On 2 November 2008, the New York Times Magazine headlined “Questions for James K. Galbraith: The Populist,” which was an “Interview by Deborah Solomon” of the prominent liberal economist and son of John Kenneth Galbraith. She asked him, “There are at least 15,000 professional economists in this country, and you’re saying only two or three of them foresaw the mortgage crisis” which had brought on the second Great Depression?

He answered: “Ten or twelve would be closer than two or three.”

She very appropriately followed up immediately with “What does this say about the field of economics, which claims to be a science?”

He didn’t answer by straight-out saying that economics isn’t any more of a science than physics was before Galileo, or than biology was before Darwin. He didn’t proceed to explain that the very idea of a Nobel Prize in Economics was based upon a lie which alleged that economics was the first field to become scientific within all of the “social sciences,” when, in fact, there weren’t yet any social sciences, none yet at all. But he came close to admitting these things, when he said: “It’s an enormous blot on the reputation of the profession. There are thousands of economists. Most of them teach. And most of them teach a theoretical framework that has been shown to be fundamentally useless.” His term “useless” was a euphemism for false. His term “blot” was a euphemism for “nullification.”

On 9 January 2009, economist Jeff Madrick headlined at The Daily Beast, “How the Entire Economics Profession Failed,” and he opened:

At the annual meeting of American Economists, most everyone refused to admit their failures to prepare or warn about the second worst crisis of the century.

I could find no shame in the halls of the San Francisco Hilton, the location at the annual meeting of American economists. Mainstream economists from major universities dominate the meetings, and some of them are the anointed cream of the crop, including former Clinton, Bush and even Reagan advisers.

There was no session on the schedule about how the vast majority of economists should deal with their failure to anticipate or even seriously warn about the possibility that the second worst economic crisis of the last hundred years was imminent.

I heard no calls to reform educational curricula because of a crisis so threatening and surprising that it undermines, at least if the academicians were honest, the key assumptions of the economic theory currently being taught. …

I found no one fundamentally changing his or her mind about the value of economics, economists, or their work.”

He observed a scandalous profession of quacks who are satisfied to remain quacks. The public possesses faith in them because it possesses faith in the “invisible hand” of God, and everyone is taught to believe in that from the crib. In no way is it science.

In a science, when facts prove that the theory is false, the theory gets replaced, it’s no longer taught. In a scholarly field, however, that’s not so — proven-false theory continues being taught. In economics, the proven-false theory continued being taught, and still continues today to be taught. This demonstrates that economics is still a religion or some other type of philosophy, not yet any sort of science.

Mankind is still coming out of the Dark Ages. The Bible is still being viewed as history, not as myth (which it is), not as some sort of religious or even political propaganda. It makes a difference — a huge difference: the difference between truth and falsehood.

The Dutch economist Dirk J. Bezemer, at Groningen University, posted on 16 June 2009 a soon-classic paper, “‘No One Saw This Coming’: Understanding Financial Crisis Through Accounting Models,” in which he surveyed the work of 12 economists who did see it (the economic collapse of 2008) coming; and he found there that they had all used accounting or “Flow of Funds” models, instead of the standard microeconomic theory. (In other words: they accounted for, instead of ignored, debts.) From 2005 through 2007, these accounting-based economists had published specific and accurate predictions of what would happen: Dean Baker, Wynne Godley, Fred Harrison, Michael Hudson, Eric Janszen, Stephen (“Steve”) Keen, Jakob B. Madsen, Jens K. Sorensen, Kurt Richebaecher, Nouriel Roubini, Peter Schiff, and Robert Shiller.

