Too many uncertainties after retirement

Today's pension scheme should reduce more uncertainties after retirement; however, sometimes some uncertainties have been ignored by many pension schemes. For example, the retirement age has been delayed several times. However, when the workers start their pension schemes, they expect different retirement ages. This makes the contract unfair and workers should be provided the minimum and the maximum age that they can start collecting their pensions or they should be allowed to have complete controls over their ages of starting receiving pensions.
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We could find out how selfish people are to help people

People are not only self-interested, there are other relative preferences, including social preferences, which have been approved by many economic researches. Charitable giving is one prominent example, suggesting people do care about others in need. Andreoni (2006) suggests most giving is made by individuals. The paper also shows that giving behavior is constant. However, the paper could not fully explain how much people care about others in need, because charitable giving could have other incentives, such as showing off. Therefore, we could compare anonymous charitable giving by ordinary charitable giving. However, by making such comparison, we do not find how much people care about others in need, instead we find how much charitable giving is influenced by using real names. There are always other self-interesting incentives affecting charitable giving, it is impossible to eliminate all; however, we can find out each individual self-interesting incentives affecting charitable giving that we can list and draw a conclusion about how much charitable giving is influenced by the main self-centred incentives. Maybe we do not find out how selfish people are but we can use these incentives to increase charitable giving and help more people in need.

A U-turn in globalism

Currently we can see a U-turn in globalism. The majority of the US population is against the TTP,which had been described by some American politicians as the "gold standard" for trade agreements, even including Hillary Clinton. Border control is put back into the center of political debates in many countries. Tougher border control is more popular in developed countries and it is not only about national security, it is also about the conflicts between the locals and migrants. In addition, all countries are self-centred and selfish, such behavior is natural and should not be blamed. Countries only take the actions that only bring benefits and enlarge the fears of all kinds of potential losses. This increases the difficulty for countries to cooperate together. The danger of the current global environment could distance the relationships between countries and make countries more self-sufficient but slow down the growth speed due to the shrinking PPF caused by the reduced trades.

Several things that we may be too optimistic

First of all, the UK stock has almost recovered from the shock created Brexit. Brexit is still happening and the negotiations have not started yet that we cannot expect that Brexit will not make any impact on the British market. Maybe the sharp drop after the referendum was an overreaction by the market; however, I think the current market growth is too optimistic, though the labour market data seems very strong. Secondly, the US Fed announced that there could be a second interest rate increase later this year due to the market momentum. I do not disagree with the Fed's opinion. However, as we can see a lot from the past that growth always takes relatively slow paces, but the collapse of our systems could happen suddenly. It is important to consider carefully about the side effects of all policies, although there is no absolute security. Overall we can see that people could be frightened by shocks, but much less sensitive about some long term changes.

"Doom cycle" takes place everywhere

Doom cycle is often used to explain the negative effect of central bank regulations that more regulations will be made to correct the system due to the increased complexity caused by the previous regulations. Such phenomena could happen to all fields and such cycle could be seen as the engine of our society and economy optimistically. Because any new facts added into our society and economy, our society and economy become more complex and require even more supporting elements. This generates our invention and innovation. However, when we are entering into more fields, the speed of invention and innovation in one field becomes slower due to the constraints of our abilities and resources. Therefore, when our society, technology and economy are growing, we could see a slower speed of invention and innovation, but the invention and innovation are taking place in much more fields at the same time.

Should PayPal cooperate with Visa?

PayPal and Visa previously competed against each other; however, they build up a partnership that PayPal can now access to the Visa's contactless payment points in America while PayPal stop encouraging its customers to link to bank accounts and Visa will provide some economic incentives to PayPal in return.  It seems that both companies can win greater revenues by accessing to larger markets. However, my opinion is that Visa is a bigger winner in this partnership. Firstly, Visa infiltrates its business into PayPal's business when more PayPal customers link their accounts directly to Visa. This could be seen as a strategy of Visa extending its business among its existing customers. On the other hand, PayPal can receive  economic incentives from Visa and make PayPal not just digital but also physical as well by having access to the contactless payment points. However, compared with the existing Visa customers linking their PayPal accounts to Visa, the PayPal customers may not have the same incentive to use their PayPal physically as they have many more alternatives, such as Apple Pay. To conclude, Visa cooperates with PayPal in order to enter a limited but less competitive market (the PayPal customers), while PayPal cooperates with Visa to enter a wide but more mature and more competitive market; therefore, I believe Visa expectedly benefits more in the partnership than PayPal does.

What does China want from other countries in the G20 meeting?

