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VIDEOWhy We Should Listen to Austrian Free-Market Economists
Ron Paul and Peter Schiff predicted the financial crisis when no one else would listen.
Paul blames the country’s economic woes on a long-dead economist by the name of John Maynard Keynes, whose present-day adherents, he says, are the ones bringing the country’s economy to the cliff’s edge.
Keynesian economics gained dominance after World War II and it was President Richard Nixon who proclaimed in 1971: “We are all Keynesians now.” It was about the same time that Nixon “temporarily” severed the link between the dollar and gold, thus laying the framework for the currency’s debasement. Congressman Paul is an adherent of the Austrian school of Economics.Peter Schiff, president of Euro Pacific Capital, is another follower of the Austrian School of Economics.
But there is something else that Paul and Schiff have in common, other than their economic philosophy. Both foretold the housing bubble and the near collapse of our financial system several years before they happened.
Here's what Paul told the House Financial Services Committee in September 2003, almost five years to the day before the collapse of Lehman Brothers:
The special privileges granted to Fannie (FNM) and Freddie (FRE) have distorted the housing market by allowing them to attract capital that they could not attract under pure market conditions. Like all artificial bubbles, the boom in housing prices cannot last forever. When housing prices fall, homeowners will experience difficulties as their equity is wiped out. Furthermore, the holders of 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.
Almost no one on the committee, or anywhere for that matter, listened to Paul’s warnings. Instead, Paul was mocked and accused of insensitivity toward the poor.
Here's what Schiff had to say in an August 2006 television interview: "The United States economy is like the Titanic and I am here with the lifeboat trying to get people to leave the ship... I see a real financial crisis coming for the United States."
Six months later in a televised debate, Schiff forecast that "what's going to happen in 2007" is that "real estate prices are going to come crashing back down to Earth". As Schiff was sounding the alarm, mainstream pundits were laughing in his face on national TV. 
A famous YouTube video with almost 1.5 million views titled, “Peter Schiff Was Right,” catapulted him into the spotlight and finally vindicated him after years of marginalization and ridicule.
So what is this Austrian School of Economics and why is it being mentioned now? How is it different from the Keynesian school?
The Austrian School is an outgrowth of classical liberalism. Its main proponents were Ludwig von Mises, Nobel Prize winner Friedrich von Hayek, and Murray N. Rothbard.
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