Wine, Physics, and Song

I wasn’t planning another post in the “Smash” series for awhile, but this just had to be titled so.  When I followed this up from Matt Leifer’s site, I just had to draw attention to it.   British science writer Simon Singh is being sued for libel by the British Chiropractic association for calling some of their treatments bogus.  Part of a broader problem of British libel laws chilling free speech, including discussion of so-called Islamist extremism in Britain, as discussed in this Daily Mail article.  More links at “sense about science“.  Matt’s post is from last August, so hopefully something strong has been done about this by now; I’ll have to look into it.  This could seriously damage Britain if something isn’t done about it.

Kokopelli, described as a biodiversity-promoting nonprofit association and seedbank that sells seeds of traditional varieties, loses a suit against a big seed company because their varieties aren’t—and perhaps can’t be, due to the genetic inhomogeneity associated with traditional varieties and that is part of their contribution to biodiversity—on the EU’s official catalogue of seeds that can be sold.  In French at Kokopelli’s site here, summarized (read down past the Iraq stuff) in English here.  One can see how this might be in part a case of well-intended regulation gone awry…regulation perhaps even intended in part to keep new technologically developed seed varieties from running amok or genetically influencing other varieties…but one can also imagine that the regulations that big agribusiness is exploiting were likely influenced by them toward such results.  Hopefully over the next few decades this kind of outrage, and similar ones like the “patenting” of existing varieties by agribusiness, will be curbed, but I have my doubts.  Even more hopefully, some resolution will be found by modifying the existing EU regulations, but there too I have my doubts.

Oh yeah, I learned of this at Wine Terroirs.

A must-read article by Kevin Drum at Mother Jones on the power of the finance lobby.  He cites figures from (but doesn’t link) this page at the politics-’n-money tracking website opensecrets.org on how the finance lobby, at $475 million in political spending, dwarfs even the healthcare sector, the next relatively specific sector at $167 million.  There are four categories inbetween, however, comprising one and a quarter million dollars, so clearly a lot of the action is there, in “Other, Ideology/Single-issue, Misc Business, and Lawyers and Lobbyists”.  Finance, in this way of slicing things, is actually finance, real estate, and insurance, so it includes other activities than strictly financial ones although the role of real estate and insurance in the financial sector, and the recent meltdown, is well known.  Still, this is a big wad.

The article has lots of details about how they’ve used that power, and what they got for their money.  Kinda makes you want to revisit more sympathetically the kind of attitude represented by the headlines of the minute left-sectarian fringe newspapers that used to be (and must still be—some things will never change) hawked at demonstrations, and by the title of this post.  Or by this quote (also via Kevin Drum) from a rabble-rousing Thirties radical:

We had to struggle with the old enemies of peace — business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering.

Drum is quite a good writer, sprinkling his piece with to-the-point metaphors (Long Term Capital Management was “a relative minnow”, and “leverage is a harsh mistress“), and I’m going to add him to my RSS feed if I ever get one set up.  FDR (the rabble-rousing radical quoted above) wasn’t too bad with the quotable one-liners either—the remainder of the quote includes the line “We know now that Government by organized money is just as dangerous as Government by organized mob”.  Okay, he had good speechwriters.

“The real size of the bailout“, also at MoJo, is interesting but really needs a lot more analysis and explanation.  They peg it at $14 trillion, calling it “the price of the bailout” at one point, but I’m not convinced that everything in the graph is money down the tubes for the government, rather than pay-ins to funds for subsidized loans and asset purchases some of which will turn out to be repaid, or worth something.

Update:  There’s now some more explanation here.

Today’s press release from CDMS, who maintain a stack of germanium and silicon detectors in a mine in Minnesota in hopes of detecting Weakly Interacting Massive Particles (WIMPs) that are candidates for dark matter.  2 events passed their cuts, 0.8 expected; they estimated an ex ante chance of 1 in 4 chance of getting 2 events.  So, not strong evidence for WIMPs, but not strong evidence against them either.  More and better detectors are being installed.

