Faber Report

Dr.
Marc Faber Market Commentary July 1, 2016
Discomfort among the Ruling Class, their

Financiers and their Academic Supporters
Marc Faber
The Monthly Market Commentary Report
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© Copyright 2016 by Marc Faber - All rights reserved
Dr. Marc Faber Market Commentary July 1, 2016
Discomfort among the Ruling Class, their

Financiers and their Academic Supporters
“We are continually faced with a series of great

opportunities brilliantly disguised as insoluble
problems.”
John W. Gardner
“Freedom without responsibility is chaos.”
Rod Steiger (In the Heat of

the Night)
“Liberty means responsibility. That is why most men

dread it.”
George Bernard Shaw
“Americans are so enamored of equality that they

would rather be equal in slavery than unequal in
freedom.”
Alexis de Tocqueville
“If a nation values anything more than freedom, it

will lose its freedom; and the irony of it is that if it is
comfort or money that it values more, it will lose that
too.”
Somerset Maugham
“Americans cannot escape a certain responsibility for

what is done in our name around the world. In a
democracy, even one as corrupted as ours, ultimate
authority rests with the people. We empower the
government with our votes, finance it with our taxes,
bolster it with our silent acquiescence. If we are

passive in the face of America's official actions
overseas, we in effect endorse them.”
Mark Hertzgaard
Three years ago, I met Fernando del Pino Y Calvo-Sotelo at a CLSA

conference for a drink. His grandfather, Rafael del Pino Moreno was the founder of
Ferrovial, a highly successful Spanish company involved in engineering, and
infrastructure projects and investments (his father is Executive Chairman of
Ferrovial). Del Pino has been a Member of the Management team of del Pino
Family Office since 1998. He has also been a Director of Ferrovial-Agromán, S.A.
since 1999 and served as Director of Ferrovial, S.A and Cintra Concesiones de
Infraestructuras de Transportes SA. since 1999. However, his business and family
background is not the reason I am bringing him up. Over drinks I noticed that del
Pino is a highly cultured, educated, warm, and religious person (from his way of
argumentation and from his writing style I suspect he was brought up by the Jesuits
but I never asked). I encourage my readers to peruse his essay below in peace and
when they are not stressed in front of a Bloomberg terminal.
In his blog (www.fpcs.es) Fernando del Pino explains that,
“I’ve been helped tremendously by the ideas of many who were generous enough
to share them with me in times past and present. I feel that now is the time for me
to share my own ideas in case they are of help to others. ….We all end up shaped
by the choices we make, hoping to do it right, and the personal values we struggle
for, often against ourselves. Below, you’ll find a sample of my own choices and
my own struggle. You have yours, I have mine. Thank you very much for your
interest.
In a world subjugated by the invisible tyranny of political correctness and

monolithic thinking, I beg to differ.
In a world impressed by power-seekers and power-holders, I remain extremely

unimpressed.
In a world that trusts the arrogant elite, I know they are no elite and remain
deeply committed to liberty.
In a world where the opinion of the majority enjoys immediate legitimacy, I

strive not to become intimidated and to only bow before the truth.
In a world awash with conformity, herd behaviour and propaganda, I relish

contrarian thinking and prefer to do my own reasoning rather than accepting
others’ views at face value.
In a world of hurry, I favour slowness.
In a world of artificial complexity and too many choices, I prize simplicity and
the power of less.
In a world obsessed with intelligence, I also like it, but rate wisdom higher.
In a world where aggressiveness is seen as a virtue, I prefer kindness.
In a world measured by acquaintances and contacts, I know in the end only my

family and a few friends count.
In a world hooked on screens, enslaved to connectedness and addicted to being

updated on the immediately forgettable, I still choose paper and freedom.
In a world so certain about cause and effect and with so much illusion of
control, I believe in human fallibility, unintended consequences and chance.
In a world of fast talking and noise, I am comfortable with thoughtfulness and

silence.
In a world gripped by fears invented by those who just want to enslave it, I try
not to succumb to them so I can remain free.
In a world where many think there is nothing beyond that allegedly ultimate
creature called Man, I turn to God.”
------------------------------------------------
Following our meeting del Pino and I stayed in touch and in early January of this
year he sent me an essay entitled The Five Experiments, which I think my readers
and their families and friends should study because most people take some social,
political, and economic conditions for granted, and as if they were the ultimate
Truth when in fact they are, as del Pino explains below, just experiments, and
untested in the history of mankind (you have my permission to pass on this report).
I have taken the liberty to add some charts and quotes where appropriate.
THE FIVE EXPERIMENTS: a short essay

By Fernando del Pino (December 2015)
Blog: www.fpcs.es
When I was kindly invited by our founder to make a presentation in our first
meeting, I thought it would be interesting to bring out some global views on what I
believe is a multigenerational decline of the Western civilization rather than talking
about the very interesting but narrower field of investment. I must start with two
disclaimers: the first is that I am not a historian (he is actually a far better historian
than most people I know – ed. note), so I do not pretend all my data to be utterly
accurate or exhaustive (although I have done my best). Secondly, I will use my
right of freedom of speech to be completely politically incorrect: some data may
surprise you the same way they surprised me when I came upon them.
My speech is titled “The Five Experiments”. According to the Webster

dictionary an experiment is “something that is done as a test: something that you
do to see how well or how badly it works “. It is also “a scientific test in which you
perform a series of actions and carefully observe their effects in order to learn
about something”. Western societies are undergoing five experiments – yet we
are not aware that they are just that: experiments. All of them are fairly new and
untested in the history of mankind, with the problem being that they are now taken
for granted as if they were not experiments but an immutable reality, an axiomatic
truth that cannot be changed. They are experiments – yet we are not carefully
observing their effects in order to learn, we are not judging how well or how badly
they work. Worse yet: they are all thought to be undeniable advances in
civilization, protected by the iron fist, the tight grip of the tyranny of political
correctness. Churchill said that “however beautiful the strategy, you should
occasionally look at the results.” That is precisely what I intend to do.
The first experiment is universal suffrage and unlimited

