Power & Market

For those who have followed the background noise of US activities in the Middle East over the past year, since it was last seriously in the news following the disastrous execution by the Biden administration of the long overdue withdrawal from Afghanistan, they will recall a vague haze of reported drone strikes, arms sales, and Israeli assassinations; more recently, they will recall resistance to attempts to end the U.S. military roles in Syria and Yemen, the death of the Iran nuclear deal, and the blocking of earthquake relief. 

China, by contrast, with no military presence in the Middle East at all, just quietly concluded talks between the Iranian and Saudi leadership that resulted in the normalizing of their diplomatic relations. 

Quite the contrast.

And despite complaints by the hawks and Israel-firsters in the Democratic and Republican parties, this deal is good for multiple reasons. First, it will help end the wars in Yemen and Syria where Iran and Saudi Arabia have been among the chief backers of opposite sides of the two proxy conflicts. Together, they’ve gone on over twenty years and killed well over a million people.

Two: it signals that China, who buys most of the oil from the Gulf monarchies these days, is going to start more actively investing political capital in the region. The only party that can be trusted by all sides concerned, as Beijing is ideally situated to mediate invariably arising disputes. There are real costs involved, and it would be good to see someone other than the American taxpayer start footing these bills.

Naturally, Washington acts like anything that happens anywhere without its imprimatur constitutes a threat to national security – much like Ted Cruz recently embarrassed himself by claiming the same about the mere temporary docking of two small Iranian warships in Brazil.

Worth noting as an aside, their permission to dock came despite months of reported pressure by Washington to deny them port and after Lula had already been to Washington to meet with Biden.

Apart from knowing that somewhere at the State Department someone is being paid a six-figure salary to harass Brazilian officials for literal months about a pair of small Iranian vessels taking port in their ostensibly independent and sovereign country, everywhere everyone seems to be taking every opportunity to try to send Washington the message that they have no interest in yet another round of so-called “great power” competition.

A minor, potential downside to the deal being done between Riyadh and Tehran is that it may complicate efforts to normalize Saudi-Israeli relations. But here it should be noted that any potential deal to get that done already looks terrible from the point of view of the average American: Riyadh’s demands include formal American security guarantees, more weapons, and a nuclear program.

Realistically, given the power of the Israel lobby, Washington’s failed policy of wasting American lives and treasure in pursuit of Israeli policy priorities in the Middle East hardly looks likely to be seriously disturbed by China’s mediation of Riyadh and Tehran’s most recent spat. 

If it is going to be disturbed by anything, it will be by the new Israeli government. But that is another story.

In short, China facilitating these talks between Iran and Saudi Arabia was a good thing to see. It will help bring peace and save lives.

Or, as State Department shill Jonathan Panikoff, writing for the Atlantic Council put it:

“It should be a warning to U.S. policymakers: Leave the Middle East and abandon ties with frustrating, even barbarous, but long-standing allies, and you’ll simply be leaving a vacuum for China to fill.”

Fill with what? Peace? To replace four decades of Washington’s war? 

The horror.

Last week, two federal government entities produced financial reports. The Treasury Department issued the latest annual (FY2022) Financial Report of the United States Government (FRUSG), and the Federal Reserve Board of Governors issued its weekly H.4.1 report on the financial condition of the Federal Reserve Banks. These reports deserve closer scrutiny by citizens and taxpayers.

Treasury Secretary Janet Yellen introduced the FRUSG with a traditional “Message from the Secretary of the Treasury.” Yellen’s message laid claim to much broader responsibilities than one might think appropriate for a report on the government’s finances.

Yellen opened with a paragraph describing positive trends in the overall economy, including how “the American economy continued its historically strong recovery from the pandemic amid serious global economic headwinds …” Again, this is a report describing the finances of the federal government, not the economy. The report theoretically secures accountability for government stewardship, or lack thereof, in the dollars it takes from citizens by force in taxes, or those it borrows on the backs of future taxpayers.

Yet Yellen chose to emphasize claims for the federal government’s responsibility for the (growing) overall economy -- not how well it managed the public purse. She went on to identify three specific laws passed by Congress and signed by the President she deemed responsible for strengthening “American” economic growth over the long-term. One of them was the “Inflation Reduction Act,” which she called:

… our nation’s most aggressive action to tackle the climate crisis, while also providing funding for fairer enforcement of our tax code and improved taxpayer service.

