Charles Hugh Smith

What Could Cause Interest Rates to Rise? Charles Hugh Smith

This is a syndicated repost courtesy of oftwominds-Charles Hugh Smith. To view original, click here. Reposted with permission. There is an interesting paradox at work as central banks suppress interest rates. Correspondent Mark H. recently asked: “What is your take on what the outcome will be if/when interest rates start rising?” Let’s break this excellent…

How I Became a Trillionaire (and Some Thoughts on Inflation) – Charles Hugh Smith

This is a syndicated repost courtesy of oftwominds-Charles Hugh Smith. To view original, click here. Reposted with permission. Some thoughts on being a trillionaire and inflation. Reader gratitude is always appreciated here at oftwominds.com, but imagine my delight when correspondent Paul Wegzyn gifted me with $100 trillion. Wow–I’m a trillionaire! Since Paul was visiting the San…

What’s Supposed to Happen, and What Might Happen: 3 Baseline Scenarios – Charles Hugh Smith

This is a syndicated repost courtesy of oftwominds-Charles Hugh Smith. To view original, click here. Reposted with permission. What might happen: printing money and issuing propaganda lose their effectiveness. We all know what’s supposed to happen in the global economy: we get more of everything: more stuff manufactured, more coal dug up and burned, more “aggregate…

The Deeper Meanings of Cyprus – Charles Hugh Smith

The deposit-confiscation “bailout” of Cyprus reveals much about the Eurozone’s fundamental neocolonial, neofeudal structure.


At long last, Europe’s flimsy facades of State sovereignty, democracy and free-market capitalism have collapsed, and we see the real machinery laid bare: the Eurozone’s political-financial Aristocracy will stripmine every nation’s citizenry to preserve their power and protect the banks and bondholders from absorbing losses.
The deposit-confiscation “bailout” of Cyprus confirms the Eurozone’s fundamental neocolonial, neofeudal structure and the region’s political surrender to financialization.
Let’s list what Cyprus reveals about the true state of financial-political power in Europe:
1. The Core-Periphery terminology masks the real structure: the E.U. operates on a neocolonial model. In the old Colonialism 1.0 model, the colonizing power conquered or co-opted the Power Elites of the periphery regions, and proceeded to exploit the new colonies’ resources and labor to enrich the Imperial core.
In Neocolonialism, the forces of financialization (debt and leverage controlled by State-enforced banking cartels) are used to indenture the local Elites and populace to the financial core: the peripheral “colonials” borrow money to buy the finished goods manufactured in the core economies, enriching the Imperial Elites with A) the profits made selling goods to the debtors B) interest on credit extended to the peripheral colonies to buy the core economies’ goods and “live large”, and C) the transactional skim of financializing peripheral assets such as real estate and State debt.
In essence, the core banks of the E.U. colonized the peripheral nations via the financializing euro, which enabled a massive expansion of debt and consumption in the periphery. The banks and exporters of the core exacted enormous profits from this expansion of debt and consumption.
Now that the financialization scheme of the euro has run its course, the periphery’s neocolonial standing is starkly revealed: the assets and income of the periphery are flowing to the core as interest on the private and sovereign debts that are owed to the core’s central bank and its crony money-center private banks.
This is not just the perfection of neocolonialism but of neofeudalism as well. The peripheral nations of the E.U. are effectively neocolonial debtors of the core (quasi-Imperial) banks, and the taxpayers of the core nations (now reduced to Germany and The Netherlands) are now feudal serfs whose labor is devoted to making good on any bank loans to the periphery that go bad.
Though we can term the E.U. a plutocracy or oligarchy, the neofeudal structure compels us to distinguish a class of those holding wealth and political power that is not limited to national border: this is an Aristocracy.

Serving the Aristocracy is a well-paid technocrat class of factotums, lackeys, toadies and enforcers. Below this well-compensated caste of technocrats is the larger class of debt-serfs, enslaved to interest payments on either their own debts or the debts of others, and bound by their class powerlessness to protecting banks and bondholders from losses.
Cyprus merely adds an expropriation twist to this well-oiled plunder: deposits will be expropriated directly to insure no Imperial (core) banks or bond holders lose money on their absurdly risky loans to periphery nations and serfs.
2. This is a supranational plunder. While commentators can wile away years debating how much Germany benefited from the euro, the real core is not national, it is supranational banks and the political machinery of the E.U. the banks have effectively captured.
The citizenry of Germany may approve or disapprove of the Cyprus expropriation, but it doesn’t matter either way: their own serfdom to banks and bondholders is simply being masked: the bailouts of periphery nations are transparently bailouts of core banks and bondholders.

