Chris Martenson: Welcome to another
ChrisMartenson.com podcast. I am, of course Chris Martenson and today, a very
special guest. We haveCharles Hugh Smith, who has been an independent journalist for over twenty
years and his excellent web blog www.oftwominds.com, offers very thoughtful
unique analysis of global finance, social themes, the political economy - and
he’s an accomplished author as well. Charles wrote the very impressive
handbook, Survival +:
Structuring Prosperity for Yourself and the Nation, which I highly recommend -
I have read it. And he has just finished another book, An Unconventional Guide to Investing in Troubled Times. Charles, you know it's
high time we had you as an interview guest, here you are. I am really looking
forward to our discussion today. Welcome.
Charles Hugh Smith: Thank you Chris, I am
delighted to be here.
Chris Martenson: Well, there is so much
I want to talk with you about, especially with all that is going on these
days, but let’s start with your new book, if we could. Tell our
listeners what it's about and why you decided to write it now.
Charles Hugh Smith: Okay, I have been
working on the book for eighteen months for the reasons that are familiar
with ChrisMartenson.com readers and members, which as we all know is: the
present is unsustainable. So where can we put our resources and our capital
and our labor that will be productive as the status quo basically defaults or
crumbles? So the book, having come out in July, just happened to be good
timing as the market is, in fact, crumbling as we speak.
Chris Martenson: Yes, yes it is.
Charles Hugh Smith: And I think the basic
thrust of the book is that standard or conventional financial advice that we
typically hear is: well, we’ll balance your portfolio between stocks
and bonds and overseas investing and domestic – I don’t think
these metrics have any value anymore. Or they’ve lost their meaning, as
all of the status quo investments are coming apart at the seams.
Chris Martenson: So your general thesis
is we’re on an unsustainable course, which for those who are new
listeners may be shorthand for the idea that the past couple of decades,
maybe even past four decades, have all been defined by the idea that
we’re going to grow debt and accumulation of debt at a faster pace than
the underlying economy. That means that we are living on borrowed money, we
are living beyond our means - however you want to look at that at the
national level, whatnot. So are you looking just through that first economic
lens and just looking at it and declaring it unsustainable? Then saying
because of that, this is going to devolve or shift or change. Is that the
general macro landscape you are looking at?
Charles Hugh Smith: Yes Chris. And of
course, I learned from the Crash Course about the unsustainability of that
exponential rise in debt. But also, as you’ve covered in-depth, we are
running out of the idea that there are unlimited resources that we can
exploit at ever-greater rates of consumption. So “Peak
Everything”, as we call it - that’s also an issue. And also the
unsustainability of a lot of our political and social structures that
we’ve kind of grown fat and sassy and complacent based on this
unlimited debt. It has allowed us to sustain things which are not
sustainable. So there is definitely a social and political impact to the end
of this kind of debt + cheap oil era.
Chris Martenson: So in your mind, what
happens when that debt cycle ends, when the party is over, and it comes to
the additional accumulation, exponential accumulation of more debt –
which by the way, they are trying very hard in Europe and Washington, D.C. to
perpetuate and keep that debt moving? Let’s say they can’t
– what happens?
Charles Hugh Smith: There will have to be
a renunciation of debt on a vast scale and it could take the form of a
forgiveness of debt, meaning that we deal with it as adults and write it off.
Or it could be renounced in a very chaotic unplanned way, as people just
default and that triggers a whole domino chain of the borrowers are
defaulting and then of course, the lenders become insolvent and they default
on their counterparty obligation. And so then it reaches the same point
– that it’s written off.
Chris Martenson: So this would be a
process of default. The Fed’s been fighting that tooth and nail and we
just found out through a formal request that Bernie Sanders that the Fed had
put $18 trillion in cash and guarantees across the global landscape to
prevent exactly what you are talking about from happening. By all measures,
they kind of did. And so what’s to prevent the world central banks – by the way
we’ve had three interventions of central bank actions in the last
twenty-four hours, so we are recording this on Thursday afternoon, August 4th -
but we’ve seen the Swiss Bank come in and essentially print like crazy.