The Chinese finance minister said that the G20 countries should redouble their effects to boost the shared growth and make their monetary policy more transparent. From his words, we can see that China wants its currency to depreciate in order to boost its exports, so we may come to this conclusion that in the future decade China will put a lot of effort to maintain its global manufacturer position. The falling global trading worries China a lot that it urges other G20 countries to cooperate together to boost the trading volumes. Domestically the Chinese economic growth also depends on the government investment that it has been investing trillions RMBs into infrastructures. Moreover, the Chinese government has put a lot of effort into improving its environmental condition, such as reducing coal production. This leads to that the solar industry is growing rapidly in China and in the next few years, the international big solar firms will face greater competition from the Chinese companies. China also sends a signal to other countries that all G20 countries should work together to improve the environmental statement. If this can happen, it can expand the solar market for the Chinese companies as well.

A continuous zero sum game is the worst scenario

A zero sum game is when the gain of the winners of a game is the same as the loss of the losers of the game. When players can always repeat their games in order to turn over or secure their positions in the games, the game can be repeated forever, as it is the best interest for the losers to repeat the game, and once the losers repeat the game, the winners also are forced into the game. There is a real world example of such phenomena. Currently, many countries tend to drag down their currencies' values; however, when all countries continue their currency depreciation policies, especially when they trade with each other, their trade balances will not be improved, as they beat down each other's prices, this could create a wide range of deflationary pressure. As we can see from this example, as the game repeats itself forever, there is no winner in the game and it also creates some negative effects, which spread among all players in the game.

Prefer local or foreign goods?

Some local goods are more expensive than similar imports. For example, in Japan, most of the locally produced goods have higher prices than imported products. when imports have the cost of transporting and tariffs, with the same productivity and cost of production, local goods should be cheaper than imports. However, sometimes the local companies could have higher costs of production, including labour and raw material costs. This makes local products more expensive. Moreover, in some regions, people trust local companies, as they may know the owners of the local companies or the local companies have a long history that they have served for several generations. The values of trust and brand add to the prices, thus the local goods become more expensive. In addition, the local companies may have relatively smaller sizes so they could have lower productivities due to the economies of scale. Overall, I think that local products have to have all of the above characters or even more in order to maintain their market shares with higher prices.

If not depending on central bank policies, what should the market behaviour depend on?

Some investors complain about that the market react too much to the central bank policies, especially the decision on quantitative easing. Individual stock depends on information relative to a specific firm. The such market behavior is just like we are in a crisis. Once the central bank wants to cut off its expansionary policy, the market reacts poorly. I always think that we are not really out of the last crisis. And this phenomenon may prove my point. The market behavior shows the market is not confident without the financial support from the bank and leaves no breathing space to the central banks. Once the economy enters into another crisis, the central bank cannot provide efficient solutions. Some governments start to cut their spending, this can create some space when they face unexpected crisis. However, those who continue their expansionary government spendings are in a weaker position when facing crises.

Government can default without being recognized

Government bonds are usually considered as less risky securities; however, there is still a possibility of government defaults. Greece and other countries like Italy cannot pay back their debts without aids from the IMF and other institutions. While, Britain and America also have high debt levels, but have less pressure. Why? Because they can default without being recognized by the market. When banks collect their loans, they do not want to receive some depreciating assets from their borrowers; however, government bond buyers always receive depreciating assets from the government due to the inflation that is affected by the public policies. Every one knows about it; however, the market focuses more on the risk-avoiding function of the government bonds. There is a downside of it that when people all look for some safe investment choices, the returns of government bonds will drop sharply, investors will look for some longer term government bonds, once the economy is less uncertain and in a good shape, these longer term government bonds will be stuck in the investors' hands and if the amount is huge, there can be insufficient funds available in the market and the profits of the financial institutions will be dragged by these low-return but long-term government bonds.

Do you want free "helicopter money"?

Anyone daydreams of receiving free money without doing any work? This can be done by the government, which is called by economists "helicopter money". The idea about "helicopter money" is that a government gives its people free money in order to inject cash flows into the economy by encouraging consumption. Is there any circumstance that such free money is not welcome? Of course, there is. The problem could happen when the government how much it will give to its people. Especially with a large number of money each person can receive, equal payment is not welcomed by the people who previously have higher income, as after such payment, the difference between their wealth and the wealth of the rest of the population becomes smaller. In terms of real value, their wealth could decrease. Moreover, even without the complaints of the rich, even the poorer people do not receive a huge amount of free money. Once everyone receives such free money, people expect there is a big increase in the inflation rate, your wealth which is mostly cash becomes worthless, while the real assets which mostly belong to the rich become more valuable. Therefore, when everyone receives free money, no one wants a big dividend for all of the others.

