Negativity

To clarify - quantitative easing (QE) is buying commercial paper of banks, which is equivalent to depositing money at the bank, which is equivalent to giving the bank a loan. CP matures very quickly (1-4 weeks).

If QE doesn't cause banks to lend more, and if banks have to resort to negative interest rates to discourage the risk-averse practice of depositing excess funds at the central bank (see Japan, Dennmark), then the following are happening:

• Banks don't want to lend because:
• They are artificially constrained by government-imposed capital reserve requirements
• They are constrained by increasing % of bad loans, which are increasing their capital reserve requirements 
• They are so administratively inefficient that none of them can do their core business
• They are afraid due to uncertainty about future government requirements or actions
• They see no viable loan applications
• They think inflation will devalue the future repayments they receive
• Companies don't want to borrow because:
• People aren't buying their stuff for a profitable price
• They are afraid due to uncertainty about future government requirements or actions
• They think their company will not grow in the future and/or is already shrinking
• They think deflation will make their debt painfully expensive to pay back

If QE broadens to include equities or real assets, this is exactly equivalent to government manipulation of markets or nationalization at the extreme. This is not the behavior that made the US the world's largest and strongest economy. This is not the behavior that makes other governments want to sell their own currency and hold their money in USD. This is not the behavior that makes the USD the currency of reference on the vast majority of financial tranactions worldwide, including most oil and other commodity transactions.

Rather, this is the behavior of a failing state - Post-coup Thailand; Argentina; Ecuador; 1980s Mexico; 1970s Iran; Stallinist Russia, Mao's China.

But ... isn't the core issue really about lagging demand? If so, that is driven by:

• Consumers who overspent in the past and are paying down debt (including student debt?) instead of consuming
• Consumers who are broke and/or don't have a reliable income and/or are delaying consumption because they are still acquiring skills to build a career 
• Consumers who are afraid for the future and are saving everything they can
• Consumers who are delaying purchases because they think deflation (aka industry-wide discounting) will mean cheaper prices in the future
• Fewer consumers (ahem, one-child-China?) 

While I'm not going to take a position on which of the above are the primary drivers, I will say that we all keep hearing how expensive it is to have kids. Betcha didn't think that's where this was going. No debate about the cost of kids, but it's interesting to break that into component pieces:

• The "we don't want to give up our current level of consumption/lifestyle" aspect
• and the "the cost of having kids is high and increasing rapidly" aspect
• and the "we are saving for our own retirement and thus don't need a gaggle of kids to support us when we're old" aspect, which may sound silly until you look at how we took care of the elderly 150 years ago. (Hint: it wasn't an assisted living facility covered by a supplemental insurance policy).

All of the above decrease the motivation to have more than 1-2 kids, if at all. The planet is crowded, and emerging economies continue to make it more so, but they don't consume at the same levels we do (yet). Coastal China, Mexico, Philippines, and urban India all demonstrate that consumption patterns can swing from subsistence to luxury good quickly (in way less than a generation). So, despair on this front may be temporary. Or maybe not.

Dronestrikes over US Soil?

Flying into LaGuardia (NY) this weekend, at probably 2000 feet, I looked out the window to see the sun glint momentarily off a tiny metal object just a few feet below and a few hundred feet to our port side. It was a drone being flown by some idiot in some backyard in Queens.

If birdstrikes can bring down a passenger plane (remember "Sully"?) what do you think a hobbyist drone would do to an aircraft engine?

We have the technology to prevent that, and it would be criminally negligent to delay implementation of systems to protect our planes and people. Airports have radar monitoring of their column or airspace. It's probably not accurate enough to find a small hobbyist drone, so it needs to be improved. Once they are identified, the airports need lasers or laser-focused electro-magnetic pulses strong enough to disable a hobbyist drone. These weapons wouldn't be strong enough to hurt a plane (or even a military drone), but could prevent a dumb or malicious hobbyist. 

Income Inequality

Nobel and I don't seem to agree much these days. First Obama. Then (no) Kirzner. Then Piketty.

I think at a minimum, they should require people to explain their positions before being considered for a prize. Piketty, for example, seems to have watched enough MSNBC and Fox News to master the art of scare-mongering soundbites. He has also mastered the art of economic analysis of large data sets. However, I've yet to see him effectively connect those two things. In other words, he really hasn't been able to convincingly show that his data supports his soundbites. Larry Summers, for one, agrees.

To wit,I've been thinking about his position on income inequality. Think about the amount a product or service can be sold for as a function of:

raw materials + labor inputs (human or machine) + intellectual inputs (human or machine) + profit (or loss)

Each of those inputs has an associated dollar value, but it also has a contribution factor. For example, people pay a lot these days for fancy tasting menus at top-notch restaurants. The meat and veg and spices to compose the meal might contribute 20% of the cost. The chef had to exert a lot of intellectual work to invent the amazing recipe. This must be amortized over all meals sold, so maybe 10% of the cost. On the other hand, he might spend only 2 minutes per diner to quality-check and coordinate their specific dishes, so maybe only 2% of the cost. The dish washer might exert a lot of labor (so, maybe 5% of cost) but not much intellectual effort (1% of cost). He may use a medium level of machine labor (washing machine) (amortized as 2% of cost) and a low level of raw materials (soap and water contributing less than 1%).

Here's where I get controversial. In terms of output, clean dishes are only a small contribution to the overall "value" of dinner bill. People expect clean dishes, but they don't pay extra for extra-clean ones. They pay for the experience of good service and interesting tasty fun food. Thus, a stellar chef's contribution to the overall value is huge. He does this through inputs of his labor and intellectual R&D, possibly facilitated by some machine inputs (mixers, stoves). More investment by the chef would drive cost higher but would also support a higher price (El Bulli?). One way to think about this might be to have a line item on the menu and bill for "clean plates." How much would customers be willing to pay for this? Let's assume the restaurant gets customers to pay $36 for the fancy food and $4 for the clean plates. For simplicity, let's leave out the front-of-house (waiters, bartenders, etc.). Maybe this is a fine-dining food truck situation with just 2 workers.

• If the dish washer and chef were paid in the idealistic communist way, they would each get 50% of the money left over after paying for raw materials, equipment, etc (aka "cost of goods sold" in accounting terms). I think most folks would struggle to support Marx at this point, but Piketty certainly tries to argue for forceful wealth distribution in order to move in this direction.
• If they were paid in the idealistic socialist way, the dishwasher would get 40% of the money left over, based on his level of effort. This more or less aligns to the classic economic principle of "marginal price of labor capital" which has been, like all other economic theories, criticized. 
• If they were paid in the idealistic capitalist way, the split would be based on labor pricing arbitrage mechanisms and efficient markets where the restaurant would post an open position notice and would seek out the best candidate who responds. Commensurately, each job-seeker would scan the job market and consider all the things they could do with their time (or other capital). The "breakeven" point between these two would determine how much each person got paid. This tends to lead to a fixed wage rather than a percentage of the revenue.
• An alternative capitalist model might see that customers are willing to pay $4 for plates vs. $36 for food and compensate the chef and dishwasher accordingly.  

What would Piketty say, based on his worry around human labor being pushed out by machines? To explore this, let's think about machine costs in a way that is comparable with human labor. To do this, we take the initial and ongoing cost of the machine and amortize it over all products/services sold.

We can represent this graphically as follows:

This enables us to play out Piketty's concern. Imagine an entrepreneur was able to have a robot make those fancy dishes from the chef. The piecharts would change:

In our example above, the chef provided the critical intellectual and labor inputs to invent the recipe.The entrepreneur also provided intellectual and manual labor when he designed and created the robots. On a per-meal basis, the amortized fraction of those efforts is tiny if the robot makes a huge number of meals ... or is copied. While the machine has taken over the chef's per-meal labor, the dish washer still has to manually do his part.

Piketty's million-dollar question is who should get what share of the revenues? Since the dishwasher is the only one really doing manual labor, should he get all the profits? Since the chef is no longer involved in the creation of individual dishes, should he get nothing? Should the chef's paycheck now go to the owner of the robot, even though they don't lift a finger? Piketty worries that this type of shift from human (labor and analytic) effort to machine (labor and analytic) effort will mean that laborers will get a decreasing slice of the pie, while owners of computers/machines will absorb the rest. For this reason, he says wealth will pile up in the hands of "a small elite."

Bold and headline-grabbing, but pretty full of unsafe assumptions.

