Michael Pettis's Contributions

How Trump Can Fix America's Trade Imbalance

Aug 6 – Taxing capital inflows is a far better way to balance trade than imposing tariffs. This would address the root causes of trade imbalances, improve the productive investment process, and shift most of the adjustment costs onto banks and speculators...

China Cannot Weaponize Its U.S. Treasury Bonds

May 30 – A number of recent articles suggest that Chinese officials may reduce their purchases of U.S. government bonds. It is very unlikely that China can do so in any meaningful way because doing so would almost certainly be costly for Beijing. And even if China...

Should the United States Run a Trade Surplus?

Mar 5 – Although standard trade theory predicts that highly advanced economies with sophisticated financial sectors, like the United States, should generally run trade surpluses, the country has run persistent, and often large, trade deficits for five decades...

Why U.S. Debt Must Continue to Rise

Feb 08 – Many Americans are worried about the seemingly inexorable rise in U.S. debt, whether government debt, household debt, or business debt. They are right to be concerned. Rapidly rising debt is a problem not just in the United States...

The Chinese Economy May Be Growing at Half of What's Officially Reported

Feb 04 – Analysts are increasingly skeptical that China’s very high reported GDP growth rate provides a meaningful picture of the economy’s health. There are, however, at least three very different ways...

Beijing’s Three Options: Unemployment, Debt, or Wealth Transfers

By Michael Pettis – China’s debt problems have emerged so much more rapidly and severely this year than in the past that a growing number of analysts believe that this may be the year that China’s economy breaks...

The U.S. Trade Deficit Isn’t Caused by Low American Savings

By Michael Pettis – Economist Joseph Stiglitz recently published an interesting piece in Project Syndicate called “The US is at Risk of Losing a Trade War with China.” I am always surprised by claims that deficit countries like the United...

Tariffs and Trade Intervention

By Michael Pettis – Given all the discussions about the beginning of a tariff war between the United States and China, I thought it might be helpful to wade through some of the relevant issues. To summarize, I want to...

Will China “Go Nuclear” and Dump US Bonds?

Jun 28 – FS Insider interviews Michael Pettis in Beijing on US-China advantages and disadvantages in a trade war, whether China will use the “nuclear option” of dumping its large US bond holdings and what would likely happen...

Michael Pettis on Trade Wars, Commodities, and More

Apr 13 – FS Insider interviews Michael Pettis to discuss how global trade actually works today, why leaders should be worried about large deficits and why trade tariffs won’t fix the problem. Pettis also explains which countries are...

High Wages Versus High Savings in a Globalized World

By Michael Pettis – Investment-driven growth can broadly occur in the form of one of two models, each with a different way of treating wages and household income. One model, which I will call the high-wage model...

The GDP of Bridges to Nowhere

By Michael Pettis – I was recently part of a discussion on a listserv that brings together Chinese and foreign experts to exchange views on China-related topics. What set off this discussion was a claim that the Chinese economy...

What Would Happen If China Stopped Buying U.S. Treasury Bonds?

By Michael Pettis – If China is indeed threatening to retaliate against any U.S. trade action by reducing its purchases of U.S. government bonds, not only would this be a pretty hollow threat, but in fact it would be exactly what Washington wants. To see why...

China Update - Why Is the Consensus Now So Optimistic?

As long as China has debt capacity, it can achieve any GDP growth rate Beijing requires, simply by allowing credit to expand. But debt levels are already high, and credit must expand at an accelerating pace to maintain growth. China is probably still a few years away...

Mexico’s Positive Impact on the US Trade Balance

Contrary to what one might first expect, Mexico’s role in global trade is actually beneficial to the United States. While restricting Mexican imports will reduce the American deficit with Mexico, it will increase the overall American deficit.

Michael Pettis on Capital Flows and Debt Crises

Feb 17 – Today, we resume our conversation with Michael Pettis where he discusses how large concentrations of capital into a single market—as we see in the US today—often resolve with an eventual debt crisis and soaring unemployment.

Michael Pettis: Most People, Including Trump, Don’t Understand How Global Trade Works

Feb 16 – When it comes to global trade, most people—including President Trump—don’t understand how it operates, says Michael Pettis, author of The Great Rebalancing. In today’s podcast, Michael explains why many of the fears surrounding...

Is Peter Navarro Wrong on Trade?

Whether the US current account deficit is harmful or not to the US economy depends on the assumptions we make about capital scarcity. In a world awash with excess capital and insufficient demand, the US current account...

Three Possible Scenarios for China

In an article in Wednesday’s Financial Times, Gabriel Wildau, Yuan Yang, and Tom Mitchell set out a range of economic outcomes for China. They propose three scenarios that they think—and I agree—are the most plausible ones.

A US Retreat on Global Trade Will Not Lead to a Shift in Power

The very first on the list of executive actions that his administration would implement from “day one,” according to US President-elect Donald Trump in his November 21, 2016, video clip, involved a US retreat on trade...