Ben Bova: Astrophysics and the economy

Thomas Sowell’s new book, “The Housing Boom and Bust” (Basic Books, 184 pp., $24.95) is about the economics and politics of today’s disastrous downturn of the American (and global) economy.

But first, a little astrophysics, because the way that stars die can give an insight into the way our thriving economy collapsed.

Stars live on nuclear fusion. Healthy, prime-of-life stars shine with the light of fusion energy. Deep in their cores, nuclei of hydrogen atoms are fused together to form helium nuclei. This process gives off energy: sunlight.

The star lives in balance between the force of its own gravity, which is trying to pull it inward toward its center, and the outward-pushing pressure generated by its seething hot gases.

As a star ages it begins to run short of hydrogen fuel. (Don’t worry; this won’t happen to the Sun for another few billion years.)

Deep in its core, helium nuclei begin to fuse into the nuclei of heavier elements: carbon, oxygen, and neon. The core gets hotter, and the outward-pushing pressure of the hotter gases makes the star expand.

When the star’s used up its helium it begins to fuse its carbon, oxygen and neon into still-heavier elements. The star grows even hotter and expands still more. This keeps going until the star begins to create nuclei of iron in its core. That’s the tipping point.

All the previous fusion processes produced energy, energy that made the star hotter and allowed it to swell to monstrous size. But iron fusion absorbs energy. The star is doomed.

All of a sudden there’s no more energy being produced in the star’s core. The outward-pushing pressure disappears. But gravity is still there, and it pulls the star in on itself in a titanic collapse. If the original star was massive enough, its collapse leads to a spectacular supernova explosion, bright enough to be seen halfway across the universe, an explosion that destroys the star and leaves nothing but a wildly expanding tangle of seething gases.

That is similar to the boom and bust that happened to the housing market.

Sowell explains that the housing boom began, at least in part, when local governments began to restrict growth by setting aside portions of their territory for preservation, forbidding by law any development there. These restrictions raised the value — and the price — of the land still available for building housing.

With housing prices rising in certain markets (including southwest Florida) there came new pressures for “affordable housing” for middle and working class families. Prodded by Washington, banks began to loosen their requirements for mortgage loans. Representative Barney Frank (D. Mass.) and Senator Chris Dodd (D. Conn.) are repeatedly named by Sowell as leaders in this movement. President George W. Bush and others are fingered, as well. There’s plenty of blame to go around.

The banks did indeed produce more “creative” (and riskier) mortgage loans, fearing that government regulators would hamper their business if they did not. Some mortgages required no down payment at all.

For a while all went well. Like a star burning up its fuel, the economy grew hotter and expanded.

The bankers were in business to make profits. If they did not bend to the government’s pressure bureaucrats would smother them in red tape. And when they did loosen their requirements for loans, business boomed! A win-win situation.

For a while.

There were warning voices raised here and there, but they were largely ignored. Everybody was making money. Families that could not have afforded a house under the older requirements for a 20 percent down payment and firm evidence of the ability to pay the monthly mortgage could now buy houses. The American dream come true.

Virtuous goals can lead to less-than-virtuous behavior. Seeing that mortgage money was easily available, some investors went out and bought several houses, intending to resell them quickly while housing prices were still on the rise. These “flippers” took on multiple mortgages, thinking that they’d resell the properties long before they had to pay more than a few months of mortgage bills.

The banks, meanwhile, were bundling their shaky mortgages into investment packages that were bought on stock exchanges around the world, from Canada to China.

Then came the tipping point. People who had gotten mortgages that they really couldn’t afford began to fall behind on their monthly payments.

“Flippers” walked away from the homes they had bought because they couldn’t pay all the mortgages they held and no one was buying their houses at the prices they were going for. Working class families defaulted because the size of their mortgage became bigger than the worth of their home.

Like the vastly distended star that suddenly stops producing energy at its core, the banking and financial world collapsed.

Crisis. Again, Washington stepped in — amid loud accusations of greed and incompetence from the likes of Barney Frank and Chris Dodd. In Sowell’s view, these politicians created the crisis by interfering in the workings of the private marketplace. Rather than accept blame, though, they point their fingers elsewhere.

Politicians work, first and foremost, to win the next election. The politicians of both parties who created today’s economic disaster, according to Sowell, did it at least in part to gain votes among the middle and working class families who would benefit from relaxed mortgage regulations.

Now Washington is pumping trillions of dollars of “stimulus” money into the economy. Our tax dollars are being spent to rescue the banks and the investors — and the politicians — who created the mess we’re now in.

Will the “stimulus” work? Sowell has his doubts. Read “The Housing Boom and Bust” and form your own opinion. Sowell is an able writer; his book is a quick and enlightening read. You may not agree with him, but you should see for yourself what he has to say.

Naples resident Ben Bova is the author of 120 books, including “The Immortality Factor,” his latest novel. Dr. Bova’s Web site address is

© 2009 All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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