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After years spent toiling as an activist against the tide of Czech politics, Vít Jedlička concluded that it would be easier to build a libertarian nation from scratch somewhere else. In April 2015, he declared that a new country called the Free Republic of Liberland would be founded on unclaimed land on the Danube River.

Legal scholars Harry Hobbs and George Williams reject the prevailing perspective that Liberland and other similar initiatives are “mere oddities” that are “more suited to humour than serious study.” The status of micronations under international law and their prospects in the years ahead are the focus of Hobbs and Williams’s book Micronations and the Search for Sovereignty, published in 2022 by Cambridge University Press.

Micronations and the Search for Sovereignty is the first comprehensive book-length academic treatment of micronations. The challenge of defining a micronation speaks to why the topic has garnered limited scholarly interest. The lack of a universally accepted legal definition of a state leaves upstart entities like micronations with an ambiguous legal status.

The book provides a coherent definition of micronations that fits within the current realities of international law. The authors consider micronations to be state-like entities that fall short of statehood but can be placed on a “statehood spectrum.” The central feature of micronations is that they “express a claim of sovereignty despite the absence of any basis in domestic and international law for that claim or for their existence.” Micronations declare themselves nations. They “perform and mimic acts of sovereignty” by, for example, defining citizenship rules, writing constitutions, and printing currencies. They “adopt many of the protocols of nations,” such as deploying diplomats around the world.

Using this criteria, Hobbs and Williams identify about 135 territorial micronations that have operated throughout history, albeit in widely varying form and function. These do not include virtual or simulated micronations, which are generally beyond the scope of the book’s inquiry.

Common motivations for launching a micronation help explain why libertarianism is at the heart of the global micronationalism story. The primary motivation is frustration with state authority. Although libertarians are hardly the only political faction with grievances over taxes and regulation, statist trends throughout the West have led influential libertarians to conclude that conventional political engagement is unlikely to yield sufficient progress in downsizing government. Starting a new nation is a natural extension of the principle of the libertarian exit. Libertarian billionaires such as Peter Thiel have devoted not only financial resources to micronations, but also the skill and capabilities needed to promote them through tourism, attention-seeking stunts, and acts of resistance. Libertarian civil-society groups around the world are advocating for the expansion of diplomatic ties with micronations.

The authors’ analysis leads them to mixed but mostly pessimistic forecasts for micronations. On the one hand, they argue that the “future of micronationalism is bright” because even the mixed success of micronations to date will continue to inspire further activity. These efforts are bolstered by appeals for legitimacy that raise compelling questions about international legal personality. Technological advances are turning floating autonomous sea colonies into a more realistic prospect, yet the status of artificial structures existing outside national jurisdictions remains unresolved. Micronationalist ambitions also add another facet to the overarching international law question, unsettled in the International Court of Justice and other venues, of when precisely secession is legal. The persistence of micronations in litigating these types of issues, Hobbs and Williams maintain, forces “renewed consideration as to why some political communities are accepted as states, and others are not.”

Ultimately, however, Hobbs and Williams regard micronations’ quest for sovereignty and statehood as an “impossible dream.” They point to the ways states tend to respond to micronationalist ambitions. Fearful that micronations will encourage secessionist challenges, states routinely seek to “decisively quell incipient challengers” without fear of sanction by international organizations and other nation-states. For this reason, no micronation to date has successfully transitioned into a recognized state. These ongoing attempts Hobbs and Williams assess are “remote.”

Although precedent supports the authors’ conclusions, Hobbs and Williams might have foreseen a wider array of scenarios had they given more consideration to the revisionary potential of United States statecraft. In an American-led world order, US policy has the potential to shift international norms unilaterally. US recognition of micronations is highly unlikely in contexts where such a step would conflict with the foreign policy of powerful US allies. But in its traditional spheres of influence, the US may have a freer hand to legitimize micronations in the context of different legal regimes and multilateral relations.

