Author: Charles Hugh Smith

Take your pick–here’s three good reasons to engineer a “crash” that benefits the few at the expense of the many. There is an almost touching faith that markets are rigged when they loft higher, but unrigged when they crash. Who’s to say this crash isn’t rigged? A few things about this “crash” (11% decline from all time highs now qualifies as a “crash”) don’t pass the sniff test. Exhibit 1: VIX volatility Index soars to “the world is ending” levels when the S&P 500 drops a relatively modest 11%. The VIX above 50 is historically associated with declines of 20% or more–double … Continue reading →

Don’t rely on the declining value of credentialing signals: demonstrate you have the skills. My recent conversation with Max Keiser on Summer Solutions (25:45) included three bits of advice: 1. Stop financializing the human experience 2. Acquire skills, not credentials 3. Vote with your feet Today’s topic is acquire skills, not credentials. I have written two books on this topic: Get a Job, Build a Real Career and Defy a Bewildering Economy and The Nearly Free University and the Emerging Economy: The Revolution in Higher Education. There is a place for credentials that act as an entry key to a … Continue reading →

When borrowing become prohibitive (or impossible) and raising taxes no longer generates more revenues, state and local governments will have to cut expenditures. Strangely enough, every easily foreseeable financial crisis is presented in the mainstream media as one that “nobody saw coming.” No doubt the crisis visible in these three charts will also fall into the “nobody saw it coming” category. Take a look at this chart of state and local government debt. As we noted yesterday, nominal GDP rose about 77% since 2000. So state and local debt rose at double the rate of GDP. That is the definition … Continue reading →

When do we get to exercise democracy and fire every factotum, apparatchik, toady and lackey in the state who has abused his/her authority? Everyone lauds “creative destruction” when it shreds monopolies and disrupts private enterprise “business as usual.” If thousands lose their middle-class livelihoods– hey, that’s the price of progress. Improvements in productivity and efficiency can’t be stopped, and those employed making buggy whips and collecting horse manure from fetid streets will have to move on to other employment. This raises an obvious question few dare ask: does this inevitable process of creative destruction include the state? If not, why … Continue reading →

Assuming “growth” will fund all promised pensions and entitlements is magical thinking. The core problem with pension plans is that the promises were issued without regard for the revenues needed to pay the promises. Lulled by 60 years of global growth since 1945, those in charge of entitlements and publicly funded pensions assumed that “growth”–of GDP, tax revenues, employment and everything else–would always rise faster than the costs of the promised pensions and entitlements. As the 60+ million baby Boom began qualifying for Social Security and Medicare entitlements, the percentage of beneficiaries rose quickly from a decades-long level of about 16% … Continue reading →

You’ve probably read that there is a “war on cash” being waged on various fronts around the world. What exactly does a “war on cash” mean? It means governments are limiting the use of cash and a variety of official-mouthpiece economists are calling for the outright abolition of cash. Authorities are both restricting the amount of cash that can be withdrawn from banks, and limiting what can be purchased with cash. These limits are broadly called capital controls. The War On Cash: Why Now? Why are governments suddenly acting as if cash money is a bad thing that must be … Continue reading →

These charts help us understand that a top is not just price, but a reversal in extremes of margin debt, valuation and sentiment. In blow-off tops, extremes of valuation, complacency and margin debt can always shoot beyond previous extremes to new extremes. This is why guessing when the blow-off top implodes is so hazardous: extreme can always get more extreme. Nonetheless, extremes eventually reverse, and generally in rough symmetry with their explosive rise. Exhibit 1 is margin debt: NYSE Margin Debt Hits a New Record High (Doug Short) Note the explosive rise in margin debt in the past few months: … Continue reading →

As it stands now, U.S. healthcare will bankrupt the nation and doom it to permanent stagnation and recession. That healthcare alone is dooming the U.S. economy is not news to Of Two Minds readers, as I have been covering the catastrophic consequences of our runaway healthcare system for the past decade. Three charts crystallize the healthcare dynamics that are dooming the U.S. economy. The first depicts the runaway growth of healthcare costs–a rapid expansion that is a permanent feature of U.S. healthcare, regardless of which party is in office or what reforms are instituted. This expansion of costs has many … Continue reading →

The nation is wallowing self-piteously in a fetid trough of denial and adolescent rage/magical thinking now that the nation’s bogus, debt-based “prosperity” has crashed and cannot be restored. If you type Deep State into the custom search window in the right sidebar, the search results fill 10 pages. I think it is fair to say I have long had a deep interest in the Deep State. The Deep State is generally assumed to be monolithic: of one mind, so to speak, unified in worldview, strategy and goals. History suggests that this low-intensity conflict within the ruling Elite is generally a … Continue reading →

The ROI (return on investment) of a home garden can be $1,000 a year and $30/hour. The benefits of a vegetable garden extend beyond the food being grown and the superiority of that food in nutritional value and quality over agribusiness-grown vegetables. I listed some of these intangible benefits in The Hidden Value of Gardens (September 13, 2014). But we shouldn’t overlook the actual cash value of gardening. The ROI (return on investment) of a productive home garden can be $1,000 a year and $30/hour. Longtime correspondent Bart D. (Australia) recently shared a spreadsheet of his garden’s yields, the cash value … Continue reading →

Either join the disruptors or prepare to be disrupted. Disruptive technology is a tiresome cliche, as every Twitter/ AirBnB/ Uber/ Skype/etc. wannabe start-up declares itself disruptive. That the vast majority of self-congratulatory start-ups are over-hyped and derivative should not distract us from the larger reality that some technologies do in fact disrupt how things are done. Fossil-fueled mechanization, for example, turned an overwhelmingly rural farming society into a highly urbanized services-dominated economy. In the more recent past, CraigsList single-handedly turned the newspaper industry from an immensely profitable license to print money (via costly classified ads) to a struggling sector with … Continue reading →

My advice is to focus not on retiring comfortably, but on working comfortably. You’ve probably seen articles and adverts discussing how much money you’ll need to “retire comfortably.” The trick of course is the definition of comfortable. The general idea of comfortable (as I understand it) appears to be an income which enables the retiree to enjoy leisurely vacations on cruise ships, own a well-appointed RV for tooling around the countryside, and spend as much time on the golf links as he/she might want. Needless to say, Social Security isn’t going to fund a comfortable retirement, unless the definition is … Continue reading →