Her opening message didn’t identify how the “Inflation Reduction Act” would reduce inflation, however.

More importantly, she didn’t discuss how the laws she advertised mattered for the federal government’s financial performance – the key reason for an annual financial report in the first place.

Following these opening claims, Yellen asserted that the report serves as a “comprehensive view into our nation’s finances and economic outlook.” Consider the possibility of a dangerous extension of authority underneath this “comprehensive view.”

The report looks not at our federal government’s finances, but at “our nation’s finances and economic outlook.” If Yellen considers financial accountability to include not only accountability for the federal government’s finances, but the finances for all of us, what happens to the nature of private property? How about popular sovereignty?

Yellen then provided some brief (and selective) observations on results in the report, including “a decrease in the federal budget deficit.” Unfortunately, this decrease was to a deficit of $1.4 trillion, a still-negative-result and a rate of deterioration in government’s financial position more than 50% worse than the three years before the arrival of COVID and associated government spending responses.

And while focusing on the budget deficit, Yellen chose not to report on the more-economically-meaningful result in the accrual accounting measure called the “net operating cost.”

Take a look at the summary chart below, from p. 3 of the 250+ page report, showing the cash-accounting-based “budget deficit” and the accrual-accounting-based “net operating cost” over the last five fiscal years.

The trend in the red bars (the budget deficit) is much easier to see than the trend in in the white bars (the net operating cost). But the net operating cost trend is distinctly unfavorable, on closer inspection.

In closing her introductory message, Yellen repeated an alarmingly broad claim of responsibility for the scope of the federal government’s accountability:

It is my duty and pleasure to present the Fiscal Year 2022 Report to the American people, which demonstrates the government’s steadfast commitment to accountability and transparency in managing the nation’s finances.

The government’s (possessive “s”) “steadfast commitment” apparently relates to its role in managing the nation’s finances – not only the federal government’s finances. And an alarmingly possessive “s” continues to appear in another context later in the latest annual report.

On p. 65, in the financial statements section, the report includes an overall balance sheet for the federal government. Assets fell short of reported liabilities by about $30 trillion in FY 2021. In the latest fiscal year, that shortfall mushroomed to $34 trillion -- a $4 trillion deterioration far in excess of the budget deficit strategically emphasized by Yellen in her opening message.

Introducing the unbalanced balance sheet, the report delivers (on p. 55) the following comforting words:

There are, however, other significant resources available to the government that extend beyond the assets presented in these Balance Sheets. Those resources include stewardship PP&E in addition to the government’s sovereign powers to tax and set monetary policy.

The government should be OK, the implication goes, despite the picture in the Balance Sheets, given the government’s “sovereign powers to tax, and to set monetary policy.” The government can take away the money of the people, or inflate the value of their money away.

This report theoretically secures financial accountability of the government to We The People – the real sovereign, in our United States. Yet the government claims to possess the sovereign power to tax the People to assuage any concern for its unbalanced balance sheet.

Yes, our government has the power to tax. But does it possess, as an entity reporting to We The People, the sovereign power to do so? Isn’t our nation grounded in popular sovereignty? Do we have to bend and bow to our Sovereign?

And speaking of the “sovereign” power to set monetary policy, what about the other report that came out last week – the Federal Reserve Board’s weekly H.4.1 report on the financial condition of the Federal Reserve Banks?

A longer story, but in a single week, we had a $3 billion increase in a curious negative liability called “earning remittances due to the U.S. Treasury.” Granted, it’s only one week, but that’s a big chunk of change on an annualized basis. These are effectively financial losses in the Federal Reserve Banks whose financial statements are not consolidated in the Federal Government’s overall financial statements.

More to read, and report on, in the days ahead.

The title might be misleading at first, but there is a good reason for that. To understand the needs and opportunities for the contemporary Right, we first need to understand what got the Left into power at first.

Enter Che Guevara, or more exactly, enter Ernesto Guevara de la Serna.

For anyone in either the free-market or the classical conservative sphere, the travel log of his motorcycle trip around Latin America should be a required reading. Not because it is an historical account of the radicalization of one man, who from well-educated Argentinian bourgeois doctor went to terrorist, revolutionary and guerrilla leader, but because it shows the seeds of how a simple man with ideas (albeit in his case, the worst ones) can become an archetype, a religious icon for a set of beliefs.

