Tuesday , April 23 2019
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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

America’s Forced Financial Flight: Fleeing Unaffordable and Dysfunctional Cities

2 days ago

The forced flight from unaffordable and dysfunctional urban regions is as yet a trickle, but watch what happens when a recession causes widespread layoffs in high-wage sectors.

For hundreds of years, rural poverty has driven people to urban areas: cities offer paying work and abundant opportunities to get ahead, and these financial incentives have transformed the human populace from largely rural to largely urban in the developed world.

Now a new set of financial pressures are forcing a migration of urban residents out of cities which are increasingly unaffordable and dysfunctional.As highly paid skilled workers and global capital have flooded into high-job-growth regions, living costs and the costs of doing business have skyrocketed: where not too long ago $1,000 a month would secure

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How Empires Fall: Moral Decay

4 days ago

There is a name for this institutionalized, commoditized fraud: moral decay.

Moral decay is an interesting phenomenon: we spot it easily in our partisan-politics opponents and BAU (business as usual) government/private-sector dealings (are those $3,000 Pentagon hammers now $5,000 each or $10,000 each? It’s hard to keep current…), and we’re suitably indignant when non-partisan corruption is discovered in supposed meritocracies such as the college admissions process.

But we’re less adept, it seems, at discerning systemic moral decay, which infects the very foundations of the economy and society.

Consider America’s favorite pastime, corrosive partisan politics. This distemper is often traced back to (surprise!) extreme partisans, but as the chart below shows, political partisanship has

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The Next Financial Crisis Won’t Be Caused by Fraud: This Time Will Be Different

6 days ago

Extreme levels of debt and overvaluation characterize the entire global economy, and are not limited to any one nation or sector.

Financial crises come in two flavors: fraud and credit-valuation over-reach.Fraud-based financial crises may differ in particulars, but they share many traits: perverse incentives are institutionalized; the perverse incentives reward figuring out how to evade oversight via fraud, embezzlement, masking risk, etc. which are soon commoditized; regulations are gutted by insider-funded lobbying; regulators fail to do their job in hopes of getting lucrative positions in the industry they’re supposed to be regulating; reports of systemic, commoditized fraud are ignored because everyone’s getting rich, and so on.

The resolution has to 1) eliminate the perverse

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The World’s Hypocritical Silence as China Imprisons its Ethnic Muslims En Masse

7 days ago

The entire world’s ruling elites are silent because they’re terrified that even mild murmurings might limit the blood-soaked billions they want to reap from trade with China.

Imagine the reaction in the global Muslim community if a western nation imprisoned hundreds of thousands of Muslims solely for being Muslim and subjected them to torture, "re-education" that amounts to treating their religious faith as a pathological mental illness, forcefully separating parents and children, incarcerating the children in state-run orphanages, and on and on in a ruthlessly efficient Nazi-like systemic oppression.

The Muslim "street" would erupt in mass protests, burning flags and calling for the downfall of The Great Satan, and the Muslim nations would cancel energy and trade contracts and lodge

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Notre Dame and the Identity of France

8 days ago

These are not matters solely of politics and finance; they are manifestations of the elite war on the identity of France.

As rationalists, we’re supposed to take the dramatic and profoundly tragic fire at Notre Dame Cathedral in Paris as random chance or bad luck. But I cannot be the only one who feels a symbolic tie between the near-destruction of a French religious and cultural icon and the embattled identity of France.

As it happens, I am reading Fernand Braudel’s massive two-volume history The Identity of France: Volume One: History and Environment and Volume Two: People and Production.

Longtime readers know I have often recommended Braudel’s three-volume history, Civilization and Capitalism, 15th-18th Century, as essential to the understanding of the rise of Capitalism in

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No Fix for Recession: Without a Financial Crisis, There’s No Central Bank Policy Fix

9 days ago

There are no extreme "fixes" to secular declines in sales, profits, employment, tax revenues and asset prices.

The saying "never let a crisis go to waste" embodies several truths worth pondering as the stock market nears new highs. One truth is that extreme policies that would raise objections in typical times can be swept into law in the "we have to do something" panic of a crisis.

Thus wily insiders await (or trigger) a crisis which creates an opportunity for them to rush their self-serving "fix" into law before anyone grasps the long-term consequences.

