New class conflict

Trump has become unpredictably popular since the launch of his presidential campaign. He has got some extreme statements about Muslim, Mexicans and etc. His popularity shows there is a conflict between American locals and foreign migrants. Many developed countries have similar problems. Moreover, though China has few foreign migrants, it has conflicts between locals and migrants from other parts of China.  This sort of conflict is inevitable. Firstly, we cannot stop such migration, unless we do not want economic growth, as migration contributes to some of our economic growth. Secondly, providing locals with better infrastructures and a better welfare system may not mitigate the conflict, as it could attract more migrants who hope their future generations could benefit from the system. Thirdly, locals want to stay on their land, as they will understand the benefits of their current living environment. The only way to mitigate the effect of such conflicts is to narrow the wealth gap between different areas domestically and globally.

What makes people get paid differently?

It is interesting for me to study what makes people's incomes different and how incomes vary across different jobs. I think there are several elements/variables that have effects on people's incomes: education, working hours, working conditions, experience, family background and risk. Education, working hours, working conditions, experience and family background are easy to understand their effects on incomes and easy to measure or rank. However, different jobs have different degrees of risk, such as job security. Risk is very difficult to measure and sometimes people cannot precisely tell how much risk they face. Risk is exogenous as well as endogenous and changes overtime. Moreover, it is reasonable to assume people who carry greater risk receive higher incomes but from data some people could receive much lower incomes when they are suffering from the negative sides of their risk. To study the correlation and influences of these variables, we could probably have some ideas which one plays the largest role in widening the income gap. Moreover, we can compare different jobs and see which jobs have better payment and lower cost (working hours, working condition and etc).

The population structure may put the pension fund business in decline

When we reach the ageing population, more people are ready to collect their pensions through the public and private channels. Although the age of retirement has been rising, these people will collect their pensions one day and this could make the pension funds have a tough time. Moreover, if there are more people retiring than those who enter the labour market and pay their contributions to the pension schemes, then there could be a limited fund growth or even a deficit in the cash flow of the pension funds.  This could put pressure on the pension funds to generate higher returns of their funds in order to attract more funds, so the pension funds may take more risky strategies, leading to an increase in the systemic risk within the pension operation or even the whole economy. To conclude, the current population structure may increase the systemic risk and cause a decline in the pension fund business.

How to break down price leadership

In some oligopoly markets, there are price leaders. I would like to discuss how price leadership breaks down. Today, Apple announces cuts in the prices of several of its products. This might show Apple is losing its price leadership. From the figures that Apple provides, we can see that Apple is the leader in the smartphones market. As the leader of the markets, Apple gains the market power, especially price leadership. With price leadership, Apple could set its price first, and other companies will set their prices accordingly. This time Apple cuts its smartphone's price. Why does this happen? Firstly, there are more competitors in the markets. Secondly, Apple no longer has its operating efficiency advantage. Other companies have as low cost of production as Apple does and an Indian company produces a smartphone with a two-figure price. Therefore, to break down a price leadership, there are two ways: the first is to increase the market competition, the other is to improve scale or technology to catch up with the price leader's product efficiency.

The different demands in a company

When doing any business, there is a complex circle of demands: the company's shareholders want their investment returns maximized, the managers want to maximize their salaries and the clients want to minimize their costs. In some situations, these demands could be met at the same time; however, there are some situations that these demands could not be all satisfied. When this happens, the managers and the clients are the two who are the most likely to achieve their goals, as they directly participate in the business. Due to the imperfect information, the interest of shareholders is likely to be left out. The shareholders cannot be fully aware of the accumulation of micro risks. This is especially crucial in the banking sector. Therefore, it is important to balance different parties' interests to ensure no one crosses the line.

Interconnection is the nature of the financial industry

It is very common for regulators to focus on stability of the banking sector and adjust the competition in the industry to achieve the goal. However, in other industries, our regulators encourage effective competition in most of other industries and markets. Why? Because the banking industry is too important to have any volatile. In the banking industry, the most crucial element is the interconnection within the industry. Interconnection makes all banks in the system have the characteristics of "too big to fail" and reduces the incentives of banks to compete with each other. The interconnection exists in the entire financial industry. This is a problem that I am not able to find any optimistic way to solve. Why? Because this is a very strange industry that it supplies something it also demands - funds. All banks and institutions are suppliers as well demanders, such characteristic makes banks and institutions inevitably interconnected, as they always demand each other's products. Therefore, interconnection is the nature of the financial industry.

Low inflation rate could happen "naturally"

My opinion is that the cost of production is always diminishing due to improvement in technology and productivity. As the cost of production decreases, if the market is competitive, the price will decrease as well. From this aspect, it is reasonable to see a deflation in long run. However, from our recent experience, this is not the case. When our economy grows rapidly, we usually see a very high inflation. One of the reasons that why high inflation happens is that our population grows at a faster rate compared with the improvement of technology and productivity. Another reason is that what we consume has changed when we receive higher incomes. When economic growth is fast, our incomes increase as well. When we have higher incomes, we tend to consume better quality goods and services which have higher prices. The previous cheap and poor quality goods and services are forced out of the market and excluded from the equation calculating the CPI. Based on these two reasons, we can have ideas what causes the current low inflation rate. Firstly, if we have a real GDP growth rate which is higher than the country's population growth rate. This adds deflationary pressure on the economy. Moreover, when we can hardly improve the qualities of our goods and services, we will continue our previous consumption. When the cost of production as well as the prices are diminishing, we will have a deflation in the economy. To conclude, the problem of deflation is not necessarily caused by the lack of the market confidence or economic downturn.