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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

Dancing Through the Geopolitical Minefield

3 days ago

The elites dancing through the minefield all have plans, but how many are prepared for the punch in the mouth?
Open any newspaper from the past 100 years and you will soon find a newsworthy geopolitical hotspot or conflict. Geopolitical conflict is the default setting for humanity, it seems, but it does feel as if the minefield of geopolitical rivalries and flashpoints has been thickly sown and many of the players are dancing through the minefield with a worrisomely cavalier confidence that they won’t step on mine, i.e. bad stuff only happens to the other players.
The global minefield includes these dynamics:
1. The grinding collision of geopolitical tectonic plates: spheres of influence, soft and hard power projection, border conflicts, etc.
2. The urgency

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An Interesting Juncture in History

5 days ago

Just as the rewards of central-bank bubbles have not been evenly distributed, the pain created by the collapse of the bubbles won’t be evenly distributed, either.
We’ve reached an interesting juncture in history, and I don’t mean the pandemic. I’m referring to the normalization of extremes in the economy, in social decay and in political dysfunction and polarization.
Let’s ask a very simple question. The S&P 500 stock index went up five-fold from its 2009 low at 667 to a recent high around 3,400. Did your income rise five-fold since 2009? Probably not.
Houses that sold for $150,000 in 2000 are now valued at $900,000, a six-fold increase since 2000. Did your income rise six-fold since 2000? Probably not.
State university tuition has risen about 2.5 times from

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Forget the V, W or L Recovery: Focus on N-P-B

8 days ago

The only realistic Plan B is a fundamental, permanent re-ordering of the cost structure of the entire U.S. economy.
The fantasy of a V-shaped recovery has evaporated, and expectations for a W or L-shaped recovery are increasingly untenable. So forget V, W and L; the letters that will shape the future are N, P, B: there is No Plan B.
All the hopes for a recovery were based on a quick return to the economy that existed in late 2019. All the bailouts and stimulus programs were based on this single goal: a quick return to The Old Normal. This was Plan A.
For all the reasons that have been laid out here over the past six months, The Old Normal is gone for good. The Old Normal economy was too precarious, too brittle and too fragile to survive the toppling of any domino,

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Is Data Our New False Religion?

11 days ago

In the false religion of data, heresy is asking for data that is not being collected because it might reveal unpalatably unprofitable realities.
Here’s how every modern con starts: let’s look at the data. Every modern con starts with an earnest appeal to look at the data because the con artist has assembled the data to grease the slides of the con.
We have been indoctrinated into a new and false religion, the faith of data. We’ve been relentlessly indoctrinated with the quasi-religious belief that “data doesn’t lie,” when the reality is that data consistently misleads us because that is the intent.
Nobody in the False Religion of Data ever looks at what we don’t measure because that would uncover disruptive truths. My latest book Will You Be Richer or Poorer?:

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The Illusion of Control: What If Nobody’s in Charge?

13 days ago

The last shred of power the elites hold is the belief of the masses that the elites are still in control.
I understand the natural desire to believe somebody’s in charge: whether it’s the Deep State, the Chinese Communist Party, the Kremlin or Agenda 21 globalists, we’re primed to believe somebody somewhere is controlling events or pursuing agendas that drive global responses to events.
I submit whatever control we discern is illusory, as the dynamics unleashed by the pandemic have already escaped the control of elites. The fundamental reason the elites have lost control is that all the systems they depend on have been broken for 12 years, but were successfully papered over by doing more of what broke them in the first place. This papering over of broken systems

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For the Rich to Keep Getting Richer, We Have to Sacrifice Everything Else

15 days ago

They’re hoping the endless circuses and trails of bread crumbs will forever distract us from their plunder and the inequalities built into America’s financial system..
The primary story of the past 20 years is the already-rich have gotten much richer, with destabilizing economic, social and political consequences. The Federal Reserve and its army of academic / think-tank / financier apologists, lackeys, toadies, apparatchiks and sycophants have several rather thin excuses to explain this away, including:
1. Gee, wealth/income inequality isn’t quite as bad as everyone claims.
(Actually, it’s worse, but never mind unwelcome reality. Let us prove yet again how statistics can always be gamed.)
2. Wealth/income inequality is bad, but it’s not the Fed’s or policymakers’