A second truth is that crises and solutions are generally symmetric: a moderate era enables moderate solutions, crisis eras demand extreme solutions. Nobody calls for interest rates to fall to zero in eras of moderate economic

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Fitness without the Long, Grueling Workout

11 days ago

Pondering what Nature selected as advantageous in our long existence as hunter-gatherers helps us understand why walking and occasional short bursts of intensive exercise together yield the vast majority of the benefits of exercise/fitness.

What if there was a way to get rich by merely investing a modest amount of money weekly? Who wouldn’t want to join the program? Our health is our only real wealth, and fitness is like the modest investment that yields multiples of the investment made.

Since our culture is based on commerce and marketing, extreme sports are front and center: professional athletes, daredevils performing insanely dangerous stunts, oldsters running marathons, and so on.

The subtext of this media coverage implies that athletics and fitness are unattainable by us average

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Assange and the Unforgivable Sin of Disemboweling Official Narratives

12 days ago

The entire global status quo is on the cusp of the S-Curve decline phase.

There is really only one unforgivable sin in the political realm, and that’s destroying the official narrative by revealing the facts of the matter. This is why whistleblowers who make public the secret machinery of the elaborately artful lies underpinning all official narratives are hounded to the ends of the Earth.

Employees of state entities such as Ellsberg, Manning and Snowden are bound by vows of secrecy and threatened by the promise of severe punishment.Outsiders such as Assange are even further beyond the pale because they can’t be accused of being traitors, as they never took the vows of secrecy required by the Deep State.

The single most damaging revelation to all the elaborate lies that make up

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Blind Faith vs. the Bottom Line

13 days ago

There is more than a little "let them eat brioche" in the blind faith that the masses’ patience for pillage is infinite.

We’ve reached an interesting moment in history where we each have a simple choice: we either go with blind faith or we go with the bottom line, i.e. the facts of the matter. So far, 2019 is the year of Blind Faith, as the charts below illustrate: the bottom line no longer matters.

Let’s start with the Ray Dalio Effect, which strikes financiers who’ve exploited our rigged system to skim billions while creating zero goods and services or public good: discerning that the millions whose labor has created the actual goods, services and public good will eventually tear down his Bastille of ill-gotten wealth stone by stone, Mr. Dalio rigs a corporate media appearance (the

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Beneath the Surface of Brexit

14 days ago

Geography matters, the balance of power matters, and democracy–it’s not yet clear if democracy matters or not.

I’ve been asked to comment on Brexit. I’m happy to do so, but not by promoting a position yes or no, or by attempting to unravel the political machinations, as I have neither the knowledge nor the interest to do so.

What I can do is propose two beneath the surface contexts which might be useful in understanding what’s really going on. These are the impressions and opinions of a distant observer, someone who is neither an expert nor a resident of the United Kingdom / Great Britain.

It seems to me that geography is still salient. As an island sea power, England is close enough to the continental land-based powers of Europe to fear invasion or continental hegemony but

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Here We Go Again: Tech Bubble 2.0 but “This Time It’s Different”

15 days ago

The doses of Delusionol(tm) required to believe "this time it’s different" are becoming dangerous.

Here we go again, another tech bubble is expanding like a supernova and the financial media is declaring (as it does during every bubble) "this time it’s different." File Tech Bubble 2.0 under memories are getting shorter or this time is never different:

The "Uber of dog-walkers" is worth a cool $1 billion pre-IPO. Or maybe it’s the AirBNB of dog-walkers, but who cares? Just as any company with no hope of profits skyrocketed once it put blockchain or crypto in its name during the cryptocurrency mania of late 2017, now calling a dead-on-arrival start-up "the Uber of…." is enough to justify a billion-dollar valuation.

A scooter-rental company in a very crowded field of

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Trade Deal Follies: The U.S. Has Embraced the World’s Worst Negotiating Tactics

16 days ago

The world’s worst negotiating strategy is to make a crazy tulip-bubble stock market rally dependent on a trade deal that harms the interests of the U.S.

The world’s worst negotiating tactics, the equivalent of handing the other side a loaded gun while waving a squirt gun around, are:

1. Declare a de facto political deadline for a deal. Constantly tweet that a deal is imminent. This gives the other side unparalleled leverage: having backed yourself into a deadline corner, where any delay will be viewed as a political defeat, the other side knows it doesn’t have to concede anything to get a deal out of you. You’ll cave in to every one of their demands due to the fatal stupidity of creating an arbitrary deadline.