Niall Ferguson is on about deficits. The Newsweek piece is full of fearmongering and frank imperialism—his biggest worry is that “economic weakness is endangering our global power”.  Well, I guess US global power, despite plenty of abuses, is more benign than most other varieties I could imagine becoming more prominent as it ebbed (except perhaps EU global power)…and could conceivably become more benign if Obama’s election ushered in an extended era of sensible, moderately liberal, multilateral policies with the world’s wellbeing among their major goals.  But the deficit fearmongering borders on the ludicrous, and while he brings in some reasonable points, the quantitative evidence is often missing and the economic reasoning slipshod or missing too.  What is perhaps most seriously lacking is a reasonable degree of balance between long-term deficit concerns and the need for deficits in the short term.

Let’s take the seriously misleading stuff first.  The US economic stimulus is described as “muted” because:

what makes a stimulus actually work is the change in borrowing by the whole public sector. Since the federal government was already running deficits, and since the states are actually raising taxes and cutting spending, the actual size of the stimulus is closer to 4 percent of GDP spread over the years 2007 to 2010—a lot less than that headline 11.2 percent deficit.

This verges on incomprehensible.  First, what is he doing with “spread over the years 2007 to 2010″?  The stimulus bill was passed in early 2009; spreading it over 2007 and 2008, years in which it was not being spent, to get an apparent lower percentage of GDP, is hogwash.  On the other hand, if we take .787 trillion as the size of the stimulus package, and spread it over 2009 and 2010, estimating 2009 GDP at 14.2 trillion and 2010 GDP at 14.697 trillion (a 3.5% growth rate, based on not much but faster than the current pace of recovery; it makes little difference to this calculation), you get a stimulus of about 2.7% of GDP.  That’s actually quite a bit less than the 4% Ferguson uses.  But that’s a big boost to aggregate demand. Not as big as it should be given the magnitude of the economic shock we’ve been hit with, but far from negligible.

I have no idea why Ferguson feels the need to start with the size of the deficit as a candidate for the size of the stimulus, and then cut it down because “we were already running deficits” and because “state and local governments are cutting taxes and raising spending”.  What matters is the change in the amount of government spending, relative to no stimulus policy.  Ferguson would appear to be overestimating the stimulus, perhaps because he’s focusing on the idea that “the deficit is the stimulus” and then “correcting” it—but a recession usually increases deficits automatically by decreasing tax receipts, without (usually) a corresponding cut in spending.  (Many states, though, now do cut spending in response to recession, often because of balanced budget laws.)  So perhaps by doing this he is including some of that recession-induced deficit in his estimate of “the stimulus”…and then reducing his overestimate by spreading it over the two prior years, as well.

The main thing that is misleading, though, is that then he estimates “the cost of this muted stimulus” by using the full deficit.  A recession is going to have a fiscal cost even without stimulus—chalking up the full 11.2% of GDP deficit as the cost of a stimulus, whether 2.7% or 4%, is either dishonest or a mistake that is really hard to excuse in an article for a national publication like Newsweek.  The fact that he uses 4% as the stimulus figure perhaps results from some mixed-up attempt to be a little less than dumb about this while still using the full deficit as the cost—perhaps this can be thought of as a way of including “automatic stabilizers” in federal spending as “stimulus”…but then arbitrarily damping it down by dividing by the extra years.  Anyway, the bottom line is that the variable spending under control of the federal government was increased by 2.7% of GDP, and roughly speaking that 2.7% is the additional cost in current dollars of the additional fiscal stimulus.  Actually, the cost is slightly less, for reasons I’ll explain shortly.  11.2% reflects the “fiscal” cost of the recession including, but not limited to, the additional stimulus spending.  A serious macroeconomic estimate of the fiscal cost of stimulus actually needs to take into account that, if you believe the economic models used to justify the stimulus itself, the stimulus increases GDP and so increases tax revenues, and so partially pays for itself.  I haven’t done this calculation—lots of people were doing it this spring, and with reasonable figures for multipliers and tax rates—say 20% for taxes and a somewhat generous 1.4 for the spending multiplier—you’d get around a 28% reduction in the total fiscal cost of the stimulus, to around 2% of GDP.  And let’s not forget that this fiscal cost is incurred in order to obtain an increase in GDP—with this multiplier, of 3.78% of GDP.  Let’s also not forget that this fiscal cost is not a loss of GDP—it is just an increase in government debt.  The GDP gain should be around a full 3.78%—perhaps less, if the stimulus is spread out longer, or the multiplier a bit lower (which it might be because some determinants of spending, like the propensity of businesses to invest, and perhaps of households to consume, may be lower than usual in the current climate of fear), but not less by the fiscal cost.