Capitalists might say each owner of capital (intellectual or physical or labor) should get compensated according to their contribution of that capital to the product/service which is sold. They would look to markets and pricing arbitrage to help guide the pie split. For example, If the restaurant put out a dishwasher job posting and got no responses, they'd have to increase the salary until they got enough responses. If the chef didn't feel he was well-enough compensated, he wouldn't share his recipe. And so on. This talks about HOW compensation would get determined, but it doesn't take a position on WHAT each person should get paid. Thus, capitalism is NEUTRAL on the subject that Picketty is probing. His concerns don't point out issues with capitalism. Sadly, he is confused and generally french about this point. "capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine the meritocratic values on which democratic societies are based."

Fallacious logic. Nothing in capitalism forces inequalities or undermines meritocratic values.

Then he builds on this bad logic to say "because the rate of return on capital is now higher than the growth rate of the global economy, the proportion of the world's wealth that is owned by a small elite will likely keep increasing"

A couple of counterbalancing considerations:

• As the revenue "pie" grows, there is more to spread around. So, if a dish washer used to get 5% of $100 ... and now they get 2% of $500 ... their income has actually gone up, though their percentage has gone down. Therefore his observation doesn't necessarily lead inexorably to his conclusion (or fear) of poverty-stricken laborers.
• We should really focus on whether his "small elite" are owners of capital (Marx's fear, rewarmed) or idea creators (what happens every day in silicon valley and in every vibrant business). One really could be an ever-shrinking group of ever-more-wealthy "owners" ... the other is an opportunity available to every man. 
• His statement about global growth and rate of return (ROR) assumes a zero-sum game where the owner's profit increase is necessarily the worker's loss. However, he doesn't prove this through data analysis. In the example above, once the robot steps onto the scene, the chef's and dishwasher's incomes likely go UP even though they don't own the robots because revenue increases 300% but the number of people sharing it only increased by 33%. There's more money to be shared. This will continue as machine automation expands. Therefore, again, even if I agree with all his observations/data, I don't necessarily come to he same conclusion
• One way to think about it is to look at the publishing business (music, book, software, photo, etc.) where initial ideas get licensed so the creator (chef AND entrepreneur) get a slice of the profit, but so do the per-item laborers. 

In my opinion, Piketty's data simply tells us that we need to move to a "publishing" type of compensation model in more and more industries and areas. I say this recognizing that the publishing industry is in crisis, itself and is seeking better ways of operating (TIDAL, for example).

Capitalism doesn't do the greatest job of this, but it doesn't do damage either. It's answer is that the idea creator should accept bids from investors. The investor who is willing to pay the highest price should get to buy the license to use the idea. They would then put it into place (by combining the idea with financial, physical, and labor capital) and would sell the output for the highest price they can get. Labor capital would get paid for their work. Raw material suppliers would get paid for their stuff. Then the remaining profit (if any) would go to the investor. Hopefully, this profit eventually accumulates to cover the initial payment to the idea creator, after which, yes, there is a lot of profit for the investor, which over time could enable him or her to buy more and more capital, through which he or she would hope to reap more and more profits ... all while continuing to pay the laborers what they always made (or more).

Or maybe the investor does't really make more and more money as time passes. Maybe the cost of raw materials soars. Maybe someone else copies the idea and is willing to sell the product slightly cheaper. Maybe people stop liking the product. Maybe a new technology renders it obsolete and worthless. Maybe over time there are fewer and fewer laborers willing to do the work and he has to drastically increase wages to retain people. The government could shut him down or take his company. Customers could get sick and sue him. Hackers or disgruntled laborers could take all his secrets.

It's not easy. Even done right, this requires a ton of information and specifically foresight right upfront when prices are set for labor and for ideas. Since we can't really know the future, that's risky business. To encourage people to risk their hard-earned money on something like that, the potential profit margins have to be pretty awesome. The bigger the gamble, the bigger the potential has to be.

Having said that, I suspect we need to (and will) find better ways (without throwing away capitalism) to determine those prices for capital, including labor, ideas, etc. This would be a better focus of our collective attention than wringing hands and/or legislating in reaction to Piketty's soundbite.

Finally.

Yes, finally.

What Will Tomorrow Bring: Retro Fashion in Organizations

The organization, whether group, tribe, team, corporation, or government represents the ugly, bloody edge of our evolution as social animals. It's complicated ... and we're not NEARLY done yet. Perhaps a few millennia down the pike we will get it right.

At the moment, I feel safe in saying that we are all collectively burnt and battered into pessimism about our ability to get it right. Look left. Look right. Share your booze with your neighbor. Their loosened lips will start to tell you how anti-government, anti-bank, anti-corporate, or anti-politics they are. 