2. Hinge the entire advance in U.S. stock markets on a trade deal being

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Here’s What It’s Like To Be a Bear in a Rigged Market

17 days ago

Central bankers and media handlers must be laughing at how easy it is to slaughter the Bears and doubters with another fake-news round of trade-deal rumors and another Fed parrot being prompted to repeat some dovish mumbo-jumbo.

It’s not just tough being a Bear in a market rigged by trade deal rumors, Federal Reserve dovishness, a tsunami of Chinese liquidity and $270 billion in stock buy-backs in the first quarter–it’s impossible. Even "smarter than the average Bear" Yogi couldn’t beat the market, and so he ended up taking one for the Jellystone team so other Bears might live to fight another day:

Perhaps the best way to describe the impossibility of being a Bear in a rigged market is to employ an analogy. (Not that a rigged market is actually a market; it’s been transformed into a

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The Japanification of the World

19 days ago

Zombification / Japanification is not success; it is only the last desperate defense of a failing, brittle status quo by doing more of what’s failed.

A recent theme in the financial media is the Japanification of Europe.Japanification refers to a set of economic and financial conditions that have come to characterize Japan’s economy over the past 28 years: persistent stagnation and deflation, a low-growth and low-inflation economy, very loose monetary policy, a central bank that is actively monetizing debt, i.e. creating currency out of thin air to buy government debt and a government which funds "bridges to nowhere" and other stimulus spending to keep the economy from crashing into outright contraction.

The parallels with Europe are obvious, but they don’t stop there: the entire world

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Are the Rise of Social Media and the Decline of Social Mobility Related?

20 days ago

Social media offers hope of achieving higher online social status without having to succeed financially in a winner-take-most economy.

I’ve often addressed the decline of social mobility and the addictive nature of social media, and recently I’ve entertained the crazy notion that the two dynamics are related. Why Is Social Media So Toxic?

I have long held that the decline of social mobility–broad-based opportunities to get ahead financially and socially–is part of a larger dynamic I call social depression: the social decay resulting from economic stagnation and the decline of social mobility and financial security. America’s Social Depression Is Accelerating

Japan offers a real-world 29-year lab experiment in the negative social consequences of economic stagnation, a top I addressed

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The Hidden Cost of Losing Local Mom and Pop Businesses

21 days ago

What cannot be replaced by corporate chains is neighborhood character and variety.

There is much more to this article than first meets the eye: In a Tokyo neighborhood’s last sushi restaurant, a sense of loss

"Eiraku is the last surviving sushi bar in this cluttered neighborhood of steep cobblestoned hills and cherry trees unseen on most tourist maps of Tokyo. Caught between the rarified world of $300 omakase dinners and the brutal efficiency of chain-restaurant fish, mom-and-pop shops like it are fast disappearing.

Chef Masatoshi Fukutsuna and his wife, Mitsue, smile without a word. In the 35 years since they opened up shop, the couple has seen many of their friends move away for a job or family, only to return decades later, often without the job or the family, their absence

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Dear Stock Market: You Can’t Have It Both Ways

22 days ago

Eventually reality will intrude in this pleasant madness.

OK, let me see if I have this right: the stock market is soaring because the economy is softening, so the Federal Reserve panicked and went from raising rates to considering cutting rates.

It seems markets are now assuming a rate cut is already locked in, given the Fed’s commitment to cease trimming its balance sheet by September.

This dovish reversal means liquidity is flooding back into stocks and bonds, and so stocks are rising as once again "the Fed has our backs."

OK, I get it. But the market is also rising because punters and pundits are assuming the soft spot in economic expansion has ended, and growth is already resuming globally. The positive data out of China is taken as proof-positive of this resumption of

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The Fed Guarantees No Recession for 10 Years, Permanent Uptrend for Stocks and Housing

23 days ago

Those who own stocks and housing now will continue getting richer, those who don’t will be priced out of these markets.

A classified Federal Reserve memo sheds new light on the Fed’s confidence in its control of the economy and the stock and housing markets. In effect, the Fed is guaranteeing that there will be no recession for another 10 years, and that stocks and housing will remain in a permanent uptrend.

Paraphrasing the memo, we have the tools to insure that stocks and housing do not just remain at a permanently high plateau but continue to move higher in a permanent uptrend.

