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Charles Hugh Smith

Charles Hugh Smith

Charles Hugh Smith is an American writer and blogger. He is the chief writer for the site "Of Two Minds". Started in 2005, this site has been listed No. 7 in CNBC's top alternative financial sites. His commentary is featured on a number of sites including: Zerohedge.com., The American Conservative and Peak Prosperity. He graduated from the University of Hawaii, Manoa in Honolulu. Charles Hugh Smith currently resides in Berkeley, California and Hilo, Hawaii.

Articles by Charles Hugh Smith

The “Titanic” Analogy You Haven’t Heard: Passively Accepting Oblivion

6 days ago

Whether we realize it or not, we’re responding with passive acceptance of oblivion.
You’ve undoubtedly heard rearranging the deck chairs on the Titanic as an analogy for the futility of approving policy tweaks to address systemic crises. I’ve used the Titanic as an anology to explain the fragility of our financial system and the “glancing blow” of the pandemic:
Why Our Financial System Is Like the Titanic (March 15, 2016)
Coronavirus and the “Unsinkable” Titanic Analogy (January 29, 2020)
But there’s a powerful analogy you haven’t heard before. To understand the analogy, we first need to recap the tragedy’s basic set-up.
On April 14, 1912, the liner Titanic, considered unsinkable due to its watertight compartments, struck a glancing blow against a massive iceberg on that moonless,

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Why We’re Doomed: Our Delusional Faith in Incremental Change

8 days ago

Better not to risk any radical evolution that might fail, and so failure is thus assured.
When times are good, modest reforms are all that’s needed to maintain the ship’s course.By “good times,” I mean eras of rising prosperity which generate bigger budgets, profits, tax revenues, paychecks, etc., eras characterized by high levels of stability and predictability.
Since stability has been the norm for 75 years, institutions and conventional thinking have both been optimized for incremental change. This is an analog of natural selection in Nature: when the organism’s environment is stable, there’s little pressure to favor random mutations, as these can be risky.
Why risk big changes when everything’s working fine as is?
Absent any big changes in their environment, organisms’ genetic

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How We Institutionalized Incompetence

9 days ago

And so we face the ultimate irony: ‘bailing-out-everything’ destroys the entire rotten system.
You’ve probably noticed things no longer work as well as they once did. For example, the store’s online inventory says something is in stock and when you get to the store, it’s not on the shelf. A small issue, but telling nonetheless.
Or you might call a local government agency to get an explanation of how a new fee is calculated, and nobody’s ever available to explain it–or sort out your punitive late fee even though you paid on time.
You’ve probably noticed services cost a lot more now, but the quality has eroded. Sure, it’s easy to blame it all on the pandemic, but quality has been eroding as costs have risen for years.
You’ve

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Our Simulacrum Economy

9 days ago

In the hyper-real casino, everyone has access to the terrors of losing, but only a few know the joys of the rigged games that guarantee a few big winners by design.
Readers once routinely chastised me for over-using simulacrum to describe our economy and society. The problem is this word perfectly describes the hollowed-out, rigged economy and social order we inhabit and so synonyms don’t quite cut it: it’s not the same as simulation or imitation or counterfeit.
My use (or over-use) dates back to the 2009 publication of my book Survival+, which included a chapter titled Simulacrum and the Politics of Experience. I use simulacrum to describe a carefully constructed representation of a once-authentic system that is intended to shape our behavior to suit the interests of those constructing

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How We Institutionalized Incompetence

10 days ago

And so we face the ultimate irony: ‘bailing-out-everything’ destroys the entire rotten system.
You’ve probably noticed things no longer work as well as they once did. For example, the store’s online inventory says something is in stock and when you get to the store, it’s not on the shelf. A small issue, but telling nonetheless.
Or you might call a local government agency to get an explanation of how a new fee is calculated, and nobody’s ever available to explain it–or sort out your punitive late fee even though you paid on time.
You’ve probably noticed services cost a lot more now, but the quality has eroded.Sure, it’s easy to blame it all on the pandemic, but quality has been eroding as costs have risen for years.
You’ve probably noticed massive cost overruns in public projects.