We’ve seen the ECD come in and intervene in the Italian bond auction.
We’ve seen the Bank of Japan come forward and attempt to bring their
currency down. With all this intervention, what’s the trigger for this
wave of debt defaults in your mind?
Charles Hugh Smith: Chris, I think we all
sort of know that there are two end states here: the end game is either we
consciously renounce the debt or we get the hidden default of the currencies being
wiped out in terms of what they can buy. So if we do the hidden default
method, then everyone will get their Social Security check for $1,200 dollars
and that will buy them like a loaf of bread or something. And so the
government will be fulfilling its obligations, but the purchasing power of
the money that it's distributing will have been lost. And of course, we all
know that’s a possibility. And that’s just another way of
reaching the same point that the debt in the system will be purged either by
high inflation, hyperinflation, or by conscious renunciation - and that
doesn’t seem possible at the moment, a conscious renunciation, but
there could be political changes say over the next four or five years that
could bring that about, if the people realize that’s a better solution
to a hidden default.
Chris Martenson: Right, well yes it's
possible. I find that history says hidden default is the preferred option by
far.
Charles Hugh Smith: I agree. I agree, but
I like to at least address the possibility that we could chose more wisely. I
am not saying that lightly, but it's always possible.
Chris Martenson: Absolutely. So you
wrote this book and it's got Unconventional Guide to Investing in
its title. What do you mean by “unconventional” investing here?
Charles Hugh Smith: I mean that it looks
at investing as a form of expression, of personal expression, if you will,
which is completely outside the normal conventions where we are – you
simply seek the highest return from whatever mutual fund or the hot manager
or hedge fund. But I think investing your capital, which includes your
financial capital and also your human and your social capital, would not be a
form of self-expression. And as a trader myself I think the key to investing
wisely is to align that with your own interests and your own personality. A
lot of people have spent a tremendous amount of time and energy and money
trying to find that perfect system which generates returns in all markets and
that kind of stuff. And that kind of system doesn’t exist. And
statistically, there is simply no system or manager who out performs over a
twenty-year period in both bull and bear markets. The number of people who do
so is statistical noise.
Chris Martenson: Well, you would expect
somebody is out at the end of that bell curve, of course, so I don’t
know that there are statistically significant numbers of those people –
they do exist. And some of them will have some sort of a proprietary mojo that’s
awesome, but you are right, those are very rare and few and far between. And
this is a main theme of mine, which is that almost all of the methods for
investing that we’ve grown up with that you learn from your father,
your grandfather, your grandmother, your mother – wherever you got the
stuff from, your broker…it doesn’t matter. They are all
predicated on this idea of these models and techniques and styles, all of
which themselves are predicated on growth, which means that as long as we
have this three, four, five percent economic growth with the occasional
recessionary pick-up here and there. But long-term, you could put a ruler on
this thing and say, “Wow, there’s an upper slope to this economic
growth.” That growth gives a lot of the value to the overall aggregated
stock and bond markets and other financial
paper-based assets. It's that growth that is baked in and it's so baked in
that most people don’t even consider it. They are not aware of the
extent to which the current prices and values of these things depend on that
future growth happening. But the correct question I think people need to ask
if they insist on staying in the stockmarket is, “What is the correct
price earnings multiple for a company or a stock index which has zero percent
earnings growth baked into it?” I’ll give you a minute for that
one, but it's lower than it currently is. Where do you place it?
Charles Hugh Smith: Well, if we just look
at cycles and trends - a lot of people are targeting an S&P around 450 or
there about, meaning a drop of two-thirds per year - that might work, but if
you take what you just said and follow the implications, what if there are no
earnings? In other words, what if oil goes to $200 dollars a barrel and a
trade war erupts, as everyone tries to protect their own national resources
and so on? What I call deglobalization starts kicking in and it may be
extremely difficult to make profits in any way. And so it may be that a
period of really low profits would then of course bring very low stock
values.
