Friday , February 15 2019
Home / Charles Hugh Smith
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

What Caused the Recession of 2019-2021?

22 hours ago

As I discussed in We’re Overdue for a Sell-Everything/No-Fed-Rescue Recession, recessions have a proximate cause and a structural cause. The proximate cause is often a spike in energy costs (1973, 1990) or a financial crisis triggered by excesses of speculation and debt (2000 and 2008) or inflation (1980).
Structural causes are imbalances that build up over time: imbalances in trade or currency flows, capital investment, debt, speculation, labor compensation, wealth-income inequality, energy supply and consumption, etc. These structural distortions and imbalances tend to interact in self-reinforcing dynamics that overlap with normal business / credit cycles.
The current recession has not yet been acknowledged, but this is standard operating procedure: recessions are

Read More »

The Corporate Lemmings Who Rushed into Mobile/Social Media Ads Are Running off the Cliff

2 days ago

Given that corporations are run by people, and people are social animals that run in herds, it shouldn’t surprise us that corporations follow the herd, too.Take the herd move to forming conglomerates in the go-go late 1960s: corporations suddenly started buying companies in completely different sectors in businesses they knew nothing about, because the herd was forming conglomerates–not because it made any business sense but because it was the hot trend.
Oil companies bought Hollywood studios, and so on. (Ling-Temco-Vought was one of the conglomerates whose success inspired the herd.)
Few if any of the conglomerates hastily assembled in the 1960s survived the 1970s intact. Once the lemming-like frenzy to assemble conglomerates wore off, managers discovered the

Read More »

The Three Trends That Matter

4 days ago

Look no further than Brexit in Britain, the yellow vests in France and the Deplorables in the U.S. for manifestations of a broken social contract and decaying social order.
Among the many trends currently in play, Gordon Long and I discuss three that will matter as 2019 progresses: 2019 Themes (56 minutes)
1. Final stages of the debt supercycle
2. Decay of the social order/social contract
3. Social controls: Surveillance capitalism, China’s Social Credit system, social globalization
The basic idea of the debt supercycle is simple: resolving every crisis of over-leveraged speculative excess, evaporation of collateral and over-indebtedness by radically increasing debt eventually leads to an implosion of the entire credit-based

Read More »

Telltale Signs

7 days ago

I’m seeing lifestyles that are out of stock and no longer available, even in China.
Though every recession is unique, all recessions manifest in similar ways in the real economy. By real economy, I mean the on-the-ground economy we observe with our own eyes, as opposed to the abstract statistical model reflected in official declarations of when recessions begin and end.
One characteristic that never makes it into the abstract statistical representation of recession is the light switch phenomenon: business suddenly dries up, as if someone turned a light switch off. This is especially visible in discretionary purchases, which include everything from smart phones to vehicles to eating out.
Other telltale signs of recession include:

Read More »

Telltale Signs of Recession

7 days ago

Though every recession is unique, all recessions manifest in similar ways in the real economy. By real economy, I mean the on-the-ground economy we observe with our own eyes, as opposed to the abstract statistical model reflected in official declarations of when recessions begin and end.
One characteristic that never makes it into the abstract statistical representation of recession is the light switch phenomenon: business suddenly dries up, as if someone turned a light switch off. This is especially visible in discretionary purchases, which include everything from smart phones to vehicles to eating out.
Other telltale signs of recession include:

Dead giveaway #1: businesses that seemed established and doing well suddenly close. The customers are surprised, the

Read More »

Brace for Impact

9 days ago

As credit-asset bubbles pop, the dominoes start falling.
The economy is far more precarious than the surface boom/bubble suggests. A great many households, enterprises and municipalities are in overloaded boats whose gunwales are just a few inches above the water; the slightest wave will swamp and sink them.
The cost structure of the economy is completely out of whack with what households and enterprises can afford. There are several dynamics in play:
1. Enterprises have already stripped out all the expenses they can: head count has been cut, quality has been gutted, quantity has been reduced, supply chains have been squeezed, inventory controls trimmed to just-in-time and so on. There are no easy, quick cost reductions available

Read More »