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A Hard Rain Is Going to Fall

14 days ago

The status quo is about to discover that it can’t stop the hard rain or protect its fragile sandcastles.
You’ll recognize A Hard Rain Is Going to Fall as a cleaned-up rendition of Bob Dylan’s classic “A Hard Rain’s a-Gonna Fall”. Since the world had just avoided a nuclear conflict in the Cuban Missile Crisis, commentators reckoned Dylan was referencing a nuclear rain. But he denied this connection in a radio interview, stating: “…it’s just a hard rain. It isn’t the fallout rain. I mean some sort of end that’s just gotta happen….” (Source)
Which brings us to the present and America’s dependence on the sandcastles of monopoly, corruption, free money and a two-tier legal/political system. You know, BAU–business as usual. A hard rain’s a-gonna fall on these sand castles because, well, the

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What Could Go Wrong? Plenty

15 days ago

Quite a lot of things can go wrong, especially if the mainstream’s rose-tinted sunglasses induce a delusional confidence in fantasy.
The conventional assumptions are remarkably rosy: the “recovery” is V-shaped in all the ways that count (i.e. the top 10% are once again doing well), the Federal Reserve will never let stocks go down or interest rates rise ever again (never never ever!), and the Federal government will borrow and blow endless trillions in stimulus ($2 trillion every six months seems about right, but since there’s no limit, we’ll double it if that’s needed to bail out every zombie corporation, bloated bureaucracy, skim and scam in the land).
what could go wrong? Gordon Long and I considered the question and came up with: quite a lot of things can go wrong, especially if

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Corruption Is Now Our Way of Life

17 days ago

Systemic corruption and the implosion of the social contract have consequences: It’s called collapse.
Social and economic decay is so glacial that only those few who remember an earlier set-pointare equipped to even notice the decline. That’s the position we find ourselves in today.
Many Americans will discount the systemic corruption that characterizes the American way of life because they’ve known nothing but systemic corruption. They’ve habituated to it because they have no memory of a time when looting wasn’t legalized and maximizing self-enrichment by any means available wasn’t the unwritten law of the land.
If you don’t yet see America as little more than an intertwined collection of skims, scams, frauds, embezzlements, lies, gaming-the-system, obfuscation of risk and exploitation

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Things Change

20 days ago

Things Change
October 2, 2020
“Doing more of what’s hollowed out our economy and society” is a slippery path to ruin.
Things change, supposedly immutable systems crumble and delusions die. That’s the lay of the land in the The Empire of Uncertainty I described yesterday.
It’s difficult not to be reminded of the Antonine Plague of 165 AD that crippled the Western Roman Empire. The exact nature of the virus that struck down as many as one-third of the Empire’s residents is unknown; it’s thought to be an early variant of measles or smallpox.
One would have guessed the populace achieved “herd immunity” after the first wave devastated the Empire, but that’s not what happened. The plague continued until 180 AD, and recurred a decade later, continuing to sow misery and economic costs.

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The Empire of Uncertainty

21 days ago

Anyone claiming they can project the trajectory of the U.S. and global economy is deluding themselves.
Normalcy depends entirely on everyday life being predictable. To be predictable, life must be stable, which means that there is a high level of certainty in every aspect of life.
The world has entered an era of profound uncertainty, an uncertainty that will only increase as self-reinforcing feedbacks strengthen disrupting dynamics and perverse incentives drive unintended consequences.
It may be more accurate to say that we’ve entered the Empire of Uncertainty, an empire of ambiguous borders and treacherous topology.
A key driver of uncertainty is the Covid-19 virus, which is a slippery little beast. Nine months after its emergence on the world stage, discoveries are still being

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The Urban Exodus and How Greatness Goes Bankrupt

22 days ago

The best-case scenario is those who love their “great city” will accept the daunting reality that even greatness can go bankrupt.
Two recent essays pin each end of the “urban exodus” spectrum. James Altucher’s sensationalized NYC Is Dead Forever, Here’s Why focuses on the technological improvements in bandwidth that enable digital-economy types to work from anywhere, and the destabilizing threat of rising crime. In his telling, both will drive an accelerating urban exodus over the long-term,.
Jerry Seinfeld’s sharp rebuttal, So You Think New York Is ‘Dead’, focuses on the inherent greatness of NYC and other global metropolises based on their unique concentration of wealth, arts, creativity, entertainment, business, diversity, culture, signature neighborhoods, etc.
The core

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Helicopter Money and the End of Taxes

23 days ago

Rather than right the ship, the “easy fix” is to distribute “free money”–not just to billionaires and corporations but to everyone.
The system of collecting taxes and distributing the dough is a zero-sum game: each dollar of tax revenue paid by someone and given to someone else is one dollar that the taxpayer will no longer have to save or spend. Meanwhile, the recipient received a dollar that would not have been available without taxes.
State and local governments are still bound by this zero-sum game except for infrastructure spending funded by the sale of municipal bonds. These bonds are debt and must be paid back with interest. But as a general rule, the general funds of cities, counties and states are zero-sum: they can only spend what they collect in tax receipts.
As a

