Charles Hugh Smith



How Much Higher Can The U.S. Dollar Go?

And what will the implications be?
Wednesday, November 25, 2015, 12:11 PM

Our first observation is that trends in the USD tend to last for some time, so if this rally follows the pattern of previous rallies, it’s unlikely to have run its course in one year.

Secondly, previous rallies paused for a multi-month consolidation period before launching upward for the second leg of the long-term rally.

Thirdly, the USD rose sharply to previous peaks and then round-tripped back to the 80 level.

This raises the question: How high could the dollar rise in this rally? » Read more



Why The Coming Currency Crisis Will Push The USD Higher

Which will crush stocks
Wednesday, November 25, 2015, 12:11 PM

Executive Summary

  • Other currencies are inflating faster than the USD
  • The USD is still backed by a preponderance of the world's assets
  • The potential for a global currency crisis is rising
  • Why USD will be the (initial) safe haven when it arrives

If you have not yet read Part 1: How Much Higher Can The U.S. Dollar Go?, available free to all readers, please click here to read it first.

In Part 1, we reviewed the technical evidence in support of a second move higher in a multi-year U.S. dollar rally. Here in Part 2, we ask: What conditions might drive such a move higher?

To answer this question, let’s start with another question: What’s scarce in the world of foreign exchange (FX)?

We ask this because capital, profits and gains flow to what’s scarce and in demand. This boils down to supply and demand: gains go to whatever is in high demand and scarce, and whatever is not in demand and over-supplied will lose value.

Supply and Demand

Like every other commodity, currencies respond to supply and demand: whatever currency is scarce and in demand will rise, while currencies that are in oversupply and not in demand will decline.

Though many presume the world is awash in dollars as a result of Federal Reserve quantitative easing, the reality is that expansion of USD via bank loans (credit) and Fed money-creation is modest compared to the expansion of other global currencies such as China’s renminbi (RMB), a.k.a. yuan.

Consider this chart of bank credit expansion in the U.S. and in China since the onset of the “Great Recovery” in early 2009: China’s bank credit has soared by 260%, a sum that is roughly 140% of China’s entire Gross Domestic Product (GDP), while U.S. bank credit rose by a modest 12% of U.S. GDP.

If we compare M2 money supply, we find... » Read more


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Charles Hugh Smith: Fixing The Way We Work

Closing the wealth gap with meaningful work
Sunday, November 15, 2015, 1:34 PM

Charles Hugh Smith returns to the podcast this week to discuss the theme of his new book A Radically Beneficial World: Automation, Technology and Creating Jobs for All.

Automation and artificial intelligence are changing the landscape of work. Tens of millions of jobs are on track to be eliminated over the next decade or so by these advancing technological innovations in the US alone.

The way in which our current economy is constructed, the fruits of those cost savings are likely to go into a very small number of private pockets, while the millions of displaced workers will find themselves with no income and no work to do. It's a huge looming problem that is not being address in national dialog right now.

But there's opportunity to course-correct here. To use our new technologies to increase total productivity in a way that empowers rather than diminishes the individual worker. » Read more



How Much Longer Can Our Unaffordable Housing Prices Last?

Spoiler alert: not much
Friday, October 9, 2015, 4:12 PM

Markets discover price via supply and demand: Big demand + limited supply = rising prices. Abundant supply + sagging demand = declining prices.

Eventually, prices rise to a level that is unaffordable to the majority of potential buyers, with demand coming only from the wealthy. That’s the story of housing in New York City, the San Francisco Bay Area and other desirable locales that are currently magnets for global capital. » Read more



How A Major Housing Correction Can Happen Over The Next 1.5 Years

Own a home? This is a must-read.
Friday, October 9, 2015, 4:11 PM

Executive Summary

  • The Fed Won't Be Able To Soak Up Bad Mortgages Like It Once Did
  • Chinese Capital Will Dry Up After Capital Controls Are Imposed
  • The weakening petro-dollar will weaken demand for high-end housing
  • The inevitable symmetry of bubbles will force a price mean-reversion

If you have not yet read Part 1: How Much Longer Can Our Unaffordable Housing Prices Last? available free to all readers, please click here to read it first.