China’s S-Curve of Expansion, Stagnation and Decline

10 days ago

Natural and human systems tend to go through stages of expansion, stagnation and decline that follow what’s known as the S-Curve. The dynamic isn’t difficult to understand: an unfilled ecological niche is suddenly open due to a new adaptation; a bacteria evolves to exploit a new host, etc. Expansion is rapid until the niche is fully occupied, and then growth matures and stagnates; the low-hanging fruit has all been picked, and it’s much more costly to reach what little is left.
Human economies starved of capital, credit, access to markets and freedom are akin to unexploited ecological niches. Lacking capital, credit and the freedom to innovate, experiment and advance, economies wallow in a self-reinforcing stagnation.
Should capital, credit, access to markets and

Read More »

The Coming Global Financial Crisis: Debt Exhaustion

11 days ago

Just as generals fight the last war, central banks always fight the last financial crisis. The Global Financial Crisis (GFC) of 2008-09 was primarily one of liquidity as markets froze up as a result of the collapse of the highly leveraged subprime mortgage sector that had commoditized fraud (hat tip to Manoj S.) via liar loans and designed-to-implode mortgage backed securities.
The central bank “solution” to institutionalized, commoditized fraud was to lower interest rates to zero and enable tens of trillions in new debt. As a result, total debt in the U.S. has soared to $70 trillion, roughly 3.5 times GDP, and global debt has skyrocketed from $84 trillion to $250 trillion. Debt in China has blasted from $7 trillion 2008 to $40 trillion in 2018.
A funny thing happens

Read More »

The Alt-Media Has Way More Fun

14 days ago

The corporate-state media lives in terror that the truth will somehow leak out of the corporate-Imperial fortress, imperiling their jobs and perks.
It’s not exactly news that the Alternative Media is under assault: skeptical inquiry and dissenting narratives are smeared as “fake news,” and new suspiciously corporate entities (NewsGuard et al.) claim to be “protecting” consumers from “fake news” as cover for their real agenda, which is limiting public exposure to skeptical, dissenting independent analysis.
Social Media and Search corporations are also censoring non-corporate, non-state media, again under the purported guise of stripping out “fake news.”
Despite this semi-official censorship, we in the Alt-Media are having way more

Read More »

The Alt-Media Has Way More Fun than the Mainstream Media

14 days ago

It’s not exactly news that the Alternative Media is under assault: skeptical inquiry and dissenting narratives are smeared as “fake news,” and new suspiciously corporate entities (NewsGuard et al.) claim to be “protecting” consumers from “fake news” as cover for their real agenda, which is limiting public exposure to skeptical, dissenting independent analysis.
Social Media and Search corporations are also censoring non-corporate, non-state media, again under the purported guise of stripping out “fake news.”
Despite this semi-official censorship, we in the Alt-Media are having way more fun that the anxiety-ridden serfs in the Mainstream Media. There are many hard-working, honest journalists slaving away in the Mainstream (more accurately, the corporate-state) Media, but

Read More »

So If Half of Facebook Accounts Are Fake…

16 days ago

The social media space is absolutely ripe for a new entrant who demands arduous verification and constantly monitors its user base to eliminate cloned and fake accounts.
How many accounts on Facebook are fake? Recent estimates of half could be low. Here’s an experiment: open a Facebook account with a name that cannot possibly be anyone else’s real name, for example, Johns XQR Citizenry. Solicit a few real people to friend you, start posting something original every day and see what happens.
When you do a search, you find a half-dozen “Johns XQR Citizenry,” and every one of these cloned accounts is completely empty: no photo, no content. They were obviously set up for the sole purpose of cloning your identity to propagate spam to

Read More »

So If Half of Facebook Accounts Are Fake… What Is Facebook Worth?

16 days ago

How many accounts on Facebook are fake? Recent estimates of half could be low. Here’s an experiment: open a Facebook account with a name that cannot possibly be anyone else’s real name, for example, Johns XQR Citizenry. Solicit a few real people to friend you, start posting something original every day and see what happens.
Eventually, your friends will inform you that “Johns XQR Citizenry” solicited them to friend him, even though they’re already friends with you. Congratulations, your Facebook identity has been cloned.
When you do a search, you find a half-dozen “Johns XQR Citizenry,” and every one of these cloned accounts is completely empty: no photo, no content. They were obviously set up for the sole purpose of cloning your identity to propagate spam to your

Read More »

