Krugman’s blog, 8/31/15

There was one post yesterday, “The China Debt Zombie:”

Matthew Klein notes that Very Serious People are now worried that China’s troubles, which have caused it to switch rather suddenly from a buyer of Treasuries to a seller, will cause U.S. interest rates to spike. He rightly finds this unconvincing. What he doesn’t note is we’re looking at another instance of an economic zombie in action.

For the new concern about China is, in economic terms, the same as the old concern – that the Chinese could destroy our economy by cutting off funding, either for political reasons or out of disgust over our budget deficits. This always reflected a fundamental failure to understand the economic logic, as was pointed out many times not just by yours truly (and much earlier here)but also by people likeDan Drezner. But scare stories about our supposed financial dependence on China just keep shambling along, propounded by people who don’t even realize that there are other views, let alone that they’re talking nonsense.

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