democracy, understood as a system where a simple majority of people,
qualified to vote on a minimum age basis alone (pretty young, by the way), can
decide on mostly anything – including to a large extent the rights of the minority.
This is a pretty recent invention, which in most cases has taken place in the last 50
to 75 years.
We know that the goal of any political system should be liberty, order and
justice under an ethical framework that promotes virtue. Democracy is just an
instrument that is supposed to be the much better than others in achieving these
goals, but it should not be considered a goal itself. In today’s world, however,
democracy is confusingly considered a synonym of liberty, giving the wrong
impression that all that matters is political freedom regardless of the level of the
much broader, valuable and precious concept of personal freedom. In fact, a
democracy can be perverted to the extent that it becomes an enemy of liberty and
order, and its short history already provides quite a few sad examples of that. Hitler
was very democratically raised to power by the German people in the 1933
elections, despite the fact that he had not hidden his ideas at all. Venezuela’s
democratic tyranny is another recent example.
Most part of history man has lived under the rule of kings. Of course, even
under absolutist regimes the king was not alone in the exercise of power. As
Oxford historian Ronald Syme wrote in his book The Roman Revolution: “in all
ages, whatever the form and name of government, be it monarchy, republic, or
democracy, an oligarchy lurks behind the façade ….”. In fact, kings were subject to
many theoretical and practical restraints, the first of which was their religious
belief in a power above themselves and to whom they would unerringly have to
respond in due time. Secondly, they were subject to a rule of law that was more or
less immutable, based on religion and customs, as opposed to today’s legislation,
which changes very often and only responds to fads or the variable moods of the
majority. Kings were dependent on nobles for both revenues and troops due to the
fact that they had limited access to tax revenue and no way to effectively levy taxes,
whereas conscription didn’t exist (it was the 1789 French Revolution which
brought it). Conscription, which we take for granted nowadays despite being an
unquestionable dent to personal liberty, was an important development. Before
conscription, soldiers were much more expensive and, thus, armies much smaller.
Total wars were unconceivable, normal life was not as affected by what happened
in a front that was quite narrow by definition, and the lines between the rulers and
the ruled were not as blurred as they became afterwards -with the dire consequence
of making possible the hatred between entire peoples through the extensive use of
propaganda.
Between the 6th and the 3rd century BC, Ancient Greece is known for
having become the first democracy in History, but it really had little to do with the
unheard-of concept of universal suffrage. I will tell you later why it ended badly
according to one great American specialist in Ancient Civilizations. Republican
Rome lasted five centuries and had only some democratic scents. However, again,
neither Greece nor Rome had universal suffrage and both even coexisted with the
institution of slavery. Well, with only a couple exceptions, such as maybe the
Republic of Venice or Switzerland, since the end of both the Greek democracy and
the Roman Republic, and for the ensuing 1800 years, democracy, even in its most
limited form of a small group of people being able to vote on a few issues, was not
used as a political system roughly anywhere in the world. In the beginning of the
19th century only a small subset of the population was allowed to vote in those few
countries where there were some timid traits of a democratic system. The mere
thought of equalizing the voting power of a rookie youngster with that of an
experienced, wise old man, or of literate and learned people with uneducated
people, or of those who paid taxes to finance subsidies with those receiving those
same subsidies, was considered weird, to say the least. In the UK, for instance,
up until 1815 only 4% of the population 20 years old or older had voting
rights (in 1832 it was ca 7%), and only 10% of Germans had the right to vote
as late as 1871. In other countries it was similar. Indeed, universal suffrage was
not embraced until the 20th century, between 1913 and 1928 in the case of the UK,
Norway, Sweden, Denmark, Austria, Germany or the Netherlands, most of them
after World War I. Taking into account that subsets of the general population were
not allowed to vote until much later (women and racial or religious minorities), we
cannot talk about universal suffrage in other countries until the second half of the
20th century: Italy (1945), Canada (1960), Australia (1962), the Unites States
(1965), Switzerland (1971), Portugal (1976) or Liechtenstein (1984). Illiterates in
Brazil were banned from voting until 1988 and in Sweden, Catholics, which until
1871 were not allowed to vote, had to wait until 1950 to be eligible as members of
the cabinet (by the way, only in 2013 were the members of the British royal family
allowed to marry a Roman Catholic without losing their dynastic rights).
Arguably one of the best experiments in liberty in the History of mankind is

the 1788 Constitution of the United States. However, it might surprise the reader
(as it did surprise me) that some of the Founding Fathers didn’t like democracy
very much. They tended to define democratic systems as “two wolves and a sheep
voting what to have for dinner”, and were extremely worried that such a political
system would soon become “mob rule”, where the majority would become the new
tyrant and abuse the minority – defined by religion, race or wealth (the poorest or
the richest). Many common issues can be reexamined at the light of majority abuse
in democracies: progressive taxation (the majority decides that the richer minority
has to pay more than proportionally), rigid labor legislation that makes dismissal
difficult and increases minimum wages (apparently “protecting” the majority
current employed while undermining the possibilities of finding new jobs for the
minority unemployed), and even abortion (the majority already born deprives the
voiceless, defenseless minority which is still in the womb of their mothers from
their right to exist). That is why these Founding Fathers created a Constitution
difficult to overrule by any majority, clearly stating that the “inalienable” rights of
the people were not decided or voted by fellow men but had been determined by a
Superior Being, namely God. This Constitution was supposed to be the
unconquerable fortress that would always defend the minorities against the whims
of majorities. Further, numerous checks and balances were put in place.
Throughout the world constitutions are indeed protected to prevent easy changes.
In fact, it is so much of a hassle for politicians to legally change constitutions in
their obsessive quest for arbitrary power that they have found an easier shortcut,
which is to control the Court originally established to interpret the Constitution.
Subsequently, constitutions everywhere have been slowly twisted to allow for a
very broad range of legislation that would probably have been deemed profoundly
unconstitutional by their original authors. Therefore, people today rightfully
consider the divine right of kings something weird but, strangely enough, happily
accept the divine right of majorities (which is at least as weird) as the most natural
thing in the world. In fact, today’s governments, elected by majorities, have such
power that absolutist kings would pale in envy. In most Western countries (not all)
people do not fear the advent of a hostile majority, but in many countries around
the world where there is a heterogeneous population, or where there are serious
tensions between majorities and minorities, elections’ results are often
contemplated with anxiety by the prospective losers, as different outcomes bring
vastly different scenarios that might even trigger a temporary exile in order to
preserve one’s wealth, freedom or life.
So much for the first experiment: never before in History has democracy
been used on such a massive scale and never have majorities had so much
unconstrained power.
The second experiment is Big Government & Welfare

State, also a few decades old (again, maybe 50-75 years), and it is absolutely
linked to the first. In democratic systems, politicians need to seduce the masses,
and they usually do so by promising public money in exchange for votes. Taxes are
the other side of promises, their natural consequence: first, you promise; then you
tax. Thus, with the creation of boundless democracy, politicians started making
promises at an increasing pace, and taxation had to follow suit (however, in one of
those remarkable social phenomena, most voters still believe that promises bear no
cost).
Up until the end of the 19th century, approximately 50% of public spending
was military. In the old days, monarchies’ public spending was estimated to range
between 5 and 7% of GDP. Even in 1870, public spending in Western countries
was around 10% of GDP; prior to WWI, in 1913, it was still below 13% of GDP
(see Figure 1 – ed. note).
Figure 1: Government Spending as a Percentage of GDP,