Even for someone like Murray Rothbard himself, Che Guevara was someone worth of interest, to the point of writing a highly critical but yet prophetic obituary for him, and Rothbard, of course, was right, because Che Guevara has probably become the most well-known political figure in recent Latin American history, and outside of the developed West, that is, the US-led Anglosphere and Western Europe, his face and his name have become synonymous with armed struggle, with guerrilla warfare, with an utopian socialist ideal that knows no limits nor boundaries.

His death at the hands of the Bolivian Army, helped by the CIA, in a failed attempt to spark an agrarian Marxist revolution in the Andean Altiplano, only contributed more to his already legendary status among those who oppose the ideas of freedom and civilization.

In practice, his death made him a martyr of the Left, a religious symbol of a revolution that never came but is always presented as the gospel of egalitarianism. Say what you want about Che Guevara, say he was a killer and a terrorist, and you will be right. But that doesn't take away the fact that Che was ready to die for his ideas, and in fact did so.

The Right, neither conservative nor libertarian, doesn't have a single person who has gone to such extents. We don't have martyrs, and our beliefs are not religious. We may think of the self-immolating acts committed by the likes of Alex Jones or Kanye West as martyrdom for our causes, like free speech, but they are nothing but counterproductive folk activism.

In fact, our beliefs, are quite the opposite to a religious fanatism, for they are rooted in the reasonable analysis of history, nature and society, and as such, the results of our ideas, even if adequate on a long term, are not easy to sell to high-time preference masses, who have become used to receive subsidies from governments and have internalized the propaganda created by the corporate-managerial class that works in tandem with policy-makers.

Our society is deadlocked between an individual struggle for freedom and an organized struggle for power, and our times are stranger than ever, for they represent what Francis Fukuyama still insists is the End of History, but look closer to the civilization end stage described by Oswald Spengler in his Decline of the West magnum opus.

The problem is that if we take either Fukuyama's or Spengler's words for granted, we're still left without some key elements to understand the mechanics of our age: liberal democracy is indeed the dominant system all around the world, but it is not liberal (for it is not generous, as defined by Erik von Kuehnelt-Leddihn, and because it creates false, unstable prosperity out of heavy taxation, inorganic monetary emission and general government intervention of the economy), nor it is democratic (for it allows everyone to vote, no matter who or what "the People" is or is intended to be, and reserves power only for an unelected managerial class.)

If this account of facts is remindful of James Burnham's ideas, it is because he, like Spengler, identified elements of our current collapse, and tried to predict its future by equating the imminent managerialism of the West with Soviet Stalinism and Italian fascism, and in many senses, Burnham was right, and Western managerialism has indeed become something akin to fascism, although without the nationalism, as Lew Rockwell has repeatedly warned us.

But where does that leave us and how is Che Guevara connected to all of this?

Simple: for Burnham, as well as for Spengler, as theorists of Western collapse, the system that would be in place in the endgame of civilization would depend on strongmen like Cecil Rhodes to work smoothly, for they, as the Great Men in History described by Thomas Carlyle, would be the only ones able to take the reins of power to direct society.

This mention of Cecil Rhodes is not random, because he could probably be considered the best example of how a Great Man idea must be compensated with a sound understanding of historical processes, and because Rhodes, like Che Guevara, was strongman, a tactician and a born leader. In Hans-Hermann Hoppe's words, he was a natural elite.

From an English boy with poor health, the son of an Anglican priest, he became a mining magnate and then an important politician in South Africa. His talent for business allowed to thrive and prosper, and his short stay in Oxford University shaped his worldview into one of British dominance and influence.

In the same fashion as other strongmen before him, Rhodes was elevated into the highest prestige in his last years and after his death, with the British colonies he helped to acquire getting named after him (not unlike Bolivia being named after Simón Bolívar), with his South African estate becoming the campus for the University of Cape Town, and with his large fortune left to fund the Oxford scholarship named in his honor, which has helped educated thousands of politicians and enterprise heads from all around the Anglosphere, with the original intent of shaping them to think in the same way Rhodes himself thought about a British-dominated world.

But his legacy hasn't prospered as much as the almost religious veneration Che Guevara has acquired, for the idea of Rhodes, the imperial businessman and politician, once respected as an ideal of the British Empire, has now become anathema even in the very institution he attended and donated his fortune to, for the gospel of egalitarianism cannot allow the veneration of natural elites, in their own times and contexts.