Consider autonomous model cities and special economic zones, which enjoy autonomy but remain under the jurisdiction of states. Hobbs and Williams see little prospect for these entities transforming into micronations because their backers “are not interested in international legal personality but in commerce.” Hobbs and Williams cite as a case study Honduras’s Zones for Employment and Economic Development (ZEDEs). The Honduran ZEDEs’ disproportionately libertarian investors, the authors predict, would be satisfied with the framework negotiated by the Honduran National Congress in 2013, in which investing companies oversee tax regimes and domestic services while remaining subject to Honduras’s constitution and the country’s foreign policy. Statehood, the authors argue, is not only unnecessary but could distract from the “primary goal” of making money.

However, Honduras’s decision to repeal the ZEDE framework shows how the tenuous legal status of special economic zones can invite US concern. Threats by Honduras’s far-leftist Castro administration to expropriate American investments in Próspera and other ZEDEs have drawn notice in Washington. Letters by senators on the Foreign Relations Committee as well as the State Department’s Investment Climate Statements argue that a Honduran expropriation of US investments would violate the Dominican Republic–Central America–United States Free Trade Agreement and the US-Honduras bilateral investment treaty.

US investors in Próspera are not currently pushing for independence from Honduras. Likelier responses by Washington would involve tamer measures aimed at withdrawing US and International Monetary Fund aid to Honduras. Yet with tens of millions of dollars in foreign investment at stake, a hard left turn in Honduran politics and insufficient remedies through international arbitration institutions could push Próspera to contemplate the micronation route over time.

US recognition of micronations could be destabilizing, but findings in Micronations and the Search for Sovereignty lend credence to moves in this direction. Failures by the international community to recognize demands for national sovereignty have led secessionist movements around the world to adopt violent strategies of resistance, resulting in civil wars, refugee crises, and the proliferation of black markets. Micronations are taking a different approach. While challenging traditional concepts of statehood, they do so, in the authors’ words, “largely by engaging in the rituals of statehood rather than contesting them.” These strategic choices may reflect micronationalists’ philosophical commitments, but micronationalists’ rationale may weaken if international actors persist in denying even micronations’ most benign aspirations.

Looking beyond the “aw, neat, what a great person” façade of effective altruism, one clearly finds a level of narcissistic cynicism and a drive to the permanent power that financial immortality affords that is only matched by the amount of funds being dispersed.

The gifts offered by today’s billionaires—the Silicon Valley crowd, et al.—sound great (-ish—very -ish), but to discount the obvious underlying reason is to fail to grasp the insidious nature of their beneficence.

In the past, the rich tended to fund things—museums, schools, libraries, parks—when they gave their money away. These things were meant to accomplish two goals: to keep the benefactors’ names alive so future generations would “look them up” and to generally uplift society. Museums were given to the masses not as a monolithic lump, but as discrete individuals who could choose—except for fourth graders on field trips—to take advantage of them or not.

But effective altruism eschews such methods, focusing on causes and organizations—organizations that can be controlled indefinitely by controlling the flow of funds—in an effort to exert current and future societal control. Joining the Silicon Valley obsession with physical immortality is now the idea of financial—and therefore sociopolitical—immortality.

The creation of philanthropic LLCs to divvy up tech and other zillionaire dollars perpetuates the “lives” of donors by allowing them to forever control politics, policies, and culture. This control also becomes a form of eternal nepotism, as it has the side benefit of really, really helping donors’ individual descendants keep at the center of power and finance (the “Smith Initiative” will always hire a Smith and will always have a Smith on its board).

A key aspect of this “maltruism” is its ability to extend control through soft-sounding enterprises. How can something with “open” and “democracy” and “save” in its name—and a nonpartisan, nonprofit entity to boot—be anything but good?

As to philanthropic LLCs, they are seemingly the preferred way of doing the charity business of our current (and, they hope, forever) overlords. In a nutshell, they are not traditional charities, but organizations that can mix for-profit and nonprofit activities under the same umbrella. For example, in theory, by making money investing in x, you can give more money to y.

Even better, you can decide whether or not to leave your profits in the “charity,” enjoy certain (admittedly limited) tax benefits, and—unlike regular charities—you don’t really have to tell anyone where the money comes from or, more importantly, where it is going.

