26 million. Let’s just say it’s a lot.
You’ve probably seen articles discussing how much money you’ll need to “retire comfortably.” The trick of course is the definition

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Dear Trump Advisors: Prop the Market Up Now and Lose in 2020, or Let the Market Crash and Win in 2020

18 days ago

The Everything Bubble has topped out, and trying to push it higher for the next 14 months is a sure way to increase the damage next year.
One of the more reliable truisms is that Americans vote their pocketbook: if their wallets are being thinned (by recession, stock market declines, high inflation/stagnant wages, etc.), they throw the incumbent out, even if they loved him the previous year when their wallets were getting fatter. (Think Bush I, who maintained high approval ratings but ended up losing the 1992 election due to a dismal economic mood.)
As a result, politicians try to time the economy to align with elections. Get any economic pain over with early in the election cycle, then prime the fiscal pump in Year 3 to boost the economy in Year 4 (election

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The Fantasy of Central Bank “Growth” Is Finally Imploding

19 days ago

Having destroyed discipline, central banks have no way out of the corner they’ve painted us into.
It was such a wonderful fantasy: just give a handful of bankers, financiers and corporations trillions of dollars at near-zero rates of interest, and this flood of credit and cash into the apex of the wealth-power pyramid would magically generate a new round of investments in productivity-improving infrastructure and equipment, which would trickle down to the masses in the form of higher wages, enabling the masses to borrow and spend more on consumption, powering the Nirvana of modern economics: a self-sustaining, self-reinforcing expansion of growth.
But alas, there is no self-sustaining, self-reinforcing expansion of growth; there are only massive, increasingly

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The Benefits of a Profoundly Shattering Recession

23 days ago

Does anyone really think The Everything Bubble can just keep inflating forever?
What do I mean by a profoundly shattering recession? I mean, a systemic, crushing recession that can’t be reversed with central bank magic, a recession that only deepens with time. The last real recession was roughly two generations ago in 1981; younger generations have no experience of a profound recession, and perhaps older folks have forgotten the shock, angst and bitterness.
A profoundly shattering recession leaves tremendous damage and pain in its wake. Millions of people who reckoned their position was secure get laid off, businesses that looked solid melt into air, large corporations flip from hiring thousands to firing thousands, and everyone on the edge of insolvency gets a

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Our Wile E. Coyote Federal Reserve

26 days ago

Whatever the Fed chooses to do, it’s already failed..
Wile E. Coyote has gotten a bad rap: in all fairness, his schemes are ingenious, if overly complicated, and it’s not his fault that the Acme detonator misfires or the Road Runner doesn’t respond as predicted. Every set-up to nail the Road Runner should work. That it fails and leaves him suspended over the cliff for a woefully brief second to intuit his impending doom really isn’t his fault.
Wile E. Coyote and the Federal Reserve share a lot of similarities. Just as Wile is always trying to catch the Road Runner, the Federal Reserve and other central banks have been trying for 10 years to trigger a self-sustaining economic expansion, i.e. an expansion based on the self-reinforcing dynamics of increasing

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The Internal War in the Deep State Claims Its High Profile Casualty: Jeffrey Epstein

August 12, 2019

The “traditionalist” Neocons are going to have to decide to fish or cut bait.
I’ve been writing about the fracturing Deep State for the past five years:
The conflict has now reached the hot-war stage where bodies are turning up, explained away by the usual laughable covers: “suicide,” “accident” and “heart attack.” That Jeffrey Epstein’s death in a secure cell is being labeled “suicide” tells us quite a lot about the desperation of the faction trying to protect the self-serving predators that have wormed their way into control of many Deep State nodes of power.
Here’s the basic structure of the Deep State conflict as I see it. For context: The Deep State exploded in size and power during World War II. At the war’s

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The Gulag of the Mind

August 8, 2019

Befuddled and blind, we wander toward the cliff without even seeing it, focusing on our little screens of entertainment and self-absorption.
There are no physical barriers in the Gulag of the Mind–we imprison ourselves, and love our servitude. Indeed, we fear the world outside our internalized gulag, because we’ve absorbed the narrative that the gulag is secure and permanent.
We’ve also absorbed the understanding that escape will be punished. Dissent will quickly be suppressed or vilified, and the dissenter socially and economically marginalized.
In a peculiarly human pathology, we now believe the exact opposite of reality:our abuser is our savior, we’re getting wealthier when in fact we’re getting poorer, the

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Nothing Is Guaranteed

August 6, 2019

There are no guarantees, no matter how monumental the hubris and confidence.
The American lifestyle and economy depend on a vast number of implicit guarantees— systemic forms of entitlement that we implicitly feel are our birthright.
Chief among these implicit entitlements is the Federal Reserve can always “save the day”: the Fed has the tools to escape either an inflationary spiral or a deflationary collapse.
But there are no guarantees this is actually true. In either an inflationary spiral or deflationary collapse of self-reinforcing defaults, the Fed’s “save” would destroy the economy, which is now so fragile that any increase in interest rates (to rescue us from an inflationary spiral) would destroy our

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Main Street Small Business on the Precipice

July 31, 2019

Small businesses on the precipice need only one small shove to go over the edge, and there won’t be replacements filling the fast-multiplying empty storefronts.
As a generality, the average employee (including financial pundits) has no real experience or understanding of what it takes to start and operate a small business in the U.S. Government employees in the agencies that oversee and enforce regulations on small businesses also generally lack any experience in the businesses they regulate.
A third generality is the endlessly promoted ethos of entrepreneurism cultivates the illusion that there is an essentially endless supply of entrepreneurs who are itching to start businesses and throw everything they have into

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Why Is What Was Once Affordable to Many Now Only Affordable to the Wealthy?

July 29, 2019

With these speculative and risk management skills accessible only to the wealthy, no wonder only the wealthy have gained purchasing power in the 21st century.
Let’s start with an excerpt from a recent personal account by the insightful energy/systems analyst Ugo Bardi, who is Italian but writes his blog Cassandra’s Legacy in English: Becoming Poor in Italy. The Effects of the Twilight of the Age of Oil.
“I am not poor. As a middle class, state employee in Italy, I am probably richer than some 90% of the people living on this planet. But wealth and poverty are mainly relative perceptions and the feeling I have is that I am becoming poorer every year, just like the majority of Italians, nowadays.
I know that the

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It’s Not Just the News That’s Fake–Everything’s Fake

July 26, 2019

That we fall for the fakes and cons is understandable, given that’s all we have left in the public sphere.
What do we mean when we say corporate media is fake? We mean it’s a carefully crafted con, a set of narratives, cherry-picked data and heavily massaged statistics (the unemployment rate, etc.) designed to instill the reader’s confidence in a narrative that serves the interests not of the citizenry but of a select few pillaging the citizenry.
Once upon a time in America, no adult could survive without a finely tuned BS detector. Herman Melville masterfully captured America’s culture of cons and con artists in his 1857 classic The Confidence-Man, which I discussed in The Con in Confidence (October 4, 2006).
An

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Our Ruling Elites Have No Idea How Much We Want to See Them All in Prison Jumpsuits

July 22, 2019

Even the most distracted, fragmented tribe of the peasantry eventually notices that they’re not in the top 1%, or the top 0.1%.
Let’s posit that America will confront a Great Crisis in the next decade. This is the presumption of The Fourth Turning, a 4-generational cycle of 80 years that correlates rather neatly with the Great Crises of the past: 1781 (Revolutionary War, constitutional crisis); 1861 (Civil War) and 1941 (World War II, global war).
What will be the next Great Crisis? Some anticipate another great-power war, others foresee another civil war, still others reckon a military coup is likely, and some view a collapse of the economy and U.S. dollar as inevitable.
While anything’s possible, I propose a novel

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“Alexa, How Do We Subvert Big Tech’s Orwellian Internet-of-Things Surveillance?”

