Author Archives: howard

About howard

Wine, Physics and Song is my blog. Roughly speaking, I'm a quantum physicist, working mostly in the foundations of quantum theory, and in quantum computation and quantum information processing. My main focus recently has been understanding the nature of quantum theory by understanding how the possibilities it gives us for processing information compare to what might have been, by studying information processing in abstract mathematical frameworks, using tools like ordered linear spaces and category theory, in which not only quantum and classical theories, but all sorts of "foil" theories that don't seem to be realized in our physical world, but are illuminating to contrast with quantum theory, can be formulated. Sometimes I like to call this pursuit "mathematical science fiction".

Two views of Tim (Geithner, that is)

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In the March 8th New Yorker, John Cassidy has a long piece about Tim Geithner.  While presenting various points of view, it gives a lot of space, fairly persuasively, to the view that Geithner and other adminstration officials like Lawrence Summers' policy of not taking over shaky financial institutions was the right way to handle the financial crisis.  The "stress tests", forcing those institutions whose financial position was deemed risky to raise new capital, is said to have been the key component.

Some key points, which I'm not expert enough to evaluate decisively off the cuff, but which need to be singled out, are:

1) Takeovers and restructuring would have imposed huge costs on the economy, outweighing the potential benefits.  Cassidy does cites some who claim that the bailed-out institutions are still "wounded" and slow to lend, slowing the recovery ("wounded" is Bob Kuttner's term; Paul Krugman was using the term "zombie banks" back when he was advocating takeovers), but counterbalancing this are the metaphors like "amputating a limb" (from Lawrence Summers) for the takeover-and-restructuring process.  A detailed cost/benefit analysis is missing here, and would be nice to see.

2) Raghuram Rajam of the University of Chicago's business school is appealed to for the point that bondholders needed to take a hit.  It's claimed that while equityholders would have been wiped out in a takeover, bondholders might not have been hit hard enough.  Why this is isn't fleshed out, but I guess it's because in a bankruptcy proceeding, which probably would have been the legal framework for takeovers, there's a definite order of precedence for creditors, with bondholders coming before equityholders (who are generally last).  However, in a restructuring-style bankruptcy, where the aim might be not to liquidate, but to get an enterprise running again, it's not clear to me that such absolute precedence would hold, especially when the government might have some pretty strong powers of persuasion over some of the bondholders (many of whom were presumably in difficult straits themselves).  Perhaps this mainly boils down to the possibility of protracted legal battles...a "special feature" of our system that might make this option more difficult than in other countries where it's succeeded?

As Cassidy says, "Bondholders are supposed to monitor risk-taking at firms they lend to. If they know they can rely on a government bailout, they have little incentive to do so. "  Just what hit the bondholders took under the bailout as it unfolded, isn't clear in the article, though.

3) Cassidy also recognizes that takeovers would have had the advantage of punishing the executives and shareholders of some of these institutions.  A big question is whether they got off too lightly.  That seems to be the public perception.  It is true that existing shareholders may have been diluted when companies were forced to raise capital under the stress test, if this was done by issuing new stock.  But if they didn't pay a high enough price, the take-home lesson for future financial managers is that this kind of mismanagement is profitable for them.  This is a recipe for repetition, unless strengthened financial regulation can help prevent managers from taking these opportunities to profit by risking the stability of the financial system, next time they present themselves.

In light of all this, one should note that Mike Konczal, guest-blogging on Ezra Klein's blog at the Washington Post, claims that Geithner is arguing hard to keep explicit caps on leverage out of the financial reform bill.   He quotes a January letter from Geithner to Rep. Keith Ellison (cc: The Honorable Ben S. Bernanke) opposing fixed numerical caps.  Konczal's a bit over the top in the spin he puts on some of what he quotes.  Geithner's point that "The statutory leverage constraint and detailed statutory risk-based capital requirements for Fannie Mae and Freddie Mac proved to be inadequate to the task of ensuring the safety and soundness of the firms." should hardly be paraphrased as "If you put this in the bill you will be responsible for another Fannie and Freddie"---rather, a good point that *even* numerical caps can't do the whole job in the absence of a serious, committed, regulatory authority analyzing the actual situation.  But the point that statutory limits can help keep things from getting out of control, even if they're not a guarantee, is a good one.  It puts some weight on the right side of the scales when irrational exuberance about leverage is sweeping the financial markets.

