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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

Want to Know Where the Economy Is Going? Watch The Top 10%

12 days ago

Should the wealth effect reverse as assets fall, capital gains evaporate and investment income declines, the top 10% will no longer have the means or appetite to spend so freely.
Soaring wealth-income inequality has all sorts of consequences. As many (including me) have noted, the concentration of wealth and income in the top 0.1% has enabled the few to buy political influence to protect their interests at the expense of the many and the common good.
In other words, extreme wealth-income inequality dismantles democracy. There is no way to sugarcoat this reality.
But the concentration of wealth and income isn’t limited to the top 0.1% or top 1%. The top 5% and top 10% have increased their share of household wealth and income, too, and this has far-reaching

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What’s Behind the Global Erosion of Civil Liberties, Privacy and Property Rights?

19 days ago

The second essential step is to recognize how the spectacles of “news” and entertainment distract our attention from this erosion of basic rights.
Hierarchical power structures like city-states arose as problem-solving solutions, not just for the elites who benefited from the concentration of wealth and power but for the citizenry. This dynamic underpins the analysis presented in my recent book Global Crisis, National Renewal: when nation-states and global hierarchies no longer solve the key problems of their populaces, they dissolve and are replaced by some new arrangement.
It’s easy to see how hierarchies benefit the leaders / elites at the top, but there’s always a trade-off to the populace ceding power/control to elites: we will cede control over our lives in

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What if the “Black Swan” of 2023 Is the Fed Succeeds?

21 days ago

If the Fed succeeding is a “Black Swan,” bring it on.
What if the “Black Swan” of 2023 is the Federal Reserve succeeds? Two stipulations here:
1. “Black Swan” is in quotes because the common usage has widened to include events that don’t match Nassim Taleb’s original criteria / definition of black swan; the term now includes events considered unlikely or that are off the radar screens of both the media and the alt-media.
2. The definition of “Fed success” is not as simple as the media and the alt-media present it.
In the conventional telling, the Fed made a policy mistake in keeping interest rates and quantitative easing (QE) in place for too long, and now it’s made a policy mistake in reversing those policies. Huh? So ZIRP/QE was a policy mistake, OK, we get

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It’s a New Era

26 days ago

This dynamic–making problems much worse by forcing more of whatever worked in the previous era into a saturated, increasing unstable new era–receives little attention or understanding.
Eras may last decades, and only those who’ve lived long enough to recall previous eras have experienced the transition from one era to the next. The era of financialization, globalization and low-cost, abundant oil/natural gas began over 40 years ago in 1981.
The era of digital / Internet technologies took off about 30 years ago. All of these dynamics accelerated in the early 2000s, roughly 20 years ago.
Only those 60 and older experienced working in a previous era (pre-1981).
All of these dynamics are entering a phase of nonlinear turbulence as the changes are outpacing these

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Misunderstanding War, Money and Prosperity

28 days ago

If the consensus of experts misunderstand money, credit and prosperity, how are we going to advance?
Describing all the ways experts got it wrong is a thriving cottage industry. Expertise is itself contentious, as conventional expertise legitimized by credentials, prestigious institutional positions, scholarship, prizes, etc. can be wielded to promote the interests of the expert or whomever is funding the expert.
Another segment of experts are self-proclaimed, essentially substituting an air of confidence in their own projections for actual expertise.
Yet another segment of experts are lightweights with a misleading veneer of legitimacy to cloak their real identity as paid shills for corporations or other self-interested parties. PhD, anyone? Just put that PhD

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What’s Your Line in the Sand? The $25 Burger?

December 22, 2022

The gag reflex kicks in at some point and we walk away because it is no longer worth the price.
Everyone has a line in the sand when it comes to inflated prices they refuse to pay. For one Walmart shopper I observed, it was a carton of eggs for close to $10. She announced her line in the sand verbally, with great force and sincerity.
What’s your line in the sand, the point at which you simply refuse to pay the asking price? Is it the $25 burger? Or is it the $50 for two burritos and two beverages?
Each person’s line in the sand reflects their income, wealth, budget, social status and value system–what’s important to them. For some higher income folks, it might be the ridiculous “resort fee” that’s tacked onto the already overpriced resort room, hotel tax, excise

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A Great Madness Sweeps the Land

December 19, 2022

Those who see the madness for what it is have only one escape: go to ground, fade from public view, become self-reliant and weather the coming storm in the nooks and crannies.
A great madness sweeps the land. There are no limits on extremes in greed, credulity, convictions, inequality, bombast, recklessness, fraud, corruption, arrogance, hubris, pride, over-reach, self-righteousness and confidence in the rightness of one’s opinions. Extremes only become more extreme even as the folly of previous extremes wearies rationality.
Imaginary sins are conjured out of thin air to convict the innocent while those guilty of the most egregious fraud and corruption are lauded as saviors.
The national mood is aggrieved and bitter. The luxuries of self-righteousness,

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Monopolies and Cartels Are “Communism for the Rich”

December 15, 2022

What’s unfettered in America is “Communism for the Rich” and the normalization of corruption that results from the auctioning of political power to protect monopolies and cartels.
The irony of constantly being accused of being a communist is rather rich. When I point out that “free market capitalism” in America is neither a real market nor real capitalism, those who equate any criticism of “capitalism” as proof of communist leanings are triggered.
Noting that Marx got monopoly capitalism and alienation right triggers another group who equate any favorable mention of Marx as proof of communist leanings.
There are two ironies in these accusations of being a communist. One is that I’ve spent 17 years tirelessly critiquing centralized wealth and power–the acme of

