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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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This article in the Economist magazine points out that official data do not accurately show the health of the banking sector, with large number of bad loans at smaller banks. Bank shares it points out are priced in a way that reflects bad loans at 5-10% of loans.

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India had 11 interest rate increases in 18 months, but this has not slowed the rise of inflation. The Wholesale Price Index is around 10%. Inflation expectations as measured by the Reserve Bank of India are around 12% in mid-2011.

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The bottom half of all U.S. households have only recently recovered the wealth lost in the 2009 financial crisis. They still have 32% less wealth than in 2003 when inflation is taken into account. The top 1% of households have more than twice as much as they did in 2003. Wealth is defined as net worth that includes houses , savings and stocks minus any debt. The wealthy have 85% of their wealth in stocks and bonds. For the bottom 50% half of the assets are in the house or family home. Economic and regulatory trends have happened in ways that favored the people investing in stocks, and rescued people investing in stocks with policies designed with this purpose by central banks and the U.S. government. By contrast for the bottom 50% buying a home is more difficult today. The problem this WSJ report points out is that the next recession would most hurt the bottom 50%, even before they have recovered from the last one which was a result of shaky practices of banks in financial lending and not some cyclical swing in the economy. Policy was then geared to provide a recovery first for stock markets as a way to economic recovery. The bottom 50% have little stake in the stock market, the top 1% have most of their gains from the stock market. Much of the popular anger comes from the way policies by both Democrats and Republicans differed little in past administrations in the way they approached this in shaping economic policy. As a result infrastructure building and investments in public services took less priority in this period of 30 years with trade imbalances with China building up on the external front, in another side to this development. The shift to Trump and to right wing populists in Europe is only the first phase in the corrective action that has to take place to return to a fairer distribution of wealth that existed before the last 3 decades. Eventually it is not right wing or left wing factions or parties, but healthy policies, that matter to create a better balance for society.  ...

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Liu He, the author of the 2013 DRC report on recommended changes to China's banking and financial system, is now the director of the Communist party's top financial policy committee and senior advisor to president Jinping. Changes he is pushing for relate to increasing focus on credit risk for China's banks, promoting competiion between banks, a mechanism for letting banks fail, and a deposit insurance program to protect the public against failing banks. To open up the sector dominated by state owned banks, opening private banks would be encouraged. Local governments would be allowed to issue bonds in an effort to reduce their dependence on land sales and opaque off-market borrowing. The urgency of this agenda comes from the realization in top Chinese policy circles and the Jinping-Keqiang administration of the risks to the banking sysem from the lack of attention to credit risks in bank lending.

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The Peronist candidate Alberto Fernandez wins Argentina's election with 48% support. Mr. Macri's economic policy led to mismanagement of the economy, and recession, high inflation. Mr. Macri took on $100 billion in foreign debt and had to turn to the IMF for a $57 billion bailout. The shift in administration happens as the peso tumbles. By lifting capital controls in 2016 when the official rate was 10 to the dollar Mr. Macri shifted direction but failed to manage this in a prudent way leading to a jump in the foreign debt. By the second half of 2018 this policy led to the peso falling to 45 to the dollar and another drop by mid 2019 to about 60 to the dollar. The central bank has burned about $22 billion or a third of the central bank reserves to defend the peso, including $4 billion only last week. A third of this decline in reserves is due to withdrawals as capital controls were reimposed., the remainder due to interest on debt and bank interventions in currency markets to defend the peso. Customers are now limited to $100 in withdrawals leading to demand in the black market pushing the rate to 75 pesos to the dollar. Argentina is no stranger to these crises, yet they repeat every 10-15 years. The earlier Peronist administration of Mr. Nestor Kirchner came in when there was economic collapse in 2003 and had to suspend debt payments as a last resort. Negotiations were begun with lenders only after 2007 when Mr. Kirchner's wife Christina Kirchner assumed office. She won the election in 2011 but was defeated in the 2015 election by Mr. Macri, and reelected in 2019 as vice president running under her former chief of staff Mr. Alberto Fernandez. The Peronists are a socialist party and restored a degree of stability to the economy, limiting foreign debt and managing the economy with a rebound in commodity prices such as soyabeans exported by Argentina to meet growing demand in China. By 2015 the country appeared ready for a change, but Mr. Macri's austerity policies and mismanagement of the debt led to a repeat of earlier crises with high inflation and collapsing peso, hitting working class Argentines.    Argentina has a long history of alienation with IMF loans with policy strings attached for austerity spending, starting in 1957.  About 58% of the people who voted Macri into office opposed turning to the IMF in May 2018 after interest rates were raised to 40% by the central bank to stem a drop in the peso. The IMF loan this time was a shorter duration loan on better and was supposed to help Mr. Macri stabilize the economy and its cash and payments position. The jump in foreign debt including issue of dollar denominated bonds, lack of caution and prudence in managing the finances, lack of currency controls, drop in foreign investment by 2019, and the fall in commodity prices from the commodity boom years especially soyabeans, combined to create another collapse in Argentina. It was thought that the 2003 crisis that hit the working class and poor hardest was behind it once and for all. Yet only 15 years later the country is in a similar mess and hardships, showing that prudent management of finances, maintaining social programs to support the middle and weaker segments, and ways to create sustainable growth from within, are still the major problems facing not just Argentina, but also Brazil, Chile and other nations of Latin America.   ...