So, the 11.2% of GDP estimated federal deficit for 2009 (I should check that this is the change in net, rather than gross, public debt) is just not the cost of the “muted” stimulus, in any sense.  The “muting” of the stimulus by state budget cuts, etc., is of course argument for more short-term stimulus—for example, aid to states so they don’t have to make those budget cuts.

“We are, it seems, having the fiscal policy of a war, without the war.”  Well, hurrah for that, I say.  Better to avert a potential depression, and mitigate a serious recession, with war-footing fiscal policy than to get out of a depression the way we did in the 1940s—with the fiscal policy of an actual world war.  Of course we have the Afghan war, and had the Iraq war.  Ferguson pooh-poohs these as contributors to the fiscal situation—and here’s the second highly misleading bit of his article.

these are trivial conflicts compared with the world wars, and their contribution to the gathering fiscal storm has in fact been quite modest (little more than 1.8 percent of GDP, even if you accept the estimated cumulative cost of $3.2 trillion published by Columbia economist Joseph Stiglitz in February 2008).

Since, despite the “even if” which suggests he doubts these estimates, no other estimates are offered, let’s with Ferguson accept Stiglitz’ ones, which seem in line with what I recall hearing.  Where the heck does he come up with “little more than 1.8 percent of GDP”?  Recall that (based on three quarters of official government estimates) I estimated 209 GDP at $14.2 trillion; the total cost of the war comes to 22.5% of this year’s GDP!  (Just to clarify: this is not the yearly rate of war spending as a percentage of GDP; but Ferguson is comparing national debt to GDP, so we are looking at war debt on the same footing he’s using for total debt.) More to the point, the Nov. 25th, 2009 net federal public debt was $7.612 trillion; the estimated cost of the wars thus comes to 42%—nearly half—of the current public debt!!!  If you take at face value the CBO deficit estimates for 2019 that Ferguson cites (I have not evaluated them myself), those 3.2 trillion are still 22.4% of the projected 2019 debt of $14.3 trillion—hardly negligible (and they’d look like a higher percentage, if debt service on them were included).  I’m guessing the 1.8 percent Ferguson refers to must mean the debt service on the Stiglitz estimate of the cost of the war.  But then, since the entire rest of the public debt is less than one and a half times this war cost estimate, why doesn’t Ferguson tell us that the cost of servicing it is currently modest, too?

Now, I haven’t looked carefully, recently, into the contribution of the tax cuts of the Bush years to the deficits.  Early in the administration, they probably helped stimulate the economy out of the post-9/11 recession; but on balance they’ve added plenty to the deficit and the national debt.  By the “radical fiscal reform” we need to forestall the “fatal arithmetic of imperial decline”, does Ferguson mean things like the repeal of these tax cuts, and maybe even some modest tax hikes?  And could the current low rates private investors afford the US treasury even on long term borrowing, suggest that just maybe, these investors are pretty confident that the US will, eventually, through some combination of health care reform, tax cut repeal, tax increases, and other measures possibly including non-draconian social security adjustments, bring things into reasonable shape in the medium term, averting Ferguson’s calamitous projections?  Perhaps these low rates are a vote of confidence in a Democratic administration, as Democratic administrations have added to the national debt at a substantially lower rate than Republican ones in the past few decades. Numbers along these lines, and more on Ferguson’s article, to come.

