Major geopolitical events have often been followed by volatility in the economy and financial markets.
World War II helped to shake the US out of the Great Depression. The Civil War set the economy of the Southern US back for generations.
Now you can add to those annals of financial catastrophes the Rebel Alliance’s destruction of the Galactic Empire’s Death Star.
Zachary Feinstein, a professor at Washington University in St. Louis, published a study of the financial impact of the events in the Star Wars films on the economy of the fictional galaxy.
With tongue almost certainly in cheek, Feinstein wrote the paper exactly as you would any other academic finding.
“In this paper we study the financial repercussions of the destruction of two fully armed and operational moon-sized battle stations (“Death Stars”) in a 4-year period and the dissolution of the galactic government in Star Wars,” began the abstract of the study.
“The emphasis of this work is to calibrate and simulate a model of the banking and financial systems within the galaxy. Along these lines, we measure the level of systemic risk that may have been generated by the death of Emperor Palpatine and the destruction of the second Death Star.”
With full on footnotes and in-text citations to “Lucas” and “Kershner” (the screenwriters of Star Wars, George and Irvin respectively), Feinstein found that the destruction of the Death Stars and collapse of the Galactic Empire would throw the galactic economy into chaos.
“In this case study we found that the Rebel Alliance would need to prepare a bailout of at least 15%, and likely at least 20%, of [Gross Galactic Product] in order to mitigate the systemic risks and the sudden and catastrophic economic collapse,” said the study. “Without such funds at the ready, it likely the Galactic economy would enter an economic depression of astronomical proportions.”
The scale of the Galactic economy, as modeled by Feinstein, is massive. Average Gross Galactic Product, similar to our GDP, during the 20 year reign of the Empire is around $4.6 sextillion a year. For reference, a sextillion is a 1 followed by 21 zeros (in the US) and 59 million times the Earth’s 2014 GDP.
Feinstein estimates that based on the cost of building the Death Stars, loans from the Galactic Banking system and a fiscally conservative Emperor, the government would default on $515.5 quintillion (1 and 18 zeroes in the US) in bonds.
This would then cause the galactic banking system to collapse, necessitating a bailout as over 1,700 banks would be “too big to fail.”
As mentioned by Feinstein, this would again be a problem as the central government structure would most likely collapse after the death of the Emperor and the “scrappy underdogs”, as Feinstein says, of the Rebel Alliance would be unlikely to pick up the slack.
Based on all of this analysis, maybe we should have been rooting for Darth Vader after all.
from Business Insider http://ift.tt/1TweMcn