Chris, the other thing I
would say is the “unconventional” side of what I am describing in
the book, is to look at how we value enterprises in general. To question the
whole idea that it makes more sense to invest in a mine or a corporation six
thousand miles away than to seek out a mine or a company in our own hometown,
so to speak -- or our home state or our home region that we can really
understand. And that we would be drawing upon that productivity that we can
understand and we are not just trusting Wall Street to tell us about this
company six thousand miles away. It's really a great thing.
Chris Martenson: Yes, you know I come
from a banking family. My great-great-grandfather founded one and on the male
side in that family there has been somebody involved with it sense. They have
been cranking out just excellent earnings all the way through this whole
hiccup and I had opportunities to warn them this hiccup was coming. They
looked at me and said, “Look we know every single person on our balance
sheet. Every asset on here is somebody we know. We are intimately familiar
with all the businesses – here are our credit standards.” You
just run it like my grandfather used to run it, which is just incredibly safe
and sound and with that intimate local knowledge and guess what?
They’ve come through this period just fine.
As we get into this next
period though, if I understand you correctly and I think I do, there’s
going to be an even higher premium on really knowing where your money is and
what it's doing. Because the easy returns of just anonymously tossing your
money over a wall and towards a group of people who are going to manage it
for you - let’s call that Wall Street for now - when things get tight
one of my basic theories in life is that when there are ample resources for
both Wall Street to earn its outlandish bonuses and make themselves feel good
about themselves that way and for you to earn something of a return too, then
you both win. When there aren’t sufficient resources for both, guess
what happens? Wall Streets gets it's bonuses anyway and there is nothing left
over for you. I think we are pretty close to that moment in time here. And so
it's a fancy way of saying real conflicts of interest are at play – the
people who work in the financial industry are often deeply conflicted in
terms of what they can say and what they can’t say. They have fiduciary
responsibilities and they sometimes limit themselves from telling you about
the entire universe of opportunities. I know people who have been –
even as recently as last week – cautioned by their broker not to go
anywhere near gold. It's just a silly investment and it's not an investment,
it doesn’t have any returns, etc.
So there’s – I
think the first stage of awareness for me was understanding the extent of it.
Wall Street’s interests and my own interests were not aligned, not even
remotely aligned.
Charles Hugh Smith: That’s extremely
well said, Chris and I think that’s a key point which you just
described about the conflict of interest. And also that there’s just no
payoff in trusting Wall Street to look for our money. And I think another
topic that makes it unconventional, at least in my view, is that there is the
issue of sustainability and resilience, which is a topic that you’ve
addressed in depth on ChrisMartenson.com. So it will be familiar to most of
your readers and listeners.
I think the solution here
going forward is to have a number of income streams to increase that
resilience of your household, by having several income streams, which means
having an enterprise or enterprises in which you are an owner or a major
investor.
Chris Martenson: I am particularly enamored
with the idea that energy is going to be going up in price or let’s say
‘as a fraction of our disposal income’ as we go forward.
Charles Hugh Smith: Yes.
Chris Martenson: Price is a relative
thing. And so as that heads up over time, we are going to be discovering that
the entire landscape changes. I find a very useful thought exercise is to ask
myself the questions, “What changes in my life happen when gas goes to
$10 a gallon?” Well, I can tell you I will be taking a lot fewer trips at
a whim just to go do something. I will be thinking about consolidating those.
I will be taking far fewer trips farther away, because those will become more
expensive or I will think them through more carefully. At $20 a gallon
something even more profound happens. And that’s when we discover that
once we play that thought experiment. All the places that you probably
aren’t going to go to personally anymore. Those are places that
probably aren’t going to do all that well. That’s one way to look
at it. They are going to be exurbs, distant strip malls, certain economic
arrangements that just don’t make sense under a much higher energy cost
than we currently have. And so those are the things that fall away. And then,
as you are implying here, there are things though that will rise. Because now
we are more local and people are still going to have energy needs. We all
still want to be warm when we want to be warm and cool when we want to be
cool. And there are lots of opportunities to reconfigure our lives around
that in reality.