Silvio Jermann 2006 Vintage Tunina

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My brother-in-law and his wife gave us a bottle of Silvio Jermann's 2006 Vintage Tunina, from  the region of Friuli/Venezia-Giulia.  IGT (Indicazione Geografica Tipica) Venezia Giulia.  Fantastic, and though a much more expansive and complex wine, reminded me of savoring an afternoon glass of wine with them in a wine bar or two in Venice last summer.   Very Friulian in its clear, almost lemon-yellow color and its clarity of fruit.  Fairly intensely flavored, but balanced, very smooth in a slightly glyceriny or unctuous (that's good in this case!) way.  I didn't notice any oak, just pure, deep, complex grape flavors.  Maybe hints of coconut, lemon, a tiny hint of bitter green stemminess, maybe some hay, but this kind of analysis is beside the point.  Really delicious wine, which had some of the intense but soft characteristics of a fresh, not-so-botrytized great Sauternes, like maybe Lafaurie-Peyraguey, but without the sweetness or caramel.  Bottom line: you won't go wrong with this one.  Just plain delicious.

Worked with an excellent pasta/beans/chard/parmesan dish my wife put together, but would likely go with just about any not-too-gamey poultry dish, fish---even, or perhaps especially because of its relative softness and lack of herbaceousness, salmon---or perhaps even prosciutto or some other charcuterie-type first course.  Probably would be nice with a cream-and-wild-mushroom sauced pasta.

Steven Isserlis, cello and Denes Varjon, piano, at Perimeter Institute

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On Wednesday (March 24), English cellist Steven Isserlis and Hungarian pianist Dénes Várjon gave a concert at Perimeter Institute.  It was fascinating to hear and compare four major sonatas in a broadly Romantic idiom, in one concert, rather than the usual eclectic mix of styles.  The program consisted of Samuel Barber's Opus 6 (1932); Frederyk Chopin's Opus 65 in G minor (1845-6), Robert Schumann's posthumous Violin Sonata No. 3 in A minor (1853), and Ernö Dohnányi's Opus 8 in B flat minor (1899).  Varjon's playing was excellent, reaching the tempest-tossed craggy heights peculiar to Romantic piano writing at appropriate times, but retaining a certain control and clarity, also a rounded percussiveness that I, probably deludedly, think of as particularly Hungarian (evinced in the piano music of Bartok, or the piano of Sandor Vegh).  Isserlis playing was superb, at times sublime.   His expressiveness, his mastery of phrasing and range of moods lit up music that in the hands of lesser players can seem a bit formless in those passages when the main melodies aren't singing out.  The Barber is a work I've not heard much, and would like to hear again.  This Chopin abounds in delightful, soulful melodies, the kind you recognize when you hear them and say to yourself "I've heard that before...so that's where it's from" but for some reason is not a piece I've sought out outside of concerts, to listen to over and over again.  This performance was the best I can recall, and I'm going to go out and find Isserlis' recording of it.  The slow movement was transcendent and sublime.

Another highlight was Isserlis' own transcription of a Schumann violin sonata.  The last two movements in particular had a lot of the folksy, happy, festival-of-song character that is particular to the brighter (but not necessarily less profound) side of Schumann's music.  Images popped into my head of Brahms staying with Clara and Robert at their country place in the Rhine valley, busts of Classical Greeks and Classical musicians decorating drawing rooms, making music subtly and equally infused with folk tunes and Classical elegance, to honor the muses of the gentle side of Romanticism, who dance, clad in long robes and garlanded with flowers, in verdant fields in paintings on the wall.  That kind of thing, but good.  (And no, I hadn't been smoking anything.)

American Enterprise "Institute" finishes destroying its scholarly credibility

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The American Enterprise Institute has fired David Frum.  Presumably this is retribution for publishing his views on the passage of the health care bill---though Frum is a conservative, he thinks it a disaster for American conservatives that they refused to deal with the Democrats on healthcare.  Bruce Bartlett now reports that Frum privately told him several months ago that AEI scholars---Bartlett puts the word "scholar" in quotes, but I won't go that far on a blanket basis---"had been ordered not to speak to the media because they agreed with too much of what Obama was trying to do."