July 12, 2019

Convenience is the sales pitch, but the real goal is control in service of maximizing profits and extending state power.
When every device in your life is connected to the Internet (the Internet of Things), your refrigerator will schedule an oil change for your car–or something like that–and it will be amazingly wunnerful. You’ll be able to lower the temperature of your home office while you’re stuck in a traffic jam, while your fridge orders another jar of pickles delivered to your door.
It’s all in service of convenience, the god all Americans are brainwashed to worship. Imagine the convenience of turning on the light while seated on your sofa! Mind-boggling convenience at your fingertips–and since you’re already

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Predatory “Green Capitalism” Is Monetizing the Air, and It’s Going to Cost You

July 10, 2019

You want to reduce CO2? Then trigger a global depression that reduces global consumption of everything by 50% and destroys 95% of the phantom wealth owned by the global elites trying to monetize the air.
I recently asked What’s Left to Monetize?, and longtime correspondent Mark G. provided the answer: the air we breathe, via carbon taxes and markets for trading carbon credits, i.e. financializing / monetizing Nature to benefit the few at the expense pf the many.
Here’s Mark’s commentary:
You asked, “What’s left to monetize? It appears the answer is ‘very little.’”
I respectfully disagree. The Biggest Enchilada of all is left. Air. Specifically carbon dioxide, CO2. We just have to figure how to get the yokels to agree

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When Everything from Bat Guano to Quatloos Is Soaring, Speculative Euphoria Has Reached an Extreme

July 8, 2019

The more extreme the speculative euphoria, the greater the risks of a reversal.
One sentence sums up the speculative euphoria gripping markets: January and June of this year are the only months in the last 150 which have seen all assets post a positive total return. (Zero Hedge)
When every asset from bat guano to quatloos is soaring, the current speculative frenzy has reached extremes. We all know the quasi-religious faith driving the euphoria: central banks will push all assets higher as they pursue extremes of “easing.”
In other words, asset valuations don’t need to make any sense; just buy now and you’ll be rewarded with guaranteed gains thanks to central banks. This strategy has worked exceedingly well for 10

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Vested Interests in Charge = Guaranteed Failure

July 6, 2019

It boils down to two very simple principles: accredit the student, not the institution and teach every student how to rigorously learn on their own.
Vested interests have every incentive to maintain the status quo: specifically, those who currently own the assets, income streams and power will continue to own the assets, income streams and power.
To accomplish this, vested interests must suppress, undermine or co-opt structural innovation, which threatens to obsolete the status quo. Innovation is bandied about rather freely now, generally as a marketing pitch, but real honest-to-goodness innovation is absolutely toxic to entrenched elites and vested interests, both of whom lose out when their gravy train is thrown

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What’s Left to Monetize?

July 5, 2019

What’s left to monetize? It appears the answer is “very little.”
Advertising has always monetized consumers’ time and attention, what we call engagement today. Newspapers and periodicals publish advertisements, radio/TV networks and stations air adverts, movie theaters run trailers/ads, billboards occupy our mental space while driving and websites and apps post adverts. The more media you consume, the more adverts you see/hear, and the more time you spend consuming media, the greater your exposure to advertising.
Monetizing our time and attention has a long history, as does the monetizing encroachment on what was once private time / attention. Time spent on the telephone escaped monetization until the advent of

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America’s Concealed Crisis: Fifty Years of Economic Decline, 1969 to 2019

July 2, 2019

If we consider the long term, it’s clear America’s economy and society have been declining for the average household for 50 years.
What if the “prosperity” of the past 50 years is mostly a statistical mirage for the bottom 80% of households? What if whatever real gains (adjusted for real-world loss of purchasing power) accrued only to the top of the wealth-power pyramid, those closest to financial and political power? What if the U.S. economy and society shifted from “everybody wins” to “winner takes all” or at best, :winner take most”?
These are not “what if”, they’re reality. The working class, which as I have recently noted, now comprises the entire working populace other than the upper-middle class Misplaced

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Following in Rome’s Footsteps: Moral Decay, Rising Inequality

July 1, 2019

Here is the moral decay of America’s ruling elites boiled down to a single word.
There are many reasons why Imperial Rome declined, but two primary causes that get relatively little attention are moral decay and soaring wealth inequality. The two are of course intimately connected: once the morals of the ruling Elites degrade, what’s mine is mine and what’s yours is mine, too.
I’ve previously covered two other key characteristics of an empire in terminal decline: complacency and intellectual sclerosis, what I have termed a failure of imagination.
Michael Grant described these causes of decline in his excellent account The Fall of the Roman Empire, a short book I have been recommending since 2009:
There was no room at

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Could a Cryptocurrency Become a Global Reserve Currency?

