Elliot Wilson write: In a factory building wind turbines in China, workers have been given the day off.  The factory, has not run at close to full capacity for a year. 

The company’s woes are a microcosm of the daunting challenges that face China’s stuttering economy, the world’s second largest after the United States. This week China devalued its currency by 3.6 per cent in a dramatic bid to encourage exports.  Even the threat of a significant slowdown in China’s economy could be enough to send the rest of the world tumbling back into recession. 

From the polluted central metropolis of Zhengzhou, to Shenyang in the rustbelt northeast, the overwhelming sense is one of pessimism and urban decay. Idle cranes and vacant building sites dot the landscape. The ghost towns of legend — such as Ordos City in Inner Mongolia — are all too real, and remain a silent, cautionary reminder of the perils of engineered growth. 

Over the past year, every key indicator has begun pointing to bad times ahead. Electricity consumption, usually the most reliable single gauge of economic health in the mainland, expanded at the slowest rate in three decades in the year to June. Because of falling Chinese industrial demand, global commodity prices have slumped, threatening growth in producer countries from Australia to Zambia. Chinese house prices have stagnated, while the last time rail-freight volumes were higher than the year before was last September. Last week brought yet more bad news, with exports sliding 8.3 per cent in July from last year’s figures, imports falling for the ninth month in a row, and data pointing to further weakness in industrial output, capital investment and retail spending. China’s Slowdown

Pakistan’s current debt burden has placed their economy in a very delicate situation. The government of Pakistan has borrowed almost $950 million from banks in the past year. Pakistan is relying on it domestic debt which is adversely affecting the fiscal outlook of the country resulting in very little fiscal stability. The country’s government debt to GDP ratio is 64.30 as of December 2014. This figure is alarming because the government isn’t doing much in terms of raising tax revenues to improve the fiscal outlook.

Factors behind the debt crisis for Pakistan. Firstly, Pakistan has bee politically unstable over the past few years. The increasing debt ­to ­GDP ratio isn’t helping the stumbling nation’s cause either. This is a result of a massive decline in tax revenue over the years. Corruption has played a huge role in this aspect as only a fraction of people pay their taxes. In Pakistan, corruption occurs at the highest of levels which has a negative impact on economic growth and other business operations. Pakistan’s fiscal deficit is increasing day by day due to a major energy crisis and growing security concerns that lead to high defense spending. As a result, this causes the foreign debt to further pile up.

A developing nation such as Pakistan, where more than 60% of the people live below the poverty line cannot withstand the effects of these debts as it further worsens standard of living and well being of Pakistani citizens.

The ever rising burden of debt is one of the prime factors hampering the growth of Pakistan’s economy.

Leonid Bershidsky writes:  Russian President Vladimir Putin has mounted a new campaign in his propaganda war with the West: The highly publicized destruction of imported food, which the government banned last year in retaliation for Western economic sanctions. This time around, though, his constituents aren’t quite with him.

The ban, aimed at the U.S. and European countries that imposed sanctions on Russia over its aggression in Ukraine, covers a long of items, including fruit, vegetables, most kinds of meat, fish and dairy products. 

The local replacements often aren’t all that great. In a taste test of one of the bizarre cheeses that have filled Russian store shelves since the embargo, the Guardian’s Moscow correspondent Shaun Walker concluded that “the disintegrating texture is unnerving, and feels as if hundreds of tiny globules of parmesan have been left out on the pavement for a couple of weeks and then stuck back together with glue.”

To satisfy demand for the real thing, embargoed goods have been filtering into Russia. Some arrive by circuitous routes to establish acceptable provenance, or are repackaged in neighboring Belarus to pretend they originated there (I’ve seen Belorussian salmon in stores, though the landlocked country doesn’t produce it). Others are simply smuggled in: Russian customs inspectors are not known for their incorruptibility.

In a rare act of defiance, the Magnit chain of discount supermarkets, one of the country’s biggest retailers, sued the government agency charged with keeping embargoed items out of stores, claiming Putin’s decree on the food sanctions bans only their import, not their sale. 