1870 – 1913
Source: The Cato Institute
For the sake of giving some specific examples, public spending over GDP
was 7% in the US and 12% in the UK at the time. In the Nordic countries,
currently known for being paradigmatic Welfare State societies, public spending
was ca 6% of GDP in 1870 and below 10% in 1913 (it seems they became rich and
prosperous with limited government and then decided to squander everything as
soon as they forgot the true origins of their wealth). These were the figures only
100 years ago, when our grandparents were already adults.
Today, public spending in the EU is close to 50% of GDP (see also Figure 2
– ed. note).
Figure 2: US Government Spending as a Percentage of GDP, 1792 – 2008
Source: Dan Mitchell; The Cato Institute
Public debt was nearly non-existent at the beginning of the 20th century (in any
case it was below 10% of GDP), and balanced budgets were considered the rule
except in times of war. Government employment as a percentage of total labor
force was miniscule, between 3 and 5% in 1900. In Spain, as late as 1975, public
debt stood around 8% of GDP and public spending remained around 20% of GDP.
Sidney Homer reminds us in his work “A History of Interest Rates” that
back in the 14th century, for example, kings (governments) were required by their
lenders to pay higher interest rates than commercial private borrowers, as they
were considered less trustworthy.
In just one hundred years, public debt has soared from 10% over GDP
to the current 90-100% in many Western countries, and thanks to central
banks, many governments actually get paid by their lenders for the privilege
of lending to their near bankrupt governments. I wonder whether societal

wisdom has increased or decreased since the 14th century (see Figures 3 and 4 – ed.
note).
Figure 3: Government Debt as a Percentage of GDP (IMF Estimates for 2013)
Source: Credit Suisse, IMF
Permanent income taxes – the main source of funding or extractive capacity

of the State – is another recent invention (as you can see, not all inventions are a
progress for humankind). The first permanent tax took place in 1842 in Britain,
followed by Austria, Italy and Japan in the second half of that same 19th century.
[In the Financial Reform of 1842, Sir Robert Peel introduced the income tax in
Britain at a rate of 7% on the highest income earners – ed. note.] Around 1900, the
Netherlands and most of the European Nordic countries (Norway, Sweden and
Denmark) followed suit. Between 1913 (close to the beginning of World War I)
and 1925, the United States, France, Germany, Australia, Canada, Finland and
Belgium joined the group. Switzerland did not enact a permanent income tax at the
federal level until 1939 (when WWII started). It should be emphasized that at the
beginning tax rates used to be low single digit, ranging between 1% and 7% over
annual income (nowadays it is not uncommon to find top tax rates between 40%
and 50%).
Figure 4: US Gross Public Federal Debt as a Percentage of GDP, 1900 – 2015
tt
Source: www.economicshelp.org
Afterwards, the always astute politicians found many ways to increase

taxation. Progressive tax rates, deemed unconstitutional in the US until 1913, that
unlucky year when the Fed was created (both events taking place on the same year
may well be the origin of number 13’s bad reputation), were soon adopted. Indeed,
through progressive taxation, politicians disguise and soften the inevitable voter’s
annoyance caused by tax hikes using the always powerful feeling of envy as a
masterly softener: “the rich will pay even more”, they say. “Oh, I feel better”, the
voter responds. “Tax me, please”. In fact, progressive taxation should be seen as a
long term destroyer of the principle of private property. If the political system
allows majorities to decide without restrictions regarding the wealthy tiny
minority, it seems logical to think that abusively high income taxes will be
followed by wealth taxes, then by legal expropriation (garnished by beautiful
words such as “social justice”, for instance) and, finally, by arbitrary illegal
confiscation before the whole system explodes in total chaos.
Another trick used by politicians is to call “Social Security” what is merely another
huge tax. [Albert Camus: “The welfare of the people has always been the alibi of
tyrants” – ed. note.] Social Security sounds better, of course: it even sounds like a
pension contract, except for the little detail that there is no contract whatsoever
(just the promise of a politician, which I wouldn’t rate AAA). Yet another trick is
withholding taxes, which divide the tax payments through the year with the goal of
reducing the pain of a single payment on a certain date. Finally, politicians have
invented a myriad of little taxes, so that the overall abusive level of taxation goes
unnoticed, and also that great stealth concept called indirect taxation. The Value
Added Tax (VAT), invented by a French bureaucrat as late as 1954, is the mother
of all indirect taxes. Of course, all temporary taxes remain in place forever, and
people seem to sheepishly accept whichever new form of taxation is created
regardless how eccentric and outrageous it might have been regarded just one
generation ago – let alone two.
In any boundless democracy, a Welfare State is simply a symptom of aging.

The healthier the democratic system, the longer it takes for it to degenerate into a
Welfare State. In this sense, it is taking much longer in the Anglo Saxon countries
than in the European continent. In a Welfare State, politicians promise Peter that he
will be subsidized at the expense of Paul, and then they run to convince every
single voter that they are all Peters (except the obvious minorities, which don’t
count anyway). The politician’s principle is simple: you earn, I redistribute. He
takes with one hand and redelivers with the other (with some unfortunate midway
loss). In my view, any society that aspires to call itself civilized has the moral duty
of taking care of the weakest, of those who cannot take care of themselves,
temporarily or permanently. The State should only have a subsidiary role, though,
with the family (currently under a most vicious attack) representing the main
support of these weakest, followed by the voluntary action of fellow men through
charity. However, the weakest, by definition, are a minority, and minorities are of
little interest to the Welfare State, which is a political concept. That’s the reason
why the Welfare State has failed to provide protection to those it should, while
spoiling (controlling) those it should not.
Politicians promise a nonexistent, fraudulent, completely imaginary security