He should have added several others. Paul Krugman, wrote a NYT column on 12 August 2005 headlined “Safe as Houses” and he said “Houses aren’t safe at all” and that they would likely decline in price. On 25 August 2006, he bannered “Housing Gets Ugly” and concluded “It’s hard to see how we can avoid a serious slowdown.” Bezemer should also have included Merrill Lynch’s Chief North American Economist, David A. Rosenberg, whose The Market Economist article “Rosie’s Housing Call August 2004” on 6 August 2004 already concluded, “The housing sector has entered a ‘bubble’ phase,” and who presented a series of graphs showing it. Bezemer should also have included Satyajit Das, about whom TheStreet had headlined on 21 September 21 2007, “The Credit Crisis Could Be Just Beginning.” He should certainly have included Ann Pettifor, whose 2003 The Real World Economic Outlook, and her masterpiece the 2006 The Coming First World Debt Crisis, predicted exactly what happened and why. Her next book, the 2009 The Production of Money: How to Break the Power of Bankers, was almost a masterpiece, but it failed to present any alternative to the existing microeconomic theory — as if microeconomic theory isn’t a necessary part of economic theory. Another great economist he should have mentioned was Charles Hugh Smith, who had been accurately predicting since at least 2005 the sequence of events that culminated in the 2008 collapse. And Bezemer should especially have listed the BIS’s chief economist, William White, regarding whom Germany’s Spiegel headlined on 8 July 2009, “Global Banking Economist Warned of Coming Crisis.” (It is about but doesn’t mention nor link to https://www.bis.org/publ/work147.pdf.) White had been at war against the policies of America’s Fed chief Alan Greenspan ever since 1998, and especially since 2003, but the world’s aristocrats muzzled White’s view and promoted Greenspan’s instead. (The economics profession have always been propagandists for the super-rich.) Bezemer should also have listed Charles R. Morris, who in 2007 told his publisher Peter Osnos that the crash would start in Summer 2008, which was basically correct. Moreover, James K. Galbraith had written for years saying that a demand-led depression would result, such as in his American Prospect “How the Economists Got It Wrong,” 30 November 2002; and “Bankers Versus Base,” 15 April 2004, and culminating finally in his 2008 The Predator State, which blamed the aristocracy in the strongest possible terms for the maelstrom to come. Bezemer should also have listed Barry Ritholtz, who, in his “Recession Predictor,” on 18 August 2005, noted the optimistic view of establishment economists and then said, “I disagree … due to Psychology of consumers.” He noted “consumer debt, not as a percentage of GDP, but relative to net asset wealth,” and also declining “median personal income,” as pointing toward a crash from this mounting debt-overload. Then, on 31 May 2006, he headlined “Recent Housing Data: Charts & Analysis,” and opened: “It has long been our view that Real Estate is the prime driver of this economy, and its eventual cooling will be a major crimp in GDP, durable goods, and consumer spending.” Bezemer should also have listed both Paul Kasriel and Asha Bangalore at Northern Trust. Kasriel headlined on 22 May 2007, “US Economy May Wake Up Without Consumers’ Prodding?” and said it wouldn’t happen – and consumers were too much in debt. Then on 8 August 2007, he bannered: “US Economic Growth in Domestic Final Demand,” and said that “the housing recession is … spreading to other parts of the economy.” On 25 May 2006, Bangalore headlined “Housing Market Is Cooling Down, No Doubts About It.” and that was one of two Asha Bangalore articles which were central to Ritholtz’s 31 May 2006 article showing that all of the main indicators pointed to a plunge in house-prices that had started in March 2005; so, by May 2006, it was already clear from the relevant data, that a huge economic crash was comning soon. Another whom Bezemer should have listed was L. Randall Wray, whose 2005 Levy Economics Institute article, “The Ownership Society: Social Security Is Only the Beginning” asserted that it was being published “at the peak of what appears to be a real estate bubble.” Bezemer should also have listed Paul B. Farrell, columnist at marketwatch.com, who saw practically all the correct signs, in his 26 June 2005 “Global Megabubble? You Decide. Real Estate Is Only Tip of Iceberg; or Is It?”; and his 17 July 2005 “Best Strategies to Beat the Megabubble: Real Estate Bubble Could Trigger Global Economic Meltdown”; and his 9 January 2006 “Meltdown in 2006? Cast Your Vote”; and 15 May 2006 “Party Time (Until Real Estate Collapses)”; and his 21 August 2006 “Tipping Point Pops Bubble, Triggers Bear: Ten Warnings the Economy, Markets Have Pushed into Danger Zone”; and his 30 July 2007 “You Pick: Which of 20 Tipping Points Ignites Long Bear Market?” Farrell’s commentaries also highlighted the same reform-recommendations that most of the others did, such as Baker, Keen, Pettifor, Galbraith, Ritholtz, and Wray; such as break up the mega-banks, and stiffen regulation of financial institutions. However, the vast majority of academically respected economists disagreed with all of this and were wildly wrong in their predictions, and in their analyses. The Nobel Committee should have withdrawn their previous awards in economics to still-practicing economists (except to Krugman who did win a Nobel) and re-assigned them to these 25 economists, who showed that they had really deserved it.

