Ep. 534 Dan McCarthy on the Death of Libertarianism

4 Comments

1. Tel on 10/09/2026 at 11:55 PM

   Sorry for crashing in off topic, but I only recently found this link despite it being a month old already. I should have got onto this when you were talking about bond rates.

   https://thepriceofrisk.substack.com/p/are-sovereign-bondholders-playing

   Here’s the nutshell quote –

   Financial crises are often games of strategic interaction. The best response of a bank depositor or a sovereign bond holder may depend on what other investors holding their asset do. For example, bank depositors should run to remove their deposits if they think other depositors are doing the same. Likewise, creditors may refuse to roll over a nation’s debt if they expect other bondholders to also refuse. Early models of sovereign default like Calvo (1988) and Cole & Kehoe (2000) are very similar to models of bank runs. A nation does not default if it can roll over its debt at a reasonable interest rate. As long as bondholders believe other bondholders are willing to lend at a reasonable rate, that belief becomes self-fulfilling and no crisis ensues. However, if bondholders think other bondholders will demand much higher rates to roll over their debt, this belief also becomes self-fulfilling and the issuer defaults – either explicitly or through currency devaluation.

   These self-fulfilling belief-based dynamics can occur outside of default. Bond investors will demand higher yields on long-duration government bonds if they expect enough other investors to do the same.

   Expectations become more important when issuers have high levels of debt. In the high indebted state, any increase in yields puts stress on the deficit of the issuing country which, in turn, increases expectations of future issuance. These beliefs can create a slow-moving crisis where higher yields begat even higher yields until the country reaches a critical threshold where debtholders no longer think other debt holders will finance the deficit.

   Essentially a formalization of the “investor confidence” idea, which intuitively everyone knew was true, but without rigorous mathematical description. This is also proof of why Krugman was wrong back in the 2008/2009 crisis when he laughed off people believing in the “confidence fairy”. Like … we always knew that Krugman gets things wrong … but it feels nice to have confirmation.

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2. Americron on 10/15/2026 at 5:24 AM

   On-topic.

   The reason libertarianism is dead is because reality has pulled back the veil of the false-framing that people like Bob and Dan still are pushing.

   Here the two of them flaggelate, trying to conjure up politically safe causalities to explain the orign of the symptoms they cannot deny.

   Should we blame them too much? Maybe what I’m really waiting for is the honest admission from my younger brother Bob, here:

   “I’m sorry, but I can’t talk about that”

   Reply
3. Dave H on 10/18/2026 at 2:51 AM

   I love it when goofballs like you make reference to “false framing” or “discredited arguments” but you never actually say what was false or how you know. Nothing but a blowhard trying to seem smarter than you’ll ever be.

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4. RMB on 10/19/2026 at 7:57 PM

   I’m sorry, what libertarians pushed gay marriage and are now pushing legalization of hard drugs? I don’t hear anyone saying anything like that.

   Also, Dan said there aren’t any good libertarian thinkers around today. Sounds like he is smoking legal pot in Oregon. Rothbard isn’t around, but the number of libertarian intellectuals is way higher and they have more access to the public than ever before.

   Dan also thinks libertarians like an income tax but not tariffs. He is smoking some really strong stuff. We libertarians say, taxation is theft, every day and that includes all taxes. What the heck?

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