Holy meltdown bailout debate poll swing, Batman! It’s only Wednesday and already the seismic activity from the financial earthquakes, political pyroclastic flows, and global credit meltdown has things rocking in the high sevens on the Richter scale. Sevens as in $700 bn, that is. And that doesn’t factor in the Presidential Campaign, the Veep debate, and whether the House of Representatives can find the spine to actually provide the leadership they were elected to give. Could we hit a Richter 10 by Sunday? Could next Monday on Wall Street make this past one like a shallow pothole? Well, yeah, of course! We’re talking the best political drama in my adult life. And I’m old enough to remember the whole Watergate thing.
I’m not an economist, and at the moment, I think I’m glad I’m not. It’s not that ignorance is bliss, but this week it would be driving me nuts. I’m not sure that any specific economic theory can fully account for the chaos being generated out of the international turbulence. Right now, the economist that seems to have the better handle on the forces at play is Paul Krugman. Yes, I’m well aware that he is an unrepentant liberal, but he’s very smart and willing to look at all sides of the issue before he draws his conclusions. Today in his New York Times blog “The Conscience of a Liberal” (see, I told you), he summarizes his grudging acceptance of the bailout/rescue/CPR with the paddles bill passed by the Senate as being forced to form the “hold your nose caucus.” Works for me. Sweet or not, I don’t think anyone really knows what kinds of aftershocks the legislation will ultimately produce, assuming the House gets around to passing something on Friday.
Actually one theoretical model does appeal to me. Being an avid amateur astronomer, I’ve read a lot over the years about stars, and one of the most interesting things that some stars do is go supernova. The processes that cause a star to blow itself into space leaving only a neutron star, a white-hot glowing diamond perhaps only a few dozen miles in diameter, or if the star has enough mass, to create a black hole, is bewilderingly complex.
Stay with me, now, I’m not going to go through the whole process. If you want to read about it in lay terminology (sort of ) go read Stephen Hawking or Neil deGrasse Tyson.
But the basic process is this. Stars have a life cycle. A supernova is an event at the end of that cycle. It’s this final stage that I think has parallels in what we are seeing economically. Here’s what happens. Stars have huge amounts of hydrogen that is being converted into helium through nuclear fusion. That is its “capital.” All its life this fusion has been churning along, not only producing hydrogen, but (if you remember your high school chemistry periodic table of elements), other elements up through iron. Those elements are, in a sense, its “products.” And these are good. Our Sun, which does not have enough mass to go supernova, is producing these products too, and the energy forces by that process give us both light and heat. Both are essential for 99.9% of all known life on earth, like you and me.
The production of these elements, however, comes at a price. The star has a finite amount of hydrogen it can fuse into helium. When it’s all used up, something has to happen. And no, it’s not like when your flashlight battery runs out.
But for a supernova to take place, there is one (apparently) essential thing the star has to have. A companion star. Binary star systems are the rule rather than the exception. Most binaries are far enough from one another that despite their being bound by gravity, they don’t exchange material (products) between them. In a supermassive binary system, the two stars are locked together and the one with the more mass sucks stellar material from the other. There is international (interstellar?) market exchange, but it’s all one way.
I think you get the picture. Over time the big star gets bigger, but eventually still uses all the material from it’s internal processes plus the stuff it sucks off its companion. This is not a good thing for either of them. The result is the supernova. For the two stars, this is the end of their life cycle. However, an incredible thing happens as the star blows off its hydrogen-depleted mantle: the death of the star creates all the other elements in the periodic table by the enormous heat, quantum forces, and gravity. Remember Carl Sagan calling us “star stuff?” This is what he was talking about.
This analogy is what I hope is going to be the result of the financial bailout. The supernova forces in the global economy are supposed to recreate the very elements it takes to sustain life in the universe. What I don’t know is if the bailout will follow the same predictable and positive results that a supernova does. Let’s hope for the diamond neutron star scenario and not the black hole.
We are going to find out.