And there was another: economicpredictions.org tracked four economists who predicted correctly the 2008 crash: Dean Baker, Nouriel Roubini, Peter Schiff, and Med Jones, the latter of whom had actually the best overall record regarding the predictions that were tracked there.

And still others should also be on the list: for example, Joe Weisenthal at Business Insider headlined on 21 November 2012, “The Genius Who Invented Economics Blogging Reveals How He Got Everything Right And What’s Coming Next” and he interviewed Bill McBride, who had started his calculated riskblog in January 2005. So I looked in the archives there at December 2005, and noticed December 28th, “Looking Forward: 2006 Top Economic Stories.” He started there with four trends that he expected everyone to think of, and then listed another five that weren’t so easy, including “Housing Slowdown. In my opinion, the Housing Bubble was the top economic story of 2005, but I expect the slowdown to be a form of Chinese water torture. Sales for both existing and new homes will probably fall next year from the records set in 2005. And median prices will probably increase slightly, with declines in the more ‘heated markets.’” McBride also had predicted that the economic rebound would start in 2009, and he was now, in 2012, predicting a strong 2013. Probably Joe Weisenthal was right in calling McBride a “Genius.”

And also, Mike Whitney at InformationClearinghouse.info and other sites, headlined on 20 November 2006, “Housing Bubble Smack-Down,” and he nailed the credit-boom and Fed easy-money policy as the cause of the housing bubble and the source of an imminent crash.

Furthermore, Ian Welsh headlined on 28 November 2007, “Looking Forward At the Consequences of This Bubble Bursting,” and listed 10 features of the crash to come, of which 7 actually happened.

In addition, Gail Tverberg, an actuary, headlined on 9 January 2008 “Peak Oil and the Financial Markets: A Forecast for 2008,” and provided the most detailed of all the prescient descriptions of the collapse that would happen that year.

Furthermore, Gary Shilling’s January 2007 Insight newsletter listed “12 investment themes” which described perfectly what subsequently happened, starting with “The housing bubble has burst.”

And the individual investing blogger Jesse Colombo started noticing the housing bubble even as early as 6 September 2004, blogging at his stock-market-crash.net “The Housing Bubble” and documenting that it would happen (“Here is the evidence that we are in a massive housing bubble:”) and what the economic impact was going to be. Then on 7 February 2006 he headlined “The Coming Crash!” and said “Based on today’s overvalued housing prices, a 20 percent crash is certainly in the cards.”

Also: Stephanie Pomboy of MacroMavens issued an analysis and appropriate graphs on 7 December 2007, headlined “When Animals Attack” and predicting imminently a huge economic crash.

In alphabetical order, they are: Dean Baker, Asha Bangalore, Jesse Colombo, Satyajit Das, Paul B. Farrell, James K. Galbraith, Wynne Godley, Fred Harrison, Michael Hudson, Eric Janszen, Med Jones, Paul Kasriel, Steve Keen, Paul Krugman, Jakob B. Madsen, Bill McBride, Charles R. Morris, Ann Pettifor, Stehanie Pomboy, Kurt Richebaeker, Barry Ritholtz, David A. Rosenberg, Nouriel Roubini, Peter Schiff, Robert Shiller, Gary Shilling, Charles Hugh Smith, Jens K. Sorensen, Gail Tverberg, Ian Welsh, William White, Mike Whitney, L. Randall Wray.