But I can’t end without mentioning Ferguson’s comparisons to he fiscal situation of Habsburg Spain in the 16th-17th century, or prerevolutionary France—well, this sounds fun, and there may even be lessons from this far back in history.  Like, maybe it’s better to ditch the empire than trash your economy to support it?  I’m not ready to argue historical points with a historian, but it does seem like these comparisons just might be stretching it a bit, as far as the political economy of the situation and the economic and financial policy tools and knowledge available.  I do think the Habsburg Spain analogy might have fit better under Bush and Cheney.

I get annoyed by blogs that are mostly just links to other people’s stuff… but I had to link this great post from Brad DeLong on his inside view of the 1994 debacle in health care…

I”ve been wondering for the last few weeks or months… why can’t Obama be more like LBJ?  Still, everyone has to operate from their own strengths… he may yet pull off health care reform in his own style, and for those who care about the horse-race aspect of this (and I certainly do inasmuch as it affects the Democrats’ chances in the next two elections): by now, anything decent (or even apparently decent) by way of a health care bill will be viewed as a victory for Obama.

I’m worried, though, that although there are apparently European models for well-functioning healthcare that don’t involve a public option, they involve nongovernmental nonprofit entities, or high levels of regulation.   Such models may be very difficult to replicate in this country where they may be easily co-opted or weakened by the money and influence big insurance can put behind things, and by the continual possibility of politically motivated medldling/sabotage.  Ironically, I fear our politics and culture may make a public option more workable than a semiprivate one.

2005 was a superb year, in surprisingly similar ways, in many of the most important winegrowing areas around the world.  California and South Australia certainly did well, and I’m told 2005 Bordeaux were excellent too.  (I haven’t swilled enough of the latter to know without consulting my tasting notes…)  So I’ve gotten into a project of checking out Aussie Shiraz, especially from the Barossa and McClaren Vale…so many of them are just delicious, and some are truly great wines.  So I’ve just realized what others have probably known for more than a century…that this is one of the great grape/wine region combinations of the world.

What we may have here is a chance to benefit from the McCain campaign flameout last year… I don’t know for sure that this wine was named and released with an eye to becoming the high-end swill of Republican conventioneers in St. Paul—indeed, perhaps the subtitle “Above the Law” was intended to underline the Obama campaign’s theme (”more of the same”).   But whatever the reason (the label actually say it’s a tribute to the masive influx of immigrant mavericks to the Australian gold fields in 1851) for the too-cute name and the image of a Colt Navy Model 1851 pistol on the label of this puppy from Pure Love Wines, the wine hits the bullseye.

According to my tasting notes this is a full-bodied, pretty smooth wine with medium finegrained tannins, rich  blueberry and blackberry fruit, some spiciness or tarriness—one of the best “budget” Aussie Shirazes I’ve tasted yet.  Still excellent on the second day (after overnight refrigeration).  My wife liked it too.

I’ve only tasted one or two Aussie Shirazes this year that were better (a Two Dudes Gnarly Hands Two Hands Gnarly Dudes Shiraz) that I tasted at Vino Volo (BWI), which was sold out next time I passed through, at way more expensive, would be one; a 2005 Slipstream as well.)  This partakes of some of their complexity and tight structure, but is definitely not as full of smokiness, tarriness, and such.  In exchange, it veers toward lush, delicious fruitiness but without getting sloppy.

On further investigation the origin of the wine is described here.

The $15 price targeted is a great deal for this wine.  Major kudos to Pure Love’s Jayson Woodbridge for this one, and I’ll be on the lookout for its siblings at the same target price:  Barossa Jack, Desert Eagle, and Layer Cake.   What, no Community Organizer?  No matter, just buy this wine, get out your corkscrews, and drill… whoops, it has a Stelvin closure.  Unscrew, baby, unscrew!

Joseph Stiglitz on the bank bailout, from Bloomberg:

“All the ingredients they have so far are weak, and there are several missing ingredients,” Stiglitz said in an interview yesterday. The people who designed the plans are “either in the pocket of the banks or they’re incompetent.”

Stiglitz is only one of the world’s best economists;  when he talks, you really *should* listen.