I have long viewed a writer's AEI affiliation as grounds for deep skepticism about even a sensible-sounding argument, because of corporate and political meddling of this sort with their supposedly scholarly programs, but the details had faded over time.  The latest news seriously damages the position of any genuine scholars who still work there, putting guys like Roger Scruton, who has done superb work (The Aesthetics of Architecture, and Art and Imagination are among the best things I've encountered by way of recent philosophy of art, and I certainly read Arthur Danto and Richard Wollheim back in the day) in a difficult position.

Perimeter Institute Bistro does it again...

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Another home run hit by the Perimeter Institute Bistro's crack team of chefs.  A not exactly Kosher lunch, last Tues. or Thurs.:  milk-braised pork with ricotta gnocchi.   Deeply flavored, tender, savory pork.  The milk wasn't really identifiable as such but must have contributed to the tenderness, and maybe in some way to the intensely flavored bit of concentrated jus (that's, like, Français for juice) that coated the little bits of slightly spicy, slightly bitter greens and the delicious ricotta gnocchi.  A few bits of purple watercress, or sorrel or something, provided another perfect garnish.  Made me feel like I was staying in a nice Italian farmhouse someplace in, maybe, Emilia, or perhaps eating on the patio of a really good trattoria.  So maybe I should have said "sugo" instead of "jus".  In any case...Bravo!!!

Krugman on Chinese currency policy and purchasing power parity

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Since I linked earlier to a post arguing that the Chinese currency seemed not that undervalued based on Balassa-Samuelson considerations involving the relative prices of traded and nontraded goods, thought I should link to Paul Krugman's fairly persuasive counterargument---which is basically, look at their current account surplus: they're exporting savings.  Here's his op-ed on the subject.

Perrin Cotes du Rhone "Nature" and "Tradition"; Vacqueyras

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Perrin & fils are establishing a brand, in the best way, and following a grand French tradition.  Proprietors of the great (well, it's expensive enough that I haven't tried it) Chateauneuf-du-Pape property, Château de Beaucastel, they also make several excellent Côtes-du-Rhône that are a clear cut above most plain Côtes.  I found their Tradition to be excellent, with a bit more tannin and substance than standard Cotes, but still with easy-to-drink berry flavors and a bit of autumn-leafy complexity.  Their organic "Nature" 2007 ($17/750ml, $10/375ml, Canadian at LCBO) was even better---or at any rate different.  Mostly Grenache, with some Syrah, like most Côtes.  My notes say "Great nose--hints of chocolatiness, sweetness--something like chocolate milk or cocoa powder in the nose and on the palate.  Some complexity---hard to describe---a bit chalky or mineral.  Really a remarkable wine.  Herbs?  Tastes alive.  Pretty long finish.  Closest thing might be "The Stump Jump" (an Aussie Grenache-Shiraz).  Definite chalkiness now.  Really great!"

Nice label, too: all of Perrin's labels feature various shades of off-white to cream paper, with classic French typographic design reminsicent of the 19th century.  The "Nature" features laid paper with visible chain-lines, groovy retro typography of the sort modeled on elegant fountain-pen script, with some of the lettering in green, and green butterflies on the cream background.  On the other wines, some lettering is black, some red.  Their wine is classic French tradition-based quality product; they know it and the labels send the message too:  the design isn't uniform, but it's clearly a family of designs, discreetly but unmistakeably radiating the glory that is France at its best.

Cuvee Catharine Brut Rose---Henry of Pelham; Bodegas Weinert, Luigi Bosca and Argento Reserva Malbecs

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At wine and cheese two weeks ago at PI, I bought a glass of the Henry of Pelham, VQA Niagara, Ontario, Cuvee Catharine Brut Rosé (non vintage).  At first, I was disappointed that it seemed a bit closed, though fruity and acidic.  Then it opened up, getting toastier (or was that just me) with scents of strawberry and other yummy stuff, but keeping that crisp acidity and clarity.  This apparently costs $30 CDN at the winery, so it's getting up into the range with Champagne, but it's made by the traditional Champenoise method, from the traditional Pinot Noir and Chardonnay grapes, and I think it competes well with French bubbles, which moreover are going to set you back at least $38 at this quality level.  Bottom line, I'd buy more even at this price; I don't give numerical ratings, but take that as a rave review.

