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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 13
1/10
There will be a rush to declare yesterday's trade agreement a total success or an abject failure, but its main consequence will be to partially reopen the trade conduits without changing underlying dynamics much.
caixinglobal.com/2025-05-12/chi…
2/10
The fact is that as long as China is unable to substantially raise the consumption share of GDP, reluctant to raise the investment share, and continues to pour support into production, it will have to continue running massive trade surpluses.
3/10
Bloomberg reports that as part of yesterday's deal, China may have agreed to remove non-tariff barriers to US imports, but while these reductions may benefit specific US imports, it is China's internal imbalance that is driving down import growth, not import restrictions.
Read 10 tweets
Michael Pettis Profile picture
May 12
1/4
 In a new piece published today, I argue that the reasons Keynes and other prominent economists opposed the unfettered flow of international capital are just as valid today as they were when he was alive.

commonplace.org/2025/05/12/why…
2/4
 For every country, external and internal imbalances are always aligned, just as every country's eternal imbalance are always aligned with the imbalances of the rest of the world. Because—except in the starry-eyed world of "Econ 101"—international capital doesn't...
3/4
 flow from less productive investments to more productive investments, i.e. from where it is less needed to where it is more needed, national economies, especially those with open capital and trade accounts, must constantly adjust to accommodate non-economic capital flows.
Read 4 tweets
Michael Pettis Profile picture
May 9
1/6
 As one of Beijing's main policies to boost domestic consumption has been to force banks, since earlier this year, to increase their consumer lending, this very interesting investigative report in Caixin is especially timely.

caixinglobal.com/2025-05-09/in-…
2/6
 "China’s personal lending market," Caixin writes, "is under mounting pressure. What began as a slow-burning concern in early 2024 has become an acute worry in 2025. Housing mortgages, consumer loans, credit card...
3/6
 debt and, most critically, small business loans — collectively known as personal loans — are slipping into delinquency at rates not seen since the 2008 financial crisis. Banks across the country are scrambling."
Read 6 tweets
Michael Pettis Profile picture
May 9
1/9
 FT: "China’s exports growth showed resilience in April, defying expectations that the effects of a trade war with the US would start to bite."

There's that word "resilience" again. We'll see it a lot this year in reference to China's exports.

ft.com/content/fd98d3…
2/9
 It's also the word the SCMP used, and several other newspapers. Since March I've argued that the word will be trotted out every month in relation to Chinese exports, mainly because unless the US is able to reduce its trade deficit sharply this...
scmp.com/economy/china-…
3/9
 year (which I don't expect), we are far more likely to see a shift in trade rather than a contraction. So while China's trade surplus with the US declines, along with its exports, it will be replaced with a rising trade surplus (and rising exports) with the rest of the world.
Read 9 tweets
Michael Pettis Profile picture
May 7
1/8
 A translation (by Fred Gao) of a very interesting recent speech by Liu Shijin, a former Deputy Director of the Development Research Center of the State Council. Liu begins by acknowledging how astonishingly low China's consumption share of GDP is.

fredgao.com/p/liu-shijins-…
2/8
 "I want to emphasize a concept here." Liu says. "China's insufficient consumption is not an acceptable deviation from international average levels, but a significant gap of 20 percentage points, which can be described as a "structural deviation.""
3/8
 He proposes several solutions, but to me by far the most interesting is when he discusses government-owned assets: "In 2022, the Chinese government sector's net assets accounted for 38.6% of society's total net assets, significantly higher than other countries."
Read 8 tweets
Michael Pettis Profile picture
May 7
1/8
 As always, a very interesting article by Martin Wolf. I think, however, that he underestimates how difficult it will be for China to raise domestic demand (I agree with Matthew Klein here).

via @ftft.com/content/49e38e…
2/8
 There are two ways for China to raise domestic demand. One way, of course, is to increase domestic investment, although in an earlier piece Wolf noted that the fact that China invests 43% of GDP and is...
3/8
 growing at less than 5% shows just how problematic investment in China has become. For China to rely on further increases in investment will only exacerbate the ultimate adjustment costs.
Read 8 tweets

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