So You Want to Get Rich: Focus on Human Capital

17 days ago

So you want to get rich: OK, what’s the plan? If you ask youngsters how to get rich, many will respond by listing the professions the media focuses on: entertainment, actors/actresses, pro athletes, and maybe a few lionized inventors or CEOs.
The media’s glorification of the few at the top of these sectors masks the statistical reality that those who attain wealth in these pursuits number in the hundreds or perhaps thousands, not in the millions. As in a lottery, the odds of joining such a limited group are extremely low.
There are 330 million Americans and 150 million people reporting income, so statistically, the odds of getting rich improve significantly if we focus on joining the ranks of the 11 million people who are getting rich from their human capital rather

Read More »

The “Working Rich” Are Not Like You and Me–or the Oligarchs

18 days ago

F. Scott Fitzgerald’s story The Rich Boy included this famous line: “Let me tell you about the very rich. They are different from you and me.” According to a recent paper published by the National Bureau of Economic Research (NBER),Capitalists in the Twenty-First Century (abstract only), the “working rich” are different from you and me, and from the Oligarchs above them who pay little in U.S. income taxes due to offshore tax havens and philanthro-capitalist tax avoidance scams.
Before we start complaining about the rich not paying their fair share, let’s note that the top 3% of taxpayers–mostly “working rich”– pay more than 50% of all income taxes. The latest available IRS data is from the 2016 tax year, as reported by Bloomberg: Top 3% of U.S. Taxpayers Paid Majority

Read More »

A Recession Survival Guide

21 days ago

We know that after 10 years of expansion, a recession is baked in. Trees don’t grow to the moon, etc.
We also know that some people will hardly notice the recession while others are devastated. I addressed this in The Recession Will Be Unevenly Distributed(January 10, 2019). A retiree on Social Security and a bit of income from Treasury bonds isn’t going to be affected much, and a power couple in Washington DC who are high up the food chain in the federal government will also shrug off the recession.
What we don’t know is what kind of recession we’re going to get. It’s been almost 40 years since the U.S. experienced a “real recession,” i.e. a downturn that was severe and not limited to narrow slices of the economy.
The recession of 2008-09 was over before it started,

Read More »

The Ruling Elites Love How Easily We’re Distracted

22 days ago

No wonder the ruling elites love how easily we’re distracted and divided against ourselves: it’s so easy to dominate a distracted, divided, blinded-by-propaganda and negative emotions populace.
Let’s say you’re one of the ruling elites operating the nation for the benefit of the oligarchy. What’s the best way to distract the populace from your self-serving dominance in a blatantly neofeudal system?
1. Provide modern-day versions of Bread and Circuses to distract the commoners from what actually matters: “the golden age of TV” and binge-watching; a cultural obsession with glorifying oneself via selfies posted on Facebook and Instagram; tweeting outrage and indignation on Twitter; a corporate-state media which magnifies

Read More »

The Ruling Elites Love How Easily We’re Distracted and Turned Against Each Other

22 days ago

Let’s say you’re one of the ruling elites operating the nation for the benefit of the oligarchy. What’s the best way to distract the populace from your self-serving dominance in a blatantly neofeudal system?
1. Provide modern-day versions of Bread and Circuses to distract the commoners from what actually matters: “the golden age of TV” and binge-watching; a cultural obsession with glorifying oneself via selfies posted on Facebook and Instagram; tweeting outrage and indignation on Twitter; a corporate-state media which magnifies insignificant events into social crises, political “leaders” who intentionally inflame polarization and conflict and so on.
Combine all these distracting circuses into one 24/7 system-overload, and what do you get? A populace so distracted, so

Read More »

Gentrified Urban America

23 days ago

Combine sky-high commercial rents in homogenized, gentrified urban areas and sharp declines in the incomes of the limited populace who can afford gentrified urban areas and what do you get?
A number of macro dynamics have set up gentrified urban America for a big fall in the coming recession. What does gentrified mean? Gentrified means only the gentry (top 10%) can afford to enjoy the urban amenities as commercial rents and the cost of doing business in desirable urban areas have skyrocketed along with residential rents.
As a result, low-margin businesses have been squeezed out of desirable urban neighborhoods along with lower-income residents. The top 10% is the only demographic who can afford to live in gentrified urban

Read More »