Better still, you can do something charities really can’t: play politics. Such LLCs are legally entitled to engage in political activities like advocacy, lobbying, and, in the case of Silicon Valley’s own Chan Zuckerberg Initiative (CZI), significantly impact present-day elections (a very big more better).

A guilt-ridden-but-not-THAT-guilt-ridden plutocrat can get helpful advice on how to create LLCs from many sources, including the California-based Milken Institute (yes, also ironically, THAT Michael Milken). The handy fact sheet notes that “(A)n LLC structure provides not only flexibility but also greater integration of various social change efforts to expedite progress . . . LLCs hybridize for-profit and charitable activities, allowing philanthropists to generate financial and social returns.” All are advantages very much tailored to accomplish the goal of building a for-profit charity.

The donors who control where the money goes are insulated from any internal or external criticism by their ability to turn off the spigot whenever they wish. In other words, don’t irk, for example, the Gates Foundation because they are going to be around forever, and your grandkid may need a job someday.

The politics of this putative philanthropy are brazened. If one looks at those who have taken the Giving Pledge, one sees a list that could easily be mistaken for a list of the owners of the private planes that jet to Davos for the annual World Economic Forum (WEF) meeting.

The WEF, it seems, could be called the hub of the many rich and important spokes in the wheel that have fundamentally changed international politics in the past twenty years. From the Great Reset pandemic response to emphasizing the growth of the social economy, the influence of the WEF and the people who support it cannot be underestimated. (Note—10 percent of the economy of the European Union is now classified as social economy or the third sector, so guess what types of entities, what stakeholders, make up the social economy.)

It should also be noted that personal direct campaign donations are also part of the overall program of sociopolitical power; though in the United States, the 537 people elected by the public to federal office are seen as mere speed bumps to be gotten around or avoided entirely (hence the growth of the regulatory and deep state and their intimate ties to the tech community).

Certain government exceptions are made, though. In the case of the sandy nations of the Middle East, the government’s money is actually theirs. And in the case of poorer leaders, all they have to do is bow down to hedge fund and NGO-driven Environmental, Social, and Governance (ESG) financial processes like Sri Lanka did, and then they get to sit at the big kids’ table.

In fact, the web that weaves from WEF to NGO to foundations to media to government to consultants to stakeholders to experts to the financial world to politics and back to effective altruism is both unmistakable and intentional.

Some of the moneyed meddlers do not exactly fit the above mold. George Soros, at least, is extremely up-front about using his money to buy influence, destroy the American justice system, corrupt the media, and, in general, attempt to bring down Western civilization as we know it. Soros made his money in finance, including his infamous shorting of the pound in 1992 which netted him $1 billion in a day or so, even if it came at the expense of the British people—and here’s his website.

Sam Bankman-Fried (SBF) also practiced effective altruism; of course, he did it with stolen money, but he says he meant well. Bankman-Fried, however, could be seen as a mirror universe of a Soros or a Zuckerberg or Bezos or eBay’s founder Pierre Omidyar or Reed Hastings and his wife, what’s her name, all of whom really began buying global power—sorry, donating to worthy causes—only after they had actually made a ton of real money.

SBF clearly knew early on that he was going to need legal, social, political (the amount of money handed over to Democrat/woke causes is enough to make eyes water), and media protection at some point . . . and he clearly got it as he is now sitting in his (also very politically/Silicon Valley–connected) parent’s multimillion-dollar home in Palo Alto instead of rotting in a rat infested, nonvegan Bahamian jail. (It’s also clearly why he was arrested the day before he was scheduled to testify in front of Congress—nobody “on the inside” wanted that to happen, no way no sirree.)

It is the future that is at the center of this issue. The organizations and people involved talk about impact investing, data-driven giving, and using evidence and reason to plan their permanent programs.

They don’t talk about giving for today—they talk about investing in the future.

Because they don’t think it is our future. They know it is already theirs.