Government bonds

Government bonds are considered to be risk-free and avoiding risk. When the market is unstable and risky, we can see an increase in the prices of government bonds, which means a decrease in the returns of government bonds. However, government bonds are actually packs of many different bonds, as government bonds are used to finance all sorts of government spendings. Some government spendings are "good" investment, some can be "bad" investment.
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What is behind the 6.7% Chinese GDP growth?

The Chinese economy is reported to grow 6.7% in the second quarter. Such growth is backed by a surge in infrastructure investment by state-owned businesses. This figure shows the Chinese economy's upside and downside. Firstly, there are several disappointing factors that the private investment has no growth this quarter and the investment in some industries such as mining has negative growth. Moreover, the local government debt is another danger to the Chinese economy, as the total number of the local government debts is 25 trillion RMB, which is similar to the German GDP. The increase in infrastructure can increase the local government debts, as the infrastructure is conducted by state-owned businesses which receive subsidies from the government and local authorities that usually come from borrowing. In addition, the increase in the investment in infrastructure could widen the wealth gap as the payment difference is very wide in the construction industry. However, there are some upside factors about the increase in the investment in infrastructure. The improved infrastructure can bring more investment and generate regional economic growth. Moreover, an increase in investment can speed up invention and innovation, leading to improvement in technologies in infrastructure. This can increase the Chinese exports of infrastructure construction, especially when many developed as well as developing countries need to upgrade their infrastructure or build their infrastructure. In addition, the 6.7% figure can restore some market confidence, which help to stabilize the market. To conclude, the Chinese economy has many positive momentum, such as high investment in some new industries, but is still very dependent on government investment, including investment from the central government as well the local authorities. In order to stabilize the economy, the government has to ensure its own financial stability first.

Bad investment

The Saudi Arabia's economy is not in a recession, according to its economic data; however, non-oil industry contracted 0.7 per cent year on year in the first three months in 2016, which we can say the Saudi Arabia's non-oil economy is in a recession. Declines in certain industries are not frightening, the real problem that Saudi Arabia has got is that the oil industry is not a sustainable industry that it could have the same fortune as the coal industry had in the future and the government knows about it, so the government puts a lot of effort into its non-oil industries, such as tourism. The recession in the non-oil economy lowers the market expectation about the Saudi Arabia's future economic performance, which then can affect the credit rating of its government bonds. The cause of such decline in the non-oil industry I believe is due to the lower government spending caused by the low international oil price. Moreover, from the official data, the decline in the non-oil industry is steeper than the decrease in its oil economy. This could show some of the Saudia Arabia's non-oil industry problems that it has been too dependent on the government spending, which comes from the oil incomes. Such phenomenon happens to other oil-dependent economies, that have non-oil sectors that depend on the investment from the oil industry and are not sufficient. Therefore, I think that investment should be made in order to make projects self sufficient in the future and this is the same with investing in other sectors.

The slowdown of trade

The slowdown in world trade is reported to be worse than thought. The opinion about the cause of such slowdown is divided between economists: some believe the increasing protectionism is the cause, others think the long term trends that affect world trade. They are all right; however, protectionism could be a short term problem that could be mitigated over time, the increasing of digital trade and the shortening of supply chains are long term changes. The increasing digital trade weakens the power of protectionism, which I believe is a very positive thing to see. Moreover, the shortening of supply chains means firms are easier to find their business partners globally and a decreasing transaction cost. These factors that lead to a slowdown in world trade in the long run are positive and caused by our improved information transformation. Therefore, we need to add omitted digital trade into our trade calculation as well as to measure the cost efficiency of our trade; and by making these two changes, I think we can see that our world trade is actually increasing faster than the current figure and the transaction costs are lowering over time.

Slowdown of invention and innovation could be led by the economic insecurity

During a wartime, we can see a rapid development of all military related technologies and some of these technologies can be used in our daily life as well. However, we should never use war to stimulate innovation and invention. Therefore, we need other ways to encourage more innovation and invention. Currently we have a financial system that awards invention and innovation that angel investors provide these developers with financial supports. Moreover, universities also use their researches as a source of income. Everyone knows the importance of invention and innovation. Despite these factors, we still see a slowdown of invention and innovation. I think that the slowdown of invention and innovation has a close relationship with our economic performance. Not only the economic growth is driven by invention and innovation, but invention and innovation have to be backed by a good economic performance. The developers have lower awards and higher risks when the economy is not in a good shape, the financial support available is more limited compared with when the economy is at its boom. Therefore, I think that we have a relatively good awarding system for invention and innovation, but instead of worrying about the slowdown of innovation and invention, we should focus more on stabilizing our economy in order to provide a friendly environment for these developers.

