Charles Hugh Smith's Contributions

Right now, the US is maintaining its vast system of unproductive friction by borrowing 11% of its gross domestic product (GDP) every year, a level that is roughly four times what is considered sustainable. Though in the popular view, this money is being “printed” by the Federal Reserve (a private monopoly protected by the Central State), the money is all borrowed, and thus it requires servicing in the form of interest payments that will continue to burden future taxpayers.

Unfortunately for future generations who might like to own a home whose price was set by the market rather than a Central State devoted to "saving" predatory banks and Wall Street's financialization machine, Wall Street and the banks are terrified of a healthy housing market, because an unfettered "price discovery" would doom their marked-to-Tinkerbell house of cards.

Sovereign currencies are the only mechanism for discounting differences in credit worthiness and production costs. The euro was established as the currency equivalent of gold, holding the same value in every member country.

Trapped assets that generate no income streams in the present are not capital; the value of such non-productive assets is illusory. Strip away these trapped assets and the reality is revealed: most American households toil to service their debts.

Large corporations and even bureaucracies can contribute to making a living, providing everything from swimming pools to social work. Their problems, if anything, center upon what portion of their resources goes into direct service, production, and exchange and how much gets consumed in indirect, personally and institutionally self-serving ends—job justification, bonuses, extravagant salaries, etc.

Everybody says they want free enterprise in a democratic market exchange economy that seeks to maximize life engagement, enjoyment, responsibility, and fulfillment. So how come we are currently stuck with the opposite?

When we become increasingly confident in the direction of the game, it's always wise to step back and challenge our assertions. At a minimum, it makes us consciously reaffirm the positions we hold.

What is the technical evidence for a Bull or Bear market? If we keep it simple, the evidence is solidly Bearish. Without getting too fancy, let's look for technical evidence of a Bull or Bear market in today's charts.

The word entitlement commonly refers to government benefits to which we are entitled as taxpayers and/or citizens/residents. But there are layers of entitlement in the American psyche far beyond government benefits programs.

Technical traders don't pay attention to explanations of what should happen or is not possible; they just look at the action of price and indicators.

Europe’s fiscal and debt crises have dominated the financial news for months, and with good reason: the fate of the European Union and its common currency, the euro, hang in the balance. As the world’s largest trading bloc, Europe holds sway over the global economy: if it sinks into recession or devolves, it will drag the rest of the world with it.

Was it coincidence that wages topped out with domestic oil production? Perhaps not. Yesterday we considered the possibility that it was not coincidence that the U.S. abandoned the gold standard at almost the precise point that domestic oil production topped out, launching a need for vast quantities of imported and increasingly costly oil.

The only way to value the dollar is in the context of a mercantilist, export-dependent global economy anchored by a sole "importer of last resort," the U.S., which funds these vast imports with its fiat currency, the dollar.

Today I present an important guest essay by long-time contributor Zeus Yiamouyiannis, who suggests that when debt is essentially fraudulent, then debt forgiveness is both the logical and the only remedy. In case you missed his previous analyses on oftwominds.com, I list some of Zeus's previous essays at the end of the entry.

If you liked the past two weeks, you're going to love the next two years: welcome to the age of instability. As I explained yesterday, the quasi-religious belief in the stock market as a secure store of wealth has faded, and for good reason.

Since the stock market is in the news (perhaps as a result of trillions of dollars/euros/yen/yuan/quatloos having suddenly vanished from millions of accounts), it seems timely to examine the key correlation between stocks and the U.S. dollar.

The bottom line is that there is a fantasy view of America as a dynamic, innovative, efficient economy, and the stark reality that it is actually grossly inefficient, bloated, wasteful and not innovative in any meaningful structural way.

The consumer-debt-based economy is doomed; good riddance. It was nothing more than an elaborate cargo cult based on marketable anxiety. The entire creaking economy is based on a few ideas which no longer work.

The root causes of global financial instability cannot be wished away or "solved" with modest policy tweaks: they are systemic. Systemic financial instability is spreading rapidly around the globe. Nobody knows the precise timing, of course, but if we consider the systemic causal forces at work, it seems the future is now.

Housing has been propped up by Central State intervention. As that ends, Phase II of the retrace to pre-bubble valuations is at hand. Has housing bottomed? I have a few methods as a sure-fire way to tell.