I think the global derivatives crash of a few years ago is a great example of where libertarianism fails. Even that big fan of Ayn Rand, Alan Greenspan, had to admit its shortcomings after the crash.
I know libertarians believe it was the Greenspan and the Federal Reserve's low interest rates which caused the crash, but low interest rates were but one factor. And Greenspan's low interest rates were inspired by his libertarian beliefs. He was simply providing a helping hand to Wall Street. He gave them what they wanted.
At the root of the problem was the fact there was way too much money available for investment and too few
good borrowers. It is as simple as that.
The middle men who facilitate the transfer of money from an investor to a borrower get fees for providing this service. It is in their interest to keep the process going as long as there are fees to be had.
And so when they ran out of good borrowers to lend money to, they began lowering the lending standards, and they used derivative products to transfer the subsequent higher risk to others.
It was the throwing out the window of the underwriting laws of the Universe which had been learned over centuries where libertarianism broke down.
The "free market" advocates were able to convince regulators to untie their hands and lower their capital reserve requirements. In addition, they were able to get the government to completely deregulate their derivative products, and thus anyone was allowed to bet on the success or failure of these investment products whether or not they had an insurable interest. That is simply astonishing! And it is still allowed to this day!
These gambling derivatives (credit default swaps) are where the "financial weapons of mass destruction" came in. These instruments of death were time bombs which would greatly amplify the fallout effects of the inevitable defaults that would come from lending people way too ******* much money who had no business borrowing money.
Whether the Fed lowered interest rates or not, the financial middle men of Wall Street were going to make sure that $75 trillion of investor money was moved around and got into the hands of borrowers, good and bad alike. They wanted those fees! Greenspan simply did his part to help Wall Street, in the belief they would self-regulate and not drink too much from the punch bowl.
How wrong he was.
WORLD ECONOMIC COLLAPSE AN HONEST MAN APOLOGISES Alan Greenspan's - YouTube