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The slowing economy of Turkey as the wars in Syria and Iraq take their toll reducing demand for Turkey's exports. The conflict with Russia also affects Turkish exports. Growth slows to 2-3% a year in 2015-2016.

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Blinder cites the reasons why the stock market declines are showing a disconnect with the economy in the U.S. which benefits from low oil prices, and the small impact of a slowdown in China on the U.S. economy. Yet other reasons may account for nervousness of investors, as Grep Ip points out in the WSJ, the lack of support from the Fed with its gradual rate hike path, and lack of support from the Chinese government with its policy of reducing debt and no significant stimulus.

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The People's Bank of China lowers the benchmark lending and deposit rates by 0.25 of a percentage point, and cuts the reserve requirement ratio by 0.5 of a percentage point. The PBOC said the move was designed to offset "the persisting downward pressures on the country's economic growth." It was also designed to offset the large volatility in China's stock markets. The PBOC also removed the upper limit on interest rates for fixed term deposits of more than one year, as part of interest rate liberalization. The move also counters the large capital outflows affecting China, as is happening for all emerging markets, of $70 billion in July. These outflows may have accelerated in August 2015 with declining investor confidence. Experts say the reserve ratio cut should inject about $100 billion into the banking system.

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Argentina president Mauricio Macri wins 40% of the vote, losing to the Peronist candidate Alberto Fernandez with 48% of the vote. The Peronists, a socialist party, also won in Buenos Aires province elections for governor.. The shift from centre right to the socialist party occurs as the country is in deep financial crisis with about 50% inflation. The Argentine currency, the peso falling in a few years since 2015 from 10 to the dollar to 60 to the dollar, leading to high inflation and hurting Argentines with rapidly falling purchasing power of income. Argentines rejected austerity policies of Macri and the free market policies pursued under Macri failed. This was aggravated with lack of prudent management of finances and overborrowing using dollar denominated bonds reaching $115 billion in bonds debt by 2019. Me. Macri inherited a budget deficit from Ms. Kirchner in 2015. The economy was overly dependent on a temporary boom in commodity prices for soyabeans as a result of demand from China. A weather related crisis led to a decline in agricultural exports in 2017-2018. Yet the budget deficit was allowed to grow and the foreign debt was financed with foreign currency denominated bonds to the point where Argentina could now default on $115 billion in foreign currency denominated  bonds. Overly dependent on uncertain foreign interest in Argentine bonds, Argentine agricultural commodities exports at high prices, uncertain foreign investment, hurt Argentina. Drought conditions in 2018 hurt export revenues. This required very prudent and careful management of finances which Mr. Macri failed to provide. Turning to the IMF for a $57 billion loan in May 2018, in just 3 years of his administration, and after Argentina took years following the crisis of 2003 to settle foreign debts, showed a failure and mismanagement of huge proportions. ...

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With a credit led expansion, and credit flowing as rapidly as in 2009, China faces some difficult choices in 2010. Inflation's annual rate rose to 4.4% in October 2010 from 3.6% in September. China's CPI target is 3%. October 2010 saw an additional $89 billion of new loans, and China is floating on a sea of credit. The question is how econmic growth can be maintained once this slows.

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The Economist points to a second hit from bad debt in the post 2008 stimulus binge of spending in China. This is after an earlier hit, that was absorbed as a result of high growth rates and high savings. About $420 billion was injected into 5 state owned banks since 1998, according to one estimate, as a result of the first hit to China's banks from bad debt. In this second round of bad debt, covered in more detail by David Barboza in the New York Times, and merely alluded to here, many bad loans to infrastructure projects were rushed through by local governments. The Economist considers this one of the successes of the state directed banking system, that loans were quickly made and projects started in the post 2008 crisis period; and expresses the view that this hit will be absorbed just like the last hit. However the more detailed account by David Barboza and in Business Week, points to the working of a system of incentives gone astray in a capitalist system without the necessary controls or regulation. Local governments used investment companies to take on loans, which were then used to prepare properties to be auctioned off at a profit and speculative prices to state owned companies in different industrial sectors. This is part of rampant speculation in China in real estate markets. Can China with its high savings and growth absorb a second hit? This depends on the magnitude of the hit and the size of the bad debt, which depends on how long this speculative market continues to operate, and how bad debt is hidden in the books. The difference this time is that large state owned companies in different industrial sectors are engaged in this speculation. The other difference is that the high growth rates in China depend on continued large trade deficits with the USA and Western Europe, something which is not likely to continue for long, as consumers in Europe and the USA with high debt are becoming cautious spenders. This suggests that China, like the US with the mortgage crisis, faces the same effects of unregulated or uncontrolled speculative behaviours, that can endanger the banking system....

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The People's Bank of China's decision to reduce the reserve requirement for deposits at banks by 0.5% is not likely to have much impact, as banks already have enough money to lend. The problem is more a lack of demand for loans as the economy slows. Inflation fears restrict the use of growth tools such as lowering interest rates and the housing bubble limits the use of construction spending to increase growth. Political uncertainty with a leadership transition, and economc uncertainty in Europe also limit options.

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Ma Jun, economist who worked for the IMF, World Bank, and Deutsche Bank is the Chief Economist of the People's Bank of China (PBOC) in April 2014.