Thus, at least 33 economists were contenders as having been worth their salt as economic professionals. One can say that only 33 economists predicted the 2008 collapse, or that only 33 economists predicted accurately or reasonably accurately the collapse. However, some of those 33 were’t actually professional economists. So, some of the world’s 33 best economists aren’t even professional economists, as accepted in that rotten profession.

So, the few honest and open-eyed economists (these 33, at least) tried to warn the world. Did the economics profession honor them for their having foretold the 2008 collapse? Did President Barack Obama hire them, and fire the incompetents he had previously hired for his Council of Economic Advisers? Did the Nobel Committee acknowledge that it had given Nobel Economics Prizes to the wrong people, including people such as the conservative Milton Friedman whose works were instrumental in causing the 2008 crash? Also complicit in causing the 2008 crash was the multiple-award-winning liberal economist Lawrence Summers, who largely agreed with Friedman but was nonetheless called a liberal. Evidently, the world was too corrupt for any of these 33 to reach such heights of power or of authority. Like Galbraith had said at the close of his 2002 “How the Economists Got It Wrong“: “Being right doesn’t count for much in this club.” If anything, being right means being excluded from such posts. In an authentically scientific field, the performance of one’s predictions (their accuracy) is the chief (if not SOLE) determinant of one’s reputation and honor amongst the profession, but that’s actually not the way things yet are in any of the social “sciences,” including economics; they’re all just witch-doctory, not yet real science. The fraudulence of these fields is just ghastly. In fact, as Steve Keen scandalously noted in Chapter 7 of his 2001 Debunking Economics: “As this book shows, economics [theory] is replete with logical inconsistencies.” In any science, illogic is the surest sign of non-science, but it is common and accepted in the social ‘sciences’, including economics. The economics profession itself is garbage, a bad joke, instead of any science at all.

These 33 were actually only candidates for being scientific economists, but I have found the predictions of some of them to have been very wrong on some subsequent matters of economic performance. For example, the best-known of the 33, Paul Krugman, is a “military Keynesian” — a liberal neoconservative (and military Keynesianism is empirically VERY discredited: false worldwide, and false even in the country that champions it, the U.S.) — and he is unfavorable toward the poor, and favorable toward the rich; so, he is acceptable to the Establishment.) Perhaps a few of these 33 economists (perhaps half of whom aren’t even members of the economics profession) ARE scientific (in their underlying economic beliefs — their operating economic theory) if a scientific economics means that it’s based upon a scientific theory of economics — a theory that is derived not from any opinions but only from the relevant empirical data. Although virtually all of the 33 are basically some sort of Keynesian, even that (Keynes’s theory) isn’t a full-fledged theory of economics (it has many vagaries, and it has no microeconomics). The economics profession is still a field of philosophy, instead of a field of science.

The last chapter of my America’s Empire of Evil presents what I believe to be the first-ever scientific theory of economics, a theory that replaces all of microeconomic theory (including a micro that’s integrated with its macro) and is consistent with Keynes in macroeconomic theory; and all of which theory is derived and documented from only the relevant empirical economic data — NOT from anyone’s opinions. The economics profession think that replacing existing economic theory isn’t necessary after the crash of 2008, but I think it clearly IS necessary (because — as that chapter of my book shows — all of the relevant empirical economic data CONTRADICT the existing economic theory, ESPECIALLY the existing microeconomic theory).

This content originally appeared on Dissident Voice and was authored by Eric Zuesse.

The collapse of Silicon Valley Bank (SVB), for a period of time the preferred bank for start-ups, is the bitter fruit of that harvest. Three days prior to the second-largest failure of a US financial institution since the implosion of Washington Mutual (Wamu) in 2008, lobbyists for the banking sector had reason to gloat. They had the ears of a number of GOP lawmakers and were pressing the case that Federal Reserve Chair Jerome Powell had little reason to sharpen regulations in the industry.

As a matter of fact, the converse case was put: the financial environment was proving too stringent, and needed easing up. This effort built on gains made during the Trump administration, which saw the passing of the Economic Growth, Regulatory Relief, and Consumer Protection Act. Then House majority leader Kevin McCarthy was particularly keen on winding back elements of the Dodd-Frank banking measures introduced in the wake of the 2008 financial crisis. In 2018, he got much of what he wished for.

