Paul Krugman joined The New York Times in 1999 as a columnist on the Op-Ed page and continues as a professor of economics and international affairs at Princeton University. He was awarded the Nobel in economic science in 2008. Mr. Krugman is the author or editor of 21 books and more than 200 papers in professional journals and edited volumes. His latest book is “End This Depression Now!”

Remember the dire threat posed by our financial dependence on China? A few years ago it was all over the media, generally stated not as a hypothesis but as a fact.

Obviously, terrible things would happen if China stopped buying American debt, or worse, started to sell off its holