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willbeurdaddy -> RE: RON PAUL WINS HISTORIC VOTE TOTAL IN AMES (8/17/2011 9:09:40 AM)
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quote:
ORIGINAL: tazzygirl
Peter Schiff also predicted the bubble burst back in 2007. Paul wasnt the only one predicting it.
Got to give credit where credit its due. Ron Paul predicted the housing bubble in 2001, not on the basis of his own thought, but those of the Austrian Economists. He was by far the earliest in government circles and even introduced legislation designed to avoid it in 2002.
"Ironically, 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."
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