Lobbyists for SVB were particularly aggressive in that endeavour, and even went so far as to seek exemptions from the Federal Deposit Insurance Corporation (FDIC), the body responsible for insuring bank deposits in times of crisis and institutional oversight. Two former staffers for McCarthy so happen to be registered lobbyists for SVB, a fact that shows how the US revolving door between politics and business continues to whirr at some speed. The SVB lobby list also includes figures who found employment under former President Bill Clinton, former Senator Mike Enzi (R-My), former Senator Tom Coburn (R-Okla.) and former Senator Arlen Specter (D-Pa.), just to name a few.

The crisis duly came. On March 9, startups and venture capitalists made a run on SVB as its share price took a tumble. SVB had sold its available-for-sale (AFS) portfolio for US$21 billion at a US$1.8 billion loss. In a patch-up, capital raising response, SVB then announced that it would sell US$2.25 billion in new shares.

By the next day, the FDIC had placed SVB into receivership. The corporation promised that insured depositors would have access to their insured deposits on March 13; uninsured depositors would have to wait a bit longer, expecting an “advance within the next week.” But given that 90% of the bank’s deposits exceeded the amount guaranteed by the FDIC, the prospects for adequate recovery proved uncertain, at least till the FDIC, Federal Reserve and US Treasury promised protection for them.

Deputy Treasury Secretary Wally Adeyemo proved rather green in suggesting that the financial system, as things stood, would be resilient enough to hold off any contagion. “Federal regulators are paying attention to this particular financial institution,” he told CNN, “and when we think about the broader financial system, we’re very confident in the ability and the resilience of the system.”

This is bound to be misplaced. It’s certainly not the view held by former FDIC head, Sheila Blair, who argues that there are other banks in the system with large amounts of uninsured deposits and unrealised losses. “These banks that have large amounts of institutional uninsured money … that’s going to be hot money that runs if there’s a sign of trouble.”

David Sacks of Craft Ventures is also of the view that immediate intervention at the government level was required. “Where is Powell?” he wondered. “Where is [US Secretary of the Treasury Janet] Yellen? Stop this crisis NOW.” SVB, he proposed, should be placed with a top four bank. “Do this before Monday open or there will be contagion and the crisis will spread.”

Questions are being asked whether the anti-regulatory bug has gotten to the various authorities and agencies. Mike Novogratz, founder of Galaxy Digital, pondered whether all banks were now being treated like hedge funds. “Seems like a policy mistake.”

Economists such as Peter Schiff are even more damning, claiming that the entire US banking sector is set for a cathartic clean-up that will be greater than that following 2008. US banks were holding “long-term paper at extremely low interest rates. They can’t compete with short-term Treasuries.” In such an environment, depositors, in the pursuit of higher yields, would initiate mass withdrawals, resulting in a tidal wave of bank collapses.

Blame for the SVB debacle has been extensive. “This was a hysteria-induced bank run caused by VCs [venture capitalists],” opined Ryan Falvey, a fintech investor based at Restive Ventures. “This is going to be remembered as one of the ultimate cases of an industry cutting off its nose to spite its face.”

The oversight advocates are bound to agree. Dennis Kelleher, CEO of the non-profit Better Markets, is certainly one. “SVB’s stunningly quick collapse should put an end to the nonstop attempts by banks, lobbyists and their political allies to weaken capital and other financial regulations that protect depositors, consumers, investors and financial stability.”

This is likely to prove to be a flight of fancy. The banking lobbyists have destructive form and staying power. In 2019, the International Monetary Fund published a working paper noting that bank lobbying, in general, produced “regulatory capture, which lessens the support for tighter rules and enforcement. This, in turn, allows riskier practices and worse economic outcomes.”

As the great financial crisis showed, financial regulation is often the antidote to banditry. The pillaging and frontier types will always resist such tendencies. Again, they have been found wanting, and again, the harmful consequences of their ideas are going to prove deep and extensive.

This content originally appeared on Dissident Voice and was authored by Binoy Kampmark.