"these days, Americans make a living selling each other houses, paid for with money borrowed from the Chinese."
I have a soft spot for a well turned phrase.
Krugman also picks up on something that I have been hammering on and on about: borrowing from abroad to build houses won't help to generate the future export revenue needed to pay off our external debt (or help to cut US imports, freeing up existing US export revenue to pay our debt).
Beyond that, there's the disturbing point that we're paying for the housing boom (and the military buildup and tax cuts) with money borrowed from foreigners. Now, any economics textbook will tell you that it's fine to borrow from abroad if the money is used to expand the economy's productive capacity. When 19th-century America borrowed from Europe to build railroads, it was also enhancing its ability to repay its debts later. But we aren't borrowing to build productive capacity. As a share of G.D.P., investment other than housing construction is below its average between 1980 and 2000, and way below its level at the end of the 1990's.This also seems as good a time as any to note that we have made a series of small changes that hopefully will make the redesigned blog a bit easier to use. The layout was simplified, we added a list of recent posts, comments can be previewed, and if you forget the keyword, you get a second chance ...