Where I live in New England,
wood seems to be our only local natural energy source besides the sun. A
little bit of hydro but not enough to even write home about. So I am looking
at wood and saying, wow. It was a very important energy source as recently as
a hundred years ago. It probably will be again, and here’s an
opportunity for people who want to look at it that way - unconventional, but
something I can get my hands around. I understand it. It's local. I can look
at it and touch and make sense of it.
Charles Hugh Smith: Yeah, Chris, I think
that’s absolutely right that each region will have a lot of enterprise
opportunity. I consider my book hopeful, because I think that enterprise is
completely possible in an era of declining resource consumption. In other
words, just because we have to use less, doesn’t mean that there is no
opportunity for investing in enterprise. I think enterprise and investing in
fact, are the solution. And if we withdraw our money from Wall Street and put
it to use in our own communities, to the benefit of our own income streams,
then I think that things happen.
Chris Martenson: I completely agree. So
let’s sort of focus in on where enterprises might look. I am
interested, Charles, as you look at the current landscape and the financial
markets, global credit system, geopolitics, maybe energy – whatever you
are looking at - what do you see as the macro trends that will define how
these next ten to twenty years are going to play out?
Charles Hugh Smith: I would start with the
four “D’s” I call them, like deglobalization. I think
we’re now seeing that we are past the apex of globalization due to
cheap energy and the sort of smoothing of corporate profits as the key metric
of economic “growth.” I think that we are going to see a lot of
nations starting to cut off access and flow of capital and resources to
protect their own resources from exploitation by outside corporations. And I
think we might even see that in the United States, where people will say gosh
maybe we shouldn’t be selling our coal to China. Or we shouldn’t
be selling our property to country XYZ. So deglobalization will I think
radically change people’s understanding of value and risk assessment.
And then the
delegitimization of the loss of credibility of key institutions. People will
realize that they can no longer trust the savior state -what I call the
central state - to meet all their needs and do what it had promised all these
decades. And the institutions that people have relied on as trustworthy will
be revealed that they are either corrupt or incompetent. So that I think will
play out over the next couple of decades, as well.
Decentralization – I
think the whole idea of centralized concentrations of wealth and expertise
that we call corporations, with super long fragile supply chains to one or
two factories on the planet that are “efficient” - I think that
whole system is going to unravel and devolve. And so we’ll be seeking,
in terms of investors, the safety. And lowering the risk element will be to
choose local decentralized assets and income streams. So I think those are
key dynamics over the next ten to twenty years.
Chris Martenson: And was there a fourth
“D”? So far, we had deglobalization,
Charles Hugh Smith: Yes.
Chris Martenson: …and
delegitimization and decentralization.
Charles Hugh Smith: It was probably
shorthand for de-growth-ization.
Chris Martenson: [Laughs]
Charles Hugh Smith: In other words, that
there is no way that we are going to keep exploiting resources at an ever
increasing rate.
Chris Martenson: Great, how about
Deceleration then?
Charles Hugh Smith: [Laughs] Deceleration,
I love it.
Chris Martenson: All right, that sounds
good. Because that’s how I see it. It's not possible to continue to
increase the rate of extraction and consumption of many things and so as that
rate falls, this is the uncomfortable period we’re in. One of the big
macro trends is of course we have all our high priests and priestesses of
money over there waving their magic wands, pressing a magic keyboard, making
trillions appear out of thin air – that is supposed to work and guess
what? In the world of abundant and essentially unlimited resources, the limiting
factor is the number of people available to work to extract them. Once you
pass that threshold, it turns out that waving the magic money wand
doesn’t do what it used to do and it's very confusing, I am sure, to
everybody who has been infiltrated in that system. They grew up in it, it's
all they studied, and they understand all of their differential equations
around how the economy is supposed to work. They get the Taylor’s rule
and interest rate spreads and they did all that and they put all that in and
they waved their wands and the potion doesn’t work and it must horribly
confusing.
