I saw the HBO movie, "Too Big to Fail," about the 2008 market crash. I recommend it. It is a dramatization with actors. Based on what I have read about the crisis it seems to be historically accurate.
Regarding this history I recommend the book "The Devils are All Here." I mention this movie here because in my view, the history of cold fusion has been one long disaster caused mainly by dysfunctional institutions, especially the physics establishment in the US. The two events are more similar than you might think. Both took a long time to develop. Both are still happening. The problems in the financial markets have not been solved. The closing scenes of the movie show that they have not even been addressed in many ways. The roots of the 2008 crash began in deregulation in the Reagan era, when the separation between banks and investment banks was first eroded and then later abolished. The Glass-Steagall act first establish this separation. It was weakened and then finally repealed in 1999. Many experts feel this was the proximate cause of the disaster. There were many other causes such as greed, stupidity and lax supervision. Complicated, large events in history tend to have many causes I think. What I find most frightening about the 2008 crash in the weightless for trade in this movie was not the actions of evil and stupid people, but rather what the good people did -- and did not do. They were conscientious, smart, skilled bankers and government officials who saw this coming who did nothing to prevent it. Others should've seen it coming but did not. Maybe it was just the movie, but I felt particularly sorry for Ben Bernanke. As he says in the movie, he spent his whole career studying the Great Depression. He knew how it came about. He was desperate to prevent something like this from reoccurring. But you have to ask: Given all of his knowledge and power, why didn't he see it was imminent? I have encountered many good scientists over the years who know something about cold fusion, yet who are unwilling to go out on a limb and recommend funding for it or tell their colleagues that there may be something to it and it is worth investigating. These are good people. They are ethical, hard-working and honest. They have influence. Some of the members of the 2004 DoE committee were like that. Despite their virtues, these people have stood by and done nothing to prevent the worst fiasco in the history of science and technology. As I wrote here before, they are guilty of sins of omission. A professional has a moral responsibility to proactively promote virtue. An professor should promote academic freedom. A banker or regulator should work to prevent moral hazard on Wall Street. I have often quoted Martin Luther King in this context: "We will have to repent in this generation not merely for the hateful words and actions of the bad people but for the appalling silence of the good people." I have often railed against smart people such as Robert Park who campaign vigorously in opposition to cold fusion. Actually, these people are nonentities. As Ed Storms often points out, if they did not have the backing of the scientific establishment they would have no influence. Many powerful people outside the limelight agree with Park. They stand by and do nothing while he and others continue to pull strings, prevent funding, and destroy reputations. Park is an evil man. He is a political animal. But the world is teeming with such people. They do not usually cause catastrophic failure in mainstream physics or the banking system. These institutions have defense mechanisms and that usually prevent such people from doing their worst. Sometimes these mechanisms fail. I have often railed against stupid people, who sometimes cause even more harm than smart malevolent people. (See G. Livraghi, "The Power of Stupidity.") That has been the case in cold fusion and the movie gave me the impression it was often the case on Wall Street. Granted Wall Street does tend to attract attract ner-do-wells and criminals -- probably more than mainstream physics does. Another quote from King: "Nothing in the world is more dangerous than sincere ignorance and conscientious stupidity." The most dangerous kind of stupid person is someone like David Lindley or the editors at Scientific American. They are genuine experts with loads of professional knowledge. Lindley knows far more about nuclear physics than I do. What he lacks is not professional knowledge but common sense and a feel for how things work in the real world. These people have mastered a rich specialized professional vocabulary and mannerisms. They can give a convincing impression they know what they are talking about, when in fact they saying nonsense. There are many similar people on Wall Street. They know tremendous amounts about the financial system, banking, laws and regulations, spreadsheets, tax laws, and arcane investment vehicles such as "credit default swaps" (CDS). But they lack common sense. They assumed that housing prices would rise indefinitely, and never fall. They did not say this in so many words, but they built it into complex models, spreadsheets, and CDS contracts. They used CDSs to convert the AGI corporation into a gigantic bomb rigged to explode the moment housing prices fell 5%. The rigged all of Wall Street. This was not because they were malevolent; it was because they were greedy and stupid. Most of the time I have no clue what these Wall Street people are saying. There was a marvelous scene in the movie when Paulson and the experts at the Treasury Department were preparing a statement to describe the disaster in progress. Step-by-step they translate the Wall Street jargon into plain English until it becomes clear that what these people were doing at AGI was lunacy that was bound to bring about disaster. Finally, in a touching, tragic moment Paulson admits "it was becuase we were greedy." Here are 20 minutes of video clips from the movie and interviews with authors of "The Devils are All Here" and others. This is a good synopsis: http://www.hbo.com/movies/too-big-to-fail/index.html#/movies/too-big-to-fail/inside/video/video/opening-the-vault-on-the-financial-crisis.html - Jed
