Curiosity killed the Euro

About ten days ago, the Commission announced plans to regulate the rating agencies 1,2,3. Defenders of Moody’s, Fitch and other S&P responded by saying “don’t blame the messenger“. Their argument: the rating agencies are just evaluating the financial health of states and is not responsible for any crisis. In other words, don’t blame the thermometer if you have a fever.

That is true: indeed, the original cause of financial crisis is the management by states of their finance.

However, it is not fair to say that Rating agencies don’t have any responsibilities. Why ? Because of quantum physics of course !

Indeed, when one is probing for the temperature of something (outside, cake, …) with a thermometer – as rating agencies pretend they do with public finances – the thermometer does not change the temperature of what you’re measuring the temperature of (or very very very very little). This is what’s called a non destructive measurement.

But, for quantum systems, observation perturbs the system and force it to adopt a specific configuration – that is why looking into the box might kill the cat. It is very clear that it is this kind of observation that are made by rating agencies: the result they publish are fixing the financial world into one state of mind.

When the weather channel announce that it is 10˚C outside, nobody consider that information as the unmovable truth, but when a rating agencies says one country will go bust, the financial world react to this announce in a way that prevent any escape from this predicament.

To conclude this reflection, I’ll say that there is one way for the rating agencies to be effective thermometer: just to not publish their estimations will make their observations non destructive and not constraining on the finance of states.

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One year of € vs. $ data

For one year, I have collected the euro/dollar exchange rate data, via the yahoo finance API. After those twelve months, here are some data crushing points :

One year after

The first point in my data set is 1.394400 $/€, the latest is 1.357997 ; a difference of 0.0364 or -2.61 %. Quite a loss, even if, were it not for the recent drop, the balance of up and down would have been null.

Data analysis

Over the year, the average exchange rate was 1.392 $/€, with a dispersion of 0.045, a dispersion that is spilling on the lower side (negative skewness).

If we look at the spread of each value around each day average, the standard deviation is 0.0032 dollar/euro, with a slight tendency to go to the lower values (negative skewness again). One might try to fit a gaussian distribution (pointed line), with a correct but not perfect outcome : the distribution is broader at larger values and tighter at the center.

The day to day change in the daily average value is zero in average, but is clearly skewed to the negative, hence a regular drop in exchange rate during the year. 

Furthermore, the day to day change is often greater than the daily dispersion of data, this implies that the natural variation during the day are smaller than global variation over several days. Without surprise, there is a correlation between large daily variation and large day to day change in value, but with only a 6% correlation coefficient.

If you wish to investigate this data yourself, you can find the data set here – the format is “%m/%d/%Y %f” with first the date, second the euro/dollar exchange rate. 


Neutrinos on hyper-drive

Last week, the world of physics and beyond was shaken by the news (largely distorted by the media) than neutrinos may be able to go faster than the speed of light, thus breaking the speed record in the universe and also the theory of relativity pioneered by A. Einstein.

During the last euro-apéro, it has been suggested that I write a short note to explain what just happened and what it means for us(you) normal human beings.

What’s a neutrino ?

That is a very good question, in fact the neutrino is not the best known particle in physics. Still, there is plenty to tell about it. First, it is one of the building blocks of the Standart model, which describes very well how the world around us works at the tiniest scale (less than one femtometer, the femtometer is to the meter what the millimeter is to 1 trillion kilometers).

The neutrino is not charge (that means not sensitive to magnetic fields) and is very light.

The consequence is that neutrinos do not interact often with matter. Actually, hundreds of billions of them are passing through your body as you are reading these words, but no worries, it is very rare than a neutrino collides with any atom in matter. It is therefore very difficult to study the properties of this particle.

What has been measured ?

In the experiment that made the news last week, the time of flight of neutrinos have been measured between a production facility in CERN (near Geneva) and a special detector in Gran Sasso (Italy), more than 700 km away. As said before, interacting very rarely with matter, the neutrino don’t suffer on their way and there is no need to build any tunnel or guide between the production and the detection.

It has been measured an early arrival of the neutrino, as early as 60 nano seconds (or 60 trillionth of the second), in respect to the time the light would need to go the distance. It is a very tiny difference, on a race track it would be as if the neutrino cross the 100m finish line while the light is 2.5 centimeters behind.

Why does it matters ?

As we told, the difference is very tiny, but it is six time bigger than what the scientist who published this story claim to be their resolution, i.e. the accuracy of their measurement. And all that we know about physics of particle today is very clear on the speed limit of the universe, nothing should go faster than light, for a lot of reason, one of which being that A. Einstein told us so. The relativity theory have been tested and proved to be right time and time again and it is a very robust theory that won’t be overturn unless we have evidence that it is flowed.

So ?

What will scientist do now ? First, they will try to reproduce the experiment to confirm the results or prove it to be just an error in the analysis. Theorist will also work on the problem to try find how such things as faster-than-light-neutrinos can exists.

In the long run, it is very unlikely that the relativity theory will be proved incomplete, more likely, we will learn a lot on the nature of the neutrino (maybe finally measure its mass, or discover wether the neutrino is its own-antiparticle) and its interaction with matter.