Gentrified Urban America Will Be Hit Hard by the Recession

23 days ago

A number of macro dynamics have set up gentrified urban America for a big fall in the coming recession. What does gentrified mean? Gentrified means only the gentry (top 10%) can afford to enjoy the urban amenities as commercial rents and the cost of doing business in desirable urban areas have skyrocketed along with residential rents.
As a result, low-margin businesses have been squeezed out of desirable urban neighborhoods along with lower-income residents. The top 10% is the only demographic who can afford to live in gentrified urban America.
As noted in What’s Really Happening to Retail?, Only Amazon-proof businesses can now survive in brick and mortar. And that quickly boils down to high-cost, high-margin food and drinks–cafes, bars, restaurants– and mega-corporate

Read More »

Want to Heal the Internet? Ban All Collection of User Data

24 days ago

I’ve been commenting on the cancerous disease that’s taken control of the Internet– what Shoshana Zuboff calls Surveillance Capitalism–for many years. Here is a selection of my commentaries:
800 Million Channels of Me (February 21, 2011)
The New Facebook Buttons: Promote, Despise, Abandon (November 1, 2012)
How Much of our Discord Is the Result of the “Engagement” Advert Revenue Model of Social Media? (October 24, 2017)
Are Facebook and Google the New Colonial Powers? (September 18, 2017)
Hey Advertisers: The Data-Mining Emperor Has No Clothes (September 15, 2017)
The Demise of Dissent: Why the Web Is Becoming Homogenized (November 17, 2017)
Should Facebook, Google and Twitter Be Public Utilities? (March 5, 2018)
Should Facebook and Google Pay Users When They Sell Data

Read More »

The West’s Descent

26 days ago

The goal of the Cultural Revolution isn’t to persuade, it’s to enforce compliance.
A Cultural Revolution is a movement designed to preserve the political and financial power of a ruling elite by social rather than political or financial means. Thus the primary tools of a Cultural Revolution are not redistributing power via elections (politics) or financial reforms; the primary tools are public shaming and denouncements, purges of those in positions of authority, show trials, guilt-by-association, wholesale denouncements of entire classes and widespread accusations of anti-progressive (“counter-revolutionary”) tendencies in which guilt is defined by all-or-nothing litmus tests of one’s loyalties to the Cultural Revolution’s strict

Read More »

The West’s Descent into ‘Cultural Revolution’

28 days ago

A Cultural Revolution is a movement designed to preserve the political and financial power of a ruling elite by social rather than political or financial means. Thus the primary tools of a Cultural Revolution are not redistributing power via elections (politics) or financial reforms; the primary tools are public shaming and denouncements, purges of those in positions of authority, show trials, guilt-by-association, wholesale denouncements of entire classes and widespread accusations of anti-progressive (“counter-revolutionary”) tendencies in which guilt is defined by all-or-nothing litmus tests of one’s loyalties to the Cultural Revolution’s strict ideology.
You haven’t memorized Mao’s Little Red Book? Off to re-education camp you go. Or house arrest, banishment,

Read More »

A Manifesto for a ‘Deplorable’ Party

29 days ago

The “deplorables” now include vast swaths of citizenry around the world:everyone who voted for Trump in the U.S. (and all those who haven’t virtue-signaled their contempt for everyone who voted for him); everyone who voted for Brexit in the U.K. (and all those who haven’t virtue-signaled their contempt for everyone who voted for Brexit), and more recently, everyone who wears a yellow vest in France, and everyone who has yet to virtue-signal their contempt for the yellow vest dissenters.
So why not establish a political party for the “deplorables,” one whose sole aim is to reveal the facts of the matter and let the consequences manifest?Longtime correspondent Simon Hodges has penned a proposed Manifesto for just such a ‘Deplorable’ Party, which is published here in its

Read More »

France’s Ghosts of ‘68

January 17, 2019

The Paris elites and their enablers may find that the next general strike won’t immobilize Paris, it will strangle Paris from the periphery.
Eleven months ago, I posited in The Ghosts of 1968 (2/14/18) that the idealistic hope that mass demonstrations could trigger real reform had expired. The mass demonstrations of the gilets jaunes (yellow vests) in 2018 dramatically reinvigorated the topic.
I don’t see the yellow vest uprising as idealistically fueled; it’s fueled by desperation and what Francis Fukuyama termed the working classes’ “perception of invisibility” in a recent essay (Against Identity Politics (Foreign Affairs, Sept/Oct. 2018), a view echoed by French geographer/author Christophe Guilluy who said that “the French