I’ve marked up a chart of the S&P 500 and the Case-Shiller Housing Index to illustrate the Fed guarantee. As you can see, stocks and housing will at a minimum double in the 2019-2029 period, and could do

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The “Miracle Cure”: Walking

25 days ago

The activity/exercise must be enjoyable enough that it doesn’t take a massive application of willpower to make it happen.

While selling health-related "miracle cures" of one kind or another is big business, the real "miracle cure" is activity/exercise. The essential role of exercise/fitness is backed up by a large and growing body of evidence. It’s now apparent that humans are "born to walk" and need to stay active to be healthy: eating well isn’t enough.

If we apply the foundational processes of evolution to our own health, we end up focusing on the critical role of activity/exercise in our well-being–and in particular, the impressive benefits of walking.

This includes the impact of exercise on mental acuity/health, as explained in this article:

Brains evolved to need exercise

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Apple’s Rotten Core

26 days ago

Entering commoditized, fiercely competitive low-margin services cannot substitute for the high-margin profits that will be lost as global recession and saturation erode iPhone sales.

Apple has always been equally an enterprise and a secular religion. The Apple Faithful do not tolerate heretics or critics, and non-believers "just don’t get it."

So the first thing any critic must do is establish their credentials as a Believer:My first Mac model 0001 was the 21,447th made in week 32 of 1984 in Fremont, California. Now that we’ve established that, we can move on to my profound sense of anguished abandonment that Apple ceased producing the iPhone SE, the only form factor that works for me.

But Apple Faithful are accustomed to repeated bouts of anguished abandonment; it’s just one of the

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Is the World Becoming Wealthier or Poorer?

28 days ago

There is nothing intrinsically profitable about either robotics or AI.

At the request of colleague/author Douglas Rushkoff (his latest book is Team Human), I’m publishing last week’s Musings Report, which was distributed only to subscribers and patrons of the site.)

The core assumption of Universal Basic Income (UBI) and other plans to redistribute wealth and income more broadly is that the world is becoming wealthier, and so the pool of income and wealth that can be taxed is always expanding.

This pool of available wealth and income is so vast, we’re assured, that taxing the super-wealthy will not really dent their wealth or the economy as a whole.

But what if the world is rapidly becoming poorer in every important sense?What if the decline in the standard of living of the bottom

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When Are We Going to Tackle the For-Profit Monopolies Which Censored RussiaGate Skeptics?

29 days ago

We either take down Facebook and Google and turn them into tightly regulated transparent public utilities available to all or they will destroy what little is left of American democracy.

The RussiaGate Narrative has been revealed as a Big Con (a.k.a. Nothing-Burger), but what’s dangerously real is the censorship that’s being carried out by the for-profit monopolies Facebook and Google on behalf of the status quo’s Big Con.

This site got a taste of Facebook-Google-Big-Media’s Orwellian Authoritarian-Totalitarian censorship back in 2016 when a shadowy fake-news site called PropOrNot aggregated every major alt-media site that had published anything remotely skeptical of the coronation of Hillary Clinton as president and labeled us all shills for Russian propaganda.

Without any

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The Media, Mueller, the Big Con and the Democratization of Narrative

March 25, 2019

Falling for a con is painful. The first reaction is to deny being conned, of course. The second is to blame skeptics for being correct in their skepticism.

Here’s the fundamental "story" of the Mueller Investigation: elites don’t like "the little people" democratizing public narratives. The elites–who reckon their right to rule is self-evident–want to set the narrative and the context, because that’s the foundation of power: once you get the citizenry to agree on your narrative and context, you secure two valuable things: 1) political legitimacy and 2) their obedience.

Elite anxiety over the "the little people" democratizing narratives is not a new phenomenon. Elites have demanded control of any media outlet that doesn’t parrot their line and have tried to declare skeptical

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Politics Has Failed, Now Central Banks Are Failing

March 22, 2019

With each passing day, we get closer to the shift in the tide that will sweep away this self-serving delusion of the ruling elites like a crumbling sand castle.

Those living in revolutionary times are rarely aware of the tumult ahead: in 1766, a mere decade before the Declaration of Independence, virtually no one was calling for American independence. Indeed, in 1771, a mere 5 years before the rebellion was declared, the voices promoting independence were few and far between.

The shift from a pre-revolutionary era to a revolutionary era took less than a year. Perhaps no one exemplified the rapidity and totality of radicalization more than Benjamin Franklin, who went from an avowed Loyalist bent on reform to a dedicated, zealous revolutionary at the tender age of 70. (Old dogs can learn

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Which Nations Will Crumble and Which Few Will Prosper in the Next 25 Years?

