Michael Pettis > Quotes

“well-functioning market requires all three types of investors for socially beneficial projects to have access to cheap capital. Value investors allocate capital to its most productive use. Speculators, because they trade frequently, provide the liquidity and trading volume that allows value investors and relative value traders to execute their trades cheaply. They also ensure that information is disseminated quickly.”
― Michael Pettis, Avoiding the Fall: China's Economic Restructuring

“Unfortunately, predictions of this sort are notoriously unreliable, and economists seem to be especially bad at predicting turning points. Karl Marx once noted that when the train of history hits a curve, intellectuals tend to fall off the train. Intellectual inertia keeps them moving in the same direction, even though the train is no longer going there. Earlier predictions, Marx suggests, are pretty useless in a debate about whether we are at a turning point.”
― Michael Pettis, Avoiding the Fall: China's Economic Restructuring

“This is where the debate must focus. Or to cite John Mills in his 1867 paper, “On Credit Cycles and the Origin of Commercial Panics”: “Panics do not destroy capital; they merely reveal the extent to which it has been previously destroyed by its betrayal into hopelessly unproductive works.”
― Michael Pettis, Avoiding the Fall: China's Economic Restructuring

“The important thing to remember from the growth model perspective is that, whatever the reason, lagging wage growth in China represented a transfer of wealth from workers to employers. An increasing share of whatever workers produced, in other words, accrued to employers, and this effective subsidy allowed employers to generate excess profit or cover losses. The fact that productivity grew much faster than wages acted like a growing tax on workers’ wages,”
― Michael Pettis, Avoiding the Fall: China's Economic Restructuring

“Houng Lee, Murtaza Syed, and Liu Xueyan, argued that there is strong evidence that China is significantly overinvesting.”
― Michael Pettis, Avoiding the Fall: China's Economic Restructuring

“The source of the global crisis through which we are living can be found in the great trade and capital flow imbalances of the past decade or two. Unfortunately because balance of payments mechanisms are so poorly understood, much of the debate about the crisis is caught up in muddled analysis.”
― Michael Pettis, The Great Rebalancing: Trade, Conflict, and the Perilous Road Ahead for the World Economy - Updated Edition

“For reasons we will see in chapter 6, Europe’s crisis will probably lead to a partial breakup of the euro as well as to defaults or debt restructurings among one or more European sovereign borrowers. The only things likely to save the euro—fiscal union or, as I discuss in chapter 6, a major reversal of German trade imbalances—seem politically improbable as of the time of this writing.”
― Michael Pettis, The Great Rebalancing: Trade, Conflict, and the Perilous Road Ahead for the World Economy - Updated Edition

“If rural migration was sufficiently large, it tended to repress wage growth. This made it fairly common for worker productivity to grow quickly as less productive rural workers and peasants moved to the industrial centers, where their productivity was much higher, but for wages to fail to keep pace. When this happens wage growth will lag productivity growth and the worker’s share of total income will decline, even as total income might rise.”
― Michael Pettis, The Great Rebalancing: Trade, Conflict, and the Perilous Road Ahead for the World Economy - Updated Edition

“In July 1997, the Thai currency, the baht, was forced to devalue, initiating a startling series of Mexico-like crises that over the next few months engulfed the economies of Thailand, Indonesia, Malaysia, and the mighty South Korea.”
― Michael Pettis, The Volatility Machine: Emerging Economics and the Threat of Financial Collapse

“In addition, the single most important player in the market, the government, is able—and very likely—to behave in ways that are not subject to economic analysis.”
― Michael Pettis, Avoiding the Fall: China's Economic Restructuring