in exchange for a very real and precious value called liberty, and people end up
without both. That was the trap of Communism, but the temptation to accept such
poisonous deal is as old as man. In the Bible we can read how the Jewish people
bitterly blamed Moses for all their adversities in the desert just weeks after having
been saved by him from slavery: “Why did we not die at Yahweh's hand in Egypt,
where we used to sit round the flesh pots and could eat to our heart's content!.”
They’d happily trade their recently recovered freedom, naturally full of
uncertainties, for the “security” of a full stomach. [Benjamin Franklin: “Any
society that would give up a little liberty to gain a little security will deserve
neither and lose both” – ed. note.]
We definitely cannot take for granted the value placed by the average
man on his own freedom, because freedom bears responsibility, effort, taking
the right choices, erring and falling, and standing up again after every fall. In
reality, true freedom can be scary. That’s why a Spanish comedian of the 70s
and 80s famously said: “We will be free! And those who don’t want to be free,
we will force them to become free!”
Welfare States create the illusion that money grows in trees: “free” highways
and highspeed railway infrastructures, “free” health systems, “free” public
education systems. Bizarre “rights” start growing like mushrooms in a humid
forest –rights without duties. Personal responsibility, on the other hand, is killed on
the altar of universal rights and political power: the State will provide no matter
what, so there’s no need to save, no need to have children to support you at an old
age, no need to search for a job, no need to keep healthy. This is Europe: a
citizenship completely dependent on the State (of course, a free, independent
citizen has always been a nuisance for any power junkie). Social Security,
disguised as State-sponsored savings, becomes a Ponzi scheme. Voters are openly
bribed with ever more subsidies and a set of absurd, tyrannical and overwhelming
regulations seem to bring totalitarianism through the back door. They distract us
with political liberty while stealthily robbing personal liberty at an accelerating
pace. [Alexis de Tocqueville: “The will of man is not shattered, but softened, bent,
and guided, men are seldom forced to act, but they are constantly restrained from
acting. Such a power does not destroy, but it prevents existence; it does not
tyrannize, but it compresses, enervates, extinguishes, and stupefies a people, till
each nation is reduced to nothing better than a flock of timid and industrious
animals, of which the government is the shepherd – ed. note.]
The huge danger is that we may end up living in a totalitarian society
disguised as a democracy, where people would just carelessly choose the next
tyrant for the next few years with nobody bothering who he might be. [Johann
Wolfgang von Goethe “None are more hopelessly enslaved than those who falsely
believe they are free.”]
Politicians first promise, then tax. When they run out of tax revenues, they
borrow.
A gigantic indebtedness is the third experiment. The trend

is particularly noteworthy in the last 35 years. Historically speaking, governments
only borrowed heavily in times of war and particulars were wary of getting too
much into debt. Today, both private and public debt levels remain at historical
records in most world regions (see Figure 5 – ed. note). It seems that today’s
societies have lost the due respect that debt deserves. Etymologically, debt is
having without having; it means bread today and hunger tomorrow, as we say in
Spain. As it usually allows living beyond one’s means, it also brings some sort of
reality loss. Debt doesn’t add to wealth and becomes dangerous, because our assets
change in value, as does our income, but debt remains merciless constant
regardless of what assets or income may do. As a wise Spanish businessman once
said, “debt is the only thing real”.
In the good old days, debt had two natural deterrents: interest rates and
the obligation of repayment. Interest rates have been suppressed by the world’s
Great Helmsmen (central bankers), and rolling debt at maturity has become the
norm, as overleveraged lenders do not want to realize how stinky their loan book
really is and keep kicking the can down the road in the belief that better times will
come along to save them from disaster. To pretend is the name of the game. The
problem with these reckless policies is that the world has become addicted to debt
and has already consumed tomorrow’s wealth – today (see Figure 6 – ed. note).
Figure 5: Global Stock of Debt Outstanding by Type (US$ Trillion, constant

2013 Exchange Rate), 2000 – 2014
Source: McKinsey & Company
As with all addictions, the only cure implies going through the pain of
withdrawal, but in our teenager, spoiled, egocentric societies, pain is no longer
acceptable (it may well become illegal). Sooner or later, the day of reckoning
will come due, however, and the longer we postpone it, the more vicious the
final collapse will be.
Finally, the fractional reserve system, based on trust, is very dangerous. If
we have huge debts and a false sense of security through deposit “insurance” (who
insures the insurer?) that guarantees up to a certain amount of deposits (who
guarantees the guarantor?), we take responsibility off people’s shoulders in the
moment of choosing which entity is safe enough to keep their hard earned savings.
The fractional reserve system bears with it the fear of a bank run: if deposits were
real (or at least more real), a bank failure would be like any other bankruptcy, with
its shareholders and bondholders taking the burden of human error.
Figure 6: Total Global Credit-Market Debt Owed, 1950 – 2015
Source: Michael Roscoe, US Federal Reserve Bank of St. Louis, BIS, World
Bank, The Economist
There would be nothing like systemic risk, and both managers and
depositors would have to behave more prudently, more responsibly (like adults?).
What we are seeing everywhere is an abuse of trust, where the system has been
allowed to become extremely fragile. Fragility is a treacherous concept: for a
long time, nothing seems to happen and prudence resembles stupidity, until
suddenly, apparently out of the blue, all hell breaks loose.
The fourth experiment has to do with crazy central

bankers and fiat currencies, and it goes back to 1971, when US
President Nixon unilaterally cancelled the convertibility of the US dollar into gold.
Nixon literally stated: “I have directed Secretary Connally to suspend temporarily
the convertibility of the dollar into gold”. Please note the word “temporarily”, read
44 years later.
As we have already seen, the history of fiat currencies is quite simple:

powerholders first promise, then tax; there comes a moment when there are more
promises than money (the very definition of today`s Welfare State), so
powerholders have no option but to borrow. Then, when no lender in his right
mind would lend them a single dime, powerholders just print (see Figure 7 – ed.
note). It’s easy and for a while it seems harmless. We can find examples in
China as far back as in the 10th century or in the Roman Empire prior to its demise.
The end is predictable: currency destruction.
Figure 7: Growth of Central Bank Balance Sheets, 1998 – 2015
Source: Bloomberg
Money has a limited, finite demand; if you create an infinite supply, its value will
go down to zero. Of course, fiat currencies have both pros and cons. The problem
with the pros is that they rely too much on powerholders’ common sense, good
judgement and right morals, turning a blind eye to the ever present pathology of
power which, with very few exceptions, appears every time man starts believing he
is God – forgetting that he unfortunately lacks His other attributes. Extreme
power without extreme virtue is not a good idea.
Subject to a false sense of security which is nothing but an illusion of