Che Guevara, on the other side, by living fast and dying young, by focusing and sacrificing himself to his ideas, created a myth around and about himself, a myth that men like Cecil Rhodes could have never even achieved.

And now, in our Populist age, where political and business leaders emerge out of the polarization of ideas and beliefs, where strongmen and magnates like Ron DeSantis and Elon Musk can lead thousands of supporters and yet still have troubles to hold or exercise power in their own spheres of influence, the question remains: what are we missing that the Left does have?

We may not realize it, but the Left is currently lacking this key element: they don't have natural elites, they don't have caudillos, they don't have true leaders.

In their inflation of their egos, they have elevated the likes of Klaus Schwab and Samuel Bankman-Fried into their demigods, and when the societal collapse they have caused themselves may finally come, they won't be able to prevent it or to mitigate it.

But here is where and when our duty becomes clear: if the Left is a fanatic religious movement focused on enforcing egalitarianism, and if the Left has had its martyrs like Che Guevara, then our fight, just as Rothbard said, must also be a religious crusade, one for the defense of freedom and civilization.

But to fight such a fight you don't only need fighters, you need leaders, tacticians, strategists. Not everyone can be one, because our natural differences make us spontaneously inclined to different activities and positions in life, but extreme circumstances do create extreme leaders.

Ernesto Guevara did not become El Che from day to night, he was transformed by his trip around Latin American, radicalized by the poor living conditions of his fellow men, and engaged by the common identity of a single continent from the Rio Grande to Patagonia. It just happens he took to wrong path and he fought for the wrong ideas, and instead of prosperity to the masses, the only things he brought were death and misery, in Cuba, in Angola, and in Bolivia.

His face, now a symbol, still represents carnage and poverty wrapped around an utopian ideal, but ultimately proves the point of this essay: Che was, and still is, a symbol.

We, in the Right, cannot take him for our side, because it would be incoherent and counterproductive, but we must understand what made him as such. Che emerged under the most unlikely conditions and circumstances. Our Che will probably emerge from the most unlikely of the places as well.

Because if one thing is true, that our conflict with the left is indeed a religious fight against a fanatic progressive dogma, then we will also need leaders and martyrs, just like Che was for the Left in the past.

We need a Che Guevara of our own.

The progressive Washington State Supreme Court has issued a ruling that effectively gives black plaintiffs a racial advantage in lawsuits against whites.

I have called opposing litigants and counsel confrontational and combative in the past, because in those cases, they were. Race had nothing to do with it — most of those combative people were white!

But in a truly bizarre ruling, the Washington State Supreme Court has unanimously ruled that it is presumptively racist to characterize litigants as “combative” or “confrontational,” if the litigants happen to be black. Based on this strange conclusion, it ruled that a $9,000 verdict for a black plaintiff was likely inadequate, and had to be overturned at the plaintiff’s request, unless the white woman who was sued could somehow prove the judgment would not have been larger absent its counsel calling the black plaintiff combative. It also ruled by a 7-to-2 vote that it was presumptively racist to point out that three witnesses all used the exact same phrase, as if they were coached, suggesting collusion, because the witnesses happened to be black.

Lawyer Ted Frank calls it an example of “a state Supreme Court applying critical race theory for the purpose of discriminating against whites in civil litigation” and how “pseudoscientific nonsense is infecting our institutions.” The ruling does indeed rely on Critical Race Theory books, such as “Racial Microaggressions: Using Critical Race Theory to Respond to Everyday Racism,” and critical race theorists, such as a founder of Critical Race Theory, Derrick Bell. The ruling also contains all sorts of bizarre unnecessary claims unrelated to its holding, like suggesting that welfare fraud doesn’t exist (it routinely occurs) and that its existence is just a racist trope invented by Republicans.

The case involved a black woman asking for a new trial because of opposing counsel’s successful attack on her credibility and calling her “combative” in cross-examination. The black woman sued for $3.5 million after a white motorist had a rear-end collision with her. Video showed the black motorist was faking the extent of her injuries. After defense counsel called into question her credibility, based on the video, the jury awarded the black woman only $9200.

In response to the request for a new trial, the trial judge did what trial courts would do in most of the country in this situation: it refused to do so. The Washington State Supreme Court reversed that ruling, saying that the burden was on the defendant — a white woman — to prove the judgment was not affected by racism. If the white woman can’t prove that, the plaintiff can have a new trial, and sue her all over again. The black plaintiff had sued for a whopping $3.5 million after her car was hit from behind in a car accident. The jury awarded her $9,000, which the black plaintiff said was due to racism. But it is rare for juries to award $3.5 million for a traffic accident. $9000 is a much more typical amount for a motorist to collect.