June 30, 2019

Will bitcoin appear on this chart of global reserve currencies in the future?
Could a non-state cryptocurrency like bitcoin become a global reserve currency? I first proposed the idea back in November 2013, long before bitcoin’s rise to $19,000, decline to $3,200, recent ascent to $13,000 and current retrace.
The idea is intriguing on a number of levels. In terms of retaining value though thick and thin, the ultimate reserve currency cannot be printed (and thus devalued) with abandon by a government. Gold and silver have served as the ultimate reserve currency, as precious metals can be traded for commodities and services, provide collateral for debt and serve as reliable stores of value.
While many observers believe

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No, Autos Are Not “Cheaper Now”

June 28, 2019

According to the BLS, inflation in the category of “New Vehicles” has been practically non-existent the past 21 years.
Longtime readers know I’ve long turned a skeptical gaze at official calculations of inflation, offering real-world analyses such as The Burrito Index: Consumer Prices Have Soared 160% Since 2001 (August 1, 2016) and Burrito Index Update: Burrito Cost Triples, Official Inflation Up 43% from 2001 (May 31, 2018).
Official claims that grossly understate real-world inflation is a core feature of debt-serfdom and neofeudalism: we’re working harder and longer and getting less for our earnings every year, but this reality is obfuscated by official pronouncements that inflation is 2%–barely above zero.

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Local Government Is an Engine of Inflation

June 27, 2019

Insolvency isn’t restricted to private enterprise; governments go broke, too.
One reason the economy is so much more precarious than advertised is inflation has pushed households and small businesses to the edge–and one engine of that inflation is local government. This is not to dump on local government, which is facing essentially unlimited demands from the public for more services while mandated cost increases in government union employee wages and benefits ratchet higher.
Since personnel costs are 70+% of city and county budgets, those ever-increasing payroll, pension and benefits costs are the key driver of budgets expanding.
But local governments’ ability to increase revenues are also essentially

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The Human Cost of “Recovery”: We’re Burning Out

June 24, 2019

The asymmetries are piling up and we’re cracking under the weight.
Judging by the record-high stock market and the record-low unemployment rate, the “recovery” has reached new heights of prosperity. Academics and think-tankers viewing the global economy from 40,000 feet are brimming with policies to bring the remaining laggards into the booming economy.
You can imagine them rubbing their hands with glee as they quote statistics such as: the 53 metropolitan areas in the U.S. with populations of 1 million or more accounted for two-thirds of the GDP growth and three-quarters of the job growth. A staggering 93% of the population growth in the U.S. in the past decade occurred in these urban centers.
And this asymmetry is

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The Lessons of Rome: Our Neofeudal Oligarchy

June 23, 2019

Our society has a legal structure of self-rule and ownership of capital, but in reality it is a Neofeudal Oligarchy.
The Inheritance of Rome: Illuminating the Dark Ages 400-1000 is not an easy, breezy read; its length and detail are daunting.
The effort is well worth it, as the book helps us understand how the power structures of societies change over time in ways that may be largely invisible to those living through the changes.
The Inheritance of Rome focuses on the lasting influence of Rome’s centralized social and political structures even as centralized economic power and trade routes dissolved.
This legacy of centralized power and loyalty to a central authority manifested 324 years after the end of the Western

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The Fed’s Casino Is Giving Away Free Gambling Chips (But Only to the Super-Rich)

June 21, 2019

The rest of us eat our losses, either all at once or in bitter bites as we trudge through the financial wasteland left after bubbles burst.
The news that the Federal Reserve Casino is giving away free gambling chips triggered a frenzied rush that trampled the bears, including poor Yogi:

There’s just one catch to the giveaway: you have to be rich, and if you want more than a token free gambling chip, you need to be super-rich. Then you get a pile of free chips.
If you’re not rich–none for you, debt-serf! If you’re already super-rich, the Federal Reserve Casino has plenty of free gambling chips for you, which you are free to “invest” (heh) in just about any asset, since they’re all going higher: gold, silver, bitcoin,

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