If one cares to look, it’s not difficult to find numerous columns written for mainstream news outlets announcing that the US Constitution has failed. This ought to raise the question of “failed to do what?” The answer depends largely on the one claiming the constitution has failed. On the Left, claims of constitutional failure generally revolve around the idea that the constitution doesn’t empower the federal government enough. For example, Chris Edelson of the American Constitutional Society believes the constitution has failed because the US government hasn’t done enough about global warming and racial injustice. Ryan Cooper at The Week says the constitution is a failure because of gerrymandering and not enough “democracy.” On the other hand, many classical liberals (i.e., libertarians) have declared the constitution a failure because it has failed to restrain the US government from violating human rights such as life and property.

We see there are many standards we might employ to show that the constitution has failed, depending on what metric we wish to use. But let’s ask what the politicians pushing the new constitution of 1787—i.e., the “Federalists”—promised as the benefits of the new constitution. They promised three things: that the constitution would ensure the government would respect the freedoms of the citizenry, that it would provide a means of keeping the peace among the member states, and that it would provide a strong military defense.

Sadly, the constitution long ago failed on two counts out of three. A mere 73 years after its ratification, the constitution failed to prevent a bloody civil war. The Federalists had promised that wouldn’t happen. When it comes to the matter of freedom, of course, the record is even worse, and the constitution has been used to justify countless assaults on liberty from Japanese internment to unleashing armies of spies against the American people.

The only area in which the constitution has “succeeded” has been in growing the size of the central government in Washington. The enormous state that has grown out of the constitution of 1787 has indeed rendered invasion by foreign powers virtually impossible. But this has been done at the cost of numerous elective wars, trillions in waste, and an out-of-control national security state.

Yet, nostalgic appeals to the alleged greatness of the constitution—and the brilliance of the so-called “Founding Fathers”—continue to be a fixture in defending the status quo while granting legitimacy to the regime.  Any real challenge to federal power, however, will require we stop clinging emotionally to this failed legal document that has secured neither peace nor freedom. 

The Constitution Does Not Protect Freedom

When it comes to the Constitution’s ability to restrain government power, it is apparent that the text of the document is insufficient to counter efforts to empower the federal government rather than limit it. We need only look around us to see how the federal government taxes, regulates, spies, sues, and imprisons countless Americans with federal powers that are in no way authorized in the constitution itself.

It is also apparent that the public and their representatives are uninterested in limiting federal power. I claim no novelty in pointing this out, of course. More astute observers recognized the impotence and failure of the US Constitution decades ago. As Murray Rothbard wrote in 1961:

From any libertarian, or even conservative, point of view, it has failed and failed abysmally; for let us never forget that every one of the despotic incursions on man’s rights in this century, before, during and after the New Deal, have received the official stamp of Constitutional blessing.

And before Rothbard, there was Lysander Spooner, who noted:

the Constitution is no such instrument as it has generally been assumed to be; but that by false interpretations, and naked usurpations, the government has been made in practice a very widely, and almost wholly, different thing from what the Constitution itself purports to authorize….But whether the Constitution really be one thing, or another, this much is certain—that it has either authorized such a government as we have had, or has been powerless to prevent it. In either case, it is unfit to exist.

In our modern day and age, anything that the regime’s federal judges decide is “constitutional” is, in fact, de facto constitutional. In other words, appealing to the text of the Constitution to claim illegitimacy for the latest government power grab is pointless and irrelevant to the task of actually limiting the power of the state. 

Everything the federal government wishes to do is ultimately “constitutional.” So long as the public tolerates it. Public opinion is the only true restraint.

The Constitution Failed to Prevent Civil War

Moreover, the US constitution didn’t even last three generations before a civil war broke out. If the constitution were ever nearly as magnificent as its defenders claim, the US Civil War would never have occurred at all. Many defenders of the current constitution prefer to distract from this fact by attempting to dwell on the blame game: “oh, if those dastardly guys on the other side hadn’t done those bad things, there would have been no war!”

Who is to blame, however, is irrelevant to the fact that the constitution failed to provide for a peaceful way out of the conflict that boiled over by 1860. That is, the constitution’s failure can be seen in both the fact that the secessionist states concluded exit was the only option, and in the fact that the unionists felt a bloody war of conquest was constitutionally acceptable. 

