Michael Pettis's Contributions

Oct 11 – There are conditions under which governments can create money—or debt—without fear of inflation or excessive debt burdens. There are other conditions under which debt or money creation can lead to inflation and balance sheet problems...

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...

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...

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...

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...

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...

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...

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...

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...

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...

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...

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...

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...

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.

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...