March 21, 2019

Adaptability and flexibility will be the core survival traits going forward.

What will separate the many nations that will crumble in the next 25 years and those few that will survive and even prosper while the status quo dissolves around them? As I explain in my recent book Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic, the factors that will matter are not necessarily cultural or financial; being hard-working and wealthy won’t be enough to save nations from coming apart at the seams.

Here are the factors that will matter in the next 25 years:

1. The ability to engage and survive non-linear change, which is rapid, unpredictable and systemic, as opposed to linear change which is gradual, predictable and limited in nature.

None of the current political

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The Neutered Fed Is Politically Trapped

March 20, 2019

Everyone now knows that the only meaningful goal of Fed policy is propping up the world’s greatest credit-asset bubble.

In this era of fake news and deep-fake digital recordings and images, it’s important to use unedited images. With this firmly in mind, here is an unedited photo of Federal Reserve Chair Jay Powell and former Fed Chairs Janet Yellen and Ben Bernanke from their recent unprecedented appearance on 60 Minutes:

The purpose of the Fed chiefs’ dog-and-pony show was to promote the notion that the Fed really really really (try not to laugh out loud) "cares" about the average American, even though 85% of the $30 trillion in gains generated by the Fed’s policies flowed to the top 10% and roughly two-thirds of the gains flowed to the top few percent.

The bottom 80% got

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While the Nation Fragments Socially, the Financial Aristocracy Rules Unimpeded

March 19, 2019

America’s aristocracy is not formalized, and that’s the secret of its success.

If there is one central irony in American history, it is this: the citizenry that broke free of the chains of British Monarchy, the citizenry that reckoned everyone was equal before the law, the citizenry that vowed never to be ruled by an aristocracy that controlled the government and finance as a means of self-enrichment, is now so distracted by social fragmentation that the citizenry is blind to their servitude to a new and formidably informal financial aristocracy.

From this juncture, ironies abound: the so-called Socialist demands for Medicare for All, "free" college for all and Universal Basic Income (UBI) are encouraged (or perhaps orchestrated) by the financial aristocracy, which rakes in tens of

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The Coming Crisis the Fed Can’t Fix: Credit Exhaustion

March 18, 2019

Thus will end the central banks’ bombastic hubris and the public’s faith in central banks’ godlike powers.

Having fixed the liquidity crisis of 2008-09 and kept a perversely unequal "recovery" staggering forward for a decade, central banks now believe there is no crisis they can’t defeat: Liquidity crisis? Flood the global financial system with liquidity. Interest rates above zero? Create trillions out of thin air and use the "free money" to buy bonds. Mortgage and housing markets shaky? Create another trillion and use it buy up mortgages.

And so on. Every economic-financial crisis can be fixed by creating trillions of out thin air, except the one we’re entering–the exhaustion of credit. Central banks, like generals, always prepare to fight the last war and believe their preparation

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A Precarious Revolution Is Brewing

March 15, 2019

Once again profound social and economic forces are changing the nation in ways that are difficult to understand in real time.

The American Revolution arose not from politics but from rapid social and economic changes that revealed the precariousness of the colonists’ prosperity. Conventional histories focus on the political context (Boston Tea Party, etc.), but more important were the changes in social relations, and the impact of the economy moving from quasi-feudal forms of patronage to an economy of impersonal market forces.

The political revolution was the result of profound shifts in social and economic structures.

As Gordon Wood explains in his seminal book The Radicalism of the American Revolution, it was these social changes that nurtured the revolutionary zeal of the average

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What Sort of “Democracy” Do We Have If Everyone’s Goal Is Maximizing Their Government Swag?

March 14, 2019

The "marketplace" of individuals and entities all seeking to maximize their share of the central-state swag doesn’t make a democracy.

A democratic republic is a government in which power flows from citizens to their elected representatives. The American revolutionaries did not make a big distinction between republic and democracy, for in the context of the late 1700s, the dominant political structure was monarchy, and democracy meant the people have the final say via elections.

As Gordon Wood explains in his seminal book The Radicalism of the American Revolution, the upper-class revolutionaries had their doubts about the rabble’s ability to pursue the common good above their own narrow self interests. This ability to focus on the public good rather than on one’s own financial interests

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