And over here on the side
are people who see this other point of view and say, well that’s what
we would kind of predict would happen if we took the amount of available net
energy. That is the energy leftover after we invest some energy to go find
some. We take that net energy and whether we sell it for dollars or just hand
it out for free, it wouldn’t matter. Society will go out and do awesome
things with that energy. As that stream of energy shrinks down, the
complexity theory will tell you that any complex system owes it's order and
ultimate complexity to the amount of energy coming through it. And once you
decrease that energy flow it will be simpler. Well what is simpler shorthand
for? Well, fewer job types, fewer job specializations, fewer stock keeping
units, fewer whatever you want. But ultimately, they are units of economic
activity.
And so, as you throw more
money into the fewer units of economic activity, that’s where I think
economic textbooks can tell you what will happen next with reasonable
assurance. And that is that hidden default that you talked about and
otherwise known as inflation. That’s one of the macro trends that I
have an eye firmly fixed on is the idea that we are printing money at pretty
rapid, if not the fastest rates ever seen and shoving that into a world where
I see less and less units of economic activity happening. And it's a chaotic
system, so we can’t predict all the wrinkles. We don’t know where
every grain of sand is going to fall in this story, but predicting that the
sand tower is going to crumble is an easy one.
Charles Hugh Smith: Yes, absolutely. And
Chris, I remembered the fourth key which I had, which was definancialization,
which is exactly what you are describing. This is the idea that we can
financialize resources in some way that will make them larger. That’s
over, just because we print more money doesn’t mean we are going to
have more oil.
Chris Martenson: Right, right.
Charles Hugh Smith: So one of the concepts
in my book that kind of follows in this, if we are doing a creative
definancialization, what we want of course is real assets and of course
precious metals are the ultimate hedge. They serve an essential role in that.
But I am not wealthy enough to like sell off part of my precious metals every
month to buy food and stuff. So I am kind of focused on how I can get income
streams. Like, what can I do in terms of social capital to set up a network
of businesses and people that I know and that I can trust and value where I
can sell my labor for anything? I can just sell it for a quarter ounce of
gold or an equivalent amount of wheat or whatever it is, my labor will have
the same value as to what it can buy. If I have an orchard, if I know how to
actually take care of my trees, then the harvest will have a value,
irrespective of how we measure that. So I will have an income stream, whether
it's measured in wheat, gold, rent, a new fiat currency from Mars – you
know, whatever we have. So that is the focus of my book. To look at how we
can invest in income streams.
Chris Martenson: And I think it's very
wise and sad that we find ourselves here. Because the money of a nation, the
money of a people – it's an agreement. Ultimately, it's an agreement
between ourselves. So therefore, it is a social contract. That is what money
really is. Forget that it's supposed to be a store of value and unit of
account and all those other textbook things. Those are sort of features,
right? But what it really is to me is the social agreement. So you and I
agree that this piece of paper is worth ten dollars and this piece of paper
is worth twenty dollars and that piece of paper is just a newspaper. So we
have these agreements around what these things are worth and what you are
describing is that as we lose faith in that agreement, a lot of things in our
social contract began to fray. And in that scenario one of the things that we
might consider doing is understanding what really intrinsic value actually is.
An apple has an intrinsic value regardless of how many pieces of paper we
decide it's worth or agree upon: it's still an apple. And an apple still has
a relative intrinsic value as compared to an hour of labor potentially or
whatever. So you are actually talking about walking away from the money
itself simply due to a loss of faith. Is that a fear characterization?
Charles Hugh Smith: Chris, I think you
very well described the loss of trust as a social contract. So one way of
looking at this is capital: it's not just financial. It's what we call social
capital. And that is in fact, the valuation of trust. So if you have a lot of
social capital, what that is another way of saying is that you know people
you can trust. You have an enterprise that has a trustworthy output and
trustworthy sources of input. So what we are really talking about is
revaluing trust away from the paper money and institutions that rely on that.