Decades earlier, the constitution had been pushed on the masses by the Federalists with the promise that the constitution would manage competing interests and conflicts in such a way that the new nation would be able to overcome such differences. This is part of James Madison’s argument in Federalist No. 51. He insists that even assuming self-serving motives among various groups—i.e., assuming men are not “angels”—the federal government would somehow be balanced against itself to prevent the need or impetus for civil wars.

Instead, by 1861 the United States fit the definition of a violent failed state. Much of the country rejected the authority of the central government which could no longer claim to exercise authority over all of the nation’s regions and borders. The central government’s response was to rely on military force. In this regard, from 1861 to 1865—and arguably throughout Reconstruction—the United States was no different from many of the failed states in similar situations we have seen in Latin America and Africa. We find many cases in these countries in the last century in which separatists rejected rule from the center. This often resulted in civil war and military occupation of the losing side’s territory. When this happens in other countries, we often conclude (correctly) that the country’s constitution has failed. For some reason, when the same thing happens in the United States, we declare the constitution to have been “preserved” and a stunning success. 

As with many other failed states, the crisis in the US was only brought to an end by a bloodbath. The numbers were so large, in fact, that were a similar proportion of the US population to be killed in a war today, it would amount to seven million people. Moreover, as usually occurs in the wake of a conflict of that magnitude, a drastically changed constitution replaced the old one with political institutions that were far more centralized than what had come before. The union was no longer a matter of voluntary membership among states, but was now based on threats of military intervention from the center. 

The Constitution’s Only “Success” Has Been in Increasing State Power

Of course, it is always possible to label the constitution a “success” if we view the constitution primarily as a means of growing the power of the national regime. In this endeavor, the constitution and its supporters have been enormously successful. The seeds of this development were already apparent even in the days of the ratification when the Anti-Federalists greatly feared the national government would overwhelm the member-state governments. Their opposition was strong enough that the Federalists resorted to a number of dirty tricks, as noted by Murray Rothbard:

The Federalists, by use of propaganda, chicanery, fraud, malapportionment of delegates, blackmail threats of secession, and even coercive laws, had managed to sustain enough delegates to defy the wishes of the majority of the American people and create a new Constitution.

The Federalists managed to win the day, although their promises of freedom did not even survive the eighteenth century. Rather, the central government immediately got to work abusing its own powers with vicious attacks on freedom such as the Alien and Sedition acts. By the mid eighteenth century, the nation was on the verge of civil war. The “solution” to this was to have one half of the country invade the other half. 

Yet, we’re told the constitution behind all this has been a wonderful success, the “Founding Fathers” were geniuses, and we must never break up this sacred union by means of “national divorce” or any radical departure from the status quo.

The reality is far more disappointing. 

In recent years, it has become popular in parts of conservative discourse to discuss the “Brazilianization of America,” a reference to the challenges a large country faces in governing an increasingly multicultural “universal nation.” But this weekend, it was the Americanization of Brazilian politics that took center stage as pro-Bolsonaro forces rose up in aggressive protest against the newly inaugurated Lula regime, in a move reminiscent of what played out in Washington on January 6, 2021. The similar challenges facing America and Brazil, including concerns about the state of their democracies, is worthy of exploration, as is the global response to the protest and what that response means for those opposed to the current “neoliberal” international order.

At a time of concerns regarding covid, the policy ambitions of globalist institutions like the World Economic Forum, and the consequences of decades of America-led military involvement (and the immigration waves it inspires), there has been growing coordination between various right-wing political movements around the globe. The result in America has been increased fascination with countries like Victor Orban’s Hungary, right-wing celebrations over the success of Italy’s Giorgia Meloni, and skepticism of figures celebrated on the international stage, like Ukraine’s Volodymyr Zelensky.

Perhaps the American Right has no more direct parallel than the Bolsonaro faction in Brazil.

These similarities are not simply intellectual in nature. Jair Bolsonaro and his sons have become established figures at American conservative events such as the Conservative Political Action Conference (CPAC) and were considered some of the strongest international allies Donald Trump had as president. Olavo de Carvalho, who was referred to in the United States as the “Rush Limbaugh of Brazil” prior to his death last year, was an influential popular philosopher for the Brazilian Right who shared intellectual curiosities (and dinners) with former Trump strategist Steve Bannon. And Gettr, one of the Twitter alternatives favored by the MAGA crowd before Elon Musk’s purchase of Twitter, has even invested in Brazil as a market of particular focus.