Read More »

As Germany and France Come Apart, So Too Will the EU

January 15, 2019

When is a nation-state no longer a functional state? It’s an interesting question to ask of the European nation-states trapped in the devolving European Union. Longtime correspondent Mark G. recently posed seven indicators of dissolving national sovereignty; here’s his commentary:
“RE: The Ghosts of 1968 (February 14, 2018):
In France the “Ghosts of 1968” have become the Poltergeists of 2018. This looks like another real watershed in European and world history. Once again Parisian mobs have appeared and have collectively realized they now hold the real power. And their issues are all anti-EU (European Union) and anti-NWO. (New World Order)
I’m honing my German Collapse Scenario as more data flows in, as it is in ever-faster and larger quantities. ‘Germany’ will implode

Read More »

The European Union

January 15, 2019

This exhaustion of the neocolonial-neofeudal model was inevitable, and as a result, so too is the decline and fall of the European integration/exploitation project.
That a single currency, the euro, would fracture rather than unite Europe was understood long before the euro’s introduction as legal tender on January 1, 2002. The euro, the currency of 19 of the 28 member states of the European Union, is only one of the various institutions tying the member nations of the European union together, but it is the linchpin of the financial integration touted as one of the primary benefits of EU membership.
Skepticism of the benefits of EU membership is rising, as citizens of the member nations are questioning the surrender of national

Read More »

The Decline and Fall of the European Union

January 14, 2019

That a single currency, the euro, would fracture rather than unite Europe was understood long before the euro’s introduction as legal tender on January 1, 2002. The euro, the currency of 19 of the 28 member states of the European Union, is only one of the various institutions tying the member nations of the European union together, but it is the linchpin of the financial integration touted as one of the primary benefits of EU membership.
Skepticism of the benefits of EU membership is rising, as citizens of the member nations are questioning the surrender of national sovereignty with renewed intensity.
The technocrat elite that holds power in the EU is attempting to marginalize critics as populists, nationalists or fascists, overlooking the untidy reality that the

Read More »

Where Will You Be Seated at the Banquet of Consequences?

January 11, 2019

The Banquet of Consequences is being laid out, and so the question is: where will you be seated? The answer depends on two dynamics I’ve mentioned many times: what types of capital you own and the asymmetries of our economy.
One set of asymmetries is the result of the system isn’t broken, it’s fixed, i.e. rigged to favor the few at the expense of the many. There are many manifestations of neofeudal asymmetry that divides neatly into two classes and two systems, the nobility and the serfs.
A rich kid caught with drugs gets a wrist-slap, a poor kid gets a tenner in the Drug Gulag.
Upper-middle class households are tax-donkeys, paying high taxes and getting few deductions, while mega-wealthy corporations and financiers enjoy offshore tax shelters of the kind exposed by

Read More »

The Recession Will Be Unevenly Distributed

January 11, 2019

Those households, enterprises and organizations that have no debt, a very low cost basis and a highly flexible, adaptable structure will survive and even prosper.
The coming recession will be unevenly distributed, meaning that it will devastate many while leaving others relatively untouched. A few will actually do better in the recession than they did in the so-called “recovery.”
I realize many of the concepts floated here are cryptic and need a fuller explanation: the impact of owning differing kinds of capital, fragmentation, asymmetry, opacity, etc. ( 2019: Fragmented, Unevenly Distributed, Asymmetric, Opaque).
These dynamics guarantee a highly uneven distribution of recessionary consequences and whatever rewards are generated

Read More »

The Recession Will Be Unevenly Distributed

January 10, 2019

The coming recession will be unevenly distributed, meaning that it will devastate many while leaving others relatively untouched. A few will actually do better in the recession than they did in the so-called “recovery.”
I realize many of the concepts floated here are cryptic and need a fuller explanation: the impact of owning differing kinds of capital, fragmentation, asymmetry, opacity, etc. ( 2019: Fragmented, Unevenly Distributed, Asymmetric, Opaque).
These dynamics guarantee a highly uneven distribution of recessionary consequences and whatever rewards are generated will be reaped by a few.
One aspect of the uneven distribution is that sectors that were relatively protected in recent recessions will finally feel the impact of this one. Large swaths of the tech

Read More »