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Our Wile E. Coyote Economy: Nothing But Financial Engineering

16 days ago

Ours is a Wile E. Coyote economy, and now we’re hanging in mid-air, realizing there is nothing solid beneath our feet.
The story we’re told about how our “capitalist” economy works is outdated. The story goes like this: companies produce goods and services for a competitive marketplace and earn a profit from this production. These profits are income streams for investors, who buy companies’ stocks based on these profits. As profits rise, so do stock valuations.
It’s all win-win: consumers get competitively priced goods and services, workers have jobs producing goods and services and investors earn a return on their capital.
Sadly, this is a fairy tale that no longer aligns with the reality that the U.S. economy is now a decaying billboard of “producing goods and

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The Fed’s Grand Bargain Has Finally Imploded

18 days ago

The Fed has backed itself not into a corner but to the edge of a precipice.
Though the Federal Reserve never stated its Grand Bargain explicitly, their actions have spoken louder than their predictably self-serving, obfuscatory public pronouncements. Here’s the Grand Bargain they offered institutional investors and speculators alike:
We’re taking away your low-risk, high-yield investments by slashing interest rates to near-zero, but we’re giving you endless asset bubbles as a new way to notch reliable gains. This trade-off has worked for 20 years as the Fed hyper-inflated one asset bubble after another until they finally inflated everything to precarious extremes: The Everything Bubble of 2019 that started unraveling in September 2019, long before the pandemic.

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Is the Pandemic Over and a V-Shaped Recovery Baked In?

22 days ago

So what do we know with any sort of certainty about the claim that “the pandemic is over”? Very little.
Is the pandemic over in China, Europe, Japan and the U.S./Canada? Is the much-anticipated V-Shaped economic recovery already baked in, i.e. already gathering momentum? The consensus, as reflected by the stock market (soaring), the corporate media and governmental easings of restrictions seems to be “yes” to both questions.
But science is not a consensus-based activity, and so skeptics of consensus are looking to the sciences of epidemiology, virology, etc., and economics for evidence-based answers.
But as scientist and author Michael Crichton explains in this seminal paper he gave at Caltech in 2003, much of what is presented (“sold”) as “hard science” is

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Deep State to Powell: Stop Goosing Stocks Higher Or You’ll Re-Elect Trump

24 days ago

.
Come on, Jay, you can always goose stocks back to new highs after the election.
Indulge me for a moment in some backroom speculation. It’s absurdly obvious that the unelected, permanent, ever-expanding National Security State, a.k.a the Deep State, and its Democratic Party allies have been attempting to torpedo Donald Trump since the 2016 election took them by surprise. (Imagine doing everything that worked so well in the past and failing at the last minute. Ouch. Revenge is best served cold, n’est pas?)
The comedy-of-errors RussiaGate collapsed in a foul heap, the impeachment backfired, and so what’s left in the Deep State quiver other than its usual bag of, ahem, accidents?
Some might argue that urban riots and civil unrest might be enough to cause Trump to

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Global Crisis: the Convergence of Marx, Kafka, Orwell and Huxley

28 days ago

The global crisis is not merely economic; it is the result of profound financial, sociological and political trends described by Marx, Kafka, Orwell and Huxley.
The unfolding global crisis is best understood as the convergence of the dynamics described by Marx, Kafka, Orwell and Huxley. Let’s start with Franz Kafka, the writer (1883-1924) who most eloquently captured the systemic injustices of all-powerful bureaucratic institutions–the alienation experienced by the hapless citizen enmeshed in the bureaucratic web, petty officialdom’s mindless persecutions of the innocent, and the intrinsic absurdity of the centralized State best expressed in this phrase: “We expect errors, not justice.”
If this isn’t the most insightful summary of the current moment in history,

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What Lies Ahead: Destabilizing Social Stratification

29 days ago

The bill for extreme wealth/income inequality is now overdue, and the penalties for ignoring the bill will be as extreme as the inequality.
Our socio-economic-political system–let’s call it the status quo–has been hollowed out by extremes of wealth/power inequality driven by financialization and globalization, which have enriched the top 5% and left everyone else behind.
As a result, the status quo has become increasingly fragile and brittle even as cheerleaders claim everything’s never been better–witness today’s massive rally in stocks on a jobs report which suggests the V-shaped recovery is already well underway.
The fly in the ointment is even a V-shaped recovery won’t repair the structural distortions which have generated levels of social stratification that