Brazil’s 2022 presidential election offered yet another commonality: the controversial election of a corrupt leftist politician following a political campaign marked by heavy, one-sided political censorship.

The recent release of the Twitter Files confirmed what was long obvious: America’s 2020 election was manipulated by a deliberate campaign to hide factual information detrimental to the campaign of Joe Biden. Twitter and other Big Tech companies acted in explicit coordination directed by Joe Biden’s campaign and DC bureaucracies. This possibly influenced the political behavior of voters even before additional concerns about the constitutionality of covid-inspired election law changes, the security of nontraditional voting methods, and general fears about the integrity of voting machines.

In Brazil, the 2022 election was shaped by more explicit and obvious political manipulation. While Bolsonaro, like Trump, had the power of presidential incumbency at the time of the election, Brazilian politics had become shaped by the tension between the elected executive office and the nation’s supreme court, which was dominated by political rivals.

It was the court that vacated previous president Luiz Inácio Lula da Silva’s corruption conviction, allowing him  to run for office. Additionally, in 2019, the Brazilian supreme court granted itself the authority to police “disinformation.” As the New York Times noted last September,

[Supreme Federal Court justice Alexandre de] Moraes has jailed five people without a trial for posts on social media that he said attacked Brazil’s institutions. He has also ordered social networks to remove thousands of posts and videos with little room for appeal. And this year, 10 of the court’s 11 justices sentenced a congressman to nearly nine years in prison for making what they said were threats against them in a livestream.

The power grab by the nation’s highest court, legal experts say, has undermined a key democratic institution in Latin America’s biggest country as voters prepare to pick a president on Oct. 2. Luiz Inácio Lula da Silva, a leftist former president, has led Mr. Bolsonaro in polls for months, while Mr. Bolsonaro has been telling the country, without any evidence, that his rivals are trying to rig the vote. In many cases, Mr. Moraes has acted unilaterally, emboldened by new powers the court granted itself in 2019 that allow it to, in effect, act as an investigator, prosecutor and judge all at once in some cases.

These Supreme Court–led challenges escalated after Bolsonaro and his party vastly exceeded polling expectations in the first round of the presidential election. In order to compensate for an environment of extreme political censorship, creative Bolsonaro-supporting businesses began to promote sales by emphasizing Bolsonaro’s green and yellow party colors and his number, 22.

The justification for these breaks from political norms is familiar to any Trump supporter: they were necessary to combat “misinformation” and the extreme “threat to democracy” that the “fascist” Bolsonaro represented. The result was the same, a close defeat for the Brazilian Right and a collapse in confidence in the nation’s political institutions.

This loss of perceived legitimacy has created an environment in which many view the results of the election as explicitly rigged by bad actors who desire political control. Given the abuses of power documented prior to the election, anyone who categorically rules out all concerns regarding the security of the election is engaging in a reflexive defense of the political status quo, not high-minded critical thought. This does not mean that every criticism of the election process is valid, but concerns about the integrity of elections should be taken seriously if one wants to avoid violence. Brasília, like Washington, failed to do so. The result is Brazil got its own native-dressed shaman.

These concerns, however, are secondary to the clear illiberal nature of the 2022 Brazilian election. If democratic legitimacy is based on the consent of an informed public, America’s 2020 and Brazil’s 2022 elections cannot be considered legitimate. They were clearly manipulated by political agents to achieve specific desired political ends.

The notion that “democracy” is only sacred when it produces the results elites want is nothing new to the Mises Wire. Still, it is worth noting the international response to Brazil’s election and this weekend’s protest as illustrative of the challenges faced by those who desire true national self-determination.