Putin, however, won’t have it. He wants his food embargo to work as effectively as before, boosting local producers and punishing Western companies that have already seen their Russian business shrink. 

The Russian Orthodox Church doesn’t look kindly upon the destruction of food, either. More than 280,000 people — an unusually large number for Russia — have signed a Change.org petition asking the Kremlin to repeal the food destruction decree and hand over any confiscated food to the needy. “If something can simply be eaten, why destroy it?” the petition says.

Putin’s government, however, is like a tank without a reverse gear. 

Russians have seen a lot of strange things on state TV under Putin, but never before have they been treated to a public cheese execution. I expect the campaign will be as ineffectual as it is grotesque. Installing incinerators at customs and crushing wheels of Gouda is not going to make customs officials any less willing to turn a blind eye for the right reward. 

Gold reserves are viewed as being crucial to actually putting in a real value that aims to support a nation’s currency. The decline in the price of gold has gotten even worse since the end of June, but five central banks were buyers of gold in the first half of 2015.

New data released by the World Gold Council (WGC) shows central bank purchases and holdings for the month of August.   Five nations that added handily to their gold reserves in the first half of 2015. These were China and Russia for the lion’s share, followed by Kazakhstan, Mongolia and Jordan. Turkey had been classified as a net-adder of gold previously due to reserves for its bank sector, but it has been decreasing net gold holdings in 2015.

 China has been trying to curb a stock market meltdown, yet China has to maintain large reserves of real assets to keep its currency up. IChina added a whopping 604 tons of gold in the month of June.

The WGC shows that China is ranked sixth in central bank holdings in the world, but that would be fifth if you remove the International Monetary Fund.  China’s big move here appears to be the culmination of multiyear gold buying that had been reported but had not been tabulated.

If one nation needs to do what it can to bolster its currency, it is Russia. It has been under financial pressure since its Crimea invasion.  Russia’s central bank official gold holdings were listed as being 1,275 tons. That ranks it as number 7 in the world’s gold holdings, sixth if you do not count the International Monetary Fund. Russia is a gold producer and most central bank gold acquisitions there actually take place out of that domestic market rather than on the international metals markets.

Kazakhstan has added gold in the past, and it added close to 14 more tons of gold in the first six months of 2015. The nation ranks as the 23rd largest holder of gold by central bank, but Kazakhstan would be ranked the 21st largest central bank holding gold if you account for the European Central Bank and the International Monetary Fund.

Jordan did not add to its gold holdings in the central bank in the second quarter, but the first three months of 2015 saw 14 tons added so far in 2015. The WGC did not have any special notes about what this was for, but Jordan was also shown be a net acquirer of gold during both halves of 2014.

The WGC showed that Mongolia added a mere 0.7 tons via trading activity in the month of June. Its gold had fluctuated throughout 2014, also due to trading activity. What stood out was that June was the one month of gains, with 0.7 tons added — with twice as much “out” or down in the other months combined for 2015. Again, Mongolia may be an anomaly. Still the nation wants to grow its economic clout, after three years of high growth, and Mongolia even has an exchange traded fund tracking it now.

Aman Sethi writes:  Down by the sandy banks of the Yamuna River, the men must work quickly. At a little past 12 a.m. one humid night in May, they pull back the black plastic tarp covering three boreholes sunk deep in the ground along the waterway that traces Delhi’s eastern edge. From a shack a few feet away, they then drag thick hoses toward a queue of 20-odd tanker trucks idling quietly with their headlights turned off. The men work in a team: While one man fits a hose’s mouth over a borehole, another clambers atop a truck at the front of the line and shoves the tube’s opposite end into the empty steel cistern attached to the vehicle’s creaky frame.

“On kar!” someone shouts in Hinglish into the darkness; almost instantly, his orders to “switch it on” are obeyed. Diesel generators, housed in nearby sheds, begin to thrum. Submersible pumps, installed in the borehole’s shafts, drone as they disgorge thousands of gallons of groundwater from deep in the earth. The liquid gushes through the hoses and into the trucks’ tanks.