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When Institutions Fail, Fragmentation and Decentralization Become Solutions

June 6, 2020

That which has failed is unsustainable, no matter how many trillions the Federal Reserve tosses against the tides of history.
The Gulfs Between the Classes
The Credibility Gap
The Partnerships That Failed
The Groups That Opted Out
The Undermining of Effort
Every one of these is a manifestation of institutional failure. The Gulfs Between the Classes (see chart of soaring inequality below) manifests a completely broken economic and social order, and the abject failure of core institutions (for example, the source of wealth inequality, the Federal Reserve).
The Gulfs Between the Classes also reflects our pay-to-play political system, in which wealth buys political power and everyone else gets to watch a pantomime of democracy.
Government agencies widen The

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The Post-Covid Economy Will Be Very Different From the Pre-Pandemic Bubble Economy

June 3, 2020

As the old models break down, opportunities for new models will arise.
Unstable, unsustainable systems can lull observers into a comfy complacency as instability increases beneath a thin veneer of apparent stability.
That’s the systemic story of the past 20 years: all the extremes that were needed to maintain the veneer of stability have increased the instability building beneath the complacent confidence.
But sadly for the status quo, all bubbles pop, all extremes revert to the mean and all that is unsustainable implodes as apparently linear systems (snow accumulating on a mountainside) suddenly go non-linear (avalanche).
The majority of the Pre-Pandemic Bubble Economy was unsustainable:
1. Bubbles in the stock market and housing– unsustainable
2. Soaring

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We’re Living the Founding Fathers’ Nightmare: America Is Corrupt to the Core

June 2, 2020

Our ruling elites, devoid of leadership, are little more than the scum of self-interested, greedy grifters who rose to the top of America’s foul-smelling stew of corruption.
The Founding Fathers were wary of institutional threats to liberty and the citizenry’s sovereignty, which included centralized concentrations of power (monarchy, central banks, federal agencies, etc.) and the tyranny of corruption unleashed by small-minded, self-interested, greedy grifters who saw all elected offices and positions of government influence as nothing more than a means to increase their own private wealth.
The Founders feared the dominance of self-interested, greedy grifters because they had no concept of the public good: to the greedy grifters, the government existed solely to

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This Is How Systems Collapse

June 1, 2020

Flooding the financial system with “free money” only restores the illusion of stability
I updated my How Systems Collapse graphic from 2018 with a “we are here” line to indicate our current precarious position just before the waterfall:
For those who would argue we’re nowhere near collapse, consider that over 20% of the Federal Reserve’s $2 trillion spew of free money went directly into the pockets of America’s billionaires: $434 billion by the latest estimates, while most of the rest went into the pockets of the top 10% who own all the assets that the Fed is goosing higher while millions of households are worried about feeding themselves: (American billionaires got $434 billion richer during the pandemic).
In America’s system, the solution to soaring,

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An Economy That Cannot Allow Stocks to Decline Is Too Fragile To Survive

May 28, 2020

The fragile ice shelf of speculative bets and debt clinging to the mountainside is making strange creaking sounds– will you listen or will you ignore it because ‘the Fed has our back’?
Feast your eyes on the chart below of the Nasdaq 100 stock market Index, which is dominated by the six FAAMNG (rhymes with “famine”) stocks: Facebook, Apple, Amazon, Microsoft, Netflix and Google which now account for over 20% of the entire U.S. stock market’s capitalization.
Notice that despite the global economy sliding into a debt-bust depression, the NDX is within kissing distance of new all-time highs.
You’re joking, right? Sales and profits won’t slide as the depression steps on the neck of hundreds of millions of households?
As you’ve probably heard by now, sales don’t

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Re-Opening the Economy Won’t Fix What’s Broken

May 27, 2020

Re-opening a fragile, brittle, bankrupt, hopelessly perverse and corrupt “normal” won’t fix what’s broken.
The stock market is in a frenzy of euphoria at the re-opening of the economy. Too bad the re-opening won’t fix what’s broken. As I’ve been noting recently, the real problem is the systemic fragility of the U.S. economy, which has lurched from one new extreme to the next to maintain a thin, brittle veneer of normalcy.
Fragile economies cannot survive any impact with reality that disrupts the distortions that are keeping the illusion of “growth” from shattering. For the past two decades, every collision with reality cracked the illusion, and the “fix” was to duct-tape the pieces together with new extremes of money-creation, debt, risk and speculative excess.