In Part 1, we looked at factors that limit further home price appreciation—mortgage rates that can’t go much lower and stagnant household incomes—and factors that could continue to push prices higher in islands of strong job growth and global demand.

Here in Part II, we’ll look at several dynamics that could deflate the current Housing Bubble #2, even in areas currently experiencing high demand for housing such as New York City and San Francisco.

The Fed Will Encounter Political Headwinds in Pushing Money to the Wealthy

Setting aside cash buyers from overseas, a major factor in the inflation of Housing Bubble #2 was the Federal Reserve’s quantitative easing programs that expanded the pool of money available to the already-wealthy while prompting very little “trickling down” of this new money to the bottom 90% of households.

The one Fed policy that aided the bottom 90% was buying $1.75 trillion of home mortgages. This unprecedented buying spree helped push mortgage rates down to equally unprecedented lows.

But as this chart shows, the Fed is... » Read more



Off The Cuff: The Betrayal Of Capital

Leads to mal-investment that eventually topples onto itself
Monday, October 5, 2015, 7:37 PM

In this week's Off The Cuff podcast, Chris and Charles Hugh Smith discuss:

  • Growing Weakness At The Periphery
    • A reminder that collapse happens from the outside in
  • The Betrayal Of Capital
    • We are watching the predictable result of too much mal-investment
  • Natural Limits Will Be The Ones That Matter
    • The ones that can't be addressed by printing up more money
  • TINA: There Is No Alternative
    • Those in charge of the system have run out of Plan Bs

Recorded last week, here's the latest Off The Cuff discussion recorded between Chris and Charles Hugh Smith.

Both note the deflationary forces that are fast-eroding the stability of periphery countries around the globe. As long repeated here at Peak Prosperity, we're of the opinion that collapse happens from "the outside in". Once the smaller dominoes start falling, watch the pace at which the next-largest drop, as it can tell you how quickly the core ("safest") counties will start being affected.

A theme delved into in this discussion is the...

Click to listen to a sample of this Off the Cuff Podcast or Enroll today to access the full audio and other premium content today. » Read more



Off The Cuff: Beware The Misbehavior Of Markets

They aren't as predictable as we think
Monday, September 7, 2015, 10:31 AM

In this week's Off The Cuff podcast, Chris and Charles Hugh Smith discuss:

  • Manipulated Markets
    • How the Fed uses stocks as a signaling device
  • House Of Cards
    • Why the system is more vulnerable than ever
  • The Machines Are In Control
    • Which works well until it doesn't
  • Beware The Misbehavior Of Markets
    • They are not as predictable as we think


Here's Why The Markets Have Suddenly Become So Turbulent

A perfect storm of failing trends
Friday, August 28, 2015, 1:28 PM

When stock markets are free-falling 10+% in a matter of days, it’s natural to seek some answers to the question “why now?” » Read more


Is China’s “Black Box” Economy About to Come Apart?

A China crisis will de-stabilize the world
Friday, August 7, 2015, 11:37 AM

After 30 years of torrid expansion, perhaps the single most consequential factor in China’s economy is how much of it is a “black box”: a system with visible inputs and outputs whose internal workings are opaque.

That black box is looking increasingly like a Pandora's box. What will happen if it breaks apart? » Read more



Off The Cuff: We Pledge Allegiance, To The Banks...

It's the banks' world. We just live in it.
Thursday, July 16, 2015, 5:45 PM

In this week's Off The Cuff podcast, Chris and Charles Hugh Smith discuss:

  • We Live To Serve The Banks
    • Greece is now a nation of slaves for the banking system
  • Instability Risk Is Sky-High These Days
    • When central planners lose control, it's going to be bedlam
  • As Ever, Access To Resources Will Determine Everything
    • We're seeing the resource-poor countries now faltering first
  • Debt-based Money
    • As long as we have it, we'll never be free