Tag Archives: 5.) Charles Hugh Smith

All bubbles pop, period. The financial elites are pushing a narrative that asset prices, sales and profits will all return to January 2020 levels as soon as the Covid-19 pandemic fades. Get real, baby. Nothing is going back to January 2020 levels. Rather than the “V-shaped recovery” expected by Goldman Sachs et al., the crash in asset prices will eventually gather momentum. Why? It’s simple: for 20 years we’ve over-invested in speculative bubbles and squandered...

This is why it’s imperative to go big now, and make plans to sustain the most vulnerable households and small employers not for two weeks but for six months–or however long proves necessary. That governments around the world will be forced to distribute “helicopter money” to keep their people fed and housed and their economies from imploding is already a given. Closing all non-essential businesses and gatherings will crimp the livelihood of millions of households and...

Subtract their immense debts and they have negative net worth, and therefore the market value of their stock is zero. To understand why the financial dominoes toppled by the Covid-19 pandemic lead to global insolvency, let’s start with a household example. The point of this exercise is to distinguish between the market value of assets and net worth, which is what’s left after debts are subtracted from the market value of assets. Let’s say the household has done very...

The decline phase of the S-Curve is just beginning. Globalization and Imperial Pretensions have been decaying for years; now the tide has turned definitively against them. The Covid-19 pandemic didn’t cause the demise of globalization and Imperial Pretensions; it merely pushed the rickety structures over the edge. It’s human nature to reckon the current trend will continue running more or less forever, and that temporal, contingent structures are...

This is the upside of hyper-litigiousness: prevention is prioritized as the most effective means of limiting future liability. Never mind prevention or vaccines; the big question is “who can we sue after this blows over to rake in millions of dollars?” Yes, this is pathetic, tragic, perverse and evil, but that’s reality in a hyper-litigious society like the U.S. Many people are struck by the apparent over-reaction of Corporate America to the Covid-19 threat, but this...

Everyone with a pension fund or 401K invested in stocks better hope the Fed becomes the buyer of last resort, and soon. Much has been written about what the Federal Reserve cannot do: it can’t stop the Covid-19 pandemic or reverse the economic damage unleashed by the pandemic. But let’s not overlook what the Fed can do: create U.S. dollars out of thin air and use these dollars to buy assets either directly or through proxies. Let’s also not overlook how much the Fed...

Either the science is wrong and the complacent will be proven correct, or the science is correct and the complacent will be wrong. The present disconnect between the science of Covid-19 and the status quo’s complacency is truly crazy-making, as we face a binary situation: either the science is correct and all the complacent are wrong, or the science is false and all the complacent are correct that the virus is no big deal and nothing to fret about. Complacency is...

Once confidence and certainty are lost, the willingness to expand debt and leverage collapses. Even though the first-order effects of the Covid-19 pandemic are still impossible to predict, it’s already possible to ask: did the pandemic pop all the global financial bubbles? The reason we can ask this question is the entire bull mania of the 21st century has been based on a permanently high rate of expansion of leverage and debt. The lesson of the 2008-09 Global...

Force cannot restore legitimacy, trust or confidence, nor can it magically erase the consequences of a still-unfolding national trauma. The Chinese authorities threatening to punish workers who refuse to return to work are getting a lesson in the limits of force in an unprecedented national trauma: a bayonet in the back will not restore the legitimacy and confidence that have been lost. There are two enormous blind spots in conventional media coverage of the...

Disregard these second-order effects at your own peril. A great many systems that are assumed to be robust are actually fragile. Exhibit #1 is the global financial system, of course, but Exhibit #2 may well be the healthcare system globally and in the U.S. Observers have noted that the number of available beds in U.S. hospitals is modest compared to the potential demands of a pandemic, and others have wondered who will pay the astronomical bills that will be...