Within 15 minutes, the 2,642-gallon (10,000-liter) containers on the first three rigs are full. The pumps are switched off briefly as drivers move their now-heavy trucks forward and another trio takes their place. The routine is repeated again and again through the night until every tanker is brimming with water.

The full trucks don’t wait around. As the hose team continues its work, drivers nose down a rutted dirt path until they reach a nearby highway. There, they turn on their lights and pick up speed, rushing to sell their bounty. They go to factories and hospitals, malls and hotels, apartments and hutments across this city of 25 million.

Everything about this business is illegal: the boreholes dug without permission, the trucks operating without permits, the water sold without testing or treatment. “Water work is night work,” says a middle-aged neighbor who rents a house near the covert pumping station and requested anonymity. “Bosses arrange buyers, labor fills tankers, the police look the other way, and the muscle makes sure that no one says nothing to nobody.” Tonight, that muscle—burly, bearded, and in tight-fitting T-shirts—has little to do: Sitting near the trucks, the men are absorbed in a game of cards. At dawn, the crew switches off the generators, stows the hoses in the shack from which they came, and places the tarp back over the boreholes. Few traces of the night’s frenetic activity remain.

Teams like this one are ubiquitous in Delhi, where the official water supply falls short of the city’s needs by at least 207 million gallons each day, according to a 2013 audit by the office of the Indian comptroller and auditor general. A quarter of Delhi’s households live without a piped-water connection; most of the rest receive water for only a few hours each day. So residents have come to rely on private truck owners—the most visible strands of a dispersed web of city councilors, farmers, real estate agents, and fixers who source millions of gallons of water each day from illicit boreholes, as well as the city’s leaky pipe network, and sell the liquid for profit.

A man fills a tanker while another drills a borehole at an illegal water-filling point in Delhi.    Water in Delhi

Barry Ritholtz writes:  Behavioral economics is grounded in the idea that homo economicus (economic man) fails to account for real-world human behavior. The behaviorists argue that people are not rational; they don’t act narrowly in their own self-interest as profit maximizers. Instead, they are biased and emotional and often fail to make rational judgments about money.

In other words, the traditional starting point of economics is actually false. As a model, it helps conceptualize commerce, but in the real world it can be and often is wrong. This is where the behaviorists come in to show how peoples’ irrationality affects their decision-making. Specifically:

— We get too emotional about the possibility of making lots of money;

— We get too depressed about the risk of losing money;

— Our cognitive processes fool us constantly into believing things that are untrue;

— We have poor impulse control, an inability to think long term and lack patience.

Nowhere does behavioral economics promise to make you as a human being less irrational. At best, its goal is to inform you of your own irrational tendencies.

• Vanguard’s assets under management have at least tripled to more than $3 trillion since the end of the financial crisis. About two-thirds of those assets are in broad, inexpensive passive indices;

• Exchange-traded funds let investors gain broad exposure to almost any asset class in a single purchase at very low cost;

• Asset allocation can now be had for little cost or free via all manner of automated software-based advisers.

Rather than brainwashing investors, behavioral economics has helped create a set of investing alternatives that meet their financial benchmarks and cost very little.  That you may have chosen to ignore these alternatives and plunge into the latest fund of funds or private-equity offering isn’t a failure of behavioral economics; it is your own failure to apply what we now know about investing.

The basic premise of economics is that transactional commerce — the production, distribution and consumption of goods and services — is a key way to understand society. What behavioral economics has done is point out the false assumptions and erroneous conclusions inherent in the dismal science of economics.

Your wetware developed to keep you alive on the savannah, not to make risk-reward decisions in the capital markets. A secret brainwashing machine is unnecessary. You are not wired for investing. You never were. That is a feature, not a bug. But our brains have allowed our species to survive long enough to develop expensive, unnecessary financial products.

It is your job to figure that out. Behavioral economics can help.