Chris Martenson: This is a really
important point to me. I critique the Fed a lot in terms of their actual
actions, but my largest critique of them is that they are ultimating
operating a fiat money system of which confidence and trust are the two most
important characteristics. We have to have trust that they are not going to
overproduce this stuff, confidence that they are going to wisely manage it
and so when the Fed blocks every single effort for people to peer into that
public balance sheet and ask the very legitimate question –
what’s in there? Who did you buy it from? What did you pay for it? What
are your plans for disposing of it? And then we find out through a Foyer
request years after the fact that the Fed basically supported every country,
company bank in the world that needed access to dollars, without any regard
to the trust or the confidence pieces. They are in my mind playing with real
fire here, because they are eroding the most important feature of any money,
which is the trust people have in it's stability and it's utility and it's
store of value characteristics, and all of these pieces. And this is why I
think this really describes to me much of the social angst, even of people
who don’t quite understand all the mechanisms and the arcane and the
jargon around what the Fed does or doesn’t do. They just know in their
hearts somehow that printing up $600 billion dollars to buy Treasury bills
out of thin air – there is just something wrong with that. And I think
it's the trust that gets eroded that creates that anxiety, what are your
thoughts?
Charles Hugh Smith: I agree, Chris, and
it's what I call the legitimization process. The legitimacy of these
institutions is being eroded as you say. And the Fed has already lost a
tremendous amount of credibility. I think that politically it is already
mortally wounded in my mind, because people realize that that printing of
$600 billion in the QE2 was a complete, utter, total failure. It did not help
the economy. It did not help the citizens. It failed and so the Fed has
failed and I think that people’s faith in the Fed’s God-like
status has been taken down considerably. I think the same can be said of
Congress and the banking sector. I mean just a huge number of institutions
are failing and people are recognizing that and they are losing credibility.
So I think the answer is not
to get depressed about it, but to relocalize the institutions that we can
trust, which tends to be like our city council and the organizations that
form our communities.
Chris Martenson: Right so I agree with
that and I don’t really know how to counsel individuals to change the
macro system. I look at it and just looking through the energy lens alone, I
see that every energy transition we’ve ever had in history took forty
to sixty years. So we went from wood to coal to oil and so on. Each one of
those took a long time and there’s a really good reason for that,
right? You have all this invested embedded capital in the old energy
structure and it takes time for that stuff to wear out and get replaced
through normal mechanisms. And I look at our current environment and I say,
okay, we have an enormous energy challenge coming before us and we
haven’t taken any steps to really seriously address that. “Cash
for Clunkers” was more of a joke than a serious sort of effort at that.
Our fuel standards are still something of a joke, the pace at which we are
going to put them on. We don’t really have mass transit. Anyway, there
is no energy policy that I can look at and say, “Wow that squares up
with reality.” And so that’s just one example, one slice where I
am looking at current leadership and saying, I don’t see any leadership
in terms of what to me would be a credible, adult-size response to just the
energy slice of the story.
But there are other slices
here in terms of what we are doing with the deficit and how we are going to
manage the entitlement programs and what we are really doing around education
or infrastructure or the fact that we think nothing of spending a trillion on
making sure banks are healthy but we can’t seem to find the money to
invest in what I consider to be legitimate alternative technologies or the
next wave of farming that doesn’t involve big agribusiness but involves
permaculture and other practices that are legitimate and sustainable and
understandably sustainable.
So that’s the
delegitimization that I see is that almost all of the actions that I see, I
can only really understand and support, if what I am trying to do or what
they are trying to do is perpetuate the status quo. They are doing a great
job at that. I just don’t have any faith or trust that the status quo
is either desirable or sustainable at this point. So that is why I am
personally very much out of step with the current machinery as it is
architected and running. And that’s why I don’t spend any time
trying to change it or tell people how to change it. I am glad people do and
they put a lot of energy there. My energy and focus is on helping
individuals, companies, communities figure out what they can do under the
idea that somebody is going to have to manage their future and it's probably
going to be them.
Charles Hugh Smith: I think that’s a
terrific encapsulation of where we are. We have to solve our own problems.