The nation-states of the neocolonial periphery are simply convenient propaganda placeholders, useful misdirections aimed at the naive and sentimental, hollowed-out national structures propped up to mask the ugly neocolonial reality of servitude and plunder.
3. Democracy is a fiction when no matter who you vote for, the banks and bondholders win control of the national income stream and private wealth.Democracy in Europe is a travesty of a mockery of a sham, an absurd play which is acted out as a form of blood-sport circus to distract the masses from their powerlessness and debt-serfdom.
Democracy is a fiction when the policies protecting banks and bondholders from losses remain in place regardless of which political party, coalition or politico is nominally in power.
The German taxpayers’ private wealth is being expropriated via taxes to bail out core banks and bondholders; how is this any different from the blatant expropriation of private assets in Cyprus? 
It is only a difference in technique; the result is the same: the forced transfer of wealth from those who earned it from their labor to banks and bondholders which in a truly capitalist economy would be immediately forced to absorb the losses of their leveraged, highly risky bets.

4. The ideological fiction of capitalism is dead in Europe. Capitalism is a fiction if capital that is placed at risk for a return cannot be lost.
5. Cyprus is a test to see how blatant the expropriation of private assets can become without triggering overthrow and revolution. If the furor dies down soon enough, then the same technique of expropriation will be imposed elsewhere. If the reaction is sustained and threatening to the Aristocracy, other less blatant expropriations will be tested in other neocolonies.
6. Divide and conquer is the propaganda order of the day. The Power Elites are attempting to set the serfs of the periphery against the serfs of the core, the goal being to keep both sets of serfs from realizing they are equally indentured to the core’s pathological political-financial Aristocracy. 


Things are falling apart–that is obvious. But why are they falling apart? The reasons are complex and global. Our economy and society have structural problems that cannot be solved by adding debt to debt. We are becoming poorer, not just from financial over-reach, but from fundamental forces that are not easy to identify or understand. We will cover the five core reasons why things are falling apart:

go to print edition1. Debt and financialization
2. Crony capitalism and the elimination of accountability
3. Diminishing returns
4. Centralization
5. Technological, financial and demographic changes in our economy


Complex systems weakened by diminishing returns collapse under their own weight and are replaced by systems that are simpler, faster and affordable. If we cling to the old ways, our system will disintegrate. If we want sustainable prosperity rather than collapse, we must embrace a new model that is Decentralized, Adaptive, Transparent and Accountable (DATA).

We are not powerless. Not accepting responsibility and being powerless are two sides of the same coin: once we accept responsibility, we become powerful.

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Good News: the Bees Have Returned (at least to our yard) – Charles Hugh Smith

This is a syndicated repost courtesy of oftwominds-Charles Hugh Smith. To view original, click here. Reposted with permission. Ultimately, our one meaningful role on the planet is to be attentive caretakers rather than plunderers. The good news in our yard has nothing to do with the stock market: the peach tree is blossoming and the…

A Community-Based Alternative to the Welfare State- Charles Hugh Smith

This is a syndicated repost courtesy of oftwominds-Charles Hugh Smith. To view original, click here. Reposted with permission. It is important to discuss alternatives before the Status Quo devolves and collapses, so we have an intellectual framework to guide healthier, more sustainable alternatives once the current system implodes. Two of the key characteristics of an…

Net Worth vs. Net Value -Charles Hugh Smith

This is a syndicated repost courtesy of oftwominds-Charles Hugh Smith. To view original, click here. Reposted with permission. To what degree is Net Worth a phantom, a ghost, a cipher? We only discover its emptiness when we sense mortality’s hand on our left shoulder. Longtime correspondent Yoni F. recently posed a profound question: what if…

The Global Endgame – Charles Hugh Smith

This is a syndicated repost courtesy of oftwominds-Charles Hugh Smith. To view original, click here. Reposted with permission. Is pushing consequence forward the same as eliminating consequence? We will find out at some point in the near future. Today’s project is to overlay The Global Endgame in Fourteen Points (February 15, 2013) on the classic cycle of…

The Erosion of the U.S. Economy In Two Words: Jobs and Wages – Charles Hugh Smith

This is a syndicated repost courtesy of oftwominds-Charles Hugh Smith. To view original, click here. Reposted with permission. The current de facto policy of inflating asset bubbles to spark a “wealth effect” is no substitute for policies that make it less burdensome to start new enterprises and hire employees. The Status Quo is shameless when…

Unpopped Housing Bubbles Abound – Charles Hugh Smith

This is a syndicated repost courtesy of oftwominds-Charles Hugh Smith. To view original, click here. Reposted with permission. History suggests that we can anticipate the eventual popping of all remaining housing bubbles. Though much has been written about the popping of the housing bubble in the U.S. and Ireland, remarkably little has been written about…