The Wednesday Letter 197 – 6 December 2023

THIS WEEK: Venezuela v. Guyana; Henry Kissinger’s Legacy; Gold Price; Gaza Beyond Humanity; DEI Mandates; Some College Stats.



Annexation by referendum is not something we see very often. But we may now see it with Venezuelans voting on Sunday to reclaim a huge share of Guyana territory. The land in question has been in dispute for a long time, but the claim gained opportunistic urgency in recent years after Guyana discovered important oil and gas reserves in its waters offshore.

Exxon believes that “the gross recoverable resource for the Stabroek Block is now estimated to be nearly 11 billion oil equivalent barrels”. Venezuela already holds immense oil reserves estimated at over 300 billion barrels. But the game theories of the oil market and the greed of autocrats are such that it cannot easily accept Guyana’s new wealth and power.

Venezuela is massing troops on the border and has a force that is vastly superior to Guyana’s. However, the biggest obstacle to an invasion is the jungle that separates the two countries. A commentator writes that there is not a single road or bridge between the two countries that can accommodate the weight and breadth of an army. In theory, an easier route for Venezuelan forces would be through Brazil, but that would imply going to war with Brazil or getting Brazil’s agreement which is not forthcoming. Brazil’s own army has been placed on high alert in the region.

American leaders are oddly quiet on what could soon be a third hot war in the world, and one in the Western hemisphere. Perhaps they view the entire episode as Maduro theater for purposes of rallying domestic support, in sight of the upcoming presidential “election”.


He was a genius and a towering figure of the 20th century. He was a villain and a war criminal. Now that he is gone, does it really matter? Of course it matters to researchers and historians, and as a model for new diplomats to emulate or not emulate.

The legacy of Henry Kissinger is something that both sides can agree on, which is that he treated foreign policy as an amoral game of strategy. This meant approaching matters with a derivative mindset as a chess player might do. No doubt this was seen as a great thing by Kissinger’s fans but one could argue that it was in fact a problem, and a problem that seeded the crises that we now have to face.

Normalizing relations with China made a lot of sense from a strategic point of view at the time (to contain the Soviet Union), but it was a departure from previous policy that viewed the Chinese Communist Party as immoral and its leadership as irredeemable. Kissinger’s pragmatism and willingness to suspend morality in pursuit of near-term objectives opened the door to Wall Street and other constituencies that raced to do business in China and other places. It was believed that peace would endure if everyone traded and made money.

It worked out well for a few decades. But things look different now. Kissinger is gone, the Soviet Union is gone, but the CCP is still here and is now challenging the US-led world order. That is the same world order that helped elevate China in the first place. So, we’ll have to say that the last chapter on the wisdom of Henry Kissinger’s gamesmanship has not yet been written.


Gold made a brave attempt on Monday to break to the upside. In early Asian trading, it spiked to an all-time high of $2,152 but could not hold its gains. By the New York close, twenty-some hours later, it had retreated back to $2,048, effecting a 7.6% round trip in one day (up 2.8% then down 4.8%).

Gold has no calculable intrinsic value since it has no cash flows that can be discounted to the present. That leaves gold analysts with a nebulous way to determine the right level. Gold tends to do well when the dollar is weak, but not always. It also tends to do well when US budget deficits are expanding or when real interest rates are negative, but not always.

As shown in the table, gold has outperformed stock indices by a wide margin since it hit a low of $252.80 in July 1999, but it has lagged in more recent time periods. For many gold bugs, the relative performances of the past ten years suggest that gold will do better than stocks in the years ahead.

Jim Grant of Grant’s Interest Rate Observer says that the price of gold is the inverse of trust – trust in the future, trust in the economy, trust in governance – and that an investment in gold is “an investment in monetary disorder”. Trust itself is difficult to quantify but can be estimated through opinion polls. And monetary disorder can be evaluated through interest rates and deficits. The most worrying component in this equation is the US federal deficit. Failure to bring it under control will certainly propel gold higher in the years ahead.

READ MORE > > > October interview with Jim Grant.


The horror of the Gaza war continues. Everyone agrees that it is a horror. Hamas and the Palestinian population blame Israel since it is Israeli forces that are directly conducting the bombing and causing the destruction in Gaza. The Israeli government and population blame Hamas because it started the war on October 7th, continues to launch missiles at Israel, and refuses to surrender. Far from surrendering, Hamas leadership has repeated its pledge to wipe out Israel and has warned that “October 7th was just a rehearsal” of what is to come.

