Sancho goes to dinner hungry on the first day on his alleged isle, only to discover that a physician there will not let him eat anything for fear that it might be bad for him. In a fury, Sancho threatens the physician and sends him out of the room. A courier then arrives with a letter from the Duke telling Sancho that he has learned about a plan to attack the isle and to kill Sancho. Sancho becomes convinced that the physician is one of the men threatening his life. A businessman arrives to ask Sancho for a letter of recommendation for his “bewitched” son (who likely suffers from autism) to marry the maimed, hunchbacked daughter of his neighbor. When the businessman also asks Sancho for six hundred ducats, Sancho flies into a rage and threatens to kill him.
In the middle of the night, Doña Rodriguez creeps into Don Quixote’s room to ask him a favor. She tells Don Quixote the story of her daughter, who was wooed by a farmer’s son who now refuses to marry her. The Duke refuses to force the farmer’s son to marry Doña Rodriguez’s daughter, since the farmer is wealthy and the Duke does not want to risk losing the money he collects from the farmer. Don Quixote agrees to help Doña Rodriguez. She tells him that the Duchess has such a nice complexion because a physician drains the evil humors out of her legs. Doña Rodriguez’s announcement shocks Don Quixote because he considers the Duchess an upright woman, but he admits that if Doña Rodriguez says it is true it must be so. At this point, someone rushes in and slaps and pinches both Doña Rodriguez and Don Quixote.
Sancho encounters two criminal incidents on his rounds and then comes across a young girl dressed as a boy. The girl begins to cry, telling Sancho that her father, a widower, keeps her locked up day and night and never lets her see the world. She has switched clothes with her brother, she says, and snuck out to see the town because she is curious. As she tells her story, a guard catches her brother. Sancho takes them both home and tells them to be more careful next time.
The Duchess and Altisidora, Cervantes tells us, were listening outside Don Quixote’s door to Doña Rodriguez’s story about the Duchess’s legs. It was the Duchess and Altisidora who ran in and pinched the two. The Duchess then sent a page to Teresa Panza to deliver Sancho’s letter, along with a letter and a necklace of coral from the Duchess. Teresa receives the page and is thrilled by the news that her husband has been made a governor. She runs off to tell Sampson and the priest, who do not believe her until they speak with the page. Sampson offers to take dictation for Teresa’s letter back to Sancho, but she does not trust him and goes to a friar to have him write it for her.
The morning after his rounds, Sancho hears the petition of some judges who cannot decide whether to hang a man. The judges sit by a bridge whose owner demands that anyone wishing to cross must disclose his or her destination. If the person crossing tells the truth, he or she may pass, but if the person lies, he or she must be hanged on the gallows on the other side. A man has come to the bridge saying that he is going to be hanged on the gallows, which has confused the judges. If they set him free, then the man will be condemned by law to hang on the gallows, but if they hang him, then they must subsequently free him. Sancho sets the man free on the grounds that it is better to be too lenient than too strict.
Sancho receives a letter from Don Quixote that includes more advice about governing, along with the news that Don Quixote plans to do something that will anger the Duke and Duchess. Sancho replies with a long letter full of news, asking Don Quixote not to provoke the Duke and Duchess, since he does not want to lose his governorship. Sancho then makes the only laws he imposes during his governorship: a declaration that wine may be imported from anywhere as long as it clearly states its place of origin, along with a decree that he will lower the price of footwear, fix the wages of servants, and forbid the blind from singing about miracles unless the miracles are true. These laws please the populace so much, Cervantes says, that they still remain in effect and people call them “The Constitutions of the great Governor Sancho Panza.”
In your analysis of the second part of Don Quixote, you write: "The story of Anna Felix and Don Gregorio tempers Cervantes’s otherwise rampant racism" - Really? This is a masterpiece that has survived the centuries because of it's jawdroppingly brilliant use of irony, but you can't seem to notice the difference between the first narrator (Cide Hamete's translator) and Cervantes himself!
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Any analysis of Don Quixote that doesn't mention the fact that that book is, at the core, a meditation on individual liberty, monetary debasement and the moral horror of involuntary slavery, is incomplete. See the work of Eric C. Graf of Universidad Francisco Marroquín. His article-
Juan de Mariana and the Modern American Politics of Money: Salamanca, Cervantes, Jefferson, and the Austrian School