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Michael Pettis Profile picture
@michaelxpettis
Aug 19, 2019 • 6 tweets • 2 min read • Read on X
Yes, agrees. Ironically democracy seems historically to be “in crisis” precisely when it is most proving its superiority to other systems, i.e. when it is managing us through a difficult, messy adjustment. The books cited here seem to worry that democracy is in trouble because...
...the electorate isn’t just, disinterested and well-informed, but I think this would only be a problem if the purpose of a political system were to express deep political truths. In fact I’d argue that nothing is more dangerous than such a political system: what we need is...
...one that allows our institutions to adjust, however clumsily, as conditions change, and unfortunately because there are times, like today, when change is extremely messy, chaotic and hard to predict, the best we can hope for is to adjust in a messy, chaotic and...
...unpredictable way. Like in the 1930s and the 1970s, I think the populism and “crisis of democracy” that we are experiencing today is just democracy doing what it is supposed to do. It is the non-democracies that are not adjusting, and while this may look like purpose and...
...stability, in fact I think it just reflects institutional rigidity. Jefferson is supposed to have wanted a bloody revolution every fifty years to drive institutional change, but while that may be more aesthetically pleasing, perhaps our way is better.
tabletmag.com/jewish-news-an…
I meant to paste this:
monticello.org/site/research-…

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More from @michaelxpettis

Michael Pettis Profile picture
Jul 2
1/6
 A decision by China to offer more debt relief could be a “game changer for the poor and the system,” said Kevin Gallagher, the director of the Boston University Global Development Policy Center. “It’s really in China’s strategic interest to do that.”

nytimes.com/2025/07/01/bus…
2/6
 Ironically, debt relief is also in the economic interest of creditor countries, especially if, as in the case of China, the economy is highly dependent on export surpluses.

That's because capital flows are just the reverse of trade flows.
3/6
 To put it another way, every dollar an overly-indebted developing country earns from its exports must be recycled, either in the form of debt repayment or in the form of imports. The less that goes to the former, the more that is available for the latter.
Read 6 tweets
Michael Pettis Profile picture
Jul 2
1/8
 The euro is up 14% against the dollar this year, as well as against the yuan (11%) and the yen (4%), driven by financial inflows rather than by economic fundamentals (i.e. higher relative productivity grown).

bloomberg.com/news/articles/…
2/8
 If sustained, it will almost certainly have an adverse impact on EU manufacturing. In that case ECB rate cuts may keep unemployment from rising (by boosting domestic consumption), but they won't prevent the EU economy from shifting out of manufacturing towards services.
3/8
 It seems absurd that major, open economies like the EU and the US should allow imbalances in their domestic economies to be determined by changes in global financial flows, and especially by changes in the way less open surplus countries decide to balance their surpluses.
Read 8 tweets
Michael Pettis Profile picture
Jun 30
1/4
 I just finished Martin Daunton's excellent survey and analysis of the last 100 years of globalization. There is an enormous amount of material here (nearly 900 pages) and it may not be an easy read for those who aren't already very familiar with much of this history. Image
2/4
 But for those who are, or who want to be, it's well worth the effort. While the book is ostensibly about the process of globalization, and the role of government and government institutions in that process, especially in pivotal periods during the 1930-40s, the 1970s and...
3/4
 in the past decade, a major theme is the enormous distortions caused by the unfettered flow of capital, the ways in which these flows dislocated domestic economies, and the various (mostly unsuccessful) attempts individually and collectively to control them.
Read 4 tweets
Michael Pettis Profile picture
Jun 28
1/4
 Good John Authers article on business profits in the US: "After-tax profits account for an unprecedented 10.7% of gross domestic product, when in the last 50 years of the 20th century, they never exceeded 8%."
@johnauthers_
bloomberg.com/opinion/articl…
2/4
 "The only time approaching their current share of the economy was in 1929 on the eve of the Great Crash. If the nation is to deal with inequality, money must be redistributed from somewhere; corporate profits are an obvious source of funds."
3/4
 Speaking of 1929, we need to re-read Marriner Eccles (FDR's Fed chairman) on the relationship between income inequality, weak domestic demand, rising debt needed to boost domestic demand, and the eventual collapse in production once rising debt can no longer be sustained.
Read 4 tweets
Michael Pettis Profile picture
Jun 28
1/4
 Caixin: "China is in dire need of more domestic consumption as global uncertainties hamper external demand. Key to this is increasing incomes, a Chinese economics professor said at the Summer Davos Forum in Tianjin on Thursday."

caixinglobal.com/2025-06-26/inc…
2/4
 It's good that there is finally a consensus that low consumption is China's most serious economic problem, and the main cause of its other problems (soaring debt, deflation, overinvestment in infrastructure and manufacturing, over-reliance on a rising trade surplus).
3/4
 It's also good that there's a growing consensus that the only sustainable way to raise consumption is to raise household incomes.

But it isn't yet fully acknowledged that China doesn't need rising consumption per se so much as rising consumption relative to GDP.
Read 4 tweets
Michael Pettis Profile picture
Jun 26
1/15
Kenneth Rogoff says: "There is, for example, a terrific chapter in which Ray Dalio brutally critiques Japanese policymakers for failing to force debt writedowns after the country’s early 1990s financial crisis.'

via @ftft.com/content/e1b99a…
2/15
"Instead," he continues, "they allowed debt overhang to hamstring the financial system and sap two decades of growth."

I haven't read Dalio's book, but this is an extremely important point, and one that Beijing should note.
3/15
Beijing has an enormous of debt that is ostensibly backed by the book value of associated assets (most Chinese debt was used to fund investment), but the economic value of these assets are not worth nearly as much as their book value.
ft.com/content/630f82…
Read 15 tweets

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