Tag Archives: 5.) Charles Hugh Smith

The greater the excesses, speculative euphoria and moral hazard, the greater the reversal. A very convenient conviction is rising in the panicked financial netherworld that the Federal Reserve and its fellow dark lords will “save the market” from COVID-19 collapse. They won’t. I already explained why in The Fed Has Created a Monster Bubble It Can No Longer Control (February 16, 2020) but it bears repeating. Contrary to naive expectations, the Fed’s primary job isn’t...

Given the exquisite precariousness of the global financial system and economy, hopes for a brief and mild downturn are wildly unrealistic. If we asked a panel of epidemiologists to imagine a virus optimized for rapid spread globally and high lethality, they’d likely include these characteristics: 1. Highly contagious, with an R0 of 3 or higher. 2. A novel virus, so there’s no immunity via previous exposure. 3. Those carrying the pathogen can infect others while...

If you think global demand will rebound as global debt and confidence implode, you better not be making consequential decisions based on Euphorestra-addled magical thinking. Even before the Covid-19 pandemic, the global economy was slowing for two reasons: 1) everybody who can afford it already has it and 2) overcapacity. One word captures the end-of-the-cycle stagnation: saturation. Everyone who can afford a smartphone (or can borrow to buy one) already has...

This collapse of price will manifest in all sorts of markets that are based on debt-funded purchases of desires rather than a warily prudent priority on needs. Since markets are supposed to discover the price of excesses and scarcities, it’s a mystery why everything that is in oversupply is still grossly overpriced as global demand slides off a cliff: oil, semiconductors, Uber rides, AirBNB listings and many other risk-on / global growth stories are still priced as...

The Fed must now accept responsibility for what happens in the end-game of the Moral-Hazard Monster Bubble it created. Contrary to popular opinion, the Federal Reserve didn’t set out to create a Monster Bubble that has escaped its control. Also contrary to popular opinion, the Fed will be unable to “never let stocks fall ever again–ever!” for the simple reason that the monster it has created– a monster mania of moral hazard in which all risk has vanished...

Ending the limited quarantine and falsely proclaiming China safe for visitors and business travelers will only re-introduce the virus to workplaces and infect foreigners. China faces an inescapably fatal dilemma: to save its economy from collapse, China’s leadership must end the quarantines soon and declare China “safe for travel and open for business” to the rest of the world. But since 5+ million people left Wuhan to go home for New Years, dispersing throughout...

Are these claims even remotely plausible for a highly contagious virus that spreads easily between humans while carriers show no symptoms? It’s clear that the narrative about the coronavirus is being carefully managed globally to minimize the impact on global sentiment and markets. Authorities are well aware of the global economy’s extreme fragility, and so Job One for authorities everywhere is to scrub the news flow of anything that doesn’t support the implicit...

Will we wonder, what were we thinking? and marvel anew at the madness of crowds? When we look back on this moment from the vantage of history, what will we think? Will we think how obvious it was that the coronavirus deaths in China were in the tens of thousands rather than the hundreds claimed by authorities? Will we think how obvious it was that the virus would spread around the globe, wreaking havoc on the global economy and social order, even as the authorities...

If we accept what is known about the virus, then logic, science and probabilities all suggest we brace for impact. Here’s a summary of what is known or credibly estimated about the 2019-nCoV virus as of January 31, 2019: 1. A statistical study from highly credentialed Chinese academics estimates the virus has an RO (R-naught) of slightly over 4, meaning every carrier infects four other people on average. This is very high. Run-of-the-mill flu viruses average about...

Dow 30,000 is “unsinkable,” just like the Titanic. A recent Barrons cover celebrating the euphoric inevitability of Dow 30,000 captured the mainstream zeitgeist perfectly: Corporate America is firing on all cylinders, the Federal Reserve’s god-like powers will push stocks higher regardless of any other reality, blah blah blah. While the financial media looked elsewhere for its amusement, the coronavirus epidemic in China just poured fentanyl in the Dow 30,000...