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The Road to Nowhere: Whatever Can’t Be Politicized Ceases to Exist

26 days ago

Just as time is a one-way arrow, “the politicization of everything” is a one-way road to dissolution and collapse.
The essence of any Totalitarian society is the politicization of everything, as everything must be either supporting the status quo or it’s a threat to the status quo.
There is no middle ground in a Totalitarian society and so everything–literally everything– must be politicized to assess its true nature of being “for” or “against” the status quo.
In such a society, what cannot be politicized ceases to exist. It isn’t counted or recognized, and so it fades into a netherworld of shadows, a dangerous realm where the mere act of attempting to recognize a non-politicized experience is itself a threat to the status quo.
You will of course be thinking of the former Soviet Union

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The Silent Exodus Nobody Sees: Leaving Work Forever

28 days ago

The “take this job and shove it” exodus is silently gathering momentum.
The exodus out of cities is getting a lot of attention, but the exodus that will unravel our economic and social orders is getting zero attention: the exodus from work. Like the exodus from troubled urban cores, the exodus from work has long-term, complex causes that the pandemic has accelerated.
These are the core drivers of the exodus from work.
1. labor’s share of the economy has been in multi-decade decline. It’s easy to blame globalization and/or automation–and it’s true that the decline in labor’s share accelerated from 2000 on. But this trend began around 1970, long before China joined the World Trade Organization and the advent of “software eating the world.” (see chart below)
2. While it’s convenient for

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Inflation and “Socialism-Lite” Are Just What the Billionaires Want

September 22, 2020

After a bout of inflation and “socialism-light”, we could end up with even more extreme inequality when the whole rotten structure collapses.
Imagine owning a Buffett-Bezos fortune of bilious billions, or even 10% of these mega-fortunes, i.e. between $5 billion and $20 billion. Heck, imagine owning 1% of these mega-fortunes, i.e. $500 million to $2 billion.
You’re extremely rich so you can buy the best advice. Your capital is mobile, and so are you. You can live anywhere and shift your capital anywhere.
Your advisors have noted an increase in media chatter on inequality, for example: The Bill for America’s $50 Trillion Gluttony of Inequality Is Overdue, and they’re busy preparing plans to weather the storm and preserve your fortune come what may.
It’s all too obvious that a claw-back

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The Bill for America’s $50 Trillion Gluttony of Inequality Is Overdue

September 21, 2020

The battle to claw back a significant percentage of the $50 trillion is just beginning.
Do you hear the pathetic bleating of America’s billionaires and their army of toadies?If not, you soon will, for a remarkable report has been released that documents the $50 trillion in earnings that’s been transferred to the Financial Aristocracy from the bottom 90% of American households in the past 45 years.
The report was prepared by the RAND Corporation, and has a suitably neutral title: Trends in Income From 1975 to 2018. (The full report can be downloaded for free.)
Just as remarkable is the no-holds-barred coverage of the study by Time magazine, an iconic publication of the mainstream media: The Top 1% of Americans Have Taken $50 Trillion From the Bottom 90% — And That’s Made the U.S. Less

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“Inflation” and America’s Accelerating Class War

September 18, 2020

Those who don’t see the fragmentation, the scarcities and the battlelines being drawn will be surprised by the acceleration of the unraveling.
I recently came across the idea that inflation is a two-factor optimization problem:inflation is necessary for the macro-economy (or so we’re told) and so the trick for policy makers (and their statisticians who measure the economy) is to maximize inflation in the economy but only to the point that it doesn’t snuff out businesses and starve workers to death.
From this perspective, households have to grin and bear the negative consequences of inflation for the good of the whole economy.
This narrative, so typical of economics, ignores the core reality of “inflation” in America: it’s a battleground for the class war that’s accelerating. Allow me to

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This Is Why Inflation Will Rip Everyone’s Face Off

September 17, 2020

This is why inflation will rip everyone’s faces off: production will continue to stagnate no matter how many trillions the Federal Reserve prints and throws around.

This is how market capitalism is supposed to work: consumers decide (for whatever reason) to buy more toilet paper. This increase in demand strips the shelves of TP and pushes the price up as demand exceeds supply.

In response, capital flows to enterprises that ramp up production of TP to meet this new demand / scarcity of supply. Price returns to equilibrium.