control, central bankers have tried to eliminate economic cycles, which
naturally occur at least since the times of the Bible, with the seven fat years
followed by the seven lean years. However, cycles are indispensable, rewarding
vision, intelligence and rightful behavior (and luck, to be sure) and punishing
recklessness, excessive greed, shortsightedness or stupidity. Cycles bring pain, and
pain brings necessary change. That’s how human nature works: because of man’s
fallen nature, incentives are essential for righting the wrong in the long term. The
financial repression of centrally planned zero interest rate policies (ZIRP) will
be viewed in the future with dismay and judged as yet another example of
human hubris. The price mechanism has been destroyed, asset values distorted;
we have run away from reality and created a fantasy where mistakes are not
corrected, addictions are not healed and problems are not solved. On the contrary,
problems are extended and amplified. The innocent victims of ZIRP have so far
been ignored by public opinion: retirees, insurance companies, pension funds,
endowments, etc. All these have been forced to climb the ladder of risk desperately
trying to grab the yield leftovers. Unfortunately, we will pay the price as certainly
as night follows day – although central bankers themselves will comfortably retire,
find some scapegoat for the next meltdown and quietly tiptoe out of stage without
assuming any responsibility whatsoever. If you think I’ve been too harsh on central
bankers and you still believe they are a bunch of wise, benign men sitting around
crystal balls, equipped with supernatural intelligence and specially gifted and
destined to rule the world since birth, let me give you a recent example so you can
judge for yourself. Haruhiko Kuroda, governor of the Bank of Japan, said on June
4th 2015: “I trust that many of you are familiar with the story of Peter Pan, in
which it says that the moment you doubt whether you can fly, you cease forever to
be able to do it. Yes, what we need is a positive attitude and conviction”. Wow,
that’s all we need.
I recall from that same movie another character: Tick-Tock Croc. I believe
that what the crocodile had eaten were these arrogant, reckless monetary policies,
that is: central bankers’ ticking bomb. The fuse’s length is uncertain, but you can
bet on one thing: it’s finite. [Bertrand Russell: “Most of the greatest evils that man
has inflicted upon man have come through people feeling quite certain about
something which, in fact, was false” – ed. note.]
The fifth and final experiment is much more profound and

has deeper and longer lasting consequences. It is the
experiment of living without God, particularly acute in developed,
formerly Christian Western countries, and is really recent, arguably two or three
decades old in most cases. This is a huge issue: for the first time in nearly two
millennia, Western countries live as if God didn’t exist. There are no longer Ten
Commandments, no natural law, no inalienable rights, no right or wrong. Rules
and rights are decided, nearly without exception, by fellow men, by the deified
majority accountable to no one, subject to no limits at all. When you take God out,
you take human dignity out: we are no longer sons of God, with our own
indestructible rights. If fellow men can decide what our rights are, then they are not
rights, because a right cannot depend on the opinion of others. Relativism, one of
the most dangerous philosophical currents ever, asserts that absolute truth does not
exist (except this very statement, of course). Under the relativist ideology, it all
depends on subjective views, on the latest fad or on the ever changing whims of
the majority. We have forgotten something extremely important: when power is
not subject to a higher rule, those in power become gods, although not saint,
infinitely merciful, just and good gods, but somber tyrants in waiting. Also, when
we take God out of our lives, something has to occupy the empty space. Therefore
those who think they have killed God are wrong: they have just substituted Him for
other gods, like power, sex, money, popularity or mother Earth, gods who are
inferior to us instead of vastly superior, gods that enslave us instead of having the
ability to set us free. In our quest for a misunderstood freedom we have become
slaves. Worse yet, we have become slaves who remain oblivious to their state of
slavery. [The abolitionist Harriet Tubman: “I freed a thousand slaves, I could have
freed a thousand more if only they knew they were slaves” – ed. note.]
I worry that we might be blindly participating in the decline of our own

civilization in the name of progress, that we might be losing our freedom in the
very name of freedom. Our deified democracies are degenerating into a race where
majorities vote for themselves with largesse ever increasing rights and ever
decreasing duties. Freedom without responsibility and without moral
constraints is not freedom, but barbarism. [Marcus Tullius Cicero: “Too much
liberty, leads both men and nations to slavery” – ed. note.]
Indeed, once morals are sufficiently corrupted by the anesthesia of

conscience and the passage of time, the sovereign masses, unconstrained by any
rules at all, having already kidnapped truth and redefined right and wrong, will
become ruthless arbitrary tyrants. This moment is looming on the horizon.
I mentioned at the beginning that Ancient Greece was the pioneer of
democracy 2,500 years ago and the first society in which a sizable part of its
people could proudly call themselves free citizens. How did democracy in Greece
come to an end? One of the foremost authorities in this period of History, the late
Edith Hamilton, clearly explained the reason of Greece’s decline in her wonderful
book The Echo of Greece (1957). This quote belongs to the chapter called Athens’
Failure:
“What the people wanted was a government which would provide a

