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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
Dec 29
1/7
 SCMP: "China is tapping the brakes on some subway expansions, including in certain affluent cities, reflecting a shift from the debt-fuelled infrastructure boom of the past to a new era of fiscal discipline and investment efficiency."
scmp.com/economy/china-…
2/7
 I've long argued that much of the infrastructure investment in the past decade was not economically viable. It was implemented mainly to keep economic activity from dropping, and not to create economic value, and is why the debt used to fund this investment was growing...
3/7
 so much faster than the economy itself. But while there are still a few diehard analysts who insist that misallocated investment isn't a problem, it seems increasingly to have become the official point of view that it is, even if they have trouble saying it explicitly.
Read 7 tweets
Michael Pettis Profile picture
Dec 21
1/4
 WSJ: "The number of ride-hailing drivers in China tripled to 7.5 million in the four years to 2024, even though the number of rides grew only by about 60% during the same period, government data shows."
wsj.com/world/asia/14-…
2/4
 By shifting into the gig economy, workers reduce overall unemployment numbers without increasing the the total amount of wages workers receive. This is one of the reasons consumption growth has been so weak.

To boost consumption growth, Beijing must figure out how to...
3/4
 get total wages to rise much more quickly, although it must do this without further undermining already-unprofitable businesses. But if it continues to subsidize business profits while also subsidizing wage growth, the rise in debt will only accelerate.
Read 4 tweets
Michael Pettis Profile picture
Dec 17
1/10
President Macron says "We must acknowledge that these imbalances are both the result of weak EU productivity and China’s policy of export-driven growth."

The first part of that statement is technically not true.
via @ftft.com/content/c8fdf1…
2/10
Countries don't run trade deficits because of low productivity, any more than they run surpluses because of high productivity. That is not at all what global trade imbalances around the world tell us, and that is not why countries have lower or higher saving rates.
3/10
American productivity, to take one obvious example, is higher than that of Europeans, and several times higher than that of the Chinese, and yet it is the US that runs huge deficits and China, with the highest saving rate in the world, that runs huge trade surpluses.
Read 10 tweets
Michael Pettis Profile picture
Dec 15
1/8
 It's hard to find anything good in the November economic data for China, just as it is hard to find anything new to say. All the important indicators continue to weaken, as they have throughout the year, in some cases even decelerating further.
english.news.cn/20251215/a5915…
2/8
 Retail sales, for example, were expected to grow a very disappointing 2.9% year on year in November. In fact they only grew 1.3%.

For all the talk of a greater role for consumption in driving growth, in the first 11 months of the year, retail sales were up just 4.0%.
3/8
 Meanwhile industrial output rose 4.8% in November, a little below expectation and well below the 6.0% growth in the first 11 months of the year.

For me the main worry is the gap between the two, with the former so far this year growing 2 percentage points more slowly than...
Read 8 tweets
Michael Pettis Profile picture
Dec 12
1/8
 Caixin: "While concerns about weak demand and external uncertainties persist, this year's Central Economic Work Conference, which concluded on Thursday, marked a shift in tone. The official readout framed China's core economic challenge as...
caixinglobal.com/2025-12-12/chi…
2/8
 a “prominent contradiction between strong supply and weak demand” — a structural issue rather than just insufficient consumption."

"The change" Caixin writes, "suggests Beijing sees supply-side imbalances, not just inadequate consumption, as a constraint."
3/8
 Perhaps, but the only way you reduce a “contradiction between strong supply and weak demand” is either by reducing GDP growth, which Beijing doesn't seem to want, by increasing growth in consumption, which for all its efforts Beijing has been unable to do, or by increasing...
Read 8 tweets
Michael Pettis Profile picture
Dec 11
1/4
 WSJ: "President Trump’s barrage of tariff increases threatened to chill global trade flows, but commercial exchanges continued to increase as most of the international commerce system functions as it did before the onslaught."
via @WSJwsj.com/economy/trade/…
2/4
 Contrary to what WSJ says, Trump's tariffs never really threatened to "chill global trade flows" except in the view of those (including far too many economists) who mistakenly thought of trade in incremental terms rather than in systemic terms.
3/4
 As I wrote two years ago, the word "resilience" was going to be used over and over to describe trade as Trump's tariffs shifted trade and trade imbalances around without fundamentally changing them. That's because the only way the US can cause a reduction in its trade...
Read 4 tweets

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