I’m in Riyadh teaching a grad course this week, so I won’t be in the City of Brotherly Love with my Paradigm peeps. Devastating though that is - and I really miss the boys and my cheesesteaks - join me in watching Jim, Byron, Adam, Dan, Zach, and the rest of the most excellent Paradigm Press crew at RickardsLive.com. Reliable sources have told me Byron is bringing a load of samples, models, and tickers with him. Don’t miss it. Just click this link on Thursday, June 4, at 1:00p.m. ET. 

Now back to today’s edition.

Bernie Sanders is a communist.

That's what half of X posted on Monday, when the senator (Heaven Help Us!) from Vermont announced the American AI Sovereign Wealth Fund Act. The bill would require OpenAI, Anthropic, xAI, and other large AI companies to hand over 50% of their equity to a federally managed fund. The government would take voting shares, install itself on boards, and distribute proceeds to the American people for healthcare, education, and housing.

It’s communist. It’s socialist. Even worse, it’s positively French!

All of this from people who spent 2025 nodding along while the Trump administration took a 10% equity stake in Intel, a 5% stake in Lithium Americas, ownership positions in Vulcan Elements, MP Materials, USA Rare Earth, Westinghouse, ReElement Technologies, xLight, U.S. Steel, and Trilogy Metals. It also extracted substantial revenue shares from Nvidia’s AI-chip exports to China.

Eleven companies. More than $10 billion in taxpayer money. Government seats at corporate tables. Oh, those stocks are up, so it’s good business? Stop it. Those paper profits don’t make a dent in a $40 trillion debt pile.

But sure. Bernie's the communist.

Same, Same, But Different

“Nothing is so permanent as a temporary government program.”

- Milton Friedman

There's a concept in Austrian economics called interventionism. We called it the Ratchet in our five-part Memorial Day series on sound economics.

Interventionism holds that every government program, once started, expands. Every intervention creates a new problem that demands a new intervention. The dial always advances. It never retreats.

What we’re watching right now, from both ends of the political spectrum, is the Ratchet applied to corporate ownership. And it doesn't matter which party is turning the handle.

Sanders frames it as justice. AI was built on humanity's collective knowledge, such as our books, art, code, and conversations. So the public deserves a share of the profit. The argument is tidy and emotionally satisfying. And thanks to Scam Altman stealing the Internet on behalf of ChatGPT, we must begrudge Sanders the point.

The Donald frames it as a security issue. “China controls rare earths. We need chips. We need steel. We need lithium. National survival demands government ownership.”

The argument is tidy and emotionally satisfying. It also completely ignores the fact that governments the world over have a perfect record of destroying the industries they try to save.

Different uniforms. Same result.

Your Government's Stock Portfolio

Specifics matter.

In August 2025, the Commerce Department bought 433 million shares of Intel at $20.47 a share. That's $8.9 billion of your money in a single chipmaker. The stake is non-voting, they said. But two weeks before the deal closed, Trump publicly called for Intel's CEO to resign. Economists compared the administration’s methods to a Mafia-style shakedown. They weren’t wrong.

The Department of Energy took a 5% stake in Lithium Americas, a startup with no revenue that is developing a mine in Nevada. The Defense Department extended a $620 million loan to Vulcan Elements, a private rare earth company, and a $50 million equity stake from Commerce. Pentagon warrants came with the deal.

Then there's Nvidia. Trump's team negotiated a 25% cut of Nvidia's H200 chip sales to China. A quarter every time, straight to Washington. The Wall Street Journal and others described this approach as "state capitalism," that hybrid of socialism and markets in which the government guides private companies from within. To be fair, Lee Kuan Yew used state capitalism to excellent effect when building Singapore from a barren rock into one of the world’s premier financial centers.

White House officials and Trump donors appear to have profited. Stock prices spiked after every government announcement. Trump's son was quietly building a position in a tungsten mining company before the administration declared tungsten a strategic priority and unleashed $1.6 billion in government financing behind it. We covered that one a few weeks ago.

If Bernie Sanders had done any of this, the same X accounts calling him a communist would have called him a communist. But Trump did it, so it's fine. It's patriotism. It's winning.

Limitless Capital, Limitless Control

The argument against Sanders isn’t complicated. The state has no right to seize equity in private companies, regardless of who or what built those companies. “Collective knowledge” is a romantic phrase for "things that exist in the world." Roads exist. Language exists. Mathematics exists. Nobody owes the government half their business because they benefited from human civilization.

That's a solid argument. It's correct. I agree with it.

But the same argument applies, word for word, to the Trump portfolio.

The government has no right to demand equity in Intel because it wants to subsidize chip production. It has no right to take a cut of Nvidia's sales because it controls export licenses. It has no right to install itself on corporate boards and call executives to resign when the relationship sours. National security is a real concern. But "this sector is important" has never been a legitimate basis for state ownership of private enterprise in a free market economy.

Austrian School economist Ludwig von Mises understood this. Every intervention creates distortions that demand more interventions. You don't get to pick and choose which interventions are acceptable based on who's running the White House. The principle either holds or it doesn't.

Former acting White House Chief of Staff Mick Mulvaney said something that should make our guts turn to water: "The government now perceives itself as a source of capital and the markets perceive them as a source of capital — it's not going to stop."

He's right. It won't stop. That's how the Ratchet works.

To put it plainly, the lunatics with the money printer are using their unlimited resources (funny money) to buy shares.

It’s No Bueno!

Kernel (of Truth) Sanders

At least Bernie is honest about what he's doing.

He didn't dress it up as national security or supply chain resilience. He said plainly that he thinks AI wealth belongs to the public and that the government should take it. You can disagree with that, and I do, but at least the argument is in the open.

We can deal with forthcoming socialists.

The Trump approach is harder to argue with because it hides behind flags and threat maps. Nobody wants to be the person who says we shouldn't have domestic chip production. Nobody wants to say China should control our rare earths. So the government buys its way into corporate boardrooms, and half the country applauds because the press release mentioned Beijing.

Norway's sovereign wealth fund, which Sanders cited as a model, is run well. It has strict rules about governance, independence from political interference, and long time horizons. It works because the right kinds of technocrats designed it. They understood politicians must be kept away from the investment decisions.

Do you really think the American government can run a sovereign wealth fund with that kind of discipline? This is a government that took an equity stake in a company after publicly demanding its CEO resign. It’s a government whose officials already profited from the very investments they approved. And we didn’t even get to the nonsense with WTI and the SPX a few weeks ago.

The idea fails for the same reason the Trump portfolio is dangerous: the people making the decisions aren’t neutral. They have donors, enemies, campaign promises, and, of course, family businesses to run. When the government owns a piece of every major industry, those interests don't stay separate for long.

Wrap Up

Sanders is wrong. But his critics are hypocrites.

The correct response to the American AI Sovereign Wealth Fund Act is the same response that should’ve greeted the Trump administration's $10 billion stock portfolio: the government shouldn’t own private companies. Not for AI. Not for chips. Not for rare earths. Not for steel. Or for any reason dressed up in the language of national interest or economic justice.

The Ratchet doesn’t care which party holds the wrench. It clicks forward under Republicans. It clicks forward under Democrats. And every time it clicks, a little more of what you thought was the private economy becomes an instrument of state.

The people who object only when the other team does it aren’t principled opponents of government overreach.