Nothing moves faster than the speed of light, so you may as well relax.#


Debt crisis, strongly interacting systems and collective motion

It is a mathematical fact that system formed of many parts (a set of variables ) strongly interacting together (what would be put in equation as ) tend to develop a collective behavior (i.e. the variable are linked together). This collective motion can take several forms : periodic variations (), chaotic evolution, or self-enhancement ().

It is very unlikely, unless the system has been very finely tuned that the variables will have a stabilized path, where all variations are damped in the system, i.e. always gets back to a nominal value of .

What does that have to do with the euro crisis ? Simple, replace the system and its parts by the economy, the markets, the banks, the credit agency, … and the interactions by the news report, the press release, the internet, the constant flow of information, … And here it is, the financial ever-falling crisis of the moment, when nothing can stop the down trend for the simple reason that the system is locked into crisis mode.


Numérologie de la crise de la dette et des élections Européennes

Petit exercice de numérologie pour comparer le sentiment de désapprobation par rapport à l’euro et l’abstention aux récentes élections en France.

Les données de bases :

Me reposant sur les sources Wikipedia, nous allons considérer que le taux d’approbation de l’euro en France est de 46 % (soit 54% de désapprobation), les taux d’abstentions aux élections présidentielles de 2007 et aux élections pour le parlement Européen en 2009 sont de 16% et 60% respectivement.

Le calcul :

Nous supposons ensuite que ces votes et opinions sont complètements indépendants, ce qui implique que nous pouvons multiplier les probabilités.

Ainsi, le pourcentage de la population qui est mécontente de l’euro et n’a voté à aucune des élections considérées est (54 / 100 * 16 /100 * 60 / 100) * 100 = 5.2%

De même, le pourcentage de la population qui est mécontent de l’euro et qui a voté à seulement l’une des deux éléctions est 100 * ( 54/100 * 16/100 + 54/100 * 60/100) = 41 % et la part qui n’a pas voté aux élections européennes et est mécontente de l’euro est de 100 * ( 54 /100 * 60/100) = 32 %

Enfin, de toutes les personnes mécontentes de l’euro, 100 * (16 / 100 * 60 /100) = 9.6 % n’ont pas voté durant les élections mentionnées.

Conclusion :

Les chiffres indiquent que, sans être majoritaire, la part des personnes mécontente de l’euro qui boudent également les élections – en particulier européenne – n’est pas négligeable. Plus d’une personne sur deux qui n’a pas voté aux élections européennes est mécontent de la monnaie unique, même si elle a choisi de ne pas s’exprimer par le vote sur les questions Européennes en général.

N.B. : Attention, je suppose ici des probabilités complètement décorrélées, ce qui est une approximation du calcul.


Dépenses inutiles ?

J’avais il y a quelques mois exprimé mon scepticisme vis à vis de la nécessité du projet de positionnement par satellite Européen Gallileo, arguant que ce projet très couteux ne va pas apporter grand chose par rapport aux systèmes déjà existants (GPS, …).

La commission n’a pas tenu compte de mon point de vue (en même temps, ça m’aurait surpris) et vient d’annoncer que

A un moment où Galileo mobilise une bonne partie des crédits européens pour la recherche et les projets scientifiques, il aurait été bienvenue que ces 500 millions soient redirigés vers d’autres applications qui apprécierais un petit soutient financier. De façon plus générale même, 500 millions d’euros, ce n’est certes pas énorme, mais ça pourrait être  très utile à d’autres endroits: j’ai entendu dire par exemple que la Grèce été un peu short en cash…

Droping Nuclear Energy: a risky strategy

This is not a secret : nuclear energy is not looked at with favor those days. Germany just decided to shutdown its nuclear power plants over the next ten years, etc Green parties are calling for dropping nuclear power and citizens are more and more sceptic about this energy source.

As welcome as a strategy to abandon nuclear power is, this one presents an important but simple risk: not being ready on time. Indeed, to put a deadline on the use of nuclear energy implies the need to develop alternative energy sources in quantity sufficient enough before the date of the nuclear power plant shutdown. But what to do then, if comes the day, alternative energies are not enough ? There is the risk to extend the life of old nuclear power plant by 2 or 5 years, or more, or to have to import energy, or run on fossil energy sources (oil, gas, coal), or even worse, experience blackouts.

And that is because it is thought only as a transition from nuclear to another energy source. However, it is not enough to compare just the general production capacity numbers but also the details: nuclear power plant are slow to respond to consumption variations and consequently are just the base of the electric grid. On the opposite side, wind or solar energy don’t have the same constancy.

What can be done ? From the strict point of view of safety, a simple solution would be to replace old power plants with new ones, integrating all the latest safety technologies. But of course, that does not solve the problem of the “nuclear” aspect of the energy.

Alternative strategy

A better strategy would be to fight the problem by the other end: i.e. what make nuclear energy so needed. We need to change the distribution of electric power (too sensitive to consumption variation) and the consumption itself (which generates too much waste). Associated to the development of alternative energy sources, those evolutions will make nuclear electricity less profitable and unnecessary. Closing nuclear power plant will then be an obvious thing to do and no sane person will think to oppose it.