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Alex Frangos and Sudeep Jain's interview with Duvvuri Subbarao, the governor of the Reserve Bank of India, India's central bank. India's economy is slowing with higher inflation, higher interest rates, inability of the government to make firm decisions on foreign investment, a declining currency, and a growing deficit. Subbarao has come under criticism for keeping interest rates low for too long after the 2008 financial crisis, and then as higher inflation persisted making a number of interest rate increases in 2011, which reduced the credit flows in the Indian economy. Subbarao's defense of his policy of not acting earlier on interest rates and then raising interest rates repeatedly, is that the economy need stimulus in the years after the global financial crisis. He says the inflation in the early stages was a result of a supply shock in food prices and would not have responded to interest rate adjustments. Inflation declined from 9.1% in November 2011 to 7.5% in December. Subbarao says the interest rate increases are over and he is looking for the right time to increase credit flows in the economy. His remaining concerns are with the fiscal deficit, and he called on the finance minister to map out what he plans to do for the fiscal deficit. He expects the deficit for the current fiscal year to increase from 4.6% to 5.5%, as the cost of fuel subisides rises and tax receipts decline. He calls for the removal of subsidies on liquified natural gas and electricity, but concedes that this will be difficult in an election year. Looking back Subbarao sense is that the central bank's policy actions were well calibrated....

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The annual report on China by the IMF points to a diminishing margin of safety and higher risks for delays in needed economic changes from earlier infrastructure and construction focussed policies which neglected Chinese consumers and savers. The IMF pointed to risks from the shadow banking system and the real estate bubble that need to be addressed.

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This editorial in the Economist looks at China's relationship with Russia. It says the Ukraine conflict and western sanctions have resulted in Russia moving closer to China. Yet the two countries have competing interests in central Asia, and different relations with India and Vietnam, in the Asian region. Russia is also wary of China copying designs of Sukhoi aircraft in sales to China of advanced military technology. The major oil and gas deal signed in 2014 provides Russia with a new outlet for oil and gas with the cooling of the relationship with Europe. Yet Russia has strong ties built with Germany over the entire post war period, and differences have emerged in U.S.- German relations. Germany's relationship with Russia- cooled by sanctions and German wariness over Russian intervention in Ukraine and Russian wariness over NATO close to its borders- spans 7 decades and is likely to remain strong in the long term. This comes from the shared sense of awareness of the terrible conflicts of an earlier period, just as it has for French-German relations, and from the strong efforts made by Germany to preserve the relationship and peace in Europe. Chinese president Xi's visit to Moscow on May 9, for celebrations of victory over Nazi Germany, will be followed by a visit May 10 by Chancellor Merkel of Germany. A factor in German-Russian relations is the close trade links, cultural exchanges, and history going back to the GDR where Chancellor Merkel is from, built up over many years, that are likely to set the long term future of relations. China's dominant partner relationship in the China- Russia relations does not bode well for the future of relations, compared to the equal partner relations with its European neighbor, Germany. In this different light Ukraine is a temporary pause, in German-Russian relations and peace in Europe, a situation which is in China's long term interest as it focusses on its economy and the next phase of development for a modernized economy. Especially as China continues to build on its own vital trade relations with Germany and the European Union, the latest example being Germany, other EU nations, and India, joining the China sponsored Asian Infrastructure Investment Bank. ...