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The Pandemic Gives Us Permission To Get What We Always Wanted

May 24, 2020

Dear Corporate America: maybe you remember the old Johnny Paycheck tune? Let me refresh your memory: take this job and shove it.
Put yourself in the shoes of a single parent waiting tables in a working-class cafe with lousy tips, a worker stuck with high rent and a soul-deadening commute–one of the tens of millions of America’s working poor who have seen their wages stagnate and their income becoming increasingly precarious / uncertain while the cost of living has soared.
Unemployment and the federal stimulus bonus of $600 a week are far more than your regular wages, including tips. Exactly why do you want to go back to your miserable job and low pay? Why wouldn’t you take time off and enjoy life a little, which is what you’ve been wanting to do for years?

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Consumer Spending Will Not Rebound–Here’s Why

May 20, 2020

Any economy that concentrates its wealth and income in the top tier is a fragile economy.
There are two structural reasons why consumer spending will not rebound, no matter how “open” the economy may be. Virtually everyone who glances at headlines knows the global economy is lurching into either a deep recession or a full-blown depression, depending on the definitions one is using. Everyone also knows the stock market has roared back as if nothing has happened.
While most financial pundits have accepted that a V-shaped recovery is not possible, few (if any) observers have discussed two factors that will cause consumer spending to crash harder than generally expected:
1. The top 10% of households account for about half of all consumer spending, and these are the

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The Collapse of Main Street and Local Tax Revenues Cannot Be Reversed

May 16, 2020

The core problem is the U.S. economy has been fully financialized, and so costs are unaffordable.
To understand the long-term consequences of the pandemic on Main Street and local tax revenues, we need to consider first and second order effects. The immediate consequences of lockdowns and changes in consumer behavior are first-order effects: closures of Main Street, job losses, massive Federal Reserve bailouts of the top 0.1%, loan programs for small businesses, stimulus checks to households that earned less than $200,000 last year, and so on.
The second-order effects cannot be bailed out or controlled by central authorities. Second-order effects are the result of consequences have their own consequences.
The first-order effects of the pandemic on Main Street are

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The Way of the Tao Is Reversal

May 12, 2020

As Jackson Browne put it: Don’t think it won’t happen just because it hasn’t happened yet.
We can summarize all that will unfold in the next few years in one line: The way of the Tao is reversal. This is the opening line of Chapter 40 of Lao Tzu’s 5,000-character commentary on the Tao, The Tao Te Ching. There are many translations of this slim volume, and for a variety of reasons I favor the 1975 translation by my old professor at the University of Hawaii, Chang Chung-yuan (1907-1988), whom I would occasionally see doing Tai Chi late at night on his front yard in Manoa Valley.
Professor Chang–who would often write Chinese characters on the blackboard with great energy to make a point–rendered this line in English as Reverse is the movement of Tao. Others have

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Surviving 2020 #3: Plans A, B and C

May 10, 2020

Readers ask for specific recommendations for successfully navigating the post-credit/speculative-bubble era and I try to do so while explaining the impossibility of the task.
As the bogus prosperity economy built on exponential growth of debt implodes, we all seek ways to protect ourselves, our families and our worldly assets. There are any number of websites, subscription services and books which offer two basic “practical recommendations:”
1. Buy gold (and/or silver) and don’t worry about timing the market as everything else will become worthless.
2. Establish a heavily armed and well-supplied hideaway before everything implodes.
My problem with these suggestions is that they are predicated on a decisive “end of the world as we know it” collapse of

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Where the Rubber Meets the Road

May 7, 2020

Longtime correspondent Paul B. suggested I re-publish three essays that have renewed relevance. This is the second essay, from July 2008. Thank you, Paul, for the suggestion.
I received this timely inquiry from astute reader Paul B.:
I’m interested in # 1, while you seem to take into account 300 million people in your writings–would you comment on rubber-meets-the-road impacts and proactive actions we can take to help shield ourselves (and our local communities) from the economic problems we’re facing?
Would you consider including concrete actions “average” people could take to protect themselves in one of your future columns? I’d certainly appreciate it and I bet many others would, too. (emphasis added, CHS)
That’s big challenge but I’ll give it a shot. None of