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The Blowback from Stripmining Labor for 45 Years Is Just Beginning

December 13, 2022

The clueless technocrats are about to discover that unfairness and exploitation can’t be measured like revenues and profits, but that doesn’t mean they’re not real.
Economists and financial pundits tend to make a catastrophically flawed assumption. They tend to believe the technocratic myth that all human behavior boils down to financial incentives, data and metrics, as if all people make decisions based on interest rates, tax breaks and greed, the desire to maximize gains by any means available. (Cough, FTX, cough…)
The only other source of decision-making that’s recognized by the punditry is political / ideological squabbling: people make decisions based on their self-interest as expressed through political / ideological positions.
But this doesn’t exhaust the

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How Things Fall Apart

December 12, 2022

That’s how things fall apart: insiders know but keep their mouths shut, outsiders are clueless, and the decay that started slowly gathers momentum as the last of the experienced and competent workforce burns out, quits or retires.
Outsiders are shocked when things fall apart. Insiders are amazed the duct-tape held this long.The erosion of critical skills and institutional knowledge is invisible to outsiders, while everyone inside who saw the unstoppable decay either left or burned out.
Those who remain are the ambitious who lack the experience to reverse the decline and the self-awareness to realize they’re way over their head. They’re ambitious enough to want the managerial title and power but don’t have the necessary experience and competence to lead a

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The Monopoly – Labor “Let It Rot” Death Spiral

December 8, 2022

The only rational response to this reality is to opt out, lay flat and let it rot.
In my previous post, The Bubble Economy’s Credit-Asset Death Spiral, I described the self-reinforcing feedback of expanding credit and soaring asset valuations and how the only possible result of this financial perpetual motion machine was a death spiral of collapsing debt service, collateral and credit impulse.
But this didn’t exhaust the destructive dynamics of this self-reinforcing wealth-creation machine for the fewwho own the vast majority of the assets. As longtime correspondent T.D. explains, this concentration of the benefits of financialization in the hands of the few also concentrates political power and the wealth to distort every function of the economy to enrich the few

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The Bubble Economy’s Credit-Asset Death Spiral

December 6, 2022

Who believed that central banks’ financial perpetual motion machine was anything more than trickery designed to generate phantom wealth?
Central banks seem to have perfected the ideal financial perpetual motion machine: as credit expands, money pours into risk assets, which shoot higher under the pressure of expanding demand for assets that yield either hefty returns (junk bonds) or hefty capital gains as the soaring assets suck in more capital chasing returns.
As assets soar in value, they serve as collateral for more credit. Higher valuations = more collateral to borrow against. This open spigot of additional credit sluices capital right back into the assets that are climbing in value, pushing them higher-which then creates even more collateral to support even

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This Is of Course Insane

December 1, 2022

Greed is a powerful motivation to be an ardent believer in the central banking cult.
The ideal cult convinces its followers that it isn’t a cult, it’s simply the natural order of things.In current terms, this normalizes insane behaviors and beliefs. Sacrificing youth to appease the gods isn’t a cult; it’s simply the natural order of things. If we don’t sacrifice youth, bad things will happen, so we have to follow the natural order of things.
Despite the lofty claims made by our rational mind, we want to hear and obey the voices of the gods.This non-rational desire is the root of cults and episodes of mass hysteria, i.e. the madness of crowds.
Humanity is in the grip of the secular cult of central banking. The cult’s seers and prophets periodically emerge with

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The “Oil Curse” and Splashy PR Announcements of Oil Production Cuts

November 29, 2022

It’s not just the price of oil that matters: how much disposable income consumers have left to buy more goods and services matters, too.
The Oil Curse (a.k.a. The Resource Curse) refers to the compelling ease of those blessed with an abundance of oil/resources to depend on that gift for the majority of state/national revenues. The risks and demands of developing a diverse, globally competitive economy don’t seem worth the effort when the single-source wealth of oil offers such a low-risk bounty of revenues.
This dependence becomes a curse when the market value of the oil/resources plummets. Having come to depend on that seemingly inexhaustible source of massive revenues, even states that have set aside prudent reserves soon find their expenses cannot align down to

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The Uncertainty in China Is Kryptonite to Global Markets

November 28, 2022

Few seem alive to the potentially consequential financial risks arising from uncertainties evolving in China.
One thing we know rather definitively is that markets don’t like uncertainty: uncertainty is Kryptonite to markets.
Another thing we know is that the events unfolding in China are generating uncertainty on multiple levels.Whatever policy decisions are made, the potential consequences generate waves of profound uncertainty.
Should authorities respond to exploding Covid caseloads with heavy-handed lockdowns, that will trigger production and shipping consequences for global trade. If restrictions are relaxed, the healthcare consequences are also uncertain, as China lacks the facilities such as ICU beds in sufficient quantities to deal with a contagious virus

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There’s No Bottom Until Frenzied Speculation Turns to Dust

November 21, 2022

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

November 20, 2022

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

November 15, 2022

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

November 14, 2022

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:
“It

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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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