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The Bank of Japan's plans to buy 100 trillion yen of Japanese government debt in 2 years to fight deflation is having a positive effect on the eurozone economies. Japanese investors are buying eurozone sovereign debt. J.P. Morgan estimates the increase in investments for overseas bonds by Japanese investors in 2013 at 45 billion euros. This is lowering the yields on the sovereign bonds of France, Netherlands and Austria to record lows and lowering the yields of sovereign bonds of Italy and Spain. The 10 year yields on Italy's government bonds declined to 4.326%. Yields on 10 year Japanese government bonds was 0.514% on April 8, 2013.

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India's robust debate as a democracy is of an astonishing size and diversity of opinion. The debate did not diminish when there was one federal party in many states under Indira Gandhi (1970's). It actually increased many times during this period compared to the period under Jawaharlal Nehru (1950's) taking the example of one state Gujarat as an example of what was going on in 18 states of that time. Newspapers in Gujarati such as Jansatta, Gujarat Samachar and others carried on a vigorous debate with opposing points of view to the Indira Gandhi government at the state and federal level of the 1970's. Most people in places like New York and London fail to understand or see the local language newspapers or are totally unaware of their existence, and the debate carried on in their pages. So that they falsely assume what a small group of English language newspapers tell them about the vigor of Indian democratic debate that is truly unmatched anywhere in the world. And in terms of its 22 languages in one nation one could say in the entire history of the world. Swapan Dasgupta in the Times of India gives the staggering number of publications today in 2023- 144,520 publications reaching 386 million people every day. And 392 television news channels . All in 22 languages. To ignore the local languages as if they did not exist is to ignore India as if a billion people did not exist. Or as it is for China to say that everything written in Chinese papers and Chinese news channels did not exist. Dasgupta also points out that one should take Mr. Modi and the BJP out of this as at the national level its a 10 year old phenomenon. Look back from 2010 for the sixty years from 1950 to 2010 and India was as badly misconceived, misrepresented, and misperceived back then. India he says fell from 105th place in Freedom House rankings in 2006 to 140th place in 2013. Mr. Modi only enters the picture after that. Dasgupta points out the small sample for these ratings 150 respondents and the methodology having missed much if not everything that is needed in a robust democratic debate. There is another aspect which is present which is prominent in New York and London and Washington D.C. and that is that non-alignment is not popular.  One has to see the way Adlai Stevenson running against Eisenhower twice in the 1950's very warmly received Jawaharlal Nehru on his visit to the US and compare it with the way the US perceived India under John Foster Dulles after Dwight Eisenhower was elected in 1952 to understand this aspect of American perception. Dulles was facing the Soviet Union and the British under Churchill then Macmillan had an equal disdain for Nehru's non alignment and tilt towards the Soviet Union. These root perceptions did not change with the Kennedy and Johnson administrations, and continued into the 1970's when Nehru's daughter Indira Gandhi was prime minister and continued non alignment.  India's political alignment after the pandemic is anything but non-aligned. It thinks, acts and lives in a way that is similar to the people of the US and Europe. Not even because it chooses to but because of what it is, coming from being part of its ancient path of Vedanta and Buddhist civilization that is the core Asian experience. It also needs to bring 400 million out of poverty and build the next phase of industrialization and modernization that requires fossil fuels in large quantities at lower prices to sustain its rapid growth. Some of it comes from Russia purely as an economic decision during the pandemic. The Biden administration fully supports India in this task of rapidly growth to meet the aspirations of a mostly young population- sourcing fossil fuels from whichever source that makes sense. To become a key part of the US new supply chain that reverses the overconcentration of the supply chain in China. It can only be said then that Freedom House has the peculiar affliction left behind from the John Foster Dulles period, combined with a bit of arrogance in failing to grasp the central fact of India which is its 22 languages forging one nation- a task nowhere seen in the history of the world. ...

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The concluding G20 statement asked the IMF to raise $50 billion for the poorest countries through IMF gold sales. Central banks in Russia, China and Japan will be counter parties to these sales.