Why Some Academics Hate Cycles and Call them Pseudoscience
QUESTION: The criticism of your Economic Confidence Model has been that it oversimplifies complex economies, ignoring variables like policy changes or technological shifts. Would you address that?
DL
ANSWER: This emanates from the economic academic community that is Marxist based that rests on the assumption that they can steer the economy through economic disturbances. I had a conversation with Paul Volcker. He told me that the business cycle can’t be defeated and agreed it was about 8 years.
I find the criticism of the ECM is always academic because they want to have theories on how to manage the economy, so hire them. Anyone I have spoken with over the years who actually has real live experience knows that the government has NEVER been able to steer the economy to eliminate booms and busts.
Joseph Schumpeter also tried to figure out what was behind the business cycle. He saw the human innovation and how the invention of the automobile put all the horse & buggy people out of business. The development of the internet has put a lot of small local businesses into bankruptcy. COVID-19 accomplished the deliberate climate change agenda to stop people from commuting to work and also put local businesses out of operation as you can order online. These are innovations that are part of his Waves of Creative Destruction.
As far as policy changes, such criticism only shows their total lack of understanding of how the economy functions. NEVER will you find some policy change that was not inspired by the business cycle. You do not fix something if it’s not broken. It was the Great Depression that forced the world to accept the previous pseudoscience of John Maynard Keynes. His ideas before 1929 were regarded as absurd and highly dangerous inflationary dogma. The policy change nonsense is a response to the business cycle. In Russia, the Emancipation Manifesto was passed on March 3rd, 1861, emancipating 23 million Russian serfs. But they owned nothing. This policy change after 100s of years made Marxism fertile ground in Russia. That policy change became an international contagion, and Lincoln issued his on January 1st, 1863.
The very idea that policy changes can alter the business cycle is so ironic, for I can find absolutely not a single incident where some policy change comes out of nowhere that was not set in motion by the business cycle. This nonsense puts the cart before the horse.
I back-tested the ECM through world history. You cannot point to a single period in human history where the business cycle has been absent. I spent millions of dollars collecting the world’s coinage and testing it, all to provide a database from which to test the ECM historically.
We have the largest economic statistics database, from interest rates, policy changes, and currency movements. I have searched this to see if the business cycle has existed. There are no exceptions. I did not begin with a theory and try to prove it. I stumbled into this and tried to understand it. I believe what is included is war and climate, for they tend to be precursors to events. The climate turning cold in the north sent the Sea People to invade the south, ending the Bronze Age civilization except Egypt. Attila the Hun moves to invade Europe because of a massive Asian drought. This idea you make up some policy for no reason is absurd. It is always a response to events.
When Valerian I was captured, and Rome could not rescue him, the confidence in the Empire began to collapse. People were even suddenly skeptical about accepting Roman coins because their purchasing power was in excess of the metal content. Would they still be worth anything beyond the metal content? What is interesting is that the final collapse from 260 AD when Valerian was captured by the Persians, was just about 8.6 years.
A document from Egypt has survived, illustrating the financial crisis that was unleashed. It is from Aurelius Ptolemaeus, who is the strategus of the Oxyrhynchitenome. The public officials gathered and accused the bankers of closing their doors on account of their unwillingness to accept the divine coins of the Emperors. It became necessary that an order had to be issued to all the owners of the banks directing them to open, accept, and exchange all coins except the absolutely spurious and counterfeit. It was also directed that all who engaged in business transactions who refused to comply would be penalized. (POxy 1411 260AD, cited by Burnett 1987: p104)
This frequency has emerged for thousands of years. My critics are the typical Marxists who came up with the theory that economists can manipulate society to eliminate the business cycle, which they claim does not exist. I was told that in high school. There is no business cycle because Keynesian economics eliminated that. They have NEVER been able to achieve their goal of eliminating the business cycle but reject the ECM because they are too ignorant to even look at the world that not a single empire has ever lasted because history repeats since human nature never changes throughout the centuries.
Changes in policy? Wage and price controls were incorporated into Hammurabi’s legal code. The Roman Emperor Diocletian issued a decree trying to regulate inflation and prevent the decline of the Roman monetary system. He failed. There is absolutely no historical evidence whatsoever to support their claims that they alone can steer the economy to eliminate the booms and busts they do not want to admit is a business cycle beyond their ability even to comprehend.
Even climate has a cycle; civilizations expand when they get warm and contract when they turn cold. Everything is part of it; things like the weather also provoke changes. The first Clean Air Act was passed in 535AD. Look, my critics are like government employees fighting against DOGE. If there is a business cycle that they cannot stop, then they have no job. They must call the ECM pseudoscience, but every major scientific innovation began with the label pseudoscience. Even Galileo was imprisoned for defending the idea that Earth and other planets revolve around the sun. His ideas were labeled pseudoscience, and a nut claiming the Earth revolved around the Sun – OMG! Even in medicine, the idea that stomach ulcers were caused by an infection was laughed at but is now accepted.
Vaccines were first considered pseudoscience. Before Edward Jenner, there were other practices like variolation used in China and the Ottoman Empire. They exposed individuals to smallpox scabs to induce immunity. It was not some academic theory. Then Jenner comes along in the late 1700s with cowpox. He noticed that milkmaids who had cowpox didn’t get smallpox. So he tested it on a boy, James Phipps. That worked, and that’s considered the first vaccine. But back then, understanding germs and the immune system was nonexistent. They didn’t know about viruses or antibodies.
The MNRA vaccine was not a vaccine. Dr. Deborah Birx, who was advocating the lockdowns, now says she ‘knew‘ COVID vaccines would not ‘protect against infection’ yet she advocated locking down the economy, causing major unemployment and loss of jobs if people refused to get vaccinated. That was pseudoscience, for there was not even observational evidence that locking down the economy would work, and she knew that this pretend “vaccine” was not a traditional vaccine created from the virus itself, as was smallpox.
So, from our modern perspective, the method was unscientific, but they were based on empirical observation. That is what Adam Smith did. He engaged in actual observation. That is what I have done with the ECM. That is why some academics criticize me because it goes against their confined established science, which even Keynes admitted he was wrong before he died, Paul Volcker admitted their thories failed in 1979, and Arthur Burns, the Fed Chairman when Bretton Woods collapsed, also admitted that the business cycle always wins.
To them, learning from observation amounts to pseudoscience when it criticizes their beliefs. I PUBLISHED THE LIST I DISCOVERED and explained that I thought it was an average. I had no idea it would turn out to be more precise, yet because it was a list of panics internationally, it was not confined to a single cause like commodities. No trend lasts forever. Yet even with Climate Change, these people claim the temperature rose 1 degree this year, so it will continue, and we will all die in 50 years. That is like saying the stock market rose 1000 points this year, so it will continue every year for the next 50. A trader with experience understands that their stupid theories are impossible and have never worked even once.
