How powerful is illusion?

We often hear some rumors without any strong evidence or any approved evidence, such as some comments like the social security is worsening. Currently especially when the US presidential election is taking place, some politicians often give some very subjective comments. There are some comments like "the US population feels unsafe". This comment could be true, as subjective preferences are often interactive. We always face a lot of constraints that the subjective views help us to make decisions; however, subjective thinking could be used. Individual preferences could influence each other and usually more limited constraints are, more interdependence preferences are. Because when we have fewer resources, we are unlikely to come out some useful objective conclusions. Therefore, when we go into some fields where we do not have enough resources including knowledge and time, our actions are easy to be influenced and manipulated by others.

How pessimistic is the Bank of England?

The governor of the Bank of England, Mark Carney, issues the largest stimulus package since the financial crisis that the rates are cut to 0.25%. Carney said that the reason of delivering this stimulus package is the likelihood of the British economy falling into a recession increases due to the rising uncertainty caused by Brexit. 0.25% is a fairly low rate that almost zero, but not zero nor negative. However, in terms of the real rate, when the inflation is above 0.25%, then the real base rate is negative. Currently the UK inflation rate is 0.5% so the real base rate is negative. The Bank of England believes that the unemployment rate rises, the housing price falls and the inflation rate rises when a recession hit the economy. The interest rate stayed unchanged since the financial crisis and a further cut of the base rates to negative real rates shows that the Bank of England believes Brexit will hit the British economy worse than the last financial crisis.

The state sector reforms

Some countries have relatively larger state sectors; and when the economic growth is slowing down, people often think about reforming the state sectors in order to improve the efficiency. However, often the state sector reform leads to a leap in the unemployment level as to improve the efficiency the job cut is often a necessary procedure. There is one problem over here that how much of the excess labour supply could be absorbed by the market. To mitigate such problem and support a stronger economic growth, the government needs to encourage growth in one new private sector. For example, last century, the Chinese government encouraged a rapid growth in the manufacturing sector. Therefore, the state sector reform requires stronger expansion in the private sectors.

How soon are we going to approach an era of negative rates?

There has already been some report saying NatWest is ready to introduce negative rates. This is entirely possible, especially when there is an increasing degree of global risks. The saving interest rate is determined by the policy rates, the demand for loans, the riskiness of saving, the tolerance to risk and the level of competition in the industry. Currently, most central banks are taking expansionary monetary policies, though the US Fed is considering to raise rates later this year. There are several global events, such as Brexit, creating more risk in the market. Moreover, the market behaviour has changed from an aggressive one to a risk averse one that although the returns of many hedge funds increase last quarter, more funds have been withdrawn from the hedge funds, and the demand for low risk securities have increased, the prices of government bonds, large and secure large cooperate bonds have also increased. Moreover, the level of competition has decreased due to several merges of big banks. Among the facts that could lead to negative rates, the only several facts standing in the way are the safety of the banking industry and the acceptance of the public and the regulators.

To increase individual trade we need tools to filter information

Trade happens when there exists double coincidence of wants and when more parties get involved trade becomes more likely to happen as the possibility of existence of double coincidence of wants increases. Therefore, the most direct way to increase trade is to increase the existence of double coincidence of wants. We can get more people involved in trade, or make information more available to more people. Trade is mutually beneficial and it is fair to say that all countries have involved in the global trade network. However, information is imperfect and especially imperfect to individuals. Nowadays we can probably receive almost all information we need; however, we lack the tool to filter the information and get the information we actually need.

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.