The election of Lula was quickly celebrated by global leaders last October. At a time when global tensions have created new divisions between leaders around the world, the defeat of Bolsonaro was a rare unifying moment of 2022. European leaders hated Bolsonaro’s Trumpian style and his rejection of environmental hysterics. Lula actively campaigned on his relationship with China’s Xi Jinping, a pivot from Bolsonaro’s America-forward preference. To the Biden State Department, the integrity of Brazil’s election was a perfect proxy war for the administration’s own lingering domestic clash with Trump and his supporters.

America’s shift is a key international development shaped by the change in Washington’s administration. A Trump-led White House may have had an interest in assisting Bolsonaro’s political faction. Instead, Washington officials openly cheered the election of the sort of corrupt socialist leader backed by some of Brazil’s most violent criminals.

This weekend’s unorganized rebellion has only further distanced the pro-Bolsonaro factions from international support.

The international disinterest in the plights of political opponents victimized by systemic censorship and the undermining of democratic norms creates real political problems for those seeking to oppose the global order’s prevailing ideology.

While there are plenty of historical examples of South American military coups against leftist nominally elected governments, the reality is that a successful reactionary movement would quickly find itself treated as a pariah state globally. As the Russian invasion of Ukraine has highlighted, some of the most powerful weaponry of the neoliberal order is economic. One can imagine the sanctions that would follow a modern right-wing coup that threatened the policy aims of Washington or Davos.

Too many on the American Right mistakenly clung to the belief that “white hats” in the deep state would save them from a class of elites that despises them. It seems that too many in Brazil placed similar faith in the nation’s military and were also betrayed. More troubling are the real fears that this weekend’s events will justify political crackdowns on opponents, as January 6 did in the United States. American Democrats are proposing extraditing Bolsonaro, who is currently visiting Florida, to Brazil, where he would potentially face charges from his political rival.

Going forward, the Brazilian Right—like its American counterpart—needs to rally behind serious political leaders. Institutions like Mises Brasil and Instituto Rothbard have helped raise a generation of Brazilians equipped with a serious understanding of the dangerous economic and political trends we find ourselves in the midst of.

To take on the neoliberal order, we need a global network of successful, like-minded individuals dedicated to creating a freer world—not the distractions of high–time preference tantrums that do not offer tangible plans for success.

In the words of Jeff Deist:

We win with a focus on the long term, not the short run.

We win by building better elites and better institutions.

We win by going out unapologetically and forcefully into the world.

Legislators have a strange relationship with magic. To achieve that which physically cannot be done, they like to wave magic wands and pretend that it can. Reality puts a limit on political power, a realization that always sits poorly with those in charge of our trillion-dollar bureaucratic machinery.

Senator Elizabeth Warren is a stunning case in point, and she’s had her aim at the magic-seeming world of digital assets like bitcoin for a while. Last month she cosponsored The Digital Asset Anti-Money Laundering Act of 2022 with Roger Marshall which attempts to put those assets under rules that echo the regulatory system that cryptocurrencies were created to escape.

The bill’s purpose is “closing loopholes and bringing the digital asset ecosystem into greater compliance with the anti–money laundering and countering the financing of terrorism (AML/CFT) frameworks governing the greater financial system.”

This turns tens of thousands of node runners, wallet users, or bitcoin holders into licensed money service businesses for running software on their computers. The bill’s text especially rallies against “unhosted” wallets, which are just assets that are not under the custody of a regulated exchange or bank-like entity—that are owned outright instead of being counterparty to a censorable banking contract. There can be no financial privacy in the senator’s world.

Money transmitter entities would be required to perform the sort of identification and counterparty checks that banks submit to, but the bill takes things one step further:

Prohibit financial institutions from using or transacting with digital asset mixers and other anonymity-enhancing technologies and from handling, using, or transacting with digital assets that have been anonymized using these technologies.

An old-world analogy of the absurdity of this is physical cash, where using an ATM and then making a bank deposit is the most rudimentary form of “anonymity enhancing technologies.” If the senators get their way, the kind of privacy that cash permits would be ruled out in the new world of bitcoin: we must see what you’re up to and make sure you’re not spending any funds we disapprove of.    

Reality Reasserts Itself

Never before was a piece of proposed legislation so resolutely defeated by reality. Reality doesn’t go away simply because you label it “money laundering” or tangentially connect it to criminal behavior by the rogue states that ostensibly motived the bill.  