I can't purport to foresee the best master plan. But I am an organization-man. Based on daily frustrations, I can highlight a few very very VERY simple things which will ever-so-slightly evolve us. These things were once fashionable in organizations, but have gone out of style. It's time to go retro.

• Meeting agendas and minutes
• Documentation of decision taken and justification thereof
• Reading materials prior to meetings
• Discussing and understanding issues prior to meetings
• Taking time to give the context of a discussion beforehand
• Following up on your OWN To Dos
• Speaking in simple sentences which directly respond to the question at hand
• Making decisions based on informed analysis and then EXPLAINING your decision-drivers to anyone who will listen. Rinse and repeat until you have consensus.
• Saying you were wrong. And knowing why.
• Building objective business cases for investments
• Viewing man/hours as a valuable asset you are investing
• Overtly recognizing and funding innovation time at all levels (except at Google, of course)
• Having a secretary to keep the high-priced execs from spending hours formatting documents and finding conference rooms for meetings. (talk about inefficient division of labor)

Greasy Thinking

I love to hate Krugman's one-size-fits-all big-government answers to every problem but today through clenched teeth I have to agree with his op-ed yesterday (partially). Europe and the Euro need to put their big boy pants on and learn some bladder control. Fast. Diapers just aren't appropriate anymore. As he said in the NY Times today:

For the past two-and-a-half years, European leaders have responded to crisis with half-measures that buy time, yet they have made no use of that time.

Not sure how that jives with this first sentence, but anyway I agree with him: The Greece problem is not new. The Economist summarizes well this week:

Greece really has suffered: between 2007 and 2012 its economy is expected to have shrunk by almost a fifth. The economy is being strangled by a severe credit and liquidity crunch, with more budget cuts and tax rises to come. Even if all goes well, Greece’s debt will be 161% of GDP next year.

The Spanish, Portuguese, Italian and Irisih problems are not new either.

The facts about Europe (and especially these retarded countries) which have created the current situation are not new. The EC, the EU, the EMU, the European Parliament, the European Presidency - all impotent, except for farm policy (huh?). National governments, all ineffective, focused on pandering, philandering, scandal (either chasing or running away from). Citizens feel emasculated (at best), despondent and dependent (especially those just out of school), and generally pessimistic. Employers are hamstrung on everything from employment/firing to compensation to innovation to outsourcing. Consequently, employees are lazy (not dumb) and inefficient. The governments have pissed away more than enough livelihoods. They need to get busy.

As Reagan put it,

There are no easy answers but there are simple answers. We must have the courage to do what we know is morally right.

The answer to Europe's issues is simple. It may seem odd to use the phrase "morally right" in this case, but it IS a moral issue for Europeans. It should be if they care about their children, their nation, their place in the world. 

Krugman's focus yesterday was on inflation, but the price level is not the core problem, nor is inflating your way out of debt a silver bullet. Happily, it will make European products less expensive. Here's to more Bordeaux and aged Gouda and European vacations! This, however, just corrects an existing price misalignment. A croissant and coffee shouldn't cost the equivalent of $20. That's just nuts. The reason Krugman is wrong is simple:  prices go up, but productivity per worker doesn't change. Every European becomes poorer. Fewer car/house/consumer loans/credit cards are available. House prices go down. Companies can't as easily justify borrowing to invest or launch new products. Which means less innovation and growth.

And that's exactly what Europe needs, particularly in the south: GROWTH. Even Krugman will agree with that usually. 

The only ways to get there are through INNOVATION, PRODUCTIVITY, and/or DEBT.

The last one is Europe's current favorite: beg, borrow, and steal. From the rich. From the companies. From each other. From the future. Money flows from northern countries through the EU/ECB to southern countries without compensation or realistic ability to earn enough to pay it back. Money flows out of companies' profits and employees' income through high taxes but is not set aside for their own social welfare. Instead, it is used to buy votes from those without jobs and/or those with political power. Quoting Krugman again:

Europe’s central bank is, in effect, financing this bank run by lending Greece the necessary euros; if and (probably) when the central bank decides it can lend no more, Greece will be forced to abandon the euro and issue its own currency again ... This demonstration that the euro is, in fact, reversible would lead, in turn, to runs on Spanish and Italian banks

It's just not sustainable. History is littered with examples of failed currencies and governments who thought they could just borrow their way to success. 