The savior state and these institutions are not going to reform themselves
and they are not reformable in any way that is meaningful. And so, I think
what we’re talking about is taking your capital, which is your human
capital, your skills and your experience; your social capital, the people you
know and trust that you’ve created in life; and your financial capital
and investing them in local solutions. Things that people need, like energy
and food and shelter and a low energy lifestyle. As you said, perhaps the
most significant investment that someone can make is to move into a
sustainable community where they can walk or bike or ski – everything
they need within a few kilometers, a few miles.
Chris Martenson: Absolutely. I have
been counseling for a long time that anything that individuals can do and
this would apply to companies as well. Anything you can do to make an
investment today that will reduce your cash flow that you put towards energy
and in particular food, secondarily. Those will be incredible investments.
You can often make a perfectly valid economic argument under today’s
energy prices and if you just wiggle the spreadsheet a little bit and ask the
question what happens when energy prices are 50% or 100% higher or something
worse, these investments just become absolute no-brainers. There is no other
return on capital that you are going to find in today’s investing environment
that you can match with some of these opportunities. And you can do that on
pure economic terms, but then you have also increased your resilience and if
you have multiple avenues of meeting your heating needs for instance, then if
any one of them fails you have good back-ups.
So this makes sense on so
many dimensions and the one that really helps me out is that I actually sleep
better, because I’ve made these investments. Not that I feel good about
being green or anything like that, that’s not the big motivator for me.
What is a big motivator is the idea that I have more control over my energy.
And I have less cash flow going out for it and that I am less tied to and
independent on these systems over which I have no control, to deliver to me
what I feel like I need to live a good comfortable lifestyle. At the bottom
of my list, yes these things are green and that helps too, but that’s
not my prime motivator.
Charles Hugh Smith: Yeah and that raises
the next point, Chris, is that there is opportunity for technological
innovation in greatly increasing the efficiency of our appliances and the
rest of our lifestyle, as well as tremendous technological improvements in
productions and so on. But there’s also what we might call social and
behavioral innovations, which the United States is really poor in
recognizing. The simplest way to cut your energy is to live close to the
things that you need to get to. And if you have your own enterprise, then we
might benefit on a household and a social scale of like just living close to
your job. So being dependent on corporate America and a job a hundred miles
away, that’s a really fragile, vulnerable lifestyle. So if you can
relocalize your income streams and your enterprises and live close to work
and school, you’re already tremendously more resilient and have a much
more sustainable household regardless of what happens.
Chris Martenson: Yeah so we are really
talking about an issue of lifestyle. I am very fond of saying that my
standard of living has fallen by quite a lot over the past few years, but my
quality of life has gone up. These are not connected topics to me, so I am
interested – you weave a lot of social themes into your economic
observations and analyses and you are one of the most thoughtful bloggers I
follow. I want to get your thoughts on this idea of needing to choose between
growth and prosperity – they’ve been linked for a long time.
We’ve always had both and I think they have been conflated and they are
actually separate ideas in my mind. So it looks like growth is less and less
likely, but what does that imply for ourselves in terms of prosperity? Do we
necessarily have to settle for less, or if not, what is that definition of
prosperity we should be striving for?
Charles Hugh Smith: I think that’s
an excellent question, Chris, which is rarely, if ever asked. I would start
by saying that if we look at what the source of happiness is, both from
studies – academic studies and from our own intuition - we find that
happiness comes from, of course, having enough to eat and a warm place to
sleep. But those are actually rather modest. They are not that difficult to
supply. What happiness mostly flows from is having positive goals and the
opportunity to express your personality in a productive way. We have linked
this with an idea of a “job.” Like you are going to go work for
the government or corporate America and you are going to find some
satisfaction, because you are making a lot of money. But that actually is the
wrong path to prosperity. Prosperity is actually a healthy life, if you will,
which includes having productive work that you control and a modest amount of
the comforts of life. And the freedom to express yourself. This is actual
prosperity and the amount of energy that that requires is considerably less than
the sort of bogus corporate America savior state mentality, where the more
money you have and the more resources you are squandering, the happier you
are supposed to be. Of course, we all know that is false. We know lots of
people who are wealthy and miserable.