Warren cannot do this for three reasons: Bitcoin doesn’t work the way she thinks. Congress is constitutionally barred from doing it. And because the bitcoin protocol doesn’t care about her magic-wand waving. 

While bitcoin attempts to be money, it doesn’t conform to the physical properties of pieces of paper (or regulated banking institutions) that Warren pretends to understand. Paper dollars are handed over in trade, and bank transfers clear between banks or on the Federal Reserve’s balance sheet; something that has monetary value moves, and we therefore get money transmitter laws to keep tabs on who is moving funds to whom.

On the surface it seems that bitcoin operates in the same way: I have satoshis in a mobile app or a hardware wallet, I press send, and then you have sats in your wallet. Something money-like moved, right?

Wrong. What shifts are the open sesame–like secret words that allow a transaction to be accepted by the tens of thousands of nodes running bitcoin, recognizing that now someone else is in command of the protocol address existing all over the world at the same time. It’s like passing secret notes to the entire world, enciphered by a secret code.

There’s no bank for Warren to lean on for regulatory purposes. What shifts is the protocol-level recognition that someone else now has access to the funds, whereas the funds themselves never move. L0la L33tz writes in Bitcoin Magazine that “non-custodial wallets transmit Bitcoin the currency as much as the key to one’s door moves the house around.”

And words are speech which Congress has long been forbidden from interfering with. The counterintuitive notion of a monetary system that operates without money moving has yet to reach the offices of America’s legislators. Money transmission laws are as unfit to regulate bitcoin as they are regulating the janitors in the Capitol.

Bitcoin doesn’t move, so how can the software that manages one’s balance be subject to money transmitter laws? Warren faces problems on three levels:

You can’t achieve it. Bitcoin was made for attacks like these, attempts to regulate or control it. It is resilient; its ledger and block confirmations are completely unresponsive to any magician’s waving. Last spring, China tried to ban bitcoin mining—a physical process more difficult and obvious than just holding, transacting, or validating bitcoin—in a state much more authoritarian than the US, and they couldn’t do it. A year and a half later, plenty of covert mining operations exist in China, not to mention the exodus of machinery that set up in the US, Canada, Kazakhstan, and Russia. A huge authoritarian crackdown with zero impact on bitcoin.

Good luck subduing the mere transactions and privacy-enhancing methods that people run on their phones and computers.

You’re not allowed to. The First Amendment says that government cannot abridge the freedom of speech, and since Bernstein v. United States in the 1990s, the Supreme Court has said that code is speech. Every aspect of bitcoin is code: The validators running bitcoin is code. The “unhosted” wallets and the mixers the bill laments are code. The mobile apps that allow spending is code. At no point does anything related to bitcoin cease being code. End of discussion.

You’re not supposed to. Money is a neutral entity, a system that exists entirely to facilitate trade between humans. If it performs its role well, some unsavory types are going to use it (cue criminals and cash). When you meddle with it, it performs that function less well, and you harm the rest of society. Senators in a galaxy far, far away have no business interfering with it.

You cannot make words illegal—primarily because they’re nonrivalrous and exist in the human mind, available for anyone to use. When Harry Potter’s enemies in J.K. Rowling’s fantastic world enforce the “Taboo”—an enchantment that lets the Death Eaters punish anyone who utters Voldemort’s name—they do so via the use of magic, a realm that Congress thankfully has not yet uncovered.

Not for lack of trying, as we learned a few weeks ago when Senator Warren tried to regulate the code that people run when they use bitcoin. Central planners always try to plan that which is beyond their understanding—and frequently beyond their capacity.

Good news is that it won’t pass; it’s the sort of Hail Mary marketing tool for which Warren has become quite known. Bad news is that it reflects the mistaken view held by many a legislator and plenty more everyday people.

You can be in favor of bitcoin, oppose it, or be lukewarm or uninterested. What you can’t do is straw man its operation and then try to use government power to magically make it behave the way you want. Ignorance is not a good reason to mistakenly overstep one’s authority.