comfortable life for them, and with this as the foremost object, ideas of
freedom and self-reliance and service to the community were obscured to the
point of disappearing. Athens was more and more looked on as a co-
operative business possessed of great wealth in which all citizens had a right
to share. The larger and larger funds demanded made heavier and heavier
taxation necessary, but that troubled only the well-to-do, always a minority,
and no one gave a thought to the possibility that the source might be taxed
out of existence. Politics was now closely connected with money, quite as
much as with voting. Indeed, the one meant the other. Votes were for sale as
well as officials. The whole process was clear to Plato. Athens had reached
the point of rejecting independence, and the freedom she now wanted was
freedom from responsibility. There could be only one result. “The excess of
liberty in states or individuals,” he said, “seems to pass into excess of
slavery.” If men insisted on being free from the burden of a life that was
self-dependent and also responsible for the common good, they would cease
to be free at all.
Responsibility was the price every man must pay for freedom. It was to
be had on no other terms….. But, by the time, Athens had reached the end of
freedom and was never to have it again” (emphasis added in each instance).
Enough said. Thank you very much.
Fernando del Pino
MF: It will be rather interesting to see which of the five experiments - universal
suffrage and unlimited democracy, Big Government & the Welfare State, a
gigantic indebtedness, crazy central bankers and fiat currencies, and living without
God – will fail first. My nagging suspicion is that these experiments are all
interconnected and that when the experiments of a gigantic indebtedness, and crazy
central bankers and fiat currencies - which are the most likely candidates to fail
first – come unglued, the other experiments will fail too. In fact, Brexit is the most
telling symptom that ordinary people no longer trust the government, the
bureaucrats, the academics, the central bankers, and the opinion of the media, most
of which were strongly in the Remain camp with their aggressive scaremongering
campaigns. Last month, I quoted Ed Crane who opined that, “The history of
mankind is a history of the subjugation and exploitation of a great majority of
people by an elite few by what has been appropriately termed the 'ruling class'. The
ruling class has many manifestations. It can take the form of a religious orthodoxy,
a monarchy, a dictatorship of the proletariat, outright fascism, or, in the case of the
United States, corporate statism. In each instance the ruling class relies on
academics, scholars and 'experts' to legitimize and provide moral authority
for its hegemony over the masses” (emphasis added). Brexit is a peaceful
negation and revolution against the elite few or as is appropriately termed the
'ruling class.'
David Stockman who was very much in favor of Brexit wrote that, “At long
last the tyranny of the global financial elite has been slammed good and hard. You
can count on them to attempt another central bank based shock and awe
campaign to halt and reverse the current sell-off, but it won’t be credible,
sustainable or maybe even possible.
The central banks and their compatriots at the EC, IMF, White
House/Treasury, OECD, G-7 and the rest of the Bubble Finance apparatus have
well and truly over-played their hand. They have created a tissue of financial lies;
an affront to the very laws of markets, sound money and capitalist prosperity. So
there will be payback, clawback and traumatic deflation of the bubbles. Plenty of it,
as far as the eye can see.
On the immediate matter of Brexit, the British people have rejected the
arrogant rule of the EU superstate and the tyranny of its unelected courts,
commissions and bureaucratic overlords………..it is virtually certain that Brexit is
a contagious political disease. In response to today’s history-shaking event,
determined campaigns for Frexit, Spexit, Nexit, Grexit, Italxit, Hungexit and more
centrifugal political emissions will next follow. Smaller government - at least in
geography - is being given another chance. And that’s a very good thing because
more localized democracy everywhere and always is inimical to the rule of
centralized financial elites” (emphasis added). I should add that smaller countries
also in terms of population function better and more efficiently (less corruption)
than large empires.
If this were understood by investors, equity markets around the world should
have rallied on the Brexit news and not declined. The markets declined because the
“elite” and their media and academic accomplices had all warned and sold the idea
to the public that Brexit would be a disaster for the global economy and for
financial markets. The academics, the financial elite, and the bureaucrats, however,
all rather conveniently failed to explain why exactly Brexit would be a disaster. So,
when Brexit occurred after equity markets and the British Pound had rallied in the
days prior to the vote, it was only natural that stock markets and the British Pound
would sell-off (see Figure 8).
Figure 8: British Pound (monthly spot – US$ per Pound), 1900 - 2016
Source: Ron Griess, www.thechartstore.com
However, consider the following: the British Pound (BP) has been a relatively
weak currency since the beginning of the 20th century. In the opinion of my friend
Jim Walker, the BP was in mid-June 2016 “with or without Brexit the world’s
most overvalued currency” Walker thinks the BP will decline further. For sure,
with Carney at the Bank of England! Furthermore, most equity markets around the
world were already in bear markets long before Brexit (see Figure 9). I concede
that by mid-June 2016, stock markets around the world had rebounded slightly
from May 20, which is the date of Figure 9, but by not much.
Figure 9: Percentage Decline of Stocks from their Highs as of May 20th, 2016
Source: www.wolfstreet.com
I should mention that the relatively strong performance of the S&P 500 does not
reflect the performance of the typical stock in the US: After having been down
27% at the February 2016 low from the high in July 2015, the Russell 2000 index
had rebounded and was just down 10% from the high in mid-June 2016. The
Biotechnology ETF (IBB) is currently down 35% form the high. The Dow Jones
Transportation Average was down 31% at the February 2016 low, and is still down
21% (see Figure 10).
Figure 10: Dow Jones Transportation Average, 1981 - 2016
Source: www.stockcharts.com
According to Wolf Richter, “Renaissance Capital’s IPO index tracks US-listed

stocks that recently went public. They stay in the index for two years after their
IPO date. With 64 components currently, the index reflects the ‘top 80% of newly
public companies based on full market capitalization.’ However, it imposes a 10%
cap on large companies…..The index peaked in July 2015. By mid-February 2016,
it was down 36%, with the IPO window just about closed. It has since recovered
some and is now down ‘only’ 21.6%. But numerous of its components have gotten
totally crushed, including Lending Club (LC), which deserves a special mention.
When the peer-to-peer lender went public in December 2014, it soared 67% from
its IPO price of $15. This was beautifully hyped on CNBC. Lending Club would
‘transform the entire banking industry,’ CEO Renaud Laplanche explained. The
company had a market value of $9 billion at the time, about the same as the 14th
biggest bank in the US. Stephan Paternot, an early investor, called it a ‘no-brainer’.”
For what it’s worth, the stock peaked out in December 2014 at $29 and is now
down 86%.
Even Apple (AAPL), the largest holding of hedge funds in 2015 is down
31% from the April 2015 high (it is down almost 10% from the September 2012
high - see Figure 11).
Figure 11: Apple Inc., 1999 - 2016
It would seem that some stocks like Apple (the FANG stocks) and other high
flying stocks such as Tesla still have huge downside risk.
In fact, Tesla has all the characteristics of an ideal shorting candidate (see
Figure 12). An arrogant CEO, questionable accounting practices, poor corporate
governance, an expensive stock, year after year of piling in losses, murky

takeovers, and most importantly, future inevitable competition from large and far
more powerful auto companies such as Toyota, BMW, VW, GM, and Daimler.
Figure 12: Tesla, 1999 - 2016
Or take Deutsche Bank (DB) – another beauty managed by some financial

wizards and supported by Super Mario’s ECB. With brief interruptions it has been
in a downtrend since 2007. It even has the unique honor to be lower in price than it
was in 2009 (see Figure 13).
Naturally, Deutsche bank’s board members and its executives all warned that
Brexit would be a disaster, when in fact these geniuses should have warned every
year for the last fifteen years that thanks to their incompetence DB was a complete
disaster waiting to happen. [I cannot imagine that some of these European banks
would have performed worse had they been managed by their cleaning ladies and
janitors]
Figure 13: Deutsche Bank, 1999 - 2016
The point I am trying to make is this: Brexit is a blessing in disguise

for the ruling political elite, central banks, their cronies in the financial sector and
for the multinationals, which benefit from complex laws and regulations. From
now on they can conveniently blame Brexit for all the world’s problems (including
global warming, the Tika virus, ISIS, the increase in the suicide rate of middle-
aged American, the coming global recession, and for declining asset prices), when
in fact, financial cracks appeared much earlier (see Figures 9, 10, 11, and 12). In
recent reports, I explained that the global economy, and the US for that matter,
were slowing down and teetering on a recession. I brought up the Cass Freight
Index in order to show that US freight movement did not support all the bullish
calls for a strong US economy. As a reminder, according to Wolf Richter, The
Cass Freight Index is based on more than $26 billion in annual freight transactions
by hundreds of large shippers. It does not cover bulk commodities, such as oil
and coal and thus is not impacted by diminished oil-train activity and
collapsed coal shipments. The index is focused on consumer packaged goods,
food items, automotive, chemical products, OEM, heavy equipment, and retail (see
Figure 14). Needless to say, the Cass Freight Index (ex-commodities such as oil
and coal) is certainly quite representative of US economic activity and it is
unquestionably trending down.
Figure 14: Cass Freight Index, 2011 - 2016
Source: Cass Information System, www.cassinfo.com, Wolf Richter,

