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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
Jan 9
1/5
 NYT: "The U.S. trade deficit in goods and services shrank to $29.4 billion in October, down from $48.1 billion the prior month. The figure was the lowest monthly trade deficit recorded since June 2009."
nytimes.com/2026/01/08/bus…
2/5
 If this persists, it may be the most important factor for those thinking about what is likely to happen in 2026. In a three-month period during which the Chinese trade surplus has surged, the US trade deficit has declined.
3/5
 Simple arithmetic tells us that the difference must be reflected in the trade balances of other countries. Some of this will have showed up initially as rising trade deficits among developing countries, but this will ultimately be limited by their abilities to finance them.
Read 5 tweets
Michael Pettis Profile picture
Jan 9
1/8
 Very interesting CNA article on Beijing's strategic pivot towards upgrading the quality of China's existing housing stock. It turns out that much of its housing stock, including much that was built in recent years, is of unacceptable quality.
channelnewsasia.com/east-asia/chin…
2/8
 CNA: "“This strategic pivot to ‘good housing’ is fundamentally about rebalancing the economy – shifting from speculative inventory to quality living,” Lin Han-Shen, China country director at The Asia Group, told CNA. “Restoring household confidence is central".
3/8
 The article also cites the Conference Board’s Zhang Yuhan who warned that "the shift towards higher-quality housing is “likely to support confidence gradually”, but cautioned it does not resolve oversupply or developer liquidity pressures on its own."
Read 8 tweets
Michael Pettis Profile picture
Jan 7
1/6
 People often say that the problem with the global trading system is mainland China, but that's not true. Taiwan, Germany, Japan, South Korea, Switzerland, Singapore and many others have run similar positions. The problem is with the global trading system itself.
2/6
 As long as countries like the US (and the EU soon?) continue to accommodate global saving imbalances, our current trading system allows for a kind of Kalecki paradox in which individual economies can be rewarded for behavior that undermines growth in the system as a whole.
3/6
 Keynes explained this in 1944: economies that repress domestic demand in order to subsidize their manufacturing reduce overall global demand, but are able nonetheless to grow more quickly by taking a larger share of other countries' demand.
Read 6 tweets
Michael Pettis Profile picture
Jan 6
1/14
Unfortunately I don't subscribe to Krugman's substack, so I cannot comment on the whole article, but I can say that the first few paragraphs lay out the issue very accurately and with commendable simplicity. He certainly understands the main issues.
open.substack.com/pub/paulkrugma…
2/14
He notes: "In the past, China achieved stunning economic growth in part through a combination of very high savings and very high investment. Its savings remain very high, but investment in China is running into diminishing returns in the face of slowing technological...
3/14
progress and a shrinking working-age population. Yet the Chinese government keeps failing to take effective steps to reduce savings and increase consumer demand. Instead, China is in effect exporting its excess savings via its massive trade surplus. It is using consumer...
Read 13 tweets
Michael Pettis Profile picture
Jan 3
1/11
Philip Coggan: "It is a mug’s game trying to predict the end of a boom with any precision. They last much longer than anyone might reasonably expect. That is true of bull markets, as well as economic advances. The reason is that markets and... ft.com/content/2ae4ac…
2/11
economies find ways to support themselves. George Soros, the well-known investor and philanthropist, has a term for it: reflexivity."

Coggan then explains that reflexivity is Soros' name for positive feedback loops embedded in economies and financial systems.
3/11
This is a very important concept that too few economists recognize and embed in their analyses, although most traders and investors understand it intuitively.

The point that Hyman Minsky would have added is that positive feedback loops are nothing mysterious.
Read 11 tweets
Michael Pettis Profile picture
Jan 3
1/7
 SCMP: "As China grapples with persistent deflationary pressure, scholars from one of the country’s top universities have urged the government to take more forceful action to prevent the economy from becoming trapped in a Japan-style downward spiral."
scmp.com/economy/china-…
2/7
 The article continues: "“Japan’s experience has shown that once households form the expectation that prices won’t rise over the medium to long term, it becomes nearly impossible to break that mindset,” said He Xiaobei, a professor at Peking University."
3/7
 She argues that Beijing should adopt a binding inflation target and make reviving price growth a top priority. She's right, but I am not sure what this means in policy terms. In the US or Europe, it would mean expanding money rapidly enough to set off price increases.
Read 7 tweets

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