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Telltale Signs Of Recession
Charles Hugh Smith

I'm seeing lifestyles that are out of stock and no longer available, even in China.

Though every recession is unique, all recessions manifest in similar ways in the real economy. By real economy, I mean the on-the-ground economy we observe with our own eyes, as opposed to the abstract statistical model reflected in official declarations of when recessions begin and end.

One characteristic that never makes it into the abstract statistical representation of recession is the light switch phenomenon: business suddenly dries up, as if someone turned a light switch off. This is especially visible in discretionary purchases, which include everything from smart phones to vehicles to eating out.

Other telltale signs of recession include:

Dead giveaway #1: businesses that seemed established and doing well suddenly close. The customers are surprised, the employees are not; they knew sales were eroding while costs were rising, and the financial situation was becoming increasingly precarious.

Dead giveaway #2: new businesses that would have thrived a few years ago close within a few months. Maybe it was the multitude of competitors, or the high rents; but for whatever combination of factors one attributes the demise to, an enterprise that seemed to have all the ingredients for success fails quickly.

Dead giveaway #3: advertising and marketing / promotion no longer move the needle. Campaigns that reliably increased sales no longer work.

Dead giveaway #4: Matriarchs and patriarchs of established enterprises retire. They typically offer rote explanations for their abrupt retirement--to spend time with the family, to enjoy the leisure they never had working 12-hour days, and so on--but the unspoken reason is their decades of experience have finely tuned their recession detectors. They know when it's about to become impossible to grow revenues and they no longer have the need or energy to buckle down and survive the decline phase of their enterprise's S-Curve.

Dead giveaway #5: a cliffdive in new business and new customers / clients. If 3 or 4 new customers would sign up every day in the good old days, suddenly nobody's signing up, regardless of the promotions offered. Then existing customers start drifting away. If you ask why, you get routine answers: family budget cuts, time constraints, etc. Interestingly, these didn't have any impact in good times, and yet suddenly they're like a virulent virus: everybody's got budget cuts and time constraints.

Dead giveaway #6: promotions increasingly give off the pungent scent of desperation. That airline credit card that once offered 25,000 free miles once you spend $1,000 are now offering 50,000 miles on the first use of the card, even if it's for a cup of coffee at Starbucks. Then the offer edges up to 60,000 miles for customers on the airline's flights, and so on.

New renters that were previously offered some throwaway promo (once month "free" gym membership, etc.) are suddenly being offered a free month's rent to sign the lease.

Dead giveaway #7: multiple offers for homes vanish like mist in Death Valley in July. Real estate and home remodels / additions are the most sensitive canaries in the coal mine; they keel over at the first whiff of declining asset valuations and the first hint that greed has flipped polarity to fear.

Dead giveaway #8: the "fun" third vehicles and the inherited sports cars start showing up on CraigsList and "for sale by owner" lots. One of my favorite memories of the 2008-09 meltdown / recession was reporting on all the used Porsches I saw on the local "sell by owner" lot. One of my longtime correspondents said that if he saw me toodling around in a 911, he was canceling his financial support of my work. (Surrender my 1998 Civic for a sports car? Perish the thought--though it was a tempting fantasy....)

Needless to say, I didn't pick up a heavily discounted recent-vintage Porsche, though the prices were amazingly attractive. (Recall my innate frugality.)

Bonus dead giveaway #9: the IPO of the tech unicorn that was sure to be a roaring success is suddenly cancelled.

You undoubtedly have your own dead giveaways that the cycle has turned from expansion and greed to contraction and fear. I'm seeing plenty of dead giveaways the economy is already in recession--what are you seeing?


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At readers' request, I've prepared a biography. I am not confident this is the right length or has the desired information; the whole project veers uncomfortably close to PR. On the other hand, who wants to read a boring bio? I am reminded of the "Peanuts" comic character Lucy, who once issued this terse biographical summary: "A man was born, he lived, he died." All undoubtedly true, but somewhat lacking in narrative.

I was raised in southern California as a rootless cosmopolitan: born in Santa Monica, and then towed by an upwardly mobile family to Van Nuys, Tarzana, Los Feliz and San Marino, where the penultimate conclusion of upward mobility, divorce and a shattered family, sent us to Big Bear Lake in the San Bernadino mountains.

The next iteration of family took us to the island of Lanai in Hawaii, where I was honored to join the outstanding basketball team (as benchwarmer), and where we rode the only Matchless 350 cc motorcycle on the island, and most likely in the state, through the red-dirt pineapple fields to the splendidly isolated rocky coastline. In 1969-70, this was the old planation Hawaii, where we picked pine in summer beneath a sweltering sun.

We next moved to Honolulu, where I graduated from Punahou School and earned a degree in Comparative Philosophy (i.e. East and West) at the University of Hawaii-Manoa. The family moved back to California and I stayed on, working my way through college apprenticing in the building/remodeling trades.

I was quite active in the American Friends Service Committee (Quakers) and the People's Party of Hawaii in this era (1970s).

I next moved to the Big Island of Hawaii, where my partner and I built over fifty custom homes and a 43-unit subdivision, as well as several commercial projects.

Nearly going broke was all well and good, but I was driven to pursue my dream-career as a writer, so we moved to the San Francisco Bay Area in 1987 where I worked in non-profit education while writing free-lance journalism articles on housing, design and urban planning.

Within a few years I returned to self-employment, a genteel poverty interrupted by an 18-month gig re-organizing the back office of a quantitative stock market analyst. I learned how to lose money in the market with efficiency and aplomb, lessons I continue to practice when the temptation to battle the Monster Id strikes.

Somewhere in here my first novel was published by The Permanent Press, but alas it fell still-born from the press--a now monotonous result of writing fiction. (Seven novels and I still can't stop myself.)

I started the Of Two Minds blog in May 2005 as a side project of self-expression, and in an unpredictable twist of evolutionary incaution, that project has ballooned into a website with about 3,500 pages that has drawn almost 20 million page views.

The site's primary asset may well be the extensive global network of friends and correspondents I draw upon for intelligence and analysis.

The blog is #7 in CNBC's top alternative financial sites, and is republished on numerous popular sites such as Zero Hedge, Financial Sense, and David Stockman’s Contra Corner. I am frequently interviewed by alternative media personalities such as Max Keiser, and am a contributing writer on

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