www.wolfstreet.com
According to Cass, freight shipments by truck and rail in the US – well-understood

excluding commodities - fell 5.8% in May 2016 from May 2015, and 7.0% from
May 2014. It was the worst May since 2010. I am bringing up the weakening
economic indicators because for the last two years the stock bulls and bond bears
have predicted that stocks would go up and that Ten-Year Treasury yields would
rise to over 3% (see Figure 15). Having been massively wrong about the expected
increase in interest rates, Brexit is another welcome blessing in disguise – this time
for the bond bears, which populate the world’s major financial institutions (Albert
Edwards, Gary Shilling, and Jim Walker are exceptions). The bond super-bears
have now an excuse to contend that following Brexit, a flight to safety induced
investors to park their money into longer durations Treasuries, which are relatively
attractively, compared to European and Japanese sovereign bonds that have
negative interest rates.
Figure 15: Ten-Year US Treasury Yield, 1999 – 2016
Brexit is also most welcome at the Imperial Palace of the Federal Reserve where
Empress Janet and her feudal lords around the world including Lord Carney, King
Draghi, and Shogun Kuroda (I apologize to my Japanese friends for calling
Kuroda a Shogun when he is a simple runner of the global money printing
establishment), and others have now the perfect excuse to launch further
quantitative easing measures. Not to be outdone, the ruling EU elite (actually its
bureaucrats are anything but elite) will try to make Brexit as painful as possible for
Britain and its economy. After all, how embarrassing would it be if following
Brexit its economy actually grew faster than the EU? Moreover, in order to bribe
the voters in the remaining member states of the EU, “helicopter money” is
increasingly likely: “If you stay in the European Union, I King Draghi decree that
each of your citizens will receive a check for Euro 10,000 (of freshly printed
money). But if you have the audacity to leave the EU you will get nothing” (this is
pretty much what happened in Greece). [Alexis de Tocqueville: “The American
Republic will endure until the day Congress discovers that it can bribe the public
with the public’s money.”]
On the surface, EU helicopter money should weaken the Euro and
strengthen the US dollar (see Figure 16). But this is far from certain.
Figure 16: US Dollar versus Euro, 2011 – 2016
Following the announcement of Brexit on Friday June 24, 2016, the Imperial
Palace in Washington immediately released the statement that, “The (almighty)
Federal Reserve is carefully monitoring developments in global financial markets,
in cooperation with other (celestial) central banks, following the results of the
U.K. referendum on membership in the European Union. The Federal Reserve is
prepared to provide dollar liquidity through its existing swap lines with
central banks (and through the continuous running of our newly acquired money
printing machines), as necessary, to address pressures in global funding markets,
which could have adverse implications for the U.S. economy” (bracket my
additions and emphasis added). I hope this will remove any doubts of naïve
investors who still believe that there is a currency war when, in fact, all Western
central banks and the BOJ coordinate their blatant and destructive money printing
exercises. Don’t forget, central bankers work in a zero gravity environment (see
Figure 17).
Figure 17: Central Bankers
Source: Hedgeye
What this means is that a sharp decline in equity prices may be postponed for a
while. Already the markets are rallying since Tuesday, June 27 although new highs
will be difficult to achieve (see Figure 18)
Figure 18: Global Dow Index, 2012 – 2016
More so, it is unlikely that the Fed will increase interest rates further. More likely
and in the realm of possibility now is that before year end we shall have QE4 or
some form of “Helicopter Money.” This would likely underpin the strength in
precious metals and gold shares (see Figure 19).
Remarkably, the XAU, despite its doubling in price since the beginning of
the year, is no higher than it was in the early 1980s.
Figure 19: Philadelphia Gold & Silver Index, 1984 - 2016
Moreover, it is likely that gold shares will continue to outperform the bullion spot
price provided gold continues to strengthen (see Figure 20). The Gold/HUI Ratio
seems to have completed a major top (see bottom of Figure 20), and is likely to
decline much further – in other words I expect gold shares to outperform the
bullion price by a wide margin. [Gold is near term overbought though and could
correct 5% or more.] Both bearishness and bullishness amongst the so called Smart
Money and Dumb Money respectively is at an extreme currently with the caveat
that the Dumb money is winning hands down since the Brexit verdict.
My regular readers know that I own a portfolio of Asian shares. With all the
problems Europe will have to deal with and given how expensive the US stock
market is, I expect Asian stocks (ex Japan) to continue to outperform (Year-to-date
Thailand is up 12%, the Philippines 11%, Vietnam and Indonesia 9% - all in USD
terms). Credit Suisse recently published a list of “Defensive Picks” (see Table 1).
Figure 20: Gold Price and Gold Bug Index, 1971 - 2016
Source: Ron Griess, www.thechartstore.com
Table 1: Credit Suisse’s Top Defensive Picks
Source: Credit Suisse
As an aside, I own Sing Tel, CMT, SATS, MCT, MINT, and CDL REIT among
other equities in Asia.
I still hold my Treasury bonds but obviously – like gold I might add – they
are near term extremely overbought as well (see Figure 21). But, compared to
negative yielding European and Japanese government bonds US Treasuries offer
some relative value. I would like to remind my readers of the importance of
diversification. Investors who hold aside from US, Japanese and European
equities, also emerging stock markets, bonds and gold did perform well so far this
year.
Figure 21: US Treasury Bond, 1980 – 2015
I am enclosing two reports. Shawn Hackett of Hackett Financial Advisors, Inc.

shawn@hackettadvisors.com warns in a special update of the Hackett Money
Flow Commodity Report that, “Grain markets continue to be in the early stages of a
massive bull market that will complete by the summer/Fall of 2017 into a full
blown food crisis. The ingredients for this have been and will continue to be the
ongoing record demand for grains and most agricultural products and the
normalization of global yields downward from an unsustainable above trend line
yield construct that encompassed the last 2 years…..In this special
report/presentation, I have gone over the extremely rare set of weather variables
that has not occurred with synchronicity for 200 years….The combination of a
record retreat of a super El Nino to a super La Nina, the near record levels of the
PDO and AMO sea surface temperatures last seen during the ‘dust bowl’ of the
1930’s and a record collapse of the sunspot activity into a rare Dalton sunspot
cycle minimum have layered the global tapestry of arable planted acres with lethal
dynamite that has only just begun to inflict global yield damage.”
In short, Hackett expect a full blown food crisis by 2017. The report is well-
worth a read. For readers who have an interest in learning more about Hackett’s
proprietary smart money indicator, a White paper can be downloaded
at: http://www.hackettadvisors.com/Register_WhitePaper.asp
The second report is entitled False Precision by Charlie Bilello,

