If Krugman wants another massive fiscal stimulus package funded by additional deficits, and he does, and he wants the Chinese to stop depressing the value of their currency by buying American debt, and he does, then where does he expect the funds for fiscal stimulus spending to come from? More precisely, if Krugman succeeds in removing the largest purchaser of American debt from the supply side of the funds equation ("$1 billion a day"), then why wouldn't he expect the cost of borrowing to increase massively? And why does he think this will be good for the national accounts?
Then there's this conclusion to his most recent column:
China needs to stop giving us the runaround and deliver real change. And if it refuses, it’s time to talk about trade sanctions.
Is it good for economic recovery to pay more to borrow than we have to, pay more for imports than we have to, and shut off access to a very large and growing market for our exporters by triggering a trade war? Of course not.
Usually when I disagree with anyone, especially someone as intelligent as Krugman, I can at least see where they're coming from. Not this time. I really cannot reconcile his anti-China invective with his pro-Keynes dogma. It just makes no sense.