Yea for our wunnerful market capitalism … but oops, this isn’t what actually happens in our economy. What actually happens is less of a happy story. As correspondent A.P. explained in Our Wile E. Coyote Economy: Nothing But Financial Engineering (June 12, 2020), the

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Sacrifice for Thee But None For Me

September 16, 2020

The banquet of consequences for the Fed, the elites and their armies of parasitic flunkies and factotums is being laid out, and there won’t be much choice in the seating.
Words can be debased just like currencies. Take the word sacrifice. The value of the original has been debased by trite, weepy overuse to the point of cliche. Like other manifestations of derealization and denormalization, this debasement is invisible, profound and ultimately devastating.
Consider the overworked slogan of implied shared sacrifice: we’re all in this together. Pardon my cynicism, but doesn’t this sound like what the first class passengers in the lifeboats shouted to the doomed steerage passengers on the sinking Titanic?
Here is the ice-cold reality of America in 2020: Sacrifice for Thee But None For

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Isn’t It Obvious We Need a New System?

September 15, 2020

Why do we tolerate such a corrupt, undemocratic, exploitive, elite-dominated system? Because we have no other choice? No, we do have a choice.
Isn’t it obvious that we need an alternative economic system that isn’t controlled by corporations, the government and the central bank for the exclusive benefit of insiders and elites? Isn’t it obvious that the current system has failed the majority of participants, and hence the ubiquitous sensations of:
1) being ignored by the insiders / elites who run the current system to their own benefit
2) being trapped in an economy that’s been stripped of social / upward mobility
3) being stripmined / exploited by domestic and globalized elites
4) disgust / frustration with the self-enriching political class that serves corporate/elite/insider interests

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The Four D’s That Define the Future

September 14, 2020

When the money runs out or loses its purchasing power, all sorts of complexity that were previously viewed as essential crumble to dust.
Four D’s will define 2020-2025: derealization, denormalization, decomplexification and decoherence. That’s a lot of D’s. Let’s take them one at a time.
I use the word derealization to describe the inner disconnect between what we experience and what the propaganda / marketing complex we live in tells us we should be experiencing.
Put another way: our lived experience is derealized (dismissed as not real) by official spin and propaganda.
The current state of the economy is a good example. We see the real-world economy declining yet the officially approved narrative is that there’s a V-shaped recovery underway because Big Tech stocks are hitting new highs.

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This Is How It Ends: All That Is Solid Melts into Air

September 12, 2020

While the Federal Reserve and the Billionaire Class push the stock market to new highs to promote a false facade of prosperity, everyday life will fall apart.
How will the status quo collapse? An open conflict–a civil war, an insurrection, a coup–appeals to our affection for drama, but the more likely reality is a decidedly undramatic dissolution in which all the elements of our way of life we reckoned were solid and permanent simply melt into air, to borrow Marx’s trenchant phrase.
In other words, Rome won’t be sacked by Barbarians, or ignite in an insurrectionary conflagration–everything will simply stop working as those burdened with the impossible task of keeping a failed system glued together simply walk away.
If we examine

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Dear Jerry and James: You’re Both Wrong About New York

September 11, 2020

Thank you, Lara E. ($100), for your outrageously generous contribution to this site — I am greatly honored by your support and readership.

 

Thank you, Bob B. ($20), for your most generous contribution to this site — I am greatly honored by your steadfast support and readership.

Go to my main site at www.oftwominds.com/blog.htmlfor the full posts and archives.

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This Is How It Ends: All That Is Solid Melts Into Air

September 10, 2020

While the Federal Reserve and the Billionaire Class push the stock market to new highs to promote a false facade of prosperity, everyday life will fall apart.
How will the status quo collapse? An open conflict–a civil war, an insurrection, a coup–appeals to our affection for drama, but the more likely reality is a decidedly undramatic dissolution in which all the elements of our way of life we reckoned were solid and permanent simply melt into air, to borrow Marx’s trenchant phrase.
In other words, Rome won’t be sacked by Barbarians, or ignite in an insurrectionary conflagration–everything will simply stop working as those burdened with the impossible task of keeping a failed system glued together simply walk away.
If we examine the collapse of the Soviet Union and the Western Roman

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Inflation Is Stealth Austerity

