…financial markets such as the one described in this article, or last week’s two bank runs. This has been happening with increasing frequency in China during the past 2-3 years. We saw similar in the US in the late 1920s, Latin America in the late 1970s, Japan in the late…
— Michael Pettis (@michaelxpettis) June 25, 2020
…its closed, bank-dominated system, and as long there is debt capacity, and the system retains its credibility (i.e. there is no major questioning of the value of the collateral that directly or indirectly backs the liabilities in the system), it is not obvious what trigger…
— Michael Pettis (@michaelxpettis) June 25, 2020
…shortened the amount of time China has: last year the official debt-to-GDP ratio rose 6 percentage points, whereas this year it is like to rise by 16-22 percentage points. In principle China could probably avoid a very painful adjustment by engineering a rapid and…
— Michael Pettis (@michaelxpettis) June 25, 2020
…substantial rebalancing of income, but after 15 years of trying and failing, I think Beijing is finding it increasingly difficult politically to pull it off. At any rate until then we’ll probably see a lot more of these stories.
— Michael Pettis (@michaelxpettis) June 25, 2020
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
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