By allowing jury verdicts to be overturned based on speculative claims of racism, this ruling will result in more extortionate settlements. This ruling will bully some white litigants into not criticizing inappropriate behavior by black litigants and lawyers, and will bully litigants into not vigorously challenging questionable claims made by black litigants and lawyers. Thus, it undermines due process.

As Ted Frank observes, the ruling effectively gives black lawyers and witnesses an advantage. He says that if he were a Washington plaintiff’s “lawyer in state court, I’d be sure that my critical expert witness was Black. Free roll! Either I win, or [I argue that the opposing side’s] “rebuttal of the expert was a microaggression of some sort and I get a new trial — or threaten one, to induce better settlement up front.”

The Washington Supreme Court’s ruling was issued on October 20 in a case known as Henderson v. Thompson. It reinforces an earlier ruling overturning a conviction because of a criminal’s race, in State v. Sum. In that June 2022 ruling, state supreme court overturned a man’s conviction for lying to police, because he is non-white. If he were white, his conviction for making a false statement would have been upheld, because there was no dispute that he lied, and the questions he was asked by a police officer were typical attempts to gather information.

But the court ruled that the police officer’s questions to him effectively detained him, because his non-white race, in the court’s view, made the cop’s questions (such as what his name was) more coercive to him than if he were white. It ruled that the criminal was detained by these questions, regardless of whether he felt detained. The defendant in that case, Palla Sum, was not black, but rather an “Asian/Pacific Islander,” a racial group that is not arrested or incarcerated at a higher rate than white people.

By making it harder to question people of color about crimes, that Washington Supreme Court ruling made it harder to solve crimes in communities of color, such as predominantly-black areas. Murders are less likely to be solved in predominantly-black areas than predominantly white areas, fueling a much higher crime rate. And the victims of this high crime rate are disproportionately black, because most crime is committed against people of the perpetrator’s own race.

The Washington Supreme Court’s more recent decision, in Henderson v. Thompson, violates the equal protection clause of the Constitution by giving black litigants an unjustified advantage. The courts are bound by the equal protection clause, as the Supreme Court has made clear in many cases such as Strauder v. West Virginia (1880). Race-based relief violates the equal protection clause, if there is not a “strong basis in evidence” that there is racial discrimination to remedy, as the Supreme Court has made clear in decisions such as Shaw v. Hunt (1996). In the Henderson case, there was only baseless speculation that the verdict was tainted by racism, and the actual motive of the Washington Supreme Court was likely to stack the deck in favor of black litigants, as a way of compensating for societal discrimination — something the U.S. Supreme Court’s Croson decision says is not a valid justification for using race. If a government official has the wrong “purpose” for taking race-based action in favor of minorities, that taints the action, even if it would otherwise be constitutional, under the Supreme Court’s decision in Shaw v. Hunt, 517 U.S. 899, 908 n.4, 910 (1996).

The desire for such unconstitutional compensatory discrimination is explicitly stated in works by Critical Race Theorists. The “key concept” in the book How to Be an Antiracist is that discrimination against whites is the only way to achieve equality: “The only remedy to past discrimination is present discrimination. The only remedy to present discrimination is future discrimination,” says that book, a New York Times bestseller. That book is a “comprehensive introduction to critical race theory,” notes the leading progressive media organ Slate. Its author, Ibram Kendi, says he was “inspired by critical race theory,” and he has been described as a leading “critical race theorist.” Kendi said that he cannot “imagine a pathway to” his teachings “that does not engage CRT.”

However, even if the state supreme court’s decision violates the Constitution, that does not mean it will be corrected by the U.S. Supreme Court anytime soon. To obtain review from the U.S. Supreme Court, a litigant must file a petition for certiorari with the U.S. Supreme Court, and the Supreme Court must then grant the petition to hear the case. The U.S. Supreme Court turns down 99% of all cert. petitions without comment. It does not hear appeals of even most erroneous lower court decisions, and it tends to hear appeals only when there is a split among the lower courts, and not even in most such cases. It is generally “not a court of error correction,” and it can take decades before the U.S. Supreme Court gets around to abrogating a lower court’s unconstitutional doctrine.