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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
May 7
1/6
 SCMP: "The EU’s top trade official used her departing appearance at the EU Parliament to pour cold water on the prospect of an investment deal with China, hinting that new weapons for dealing with Chinese “macroeconomic imbalances” could be on the way."
sc.mp/6ku4s?utm_sour…
2/6
 Sabine Weyand said: “I’m not talking about a cyclical imbalance in trade, I’m talking about structural macroeconomic imbalances or what the IMF calls macro-industrial policy, which really suppresses domestic demand and creates durable imbalances in the relationship.”
3/6
 It is important to understand why the trade issue will be so difficult to resolve. In my 2013 book I argued that global imbalances had become unsustainable, and if they weren't soon reduced, a resurgence of trade conflict was inevitable.

In fact trade imbalances increased. Image
Read 6 tweets
Michael Pettis Profile picture
May 7
1/4
 Caixin: "The results underscore how China’s leading bad-debt managers are leaning on accounting gains linked to state-backed bank stakes to offset the effects of the prolonged property slump and broader economic slowdown."
caixinglobal.com/2026-05-06/chi…
2/4
 Caixin produces yet another very good article, this time about the surging losses at the AMC's (China's "bad banks", created in the 2000s to offload bad loans at the Big Four banks), and how these losses have been covered by what is an old accounting trick.
3/4
 When AMCs buy Chinese bank stocks, they're allowed to book the difference between a bank’s book value and the discounted purchase price as a one-time gain. Because most Chinese banks trade below book value (typically 0.5 to 0.6 times), every time an AMC buys...
Read 4 tweets
Michael Pettis Profile picture
May 6
1/9
 Brilliant article by Martin Wolf on global imbalances. Wolf is one of the few economists who have an intuitive sense of the global economy as an economic system, which means he is also one of the few who understands how global imbalances work.
ft.com/content/72ab51…
2/9
 He notes in this piece that "the domestic counterpart of its external deficits today is borrowing by the US government."

Many economists find this almost impossible to understand. They do not see how net capital inflows can contribute to rising US debt.
3/9
 But when surplus economies export weak domestic demand to trade partners, it is mainly a rise in household and/or fiscal debt that prevents this from causing a rise in domestic unemployment.

Wolf then goes on to make a point similar to the one Keynes made in 1944.
Read 9 tweets
Michael Pettis Profile picture
May 1
1/4
 Brad Setser explains why China didn’t truly de-dollarize—it just shifted its dollar holdings from official reserves at SAFE to less transparent state entities like banks and investment funds.
@Brad_Setser
cfr.org/articles/china…
2/4
 But his explanations will probably continue to be ignored in favor of much more exciting stories about the collapse of USD as a reserve currency. That's because as long as the PBoC shifts out of its direct holdings of US Treasuries (mainly, it seems, into indirect...
3/4
 holdings through custodian accounts), something that is relatively easy to measure, confused analysts will ignore everything else that is happening in the direct and shadow reserves and take this shift as representing the full story of China's reserve management.
Read 4 tweets
Michael Pettis Profile picture
Apr 29
1/9
 Interesting SCMP article: "China’s top market regulator is intensifying its crackdown on debt-laden “zombie companies” – rolling out a pilot programme in seven economic hubs to facilitate the forced exit of unprofitable firms."
sc.mp/q2aq0?utm_sour…
2/9
 Developing a robust bankruptcy framework in China is among the most important steps Beijing can take to reduce the role of non-productive investment in driving the economy. Hard budget constraints are what force economic activity to remain economic value creating.
3/9
 But it's not so easy to do this. The fact that China has far more "zombie" companies – highly inefficient businesses that are kept alive only by surging debt – than any other country is not an accident or an oversight.
Read 9 tweets
Michael Pettis Profile picture
Apr 26
1/8
 Brendan Greeley on the development of the eurodollar. If Beijing truly wants CNY to be more widely used in international finance, the eurodollar market provides one potentially useful model to show how that might happen.
ft.com/content/be3459…
2/8
 From the 1960s through the early 1980s, the eurodollar was a separate offshore dollar market and not simply an extension of the onshore USD markets. it was a way for dollars to circulate outside US regulation and US control. Its separation was created by...
3/8
 a series of frictional costs between the onshore market and the offshore needs of foreigners, including US capital controls, US bank regulation, and the refusal of Soviet bloc nations to hold their badly-needed dollars in onshore US banks.
Read 8 tweets

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