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Michael Pettis Profile picture
@michaelxpettis
Sep 2, 2019 • 4 tweets • 2 min read • Read on X
Nobody who bought Argentine bonds in this century was making a long-term investment decision about the country’s eventual ability to grow out of its debt, at least nobody who should be allowed to manage a bond fund. They were all...
ft.com/content/5cfe7c… via @financialtimes
@FinancialTimes ...speculators, hoping to ride the short-term wave and get out before Argentina was back against the wall which, given the debt burden, everyone (except the IMF, apparently) knew was just a question of time. That’s why there is no reason Argentina’s creditors – those who bet...
@FinancialTimes ...and lost – shouldn’t be forced to accept the loss and take a major haircut, the sooner the better. Restructuring the debt with IMF support just means bailing out speculators and rolling out the loss over many years, during which time the Argentine economy will do worse...
@FinancialTimes ...than ever. The history of sovereign debt restructurings is the history of making the same set of mistakes made over and over again.

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More from @michaelxpettis

Michael Pettis Profile picture
Nov 23
1/4
 Caixin: "From January to October, Chinese shipbuilders secured orders totaling 37.5 million compensated gross tonnage (CGT). That figure represents about 70% of new ship orders worldwide."

caixinglobal.com/2024-11-22/in-…
2/4
 "Some of the demand comes from China’s state-owned shipping companies," Caixin adds, "which have benefited from Beijing’s push for Chinese companies to transport a greater share of goods produced domestically."
3/4
 This is a policy perhaps worth emulating. In order to revive shipbuilding in the US and the EU, both governments should also consider legislation that "push" for locally-built ships to transport a greater share of goods produced or consumed domestically.
Read 4 tweets
Michael Pettis Profile picture
Nov 23
1/8
 Bloomberg: "German exports aren’t the problem; a dearth of imports and spending are. The next German government should therefore prioritize boosting domestic demand and raising public and private investment."

@chrismbryant via @opinionbloomberg.com/opinion/articl…
2/8
 A "dearth of imports" is always the problem. In a closed economy, trying to grow by subsidizing domestic production at the cost of domestic demand won't work because supply cannot grow faster than demand. Goods and services are produced in order to be consumed or invested.
3/8
 In an open economy, the whole point of beggar-thy-neighbor policies is to subsidize production at the expense of consumption and to export to one's trade partners, in the form of a trade surplus, the consequence of the rising domestic gap between supply and demand.
Read 8 tweets
Michael Pettis Profile picture
Nov 22
1/4
 According to Reuters, "more than three months after groundbreaking ceremony for the Funan Techo Canal that will link the Mekong River to the Gulf of Thailand, the site of the ceremony on the bank of the Mekong laid abandoned."
reuters.com/world/asia-pac…
2/4
 The article continues: "Beijing is drastically downsizing its overseas investments as its domestic economic struggles, even in countries it considers strategic partners, such as Cambodia."
3/4
 I had the good fortune to spend September in Phnom Penh thanks to the kind invitation of Prum Virak. While there, I was able to meet a number of Cambodian academics and policymakers to discuss Cambodian trade and development.
Read 4 tweets
Michael Pettis Profile picture
Nov 21
1/7
 ING's chief economist worries that "the consequences of deglobalisation will show up in the slow erosion of long-term productivity and economic wellbeing. It will leave us all poorer in the long-run."

I don't think this kind of muddled thinking is helpful.

ft.com/content/46ed4b…
2/7
 The alternatives we face aren't between "globalization" and "deglobalization". There are many different forms of globalization, and what we should be discussing is not whether or not we want "globalization, but rather the form of globalization that maximizes global welfare.
3/7
 We live in the kind of globalization that Keynes very explicitly warned against: one in which massive and highly volatile capital flows distort "normal" trade, and in which countries are able to run the persistent trade surpluses that put downward pressure on global growth.
Read 7 tweets
Michael Pettis Profile picture
Nov 19
1/7
 SCMP: "China will lower its tax rebates for exports of solar and lithium battery products, seeking to ease international concerns about overcapacity in its new-energy sector, which has led to rising trade tensions."

via @scmpnewssc.mp/4az3j?utm_sour…
2/7
 "It is possible that Beijing might want to contain the risks of excessive capacity before the US takes action, by discouraging firms from unrestrained expansions."

But while lowering tax rebates for certain sectors may indeed reduce exports from those...
3/7
 sectors, it is incorrect to assume that the resulting decline in solar and lithium battery exports will then translate into a reduction of overall excess capacity. Trade imbalances can only be addressed systemically, not incrementally.
Read 7 tweets
Michael Pettis Profile picture
Nov 18
1/10
Bloomberg: "Critics say such an approach is more akin to spinning a roulette wheel at a casino than a sound investment strategy, and excessive speculation has regularly magnified volatility and led to frequent boom-bust cycles."

via @businessbloomberg.com/news/articles/…
2/10
The speculative nature of China's stock market is often blamed on the immaturity of its large "unsophisticated" retail base, but that gets the causality backwards. It is highly speculative for structural reasons, and investors are just responding to that structure.
3/10
To be a fundamental investor – i.e. to invest on the basis of long-term earnings potential rather than on short term changes – requires a whole set of conditions and information that don't yet exist in China. Fundamental and value investors need high-quality and credible...
Read 10 tweets

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