President Obama, on why the new financial bailout/rescue plan doesn’t temporarily “nationalize” the banks (as Sweden successfully did in its 1990s financial crisis):

“Obviously, Sweden has a different set of cultures in terms of how the government relates to markets and America’s different. And we want to retain a strong sense of that private capital fulfilling the core — core investment needs of this country.

And so, what we’ve tried to do is to apply some of the tough love that’s going to be necessary, but do it in a way that’s also recognizing we’ve got big private capital markets and ultimately that’s going to be the key to getting credit flowing again.”

Well, we voted for change, didn’t we, so let’s start changing the culture that says we can’t even temporarily nationalize the largest banks with the worst balance-sheet issues, in an emergency that threatens the world economy and is in part attributable to these banks’ irresponsibility.  Say, as many, including lefties like the former IMF chief economist Ken Rogoff, and lefty financial-history prof Niall Ferguson seem to believe, a belief perhaps even reflected in the stock market’s fall on Geithner’s press conference, we need to temporarily nationalize the banks.  Call it restructuring, make the call that the zombie banks are effectively bankrupt and an expedited, not court-supervised, receivership is needed, call it tough love, pander to our “culture” of responsibility.  Nationalization is a stupid word to use—it suggests an intention for long-term transfer of banking to the government, and few are seriously suggesting that.  We can do bank restructuring and still “retain a strong sense of that private capital fulfilling the core investment needs of this country.” Maybe it can be done, in a stealthier way, through Geithner’s plan—but it’s apparently not clear to most what Geithner’s “plan” will turn out to be, in practice.

To prevent a filibuster, the administration has to coddle the Senate’s Great Men (and Women) Of The Center.  Specter insisting the plan cost less than either the $820 billion house bill or the $838 billion senate version—knocking $40-58 billion, 5% or more, off of a stimulus that may already be too small.  And with the final total looking like it will be $790 billion, pretty much succeeding.   A few Republican moderates (and a Democrat or two) holding the economy hostage so that — what?  Their power be recognized?  It’s been a while since I saw Specter in action in a hearing, but I recall, perhaps erroneously, a really bad gut-check about the guy as he browbeat some poor sap, or maybe some perfectly reasonable guy he happened not to agree with.  True, he’s been a voice of reason on some issues, but I was not impressed.   Maybe the Republican moderates feel they have something to take back to their party in order not to be drummed out of it for supporting the plan at all.  Specter also insisting on keeping $10 billion for NIH untouched, while an increase for the NSF was scaled  back by the Senate plan—what’s with that, does NIH have a facility in Pennsylvania, or is Specter just a health nut?

Probably Obama’s playing it cool at this point is the right game plan… getting the thing passed without having to break a filibuster is probably much better for his long-run efficacy.   But I worry that it is not large enough—that by not signing on, but effectively watering it down through the implcit threat of a filibuster, the Republicans are setting up—not consciously for the most part, except that there probably are those who believe an extended recession is better than any increase in government spending—to try to benefit from an unnecessary extension of the recession.  At some point—perhaps on the second batch of stimulus that will likely turn out to be necess, crying “stimulus was ineffective”.  I’m not sure Obama will get a chance to put in another round of stimulus, though he occasionally talks of it.  And, he may be able to get in another round under the guise of longer-term public investment, which he has called for, with stimulus as a side-benefit.  But I imagine there will be a filibuster showdown at some point.  Hopefully the chits will be called in and the moderates will help him break it, maybe with another ceremonial multi-billion-dollar bone or two as compensation.   But it is frustrating that the “senate moderates” are as boneheaded as they are about this.  One can only hope they are doing it because they feel the need to shelter themselves from the ire of their party.

From the AP:

“Earlier Tuesday, the Senate sailed to approval of its $838 billion economic stimulus bill, but with only three moderate Republicans signing on and then demanding the bill’s cost go down when the final version emerges from negotiations.

Negotiators initially were working with a target of about $800 billion for the final bill, lawmakers said. But GOP moderate Arlen Specter, R-Pa., said Tuesday night on MSNBC’s “Hardball” that he was insisting on a figure at around $780 billion.”

Credit for the pound of flesh metaphor to Paul Krugman, back on Feb. 6th.