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The Art of Survival, Taoism and the Warring States

May 6, 2020

Longtime correspondent Paul B. suggested I re-publish three essays that have renewed relevance. This is the first essay, from June 2008. Thank you, Paul, for the suggestion.
I’m not trying to be difficult, but I can’t help cutting against the grain on topics like surviving the coming bad times when my experience runs counter to the standard received wisdom.
A common thread within most discussions of surviving bad times–especially really bad times–runs more or less like this: stockpile a bunch of canned/dried food and other valuable accoutrements of civilized life (generators, tools, canned goods, firearms, etc.) in a remote area far from urban centers, and then wait out the bad times, all the while protecting your stash with an array of weaponry and technology

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Why Assets Will Crash

May 4, 2020

This is how it happens that boats that were once worth tens of thousands of dollars are set adrift by owners who can no longer afford to pay slip fees.
The increasing concentration of the ownership of wealth/assets in the top 10% has an under-appreciated consequence: when only the top 10% can afford to buy assets, that unleashes an almost karmic payback for the narrowing of ownership, a.k.a. soaring wealth and income inequality: assets crash.
Most of you are aware that the bottom 90% own very little other than their labor (tradeable only in full employment) and modest amounts of home equity that are highly vulnerable to a collapse of the housing bubble.
(The same can be said of China’s middle class, only more so, as 75% of China’s household wealth is in real

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With Superfluous Demand in Free-Fall, What’s the Upside of Re-Opening a Small Business?

April 29, 2020

Since superfluous demand was the core driver of most consumer spending, and that demand is in free-fall, what’s the upside of re-opening?
The mainstream view assumes everyone will be gripped by an absolutely rabid desire to return to their pre-pandemic frenzy of borrowing and spending and consuming, the more the better. While the urge to believe the Titanic scraping the iceberg will have no consequence and the collision was nothing but a spot of bother is compelling (so party on!), many people will reassess their pre-pandemic lives and ask: do I really want to go back to circling the pavement in a dead end?
Being away from the crazy-busy churn invites reassessment, especially for small business owners who are facing the near-certainty of uncertain sales and

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The Crash Has Only Just Begun

April 28, 2020

Everything, including a rational, connected-to-reality, effective financial system, is on back-order and unlikely to ship any time soon.
While the stock market euphorically front-runs the Fed and a V-shaped recovery, the reality is the crash has only just begun. To understand why, look at income and debt. Income–earned and unearned–is in free-fall, while debt–which must be serviced by income–is exploding higher.
Bailouts are not a permanent substitute for income. In the short-term, bailouts–in the form of payments to everyone who’s lost their source of earned income, i.e. their job–is a necessary substitute for lost income. But longer term, subsidizing income with borrowed money weakens the currency and the economy, as productivity stagnates.
As for servicing

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Overcapacity / Oversupply Everywhere: Massive Deflation Ahead

April 19, 2020

The price of a great many assets will crash, out of proportion to the decline in demand.
Oil is the poster child of the forces driving massive deflation: overcapacity / oversupply and a collapse in demand. Overcapacity / oversupply and a collapse in demand are not limited to the crude oil market; rather, they are the dominant realities in the global economy.
Yes, there are shortages in a few high-demand areas such as PPE (personal protective equipment), but across the entire spectrum of global supply and demand, there is nothing but a vast sea of overcapacity / oversupply and a systemic decline in demand as far as the eye can see.
Here’s a partial list of commodities that are in Overcapacity / oversupply:
1. Overvalued assets
2. Overpriced income streams (as

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Between a Rock and a Hard Place: Pandemic and Growth

April 18, 2020

There is no way authorities can limit the coronavirus and restore global growth and debt expansion to December 2019 levels.
Authorities around the world are between a rock and a hard place: they need policies that both limit the spread of the coronavirus and allow their economies to “open for business.” The two demands are inherently incompatible, and so neither one can be fulfilled.
The problem is the intrinsic natures of the virus and the global economy. This virus is highly contagious during its asymptomatic phase, which is long (5 to 20 days), and therefore impossible to control with the conventional tools of identifying people with symptoms and isolating them, and tracking their contacts with others.
While there is much we do not know for certainty about

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