How do you think about a 100-year bond?

If a country issues a bond which has a maturity of 100 years, is there any one buying such bond? Firstly, a 100-year bond does exist that Mexico has issued 100-year bonds at 4.2 per cent. Secondly, usually we consider a 10-year bond is risk free, especially the US 10-year bond and the UK 10-year gilt. However, the risk increases over the time extension. Therefore, the 100-year bond could not be considered as a risk free asset. The problems about currency, inflation and sovereign will magnify. Then what kind of people will have the motivation to buy such a bond? People who believe the world economy will be in its decline over the following 100 years will have the motivation to buy such a bond. However, there are so many uncertainties that could make a 100-year bond default if the economy is in its decline. Overall, I do not think a 100-year bond is a good way to avoid future risks.

Lower for longer, then what?

I do not think that Yellen's promise of "lower for longer" is profitable and will push up the US economic growth. Recently we can see an increase in default rates, and lower interest rates allow companies, especially those big companies, to increase their gearing ratios. Therefore, the risk of the banking sector increases. Moreover, when loans become cheaper, some successful and large private companies may decide to stay private. In the first three months of 2016, only 9 US companies succeeded in listing, but 21 were forced to shelve IPOs. The major challenge of the US economy is exogenous. Therefore, the promise of "lower for longer" is only profitable when there is no breakout of exogenous crisis.

How "bad" is the Chinese economy?

Recently we have received much negative information about the Chinese economy, especially people start to believe the Chinese economy slowdown is accelerating. Is it true? We can still receive some positive information about the Chinese economy. The traditional industries are in their downturn, especially the mining industries. The most direct way to see this is to look at their share prices. The share prices of many traditional industrial companies dropped. However, the share prices of some more advanced companies, e.g. some auto companies, IT companies and pharmacy companies, increase over the last year. These companies have their potentials but still lack the strength to compete with their overseas competitors. To conclude, I believe that the Chinese economy will grow at a relatively slow rate but there will be a big leap of the Chinese economy in ten to fifteen years when the Chinese advanced companies are able to compete with their overseas competitors.

What can make price wars more likely?

The recent drop of the oil price was caused by a price war. What kind of property makes price wars more likely to happen? There are three properties I think. Firstly, if suppliers have different costs of production, there will be a higher probability for a price war to take place that suppliers with lower cost of production start a price war to remove their competitors with higher cost of production from the market. Secondly, the products have to have very close properties. Otherwise, price competitors will not take place. Thirdly, a single supplier in the market need to have productive capacity to supply  a majority of the total market demand; otherwise, suppliers will not start a price competitor if they can increase their production when their market shares increase. From the above three properties, we can see that the industries are generally low-end traditional industries. These industries usually have very low margins as well. The unprofitable industries can hardly attract new entrants. Therefore, after several price competitions, the low-end traditional industries could become highly concentrated or even monopolistic.

How likely is "Brexit"?

Recently people have argued that Brexit has become much more likely than people expect. I still believe that Britain will stay in the EU. However, we may see that in the future Britain will put more efforts into the EU reforms; otherwise, I expect that there will be another election after another on Brexit, if some basic problems are not solved by reforms.

The practical problems of social planning

Currently, some central banks have started to act as social planners to help the financial industry to locate the resources. As explained in textbooks, we know that the output of a social planner is efficient and the best of a free market can achieve is the level of the social planner output. However, in reality, what a social planner produces is not necessary to be efficient. The best example is the Soviet. In reality, central banks can never get all information they need. The finance companies may lie about their true preferences, the cost to ensure they tell truthfully is expensive. Moreover, the red tapes could worsen the problem of inefficiency, especially when a central bank starts to play a larger part in the economy. Therefore, I deeply doubt about the efficiency of central banks in helping locate resources.

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.