September 9, 2020

Rather than decry austerity, which demands an open political discussion of trade-offs, we should decry inflation’s stealthy reduction of purchasing power.
Austerity–bad. Inflation–good. Oh wait–they’re the same thing: both are a reduction in purchasing power. The only difference is a reduction via austerity is upfront while inflation is a stealth reduction, obfuscated by “official” distortions and Federal Reserve mumbo-jumbo.
Consider $1,200 in wages, unemployment, stimulus, Social Security payment, etc. If this payment gets cut by 10%–$120–as a result of austerity, pay cut, reduction in hours worked, etc., recipients scream bloody murder.
But if inflation reduces the purchasing power of the $1,200 by 10%, nobody does anything but grumble that “prices keep rising while my income stays the

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Intolerance and Authoritarianism Accelerate Disunity and Collapse

September 8, 2020

Scapegoating dissenters only hastens the disunity and disarray that accelerates the final collapse.
Authoritarianism is imposed on us, but its sibling intolerance is our own doing. Intolerance and authoritarianism are two sides of the same coin: as intolerance becomes the norm, the intolerant start demanding that the state enforce their intolerance by suppressing their enemies via increasingly heavy-handed authoritarian measures.
Intolerance and authoritarianism increase as instability takes hold and living standards decline. In good times, dissent and differences of opinion are not only tolerated but celebrated, as this freedom to hold a variety of beliefs serves to unify society.
In bad times, dissent and differences are viewed as mortal threats to the social order. Perhaps there is a

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In the Footsteps of Rome: Maybe It No Longer Matters Who’s Emperor

September 7, 2020

Pretense and PR are not reality, and believing the Old Normal will magically be restored with sacrifice-free Federal Reserve printing is not an actual strategy.
Quick history quiz: who was the second-to-the-last Emperor of the Western Roman Empire? How about the third-to-the-last? Answers: Glycerius, 473-74 A.D. and Julius Nepos, 474-475 A.D. The last emperor was the grandly titled Romulus Augustus, who reigned less than a year until the whole shebang disintegrated in 476 A.D.
You get the point: when the momentum of collapse crosses the Event Horizon, it no longer matters who claims the title of Head Snake; the collapse is beyond the control of any individual or agency.
So when I hear the most important election in history, last chance for democracy, etc. I hear blah-blah-blah because

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Plugging into “Small Everything”: Wake Up and Smell the 3 Cs–Community, Cash, and Coin (Coffee optional)

September 4, 2020

Reversing from exploited division to creative and healthy solidarity will need to be the mantra and guiding principle going forward if we the people are to take back our economy.
Editor’s note: This is a guest post by my friend and colleague Zeus Yiamouyiannis, Ph.D., who has contributed essays to Of Two Minds since 2009.
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In the last essay I remarked that through a combination of internal pressures (disenchantment and material hardship) and external pressures (Covid-19 and catastrophic concentration of global wealth), Americans were going to have to learn to break trust with the promises of a rigged and unsustainable American Dream, decline participation in its mandates (i.e. “patriotic buying” and slaving away in dead-end jobs), and actively rebel against

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Fighting and Winning against “Big Everything”

September 2, 2020

So what can we do about all this when our politics, regulation and policies are all captured? We go directly to the source of value, which is demand.
Editor’s note: This is a guest post by my friend and colleague Zeus Yiamouyiannis, Ph.D., who has contributed essays to Of Two Minds since 2009.
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“The assumption I see everywhere in the alt financial media is the elite will do fine because they own the gold, land, factories, apartment complexes, etc. All true. However the Roman Elites owned all this too, but that didn’t save them from systemic collapse. They weren’t still fabulously rich once the Imperial structure collapsed.” Charles Hugh Smith, August 23, 2020 email to [email protected]
The gravy train for a pampered and protected elite won’t last

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Creating Perverse Asymmetries to Extort the “Little Guy”: The Special “Screw You” of Junk Bond Bailouts

September 1, 2020

LENDING is now the sucker’s game.
Editor’s note: This is a guest post by my friend and colleague Zeus Yiamouyiannis, Ph.D., who has contributed essays to Of Two Minds since 2009.
So this is the program: Devalue or deflate everything owned by the “little people”, buy it up for pennies on the dollars with unlimited free money, and attempt to use this massive financial asymmetry between the super-wealthy and the ordinary to manipulate markets back upward through artificially goosed “demand” backed by empty, cheap-money purchasing power.
Big banks only care about low interest rates so it can be gentleman-“lent” (i.e. given) to big corporations with huge fees attached (a major source of profit). Won’t that make lending impossible and unworkable to mom-and-pop businesses, etc.? Isn’t lending a

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