The relationship between exchange rate and trading

Between two countries, when one country (A) exports more to the other country (B) than importing from the other country, the currency of A will appreciate in terms of exchanging to the currency of B, as the demand of the A's currency increases. However, in reality, the exchange rate is purely determined by the expectation of trading rather than the true trading amount. Therefore, the exchange rate represents the trading positions of the two countries over the next decade, plus other factors which also determine the exchange rate. When we analyze the relationship between the exchange rate and the trade position, we could face lots of noise that causes the volatility of the exchange rate fluctuation. I think to minimize the effect of noise, we should analyze the relationship between the exchange rate difference and the trade position using the data on the day the trade data release.

Equal deals, but different outcomes

Usually the two sides of a trade agreement receive the same trade deal, in the hope of making the two sides mutual benefit from the agreement. However, though the agreement may be mutually beneficial, the two sides benefit from the agreement to different extents. If there are only two countries trading with each other, the agreement could be equally beneficial to the two countries; however, when the two countries which sign the trade agreement also involve in trading with other countries, which is much more realistic, then the two countries will benefit from the agreement to different degrees. However, is there a possibility that due to the complexity of the international trading network, a trade agreement could actually hurt one country's benefit?

Is the UK freer to negotiate trade deals?

The "out" campaigners have told the British population that they are free to negotiate trade deals with more countries; however, is this true? Trade agreement has to be mutual beneficial; therefore, both sides of any trade deal tend to be equally treated and receive the same trade deals. There won't be any unfair trade agreement for the UK to take advantage of. Preferential trade agreement is being negotiated between the EU and countries like the US, Japan and some African and South American countries. A stand-alone investment agreement is being negotiated between the EU and China. With all preferential trade agreements in place and being negotiated, all the super economies have trade agreements with the EU besides China. Britain can negotiate a deeper trade deal with China, the second largest economy in the world and Britain can also hope to get a better deal with the US independently. Moreover, Britain can negotiate trade deals with the Commonwealth countries. All of these targets are correct and doable; however, I think that the only better deal that the UK can get outside the EU is the deal with China, as there is no trade deal being negotiated between the EU and China. When negotiating trade deals with other countries, the British economy is not as large as the EU economy, which gives Britain a weaker position and when Britain in the EU, Britain has influence on the EU trade negotiations with other countries. Therefore, Britain is less likely to get better trade deals when Britain leaves the EU. Moreover, the two developed countries in the Commonwealth countries are New Zealand and Australia, which are potential free trade partners of the EU. The best trade deal Britain can get from its Commonwealth countries is the free trade deal and free trade deals with the two wealthy Commonwealth countries can be done without the UK leaving the EU. To conclude, when Britain leaves the EU, Britain can increase its trade with China; however, the trade deals between Britain and other countries is unlikely to be more generous than when Britain is in the EU.

Why does the Olympic game cost usually run over its budget?

A study from Oxford university has found Brazil's Olympic game cost is 51% over its $1.6bn budget. Similar situations happened in most of the past Olympic games. Why has such overrunning budget repeatedly happened? Firstly, the organizing local government tends to provide an underestimated budget and an overestimated return from the investment in order to persuade the local support as well as the International Olympic Committee's support. Moreover, the limited transparency makes it easier for the organizing authority to provide these misleading guidances. Secondly, the 8 year time lag increases the difficulty in estimating the cost of organizing such an event. For example, at the time of Brazil applying to organizing the summer Olympic Games, the Brazilian economy was in a good shape; however,  the economy currently is in recession and has more difficulties to organize such a large event. Thirdly, the Olympic Games do not only need stadiums, it also requires many other supporting infrastructure, and some of these supporting necessities are not realized until they start to organize the event. In addition, cities have different situations and different Olympic games organizing plans; therefore, they cannot simply use the costs of other cities organizing their events for estimation. Therefore, the cost of organizing the Olympic Games overrunning the previous budget plan is almost inevitable.

