Austrian economists and their disciples clearly predicted the "Crisis" we are experiencing today. Furthermore, they are describing exactly what further intervention will bring us in the way of prolonging it.
Just for something to think about, here are a few excerpts from Ron Paul's comments when he introduced the Free Housing Market Enhancement Act way back in 2002.
.....by transferring the risk of a widespread mortgage default, the government increases the likelihood of a painful crash in the housing market. This is because the special privileges of Fannie, Freddie, and HLBB have distorted the housing market by allowing them to attract capital they could not attract under pure market conditions. As a result, capital is diverted from its most productive use into housing. This reduces the efficacy of the entire market and thus reduces the standard of living of all Americans.
However, despite the long-term damage to the economy inflicted by the government’s interference in the housing market, the government’s policies of diverting capital to other uses creates a short-term boom in housing. Like all artificially-created bubbles, the boom in housing prices cannot last forever. When housing prices fall, homeowners will experience difficulty as their equity is wiped out. Furthermore, the holders of the mortgage debt will also have a loss. These losses will be greater than they would have otherwise been had government policy not actively encouraged over-investment in housing.
Perhaps the Federal Reserve can stave off the day of reckoning by purchasing GSE debt and pumping liquidity into the housing market, but this cannot hold off the inevitable drop in the housing market forever. In fact, postponing the necessary but painful market corrections will only deepen the inevitable fall. The more people invested in the market, the greater the effects across the economy when the bubble bursts......More
Why are the Austrians being ignored?
Below is another video of Peter Schiff being told how CRAZY he and all those Austrian economists are.
Yes, Peter Schiff was right and he is still right.
Are you paying attention?
If you would like more info on what the Austrian approach to Economics is, check out the Ludwig von Mises institute