Charles Hugh Smith's Contributions

On the face of it, American households were not that affected by the bursting of the housing bubble. If we look at the Fed Flow of Funds report, the Balance Sheet of Households and Nonprofit Organizations, we find that net worth only declined by about 11% ($7.3 trillion) from 2007 to 2010: a $2.9 trillion decline in financial assets and a $4.9 trillion decline in tangible assets, i.e. real estate and consumer durable goods.

What's behind the disturbance in the financial Force? QE, ZIRP, the dollar peg and inflation, to name a few factors. There is a great disturbance in the world's financial Force. Many sense it as a storm on the horizon, something not yet visible but telegraphed by a rising, swirling wind and a new electric scent in the air.

There are two economies--the real one, which is in decline, and the "let's pretend" one touted by the State and corporate propaganda machines. Children love to play "let's pretend." Let's pretend the economy is "recovering."Why does this "recovery" remind me of an addict who's conning his caseworker? (Yes, I'm really in recovery--those aren't tracks, they're insect bites....)

The problem with mortgage fraud wasn't broker compensation: it was the ease of the fraud and the incentives throughout the food chain for collusion. New Fed rules simply wipe out competitors to the "too big to fail" mortgage banks.

I described The Con of the Decade last July (2010). The Con makes me a heretic in the cult religion of Hyperinflation. I consider myself an agnostic about the destruction of the U.S. dollar and hyperinflation (basically the same thing), but my idea that hyperinflation is fundamentally a political process makes me a heretic. I skimmed a few of the dozens of comments posted on Rick's Picks and Zero Hedge after they posted one of my expositions on this dynamic, and didn't see even one comment in favor of this perspective.

Correspondent D.S., with one daughter in college and other children nearing graduation from high school, asks: what are the credible alternatives to $100,000 in debt for college? D.S. mentioned the relative paucity of apprenticeships in the U.S., and this is certainly a critical "missing factor" in credible alternatives.

Students and parents, wake up: your only salvation lies in political engagement and action. Of all the exploitative systems in the U.S., none is more rapacious than the Education Cartel.

The Fed can only choose the least-worst option now: either destroy the real economy by sinking the dollar below support and unleashing the Inflation Monster, or abandon the "risk trade" stock market rally. The Fed's game plan--sink the U.S. dollar to goose corporate profits, reinflate asset prices and create "modest inflation"--is now the most dangerous game on Earth. As overleveraged assets from real estate to stocks imploded in 2008 and early 2009, the Federal Reserve rushed to flood the global economy with zero-interest dollars.

We tend to speak of leverage in financial terms, but as frequent contributor Harun I. notes, leverage and thus risk is ever-present in everything from oil to technology.

The U.S. transformed into consumer economy that is exquisitely sensitive to debt and the costs of servicing credit. In other words: the bill is finally due, Baby.

If we take the very long view, we find that all of conventional economics developed in the era of ever-cheaper, ever-more abundant energy and the miraculous "low hanging fruit" productivity gains made possible by cheap energy and the tools of mass production and industrialization. Like a creature that was born in the morning and has only seen daylight, conventional economics has never experienced night and so it has no conception of darkness.

You might think property taxes have declined 30%, paralleling declines in housing values. But nope--property tax revenues have shot up 27% just since 2006. Something remarkable happened to property taxes in the U.S. while housing lost 31% of its value from 2006 to 2009: they went up by $100 billion (27%). Equally remarkably, as we can see from this U.S. Census Bureau data on state and local tax revenues, property taxes went up even when housing slumped in the early 1990s.

The structural flaw at the heart of the E.U. dooms it and the euro to either dissolution or radical transformation. To understand the structural flaw which dooms the European Union, we need to start with the Union's fundamental financial characteristics.

Way back in August 2006, near the top of the housing bubble, I suggested a two-part scenario for the housing bust: it would take eight more years to play out, and the declines would occur in sharp downlegs following a phase-shift model.

Here's a simple test of whether the economic recovery is self-sustaining or not: cut Federal spending back to 2007 levels (a $1 trillion reduction) and cancel all Fed intervention such as quantitative easing.

The "permanent Bull market" engineered by the constant intervention of banking and political authorities has a problem: the duration of each cycle is getting shorter. As we all know, the central banks of the world have decided that in lieu of actual prosperity, they will provide the illusion of prosperity via a "permanent Bull market" in stocks.

My thoughts are with those trying to contain the nuclear reactor crisis in Japan, and with their families, who are justifiably worried about the health consequences their loved ones risk as they work long hours in hazardous and difficult conditions.

Everyone wants to know how the Central State can "help" small businesses so they will start hiring again. The answer is simple: fix the structural imbalances in the U.S. economy and start favoring real production over financial speculation.

If we set aside ideological biases and seek financial common sense, we can see that the public sector costs are simply unsustainable.

To reach an integrated understanding of current events in the Mideast and North Africa, we must place them in these broad contexts.