See in the chart that nearly all of Gaza’s population has been displaced, according to UN sources. (Not everyone trusts the UN but even half these figures would be indicative).

Appeals to humanity have been futile up to this point. There is at the human level the widely felt revulsion at violence and at the killing of civilians and children, be it intentional or collateral. But there is at the state level a supra-human machinery that is irresistible and whose primary functions are to maintain the authority of the state at home and to restore deterrence abroad. When that authority or deterrence is challenged, the state – any state – reacts with force to regain its credibility. In a domestic case, the state does so methodically through the police and judiciary by prosecuting those who break laws. But when subjected to a foreign attack, the state’s reaction is often much more violent because the threat is greater and because the right to self-defense has broader boundaries.

Although a state is a human construct, it is more than a collection of humans. Its collective drive and consciousness transcend its constituency and can at times be downright inhumane or supra-human, even when leaders profess their compassion, their love of humanity and their wish to save civilian lives.

As in every iteration of a war, the human side has fallen by the wayside for now and the state of Israel has dealt directly with the quasi-state of Hamas and vice-versa. Hamas holds some appeal for both segments of the Palestinian population, the absolutists and the moderates. For the absolutists, Hamas offers messages of purity (religious, nationalist etc.), revenge for the occupation and other grievances, and a promise of total liberation. For the moderates, it represents an end-justifies-the-means calculus in which violent action is a legitimate way to reclaim one’s rights (thus the attempt to recast Hamas terrorists as “freedom fighters”). If both sides, the absolutists and the moderates, cheered the October 7th attack, it is in hope of elevating Hamas to the level of a supra-human machine that can hold its own, if only briefly, against the Israeli state machine. Supra-humanity met with supra-humanity. Both are complex machines well beyond simple humanity, which is why the killing and the promise of more killing continue.


There will be some winners and losers from the ongoing Gaza campus protests. In our view, one clear loser is universalism, the idea that one’s identity (ethnicity, religion, national origin etc.) plays a secondary role in societal relations. Tribalism has been making a comeback for years under the more respectable guise of “identity”. Tribalism on one side begets tribalism on the other side. Unfortunately as we have seen, universalism on one side does not always beget universalism on the other side.

Another loser may be DEI (diversity, equity, inclusion) mandates at some corporations, universities and other institutions. In theory, they were fostering understanding and harmony, but de facto they have stirred up tribalism and confrontation. College administrations for example have demonstrated their sheer incompetence at dealing with the racism and antisemitism that are now sweeping many campuses. We saw this only yesterday with the appalling testimonies before Congress of the presidents of Penn, MIT and Harvard. Their sense of objective reality has been trashed by years of militancy for DEI and other suppressive concepts intended to sabotage universalism. Calls for their resignations will intensify.

As nothing lasts forever, some of these top universities are entering a danger zone that may see their brands severely downgraded. Many wealthy people are withholding donations and many employers are vowing to recruit graduates elsewhere.


The number of Bachelor’s degrees awarded by US colleges grew from 1.24 million in 2000 to 2.07 million in 2021, a 67% increase. Did that segment of the US population grow commensurately? In fact, no. The number of US births was 3.33 million in 1978 (the 2000 graduates) and 3.96 million in 1999 (the 2021 graduates), a mere 19% increase.

What then justifies the much bigger jump in Bachelor’s degrees? One, many more people are attending college than in the past. Two, there were many more foreign students attending US colleges.

If we look only at the native-born US population, the 18-21 age bracket increased from 12.6 million in 1994 to 16.4 million presently (chart below). It is however expected to peak at 17 million in 2027 before starting a long decline. By 2040, there will only be 14.7 million US-born Americans aged 18-21. We could bump these figures by 10 to 20% to account for immigration but the profile will remain the same, give or take a shift of a couple of years.

All in, a net decline of say 1 million applicants will certainly be felt by some colleges. Expect the weaker ones to shut down, or expect that there will be many more foreign-born students to make up the shortfall.

Foreign students are favored by some colleges because a larger percentage of them pay full tuition. Normally, lower demand due to weaker demographics may result in lower tuitions but this is not a normally-functioning free market. Top colleges are not going to lower their tuitions in order to attract more applicants. As of today, their admission rates are 20% or lower.

READ MORE > > > College Graduation Statistics.


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