Tag Archives: 5.) Charles Hugh Smith

Everyone expecting a quick resolution to the epidemic and a rapid return to pre-epidemic conditions would be well-served by looking beyond first-order effects. While the media naturally focuses on the immediate effects of the coronavirus epidemic, the possible second-order effects receive little attention: first order, every action has a consequence. Second order, every consequence has its own consequence. So the media’s focus is the first-order consequences: the...

The psychotic instability will resolve itself when the illusory officially sanctioned “capitalism” implodes. Whatever definition of capitalism you use, the current system isn’t it so let’s call it “capitalism” in quotes to indicate it’s called “capitalism” but isn’t actually classical capitalism. Try a few conventional definitions on for size: Capitalism allocates capital to its most productive uses. Does the current system actually do this? You must be joking....

One does not need money to convey one’s thoughts, but what money does allow is the drowning out of speech of those without money by those with a lot of money. In last week’s explanation of why the Federal Reserve is evil, I invoked the principle of calling things by their real names, a concept that drew an insightful commentary from longtime correspondent Chad D.: Thank you, Charles, for calling out the Fed for their evil ways. We have to properly name things before...

In 2020, increasing monetary and fiscal stimulus will be the equivalent of spraying gasoline on a fire to extinguish it. Economically, the 11 years since the Global Financial Crisis of 2008-09 have been one relatively coherent era of modest growth, rising wealth/income inequality and coordinated central bank stimulus every time a crisis threatened to disrupt the domestic or global economy. This era will draw to a close in 2020 and a new era of destabilization and...

Perhaps even PhD economists notice that manic-mania bubbles always burst–always. Just a friendly heads-up to all the Bulls bowing and murmuring prayers to the Golden Idol of the Federal Reserve: the Fed just slashed its balance sheet–yes, reduced its assets. After panic-printing $410 billion in a few months, a $24 billion decline isn’t much, but it does suggest the Fed might finally be worrying about the reckless, insane bubble it inflated: August 28, 2019: $3.760...

The global economy and financial system are both running on the last toxic fumes of financialization and globalization. For two generations, globalization and financialization have been the two engines of global growth and soaring assets. Globalization can mean many things, but its beating heart is the arbitraging of the labor of the powerless, and commodity, environmental and tax costs by the powerful to increase their profits and wealth. In other...

Parabolic moves end when the confidence that the parabolic move can’t end becomes the consensus. The consensus seems to be that the stock market is on its way to much higher levels, and soon. The near-term targets for the S&P 500 (SPX, currently around 3,235) range from 3,500 to 4,000, with longer-term targets reaching “the sky’s the limit.” The consensus reasoning goes like this: — Central banks can print a lot more money — Stocks rise when central banks...

If you believe you’ve front-run the herd, you’re now in mid-air along with the rest of the herd that has thundered off the cliff. We’re awash in financial charts, but only a few crystallize an entire year. Here are the two charts that sum up everything you need to know about the stock market in 2020. Put another way–these are the two charts you need to ignore or rationalize away–unless you’re a Bear, of course, in which case you’ll want to tape a printed copy next to...

One day the stock market ‘falcon’ will no longer hear the Fed ‘falconer’, and the Pavlovian magical thinking will break down as the market goes bidless. The past decade has shown that when the Federal Reserve creates trillions of dollars out of thin air (QE), U.S. stocks rise accordingly. The correlation is very nearly perfect. This has given rise to the belief that buyers of stocks will always be rewarded because “the Fed has our backs.” The evidence for this...

After 11 years of “the Fed is the market” expansion, the Fed has now reduced its bloated balance sheet by 6.7%. This is normal, right? So here we are in Year 11 of the longest economic expansion/ stock market bubble in recent history, and by any measure, the hour is getting late, to quote Mr. Dylan: So let us not talk falsely now the hour is getting late Bob Dylan, “All Along the Watchtower” The question is: what would happen if we stop talking falsely? What would...