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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
Jun 1
1/5
 WSJ: "Labor’s share of gross domestic income (conceptually similar to GDP) sank to 51%, the lowest since records began in 1947. Profits’ share climbed to 12.1%, the highest since 1950."
@greg_ip
wsj.com/finance/stocks…
2/5
 Greg Ip has a good track record of zeroing in on the key point. The profit share of GDP is rising, he notes, but the wage share is declining. This is a problem, because, as Marriner Eccles explained in the 1930s, it is overall wage growth that sustains production growth.
3/5
 If the US were running a trade surplus, it would be net foreign demand that balances the gap between the two. The fact that it is instead running a trade deficit suggests that domestic demand is being propped up by rising fiscal and household debt.
nber.org/system/files/w…
Read 5 tweets
Michael Pettis Profile picture
May 30
1/5
 Very good Caixin article on the struggle to manage local-government debt: "With financing squeezed, local governments are turning to a new strategy: revitalizing state-owned resources, assets and funds. Championed by Hubei and Hunan, the idea is to...
caixinglobal.com/2026-05-29/in-…
2/5
 turn all possible state-owned resources into assets, securitize them, and leverage all state-owned funds. In practice, this means identifying and packaging things from data to reservoir silt to the space under bridges, and then selling or securitizing them to raise cash."
3/5
 Is this a good thing? I've long argued that the best way for China to manage a difficult adjustment in the least disruptive way would be to force the adjustment costs onto local governments, who could absorb these costs by liquidating the huge portfolio of assets they own.
Read 5 tweets
Michael Pettis Profile picture
May 29
1/5
 SCMP: "Chinese provinces are scouring their balance sheets to revitalise idle state assets, seeking alternative revenue streams to counter intense debt pressures stemming from the prolonged property downturn."
sc.mp/eo0mk?utm_sour…
2/5
 "This form of asset-based financing has emerged as a critical fiscal lifeline for regional governments that had relied on land sales for the bulk of their income until that stream was cut off with the onset of China’s property crisis."
3/5
 This is important. One of the best things China can do to minimize social costs once it finally begins to adjust is to transfer to households, or otherwise liquidate, local-government-owned assets. It seems it may be starting to do this.
Read 5 tweets
Michael Pettis Profile picture
May 24
1/8
 I just finished reading Chris Miller's excellent book on the collapse of the Soviet Economy. Some people might think that the topic is interesting, but largely irrelevant to global economic conditions today. They would be mistaken. This is a very relevant book.
@crmiller1 Image
2/8
 Among the important points it makes is this: "The notion that political and economic reforms were separate processes misunderstands Soviet politics. The most decisive debates during the perestroika period were about the distribution of economic resources."
3/8
 Miller notes that China's reforms began in the late 1970s, when its economy was in such terrible shape that they resulted in an immediate surge in productivity, the benefits of which could be used effectively to buy off potential elite opposition (especially in the 1990s).
Read 8 tweets
Michael Pettis Profile picture
May 22
1/9
 SCMP: "To address widening trade imbalances across the Asia-Pacific region, surplus-heavy nations such as China should be buying more, and deficit-running economies need to bolster their competitiveness, a top Apec official said on Thursday."
sc.mp/y49ox?utm_sour…
2/9
 The article continues: "Carlos Kuriyama warned that structural imbalances would remain wide in the near future and cautioned that protectionist responses could exacerbate regional fragmentation rather than resolving underlying issues."
3/9
 We are definitely in the age of Joan Robinson. She warned that large, beggar-thy-neighbor trade surpluses would eventually force deficit countries into protectionist retaliation which could lead to a breakdown in trade that would harm the global economy.
Read 9 tweets
Michael Pettis Profile picture
May 20
1/10
Important FT article by Mark Sobel, Brad Setser and Robin Brooks. They make the seemingly counterintuitive point that while incremental trade agreements, in which one side or the other agrees to buy a little more of this or a little less of...
ft.com/content/b600db…
2/10
that, may impress policymakers (and dealmakers) who don't understand trade – or, for that matter, how the balance of payments work – in fact they have no impact at all on the overall trade imbalances.
3/10
Whether or not China buys more soybeans or Boeings might matter to American soybean farmers or to Boeing shareholders, in other words, but it will have no impact on either the American trade deficit or on overall American deindustrialization.
Read 10 tweets

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