My free glass was the Bodegas Weinert Malbec from Argentina---the most Bordeaux-like of the Argentine Malbecs I've recently tried.  Darker, more restrained and tannic than these, it was nevertheless a bit elegant, and a nice wine that I order on occasion with dinner.  At $20 or so at LCBO, I'm perhaps not as wild about it as a few other Argentine Malbecs I've found there:  the Luigi Bosca single vineyard Lujan de Cuyo 2006 Malbec Reserva is fantastic, melding silkiness and Bordeaux-like caramelly oak notes with beautiful, not-too-jammy fruit ($18CDN);  the Argento reserve Malbec 2005 ($12) similar but perhaps a bit less complex, and with definite emphasis on blueberry fruitiness slightly reminscent of some Aussie Shirazes.  Again, the relevant "rating" is that I bought more of both of these after tasting them.  Fittingly for wines from Argentina, they are both great with steak.

Krugman calls out Chile/Chicago-boys spin, and tells us he told us so on Malaysia

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For anyone who completely buys the story that the Chicago-boys free market policies did wonders for Chile, Paul Krugman has an interesting twist.  Look at his graph; it really jumps out that citing historical growth rates to make points about the effects of economic policies can be hugely affected by where you choose your endpoints.  As reference points, Socialist Salvador Allende became president of Chile on November 3, 1970, and was killed in a right-wing coup led by Gen. Augusto Pinochet, on September 11th, 1973.  You can see in Krugman's graph that Chilean GDP, which had declined roughly 10% under Allende, continued to drop another 14 percentage points below its 1970 baseline, in the first year after the coup.  After poking above that baseline in 1980 and 1981, it dropped as part of the general Latin American debt and economic crisis (which I view as associated with global effects of the US inflation-fighting tight-money recession induced by the Federal Reserve board and its chair Paul Volcker at the end of the Jimmy Carter years) and didn't reach 1970 levels again until 1988.  In 1988, voters rejected the prospect of eight more years of Pinochet in a plebiscite, leading to negotiations and elections in 1989 resulting in Christian Democrat Patricio Aylwin taking over the presidency.

Perhaps part of the continued (and even greater!) decline of GDP per capita under the first year of the Pinochet dictatorship can be laid to the continuing effects of the chaos of the Allende years (which in turn, some attribute partly to right-wing "economic sabotage" though I'd guess it had more to do with Allende's policies).  But the rapid recovery from the trough reached in 1975 can hardly be viewed primarily as testimony to Chicago-boys-style ultra-free-market policies:  it was probably in large part recovery from an economic crisis, to a point where resources were again fully employed, though presumably having a functioning market economy---whether Friedmanite or just run-of-the-mill-liberal-democratic--played a crucial role.  The whole business of just what the caused of the economic chaos in the second half of the Allende administration is interesting and important, and I'm not an expert here.  I think hugely stimulative monetary policy, leading to inflation, was an important factor.  Capital flight may have been another.

I think the fact that "Chile was hit much worse than the other major players" in the early-1980s Latin American economic crisis is linked to another historical point Krugman recently reminded us of.  Many of us remember the 1996 Asian financial crisis, which I view as having been, let us say, not helped by the Clinton-era crew of economists and Goldman-Sachs-linked financial types promoting financial market liberalization in Asia.  Malaysian dictator Mahathir imposed controls on the flow of capital out of the country, after the crisis hit, and was excoriated for it by many of these same liberalization-promoting types, but they worked and the Malaysian currency and economy weren't hit as badly as predicted, and as many other countries were.  Chile had some of the most liberal capital-flow regulations in Latin America at the time of the early-1980s economic crisis, and I believe this is generally viewed as part of the explanation why it was among the worst hit.  Indeed, I think the episode is one of the things that led the IMF to reconsider its position on capital flow regulation.