Instead, the core issues of low productivity, low innovation, and perverse incentives need to be addressed. Europe needs to start acting like a single community rather than a bunch of clans of grumpy neighbors. Europe needs to recognize the limits of socialism in the face of globalization. Europe needs to acknowledge global realpolitik. Protectionism and nationalism are luxuries they can no longer afford. The Euro cannot be a fiat currency - it needs backing based on the power of taxation and reserves.

On Productivity and Innovations:

• Ya just gotta free up the labor market, folks, or productivity is never going to get better. People/roles/trades/companies/industries/countries (including those abroad) which are more productive than others should be allowed to crowd out the less-productive. Languages can be a barrier, but to the extent that, for example, a smart and/or ambitious Pole can speak enough Italian or German to work abroad, this should be enabled, not discouraged. Even in "protected" industries. Spanish companies should be able to put callcenters and operations in, for example, Guatemala.
• Extending that point, you also need to accept that people/trades/industries/countries which are less productive are going to be less wealthy. Socialism hates inequality, but if a Finn can produce 4 cars a day while an Italian can only produce 3, the Finn should make more than the Italian. Similarly, if a Greek or Bulgarian (gasp!) is willing to earn EUR10 an hour to grow grapes while an Austrian insists on EUR25, the Greek and Bulgarian grapes should be trucked to Austria, crowding the Austrian farmers out of the business or forcing them to take a pay cut. 
• Extending the above: Learn from the US (both what to do and what NOT to do) about immigration and foreign workers. Let 'em in! Create a controlled and net-positive process (as explained in my prior blog post) and then open the gates. For one thing, allowing younger immigrants into the workforce is the only way you will be able to pay for your pensions and healthcare systems going forward. There should be no prohibitive barriers against Uruguayans moving to and working in Spain, for example. Just make sure you charge them for it.
• Aside from the ability to hire/fire the people they want and the ability to pay a market-clearing wage, companies need the ability to offer both contract and full-time work. They also need to be able to offer various tiers of benefits for interns, new-to-the-workforce, tradespeople, professionals, executives, etc. It can't be just the one-size-fits-all government-dictated (tarnishing) gold-plated package. A hundred years ago, Hayek correctly described where that road leads.
• Moreover, you can't have your cake (of national champion companies in every industry) and eat it too (expecting them to be globally competitive and profitable without being able to scale). Accept that you are a common market and allow Euro-wide champions to arise in whatever Euro country they may. No longer can the Portuguese government spend money it doesn't have to promote and protect their own national paper, airline, or cell phone companies. It's ridiculous for richly-paid Italians, French, and Germans to produce nearly 10% of the world's steel ... at a loss when all governmental supports are factored in. Buy Turkish or even Indian steel!

On Perverse Incentives:

• Government borrowing needs a revamp. Existing sovereign bond markets need to be priced based on country risk, not currency risk. Separately, the ECB should introduce Eurobonds which are guaranteed by all countries in the monetary union. Individual countries would buy SDR-like rights by either depositing collateral at the ECB or by legislating pledges of future tax receipts. They would then be allowed to request that the ECB issue bonds on their behalf, most of the proceeds going to the national government, but with an adequate reserve withheld by the ECB as collateral against future payment. Overall Eurobond issuance would be capped by the ECB based on market conditions and European Parliament votes.
• More radically, impose, by irrevocable treaty, a 5% Eurozone value-added tax. Simultaneously reduce national VATs by the same amount such that there is no impact to consumers or businesses. These funds go to the ECB and are distributed according to agreed rules. In other words, taxes collected in Spain are sent to the ECB but might get sent right back to Spain if all's well. However, if one country is circling the fiscal drain, this provides a cash buffer to protect the ECB and the other Eurozone countries from getting sucked into the vortex. Most importantly, this creates a "lever" of power by the ECB over individual countries. If you don't live up to your commitments, you don't get your 5% back. The bank NEEDS this power to protect and defend the currency. It also needs it to enforce compliance with treaties and commitments.
• Enforcement of the monetary union's and European Parliament's targets (ex. Growth and Stability) must be strict. Greece has NEVER met the very friendly targets they negotiated. Never intended to, I'm sure. They should be fined. They should not get their 5% back. Their voting rights in the European Parliament should be suspended. ECB transfers should be suspended. International remittances and account balances should be frozen.
• While you're at it - fix the banking system's capital adequacy rules. Sovereign debt is NOT risk free.  

All graphics from Economist.com. 