Some thoughts after reading the Martin Wolf's article, "How Europe should respond to Brexit"

The link of the article: https://next.ft.com/content/79887f78-41dc-11e6-b22f-79eb4891c97d

The problem that the EU has in the author's opinion is the EU is too diverse and the erosion of national autonomy is the core problem in the EU. The whole article focuses on how the EU can solve its own problem, which is the legitimacy. I think that though the author provides some valuable points, he does not solve the immediate problem lying ahead of the EU, which is how to mitigate the negative effects brought by Brexit on the EU. As we can see from the data in this article the UK and the EU has a very close trade partnership, the most immediate question is how to conduct the negotiation between the UK and the EU. Both sides should realize each other's importance. The legitimacy issue could be paid attention; however, Brexit is doing a lot of damage on the British market as well as the European market, and will bring greater shocks when the negotiation starts. This has to be limited as soon as possible. The most efficient solution is to tell the date of triggering the article and both sides need to state clearly and publicly their positions in the negotiation.

The value of sharing economy in GDP data

Some people argue that the purpose of the Chinese statisticians trying to include sharing economy in the Chinese GDP data is to increase the figure and create some market confidence. This could be true, but is meaningful. We cannot deny the positive effect of sharing business in any economy that sharing business creates a way to relocate the spare and piecemeal resources efficiently. The problem here is we do not need to give values to services that are free in order to add a value to the GDP data. The true value of sharing business is to create more opportunities for double coincidences of wants in order to create more trades of goods, services, time and other resources. These trades have their values; however, as these trades are too diversified in terms of location, parties to be calculated effectively, the government usually does not have figures of the values of these trades. Moreover, some of these trades do not have official records, which makes the government even more difficult to calculate the value created by sharing business. Of course, the government can estimate the value created by sharing business and add this figure to the GDP, but such method has its weakness as it is not very convincing and may double calculate some values that are already included in the GDP data. Therefore, in order to find out a reliable and convincing GDP data, the best way is to create some data collection method to collect the data of the previously omitted trades and add the sum to the GDP data.

Over-reliance on tourism is a long term tough problem

Some island economies are reported to be overly depend on tourism. It is a gift for these island economies to have such beautiful natural resources; however, it is also a burden for the further development. As tourism is the easiest way to generate economic benefits, these island economies, of course, use tourism to earn their first barrels. However, when tourism contributes a large portion to their economies, they limit their future development choices. Some development choices, for example, digging oil and manufacturing, are almost abandoned from their lists. These methods may create rapid economic growth but will damage the tourism industry. If these countries take such methods, their images will be damaged and their economies may experience a downfall in the beginning of their economy restructuring. Moreover, their tourism-dependent economies have very close correlation with the global economic growth. When the global economy is in a good shape, the tourism-dependent economy is also in a good shape and has no need to restructure itself; however, when there is a recession globally, the tourism-dependent economy could suffer more above average and badly need to restructure itself, the problem is there is no available funding for the tourism-dependent economy to conduct such an economic restructuring program. Therefore, a tourism-dependent economy is a very volatile economic structure and to reduce such reliance is a very tough and costly process that it has to experience an economic downturn in its early stage.

Big shocks ahead

A new prime minister and cabinet will trigger the Article 50 and take control of the detailed procedure of Brexit this October. Although there is already lots of whisper about how the negotiation will be directed by both sides, German Chancellor has made it clear that there will be not informal talk until the article is officially triggered. Therefore, currently there are just some minor shocks and there will be more volatile shocks when the two sides start to negotiate and the actual details of the negotiation are released.

Should local governments give financial support to sports teams?

Brussel is expected to announce a decision to force Real Madrid and other European football teams to repay their illegal subsidies. Some of these subsidies have been enjoyed by certain football teams for decades. Subsidies are usually used as a tool to correct market failures. Sports teams are not public goods as watching football games is excludable and rivalrous, which oppose to the two properties identifying public goods. Some people may argue that sports teams have some positive externalities and need to be supported by local governments. Sports teams create employment and encourage the local population to exercise and maintain healthy, provide entertainment and pride as well. These claims could be all true; however, the key point here is about opportunity costs. Watching sports matches are one of many entertaining ways. There are many other choices that can have similar effects as sports teams. Local governments can use the money spent on sports clubs in other fields which can generate more benefits for the local population, such as education, health care, public sports centers and etc. Moreover, sports teams also ask financial supports from local governments to build new stadiums that they claim new stadiums can provide places for the local population to do exercise, which is not always true.  In addition, sports clubs do not necessarily need financial supports from local governments as they can be financially well managed if they want. Some have been recognized by financial institutions and listed in stock markets. This should be seen as positive examples. However, some sports clubs have been used as tools of big firms from other industries for the purposes of public images, tax efficiency and etc. In this case, sports clubs will never be managed as normal firms that carefully calculate their costs and profits. To conclude, I think that local governments should not spend too much on sports teams or even not at all.