Chris Martenson: Well I think you could
look at many cultural barometers and looks at rates of incarceration,
workplace violence, abuse – it doesn’t matter. It's like drug use
in children under the age of ten. There are many things that you can point to
if you are from Mars and say, maybe not the best indicator of health and
maybe there is something worth looking into here. One of my things that I
really put into my definition of true prosperity – one of the things
that I really want for myself and my kids and for everybody’s kids - is
the idea of living in peace and security and safety. The idea here for me
that is troubling is that if we as a nation consider our rates of consumption
to be a nonnegotiable portion of our way of life, as Dick Cheney put it, then
we are going to go to war for those resources if and when they become tight.
So that is one model, right? You say wow, we want to have sufficient
resources because our way of life is nonnegotiable, why we don’t have
sufficient resources, somebody else has them, well we have to go to war
because that’s the narrative that we have in play.
And then you are describing
a different one which says, wait a minute, what if we can actually live just
as meaningful – wait more meaningful - lives on less stuff and we
don’t have to go to war? Why wouldn’t we choose that? And the
people who are really running the narrative in our country right now
haven’t really started to even really explore that avenue yet. And it's
a concern for me. It's a concern for a lot of people. I will consider it a
point of failure in my life if my kids get drafted into a resource war with
China, because we just failed to do something as simple as get the story
right. What are your
thoughts?
Charles Hugh Smith: Yeah, Chris, I
completely concur and I think that you make a profound point that our
individual and household consumption has geopolitical consequences. And that
you and I both know that the 19 million barrels of oil a day we burn and the
11 million barrels a day that we import could easily be cut in half, with no
reduction the prosperity that we are talking about, with just really modest
improvements in efficiency and our lifestyle. So the idea, and that’s
what really is depressing to me, is that we would inflict a tremendous amount
of harm and perhaps as you say, even war to go get 8 million barrels a day of
oil that we are just squandering. It could be cut with efficiencies that are
not that difficult.
Chris Martenson: I agree, that is the
troubling side of this piece. I know that you are working as hard and as
diligently as you can to shift that story. I am too, a lot of people are. So
that the I hope I have is that there does seem to be a dawning awareness that
it's time to really sit back and maybe take stock of where we are. I see that
happening at what I am going to call the individual level and that includes
company level, but it not yet happening on the political landscape. But that
is okay because you know what? Those people never lead; they always follow.
Charles Hugh Smith: Yeah.
Chris Martenson: So our job is to
create critical mass awareness out here on the outside and eventually
Washington will wake up and go, “We knew it all along, but that was to
lead you to where you already are,” and they’ll be right there
waving flags. It will be an awesome thing to see. Do you have any final
parting thoughts here for our listeners today?
Charles Hugh Smith: Chris, I would say
that it's my belief that enterprise is fun and opportunity is there for the
taking and remaking of America and our lifestyle – it’s all open
to us. And investing shouldn’t be some kind of like worrisome
anxiety-producing drag; it should be part of who we are as people. In other
words, investing in ourselves and in our communities and doing stuff that is
exciting and fun.
Chris Martenson: I absolutely agree,
that’s very well said. So we are heading off into this uncertain future
and I would highly recommend people get An Unconventional Guide to
Investing in Troubled Times – Charles how would they find
that?
Charles Hugh Smith: Right now it's a
Kindle eBook on Amazon and I will have a print edition later next month. But
you can read a Kindle on any electronic device, the application to do so is
free on Amazon.
Chris Martenson: Excellent, I have it
loaded and it works great. So we have been talking to Charles Hugh Smith, his
primary blog is oftwominds.com. He’s got a couple of books out there
and we have been talking about some of the topics in his most recent one.
Charles, it's been a real pleasure.
Charles Hugh Smith: Thank you, Chris. Bye.
Chris Martenson: Bye.
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