(cbilello@pensionpartners.com), CMT | Director of Research at Pension Partners,
LLC (www.pensionpartners.com). Regular readers will remember the technical
reports which I am occasionally enclosing by Michael Gayed. According to Bilello,
his most recent research paper (“Leverage for the Long Run”) delves into moving
averages and leverage. He shows that using moving averages can help manage risk
over time and enable investors to systematically employ leverage to enhance
returns.
Finally, a short essay crossed my desk by Anant Pal Singh (apsyvr@gmail.com),

which actually has a solution for Brexit:
Dear Britain,
Should you have voted to leave the EU by the time I wake up - don't worry - I have
a solution that should relieve both remainers and leavers equally. A moment comes,
which comes but rarely, when we step from the old to the new....I've cracked the
#Brexit conundrum!
Cameron needs to immediately apply for Britain to become a Union Territory of

the Republic of India.
Whilst historically speaking it seems only right and proper to give India a chance
to rule Britain for a few hundred years - it actually makes a lot of sense for the
British too!
Worried about jobs? India's economy is growing 4x faster than Europe's and will
overtake the entire EU's sometime in the 2030s - becoming twice the size of the
EU economy by 2050.
In economic terms alone every young Brit should wish to replace their garish red
EU passport with a classy blue Indian one ASAP.
Worried about the future of the NHS? India already provides nearly as many
Doctors to the NHS as the EU does - and that doesn't even include those of Indian
origin, born or educated, in Britain. 25,055 Indian v 30,082 EU.
Worried about diversity? With over 100 different languages spoken everyday and
adherents of every religion - even Britain's favourite materialist consumption -
there truly is something for everyone here!
Worried about being understood? English is one of India's two official languages -
which will be a huge relief for all those have struggled to communicate with their
continental neighbours for all these years.
Worried about not being part of something bigger? India has more than twice the
population of the EU. Half of which are under 35, so the bonus is no more worries
about an ageing population!
Worried about where to go on holiday? The Himalayas are nearly three times the
height of the Alps and thousands of miles longer - there are more sandy beaches
along India's coastline than all the Costas you can dream of - and India has tropical
rainforests and even a desert too! Plenty of visa free inter-railing adventures as
well on the world's largest railway network.
Worried about not being ruled by an unlected bureaucracy in a far away land?
We've got that covered as well! Nowhere on the planet has perfected the shuffling
of paper and writing of rules better than New Delhi - what's more India's civil
servants salaries are more than 10x lower than Brussels. Talk about getting more
for less!
British MPs, the whole of Whitehall and even the Royal Family (subject to the
return of the Kohinor) can all be pensioned off at the fast expanding and
internationally renowned Best Exotic Marigold Hotel chain in Jaipur.
Which would free up the Houses of Parliament, Buckingham Palace and much of
Central London to become a permanent Bollywood film set. With more viewers
than Hollywood this is sure to help keep London's tourist economy going - which
within a decade or two will be mostly Indians in any case.
Embrace the 21st Century. Swap Brussels for Delhi. Say Goodbye to Little Europe
and Namaste to Incredible India!
Yours in waiting,
An Immigrant of British Origin,
New Delhi, India
MF: Finally, this is how democracy works in the EU:

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Dr.

Marc Faber Market Commentary July 1, 2016

Discomfort among the Ruling Class, their

The Monthly Market Commentary Report

© Copyright 2016 by Marc Faber and www.gloomboomdoom.com - All rights

Discomfort among the Ruling Class, their

“We are continually faced with a series of great

“Freedom without responsibility is chaos.”

Rod Steiger (In the Heat of

“Liberty means responsibility. That is why most men

“Americans are so enamored of equality that they

“If a nation values anything more than freedom, it

“Americans cannot escape a certain responsibility for

bolster it with our silent acquiescence. If we are

Three years ago, I met Fernando del Pino Y Calvo-Sotelo at a CLSA

In a world subjugated by the invisible tyranny of political correctness and

In a world impressed by power-seekers and power-holders, I remain extremely

In a world where the opinion of the majority enjoys immediate legitimacy, I

In a world awash with conformity, herd behaviour and propaganda, I relish

In a world of hurry, I favour slowness.

In a world where aggressiveness is seen as a virtue, I prefer kindness.

In a world measured by acquaintances and contacts, I know in the end only my

In a world hooked on screens, enslaved to connectedness and addicted to being

In a world of fast talking and noise, I am comfortable with thoughtfulness and

THE FIVE EXPERIMENTS: a short essay

My speech is titled “The Five Experiments”. According to the Webster

The first experiment is universal suffrage and unlimited

Arguably one of the best experiments in liberty in the History of mankind is

The second experiment is Big Government & Welfare

Figure 1: Government Spending as a Percentage of GDP,

Source: The Cato Institute

Figure 2: US Government Spending as a Percentage of GDP, 1792 – 2008

Source: Dan Mitchell; The Cato Institute

of lending to their near bankrupt governments. I wonder whether societal

Figure 3: Government Debt as a Percentage of GDP (IMF Estimates for 2013)

Source: Credit Suisse, IMF

Permanent income taxes – the main source of funding or extractive capacity

Figure 4: US Gross Public Federal Debt as a Percentage of GDP, 1900 – 2015

Afterwards, the always astute politicians found many ways to increase

In any boundless democracy, a Welfare State is simply a symptom of aging.

Politicians promise a nonexistent, fraudulent, completely imaginary security

A gigantic indebtedness is the third experiment. The trend

Figure 5: Global Stock of Debt Outstanding by Type (US$ Trillion, constant

Source: McKinsey & Company

Figure 6: Total Global Credit-Market Debt Owed, 1950 – 2015

The fourth experiment has to do with crazy central

As we have already seen, the history of fiat currencies is quite simple:

Figure 7: Growth of Central Bank Balance Sheets, 1998 – 2015

Subject to a false sense of security which is nothing but an illusion of

The fifth and final experiment is much more profound and

I worry that we might be blindly participating in the decline of our own

Indeed, once morals are sufficiently corrupted by the anesthesia of

“What the people wanted was a government which would provide a

Enough said. Thank you very much.

Fernando del Pino

Source: Ron Griess, www.thechartstore.com

Figure 10: Dow Jones Transportation Average, 1981 - 2016

According to Wolf Richter, “Renaissance Capital’s IPO index tracks US-listed

Figure 11: Apple Inc., 1999 - 2016

governance, an expensive stock, year after year of piling in losses, murky

Figure 12: Tesla, 1999 - 2016

Or take Deutsche Bank (DB) – another beauty managed by some financial

Figure 13: Deutsche Bank, 1999 - 2016

The point I am trying to make is this: Brexit is a blessing in disguise