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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
Sep 9
1/7
 NYT: "Through August, China exported $141 billion to Africa, while importing $81 billion. The widening trade imbalance with Africa stems from surging exports of Chinese-made batteries, solar panels, electric vehicles and industrial equipment."
nytimes.com/2025/09/08/bus…
2/7
 "The swell in exports to Africa," it continues, "along with record volumes of goods sold to Southeast Asia and Latin America, underscores the resilience of Chinese manufacturers in finding new markets for the products they continue to churn out in enormous quantities."
3/7
 Meanwhile, as Chinese trade surpluses surge, so do American trade deficits. This is not mainly because of transshipments, as many assume. It is because countries with expanding trade surpluses with the US use their higher revenues to fund deficits with the rest of the world.
Read 7 tweets
Michael Pettis Profile picture
Sep 8
1/7
 For all the talk of rebalancing domestic demand in China, Chinese exports continue to climb much faster than imports in 2025. In the first seven months of 2025, exports were up 6.9% in RMB terms, while imports were up 1.2%.
english.news.cn/20250908/e41cd…
2/7
 For just the month of August, exports were up 4.4% year on year to $321.8 billion while imports were up 1.3% to $219.5 billion, leaving China with a trade surplus of $102.3 billion, its fifth trade surplus this month of over $100 billion, with five out of...
3/7
 its nine monthly trade surpluses in excess of $100 billion having occurred in 2025. Year to date, China’s trade surplus is $787.5 billion, a whopping 29% increase over the same period last year.
Read 7 tweets
Michael Pettis Profile picture
Sep 7
1/6
 I often make fun of the sheer hysteria that tariffs generate amount academic economists, but Navarro's comment is just as hysterical, even if in the opposite way. Tariffs are not tax cuts.
2/6
 They are, like many other policies, a mechanism for transferring income from one sector of the economy to another, in this case from households to producers. In that sense they work like a currency devaluation, by taxing imports and subsidizing exports.
3/6
 They have broadly the same impact as policies that restrain wage growth, or that lower credit costs to producers. In each of those cases, as I explain in the article below, they work by changing the relationship between production and consumption.
imf.org/en/Publication…
Read 6 tweets
Michael Pettis Profile picture
Sep 6
1/8
 Rather than treat Mexico and Canada as trade rivals, Washington should recognize that both are substantial deficit countries that, by helping to absorb global trade and savings imbalances, actually reduce trade pressures on the US.
wsj.com/economy/trade/…
2/8
 The deep, flexible, and well-governed American financial markets, along with its completely open capital account, have given the US the role of "absorber of last resort" of global savings imbalances, which is just another way of saying "consumer of last resort".
3/8
 To the extent that any tariffs we impose on Canada and Mexico undermine their economies, their abilities to help absorb global savings imbalances will be reduced, especially in the case of Mexico. In that case the US will end up absorbing...
Read 8 tweets
Michael Pettis Profile picture
Sep 5
1/10
Ngozi Okonjo-Iweala is concerned mainly about countries following the WTO rulebook, and as head of the WTO, perhaps this makes sense, but it also suggests why the WTO has become largely irrelevant to global trade.
ft.com/content/344ef0…
2/10
For her, the problem has emerged mainly "in the past six months", in the form of tariffs from the US and, increasingly, from other countries as they struggle to absorb huge, persistent trade surpluses and China's rapidly expanding share of global manufacturing.
3/10
But, as economists used to know, large and growing beggar-thy-neighbor trade surpluses will inevitably set off retaliation, and this retaliation will, just as inevitably, come at the expense of global trade. The "past six months" in other words, was not the problem.
Read 10 tweets
Michael Pettis Profile picture
Sep 3
1/4
 I hate to disagree with Albert Einstein, but technological progress does not lead to unemployment. To the extent that it causes productivity to rise, what really matters is whether or not the resulting rise in productivity is matched by a commensurate rise in wages.
2/4
 If it is, rather than a rise in unemployment we're more likely to see a shift in employment from the sector that benefitted from technological progress to other sectors. That's because as the real cost of the former's products declines, households will spend more on the latter.
3/4
 If not, the economy will be forced to adjust in some other way which, depending on underlying conditions, may involve either more productive investment, more household and fiscal debt, or higher unemployment.
Read 4 tweets

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