Yeah! What HE Said: Fareed Z on the 9-9-9 Plan

You have to understand: complexity equals corruption. Americas corruption is institutionalized and legal. The US tax system is not just corrupt. It is corrupt in a deceptive manner that has degraded the entire system of American government. Congress is able to funnel vast sums of money in perpetuity to its favored founders through the tax code without anyone realizing it. The simplest way to get the corruption out of Washington is to remove the prize that members of Congress give away. A flatter tax code with almost no exemptions does that The simplest fix to our tax code would be to lower the income tax dramatically, lower the corporate tax, and instead tie revenues through a national sales tax or value added tax. The US is the only rich country in the world without a national sales tax What is the appeal of a consumption tax? First, it's efficient. Lower fraud. More stable. Reduces consumption and borrowing at the household level.

Woah, China!

Forget The Vest ... fear THIS:

On Monday, China's premier Wen Jiabao lowered the economy's growth target to 7.5 percent from 8 percent, where it has stood for years.  - AP

Early, of course, to sing a dirge but China's "golden era" of ridiculous growth at all costs seems to be getting a bit more expensive these days. Expect to SLOWLY see:

• Reduction in expenditures for extravagant infrastructure projects
• Asset management shift from their current stance (overweight US Treasuries) to something more akin to Singapore's Temasek
• A review of the commercial tax and licensing structure (hopefully not a Chinese Raj)
• A harder line on international trade, both in terms of limitations and in terms of tariffs
• An attempt to diversify labor-intensive businesses across labor pools (inner-China manufacturing zones, African investment zones) 
• Industrialization deeper into inner-China
• All of which will help pay for increased, but highly-targeted social support funding including medical care and pensions, as well as their continued military build-up
• Targeted efforts to increase enforcement, probably with a focus on IP law, financial regulation, governance (as the Economist said a few weeks back, the Chinese government is the only group that has actually read the entire Dodd-Frank act)
• Maybe even some efforts to address environmental sustainability issues

A better set of incentives to maximize economic efficiency by focusing directly on maximizing economic "intensity"?

Various economic systems have tried to determine the best allocation of goods, services, and capital (which includes labor, money, natural resources, land, etc). Capitalism allocates capital based on who can think of the most profitable use for that capital. This encourages risk-taking and discourages equality. In this system, people who grow wealthy by taking smart risks with their capital "deserve" the resulting profits. People who go bankrupt by taking dumb risks "deserve" that too.

One unfortunate side effect of wealth-creation under this system is that some people stop making smart capital-allocation decisions and become capital hoarders. They don't care that they are creating little value out of the capital, either because they expect the value to go up, or because they have sufficient personal wealth to meet their own needs and wants without squeezing the maximum value out of each asset.

In this case, capital becomes inefficiently allocated to the detriment of the "have nots." Second homes sit empty while homeless people sit on the street. Farmers in developed countries are paid to NOT grow crops while whole villages in developing countries starve. In other words, the usage of that capital (the "intensity") is lower than it could be.

So my challenge to my fellow readers is: could we revise the incentive mechanisms to encourage maximum capital "intensity" while preserving those components of the system which encourage the necessary innovation, risk-taking, and reward-reaping?

Less is More

From today's Meet the Press:

Kramer: The CEOs I talk to - they're hiring ... in Russia, they're hiring in Brazil, China ... its rather quizzical that we know what the Communists will give us, but we don't know what the capitalists will give us.

Greenspan: Investment occurs when you have a stable economy and when you can foresee what's going on in the future ... it's very critical that we get the uncertainties out of the system.

It's simple math, included in pretty much every good risk model - volatility is a multiplier on risk. Higher risk leads to lower willingness to invest at a given return. (Smart) investment is a multiplier on growth. Growth is a multiplier on income. Sustained income (without excessive debt) creates wealth.

Washington ... don'tcha want wealth? Think of all the new taxes you could levy.

Follow Up: I Keep Waiting for Somone to Say "Joke"

Stuff ain't cool unless it's secretive. See how it worked for Nixon? He was about as un-cool as they come until ... well, you know.

In that vein, the Nobel Peace Price nominees are kept secret for 50 years in order to avoid offending anyone ... and to respect Alfred's will, in which he ordered that the Peace Prize be the "coolest" of all prizes offered.

So we'll never know which deserving candidates really got snookered in this year's run-off for said prize. In lieu, more than one reader/friend (you know who you are) has suggested I come up with my own list. I'd never be so presumptuous as to assume I knew better ;-) but here are just a few names I might have offered if asked:

The US Military - How many lives HAS the US Military saved? Seriously, folks, is there any other entity on the planet who has actually DONE more to quell conflict? Every life is valuable - everyone is someone's son or mom. These guys are the only group on the planet willing to make the REALLY tough decisions about life - their own and those of others. If this is too big a group for ya, pick the current leaders - Gates, McChrystal, Mullen.

Ronald Reagan - Jeez, where to begin. Not only did he take the first steps to de-escalate the Cold War, he finished the job he started. He understood this had to be done from a position of power. Along the way, he left us with guiding principles that serve us well even today. "Trust but verify" would get us a lot further along with the Evil Leaders League than sending the Clinton twins for photo-ops.

The faceless, nameless, and thankless who dedicate their lives selflessly to promote peace one person at a time - Each of us knows one, but no one can see them all.

SOS Children’s Villages - In their own words, the "world's largest charity dedicated to orphaned and abandoned children"

Morgan Tsvangirai - Pick your metaphor. He put his life on the line. He went all-in. He took a leap of faith. He spoke truth to hideous power. He stood toe to toe ... and continues to do so in the most peaceful, calm manner possible.

Mordechai Vanunu - On a one-man lifelong crusade against military escalation.

Japan - For quietly fostering over 50 years of peace in Asia

Romeo Dallaire - Betcha don't know this one. Look 'em up.

Bono - If you don't know this one, your name must be Osama.

Wei Jingsheng - Oft mentioned as a candidate, and for good reason. Standing up to the People is beyond ballzy.

Helmut Kohl - Yeah, really. How quickly we forget. He accumulated and then spent incredible political capital to see through the peaceful reunification of a nation. Who'd have thought a commie police state could be turned into a beacon of democracy and capitalism in a mere decade? Who'd have thought West Germans could be convinced to effectively donate a quarter of their income for a decade or more to fund the reconstruction of the rusty East

Gerry Adams, Martin McGuinness, Ian Paisley, Hugh Smyth, Tony Blair, and Bertie Ahern - One of the world's best examples of conflict resolution, de-escalation, de-militarization, empowerment, and legitimization. They dealt with an incredibly sticky wicket with patience and trust from the grassroots up. In a scary world, they proved that, at least in some cases, there IS a way out of terrorism ... err ... I mean 'troubles.'

Gates Foundation - I'll never understand why anyone considers it novel or controversial that development creates stability creates wealth creates peace. There are too many examples to list, yet the Gates foundations is one of the few major benefactors attempting to take whole economies from zero to a stable platform for development in order to facilitate true wealth (and thus peace) creation.

Safaricom, the M-PESA, and the Safaricom Foundation - Along the lines of the above, these guys are establishing the factors of development in order to let poverty-stricken people bootstrap themselves.

The 150 (and counting) Russian Journalists murdered for speaking truth to power

OFAC - Struggling, albeit bureaucratically, but fairly successfully to cut off the lifeblood of conflict.

Rodrigo Lara Bonilla - Colombian Minister of Justice who sacrificed his life in the fight against the collapse of his country into a cartel-owned narco-state.

Virgilio Barco Vargas, César Gaviria - Colombian politicians at a time when that was a decidedly ill-advised career choice.

Talk Amongst Yourselves: The Great Canadian Oil Spill (Sprawl?)

I recently took a trip to the Canadian Rockies to enjoy the pure, spectacular pleasure of Mother Nature's creations as she meant them. Ski the glaciers. Spot moose. Or whatever people do up there.

Then I landed in Calgary. Oil may have paid for the incredible boom ... but it's not oil oozing over all the hills surrounding this former cow town.

It's houses. Scores of thousands of them. I've seen urban sprawl like this in the wastelands surrounding LA, Phoenix, and more recently Dirty Vegas, but it's absolutely shocking to see in sleepy western Canada.

And if you believe, as I do, that sprawl needs to be managed, it's downright sickening. Undeveloped land is becoming as rare a commodity as the black ooze underground. The externalities of greenfield development have never been properly priced. I've spent my entire adult life trying to balance my libertarian tendencies with my desire to see preservation of large swathes of unadulterated nature. Can development be controlled using natural mechanisms without infringing on the basic capitalist tenet ensuring the capitalist's prerogative with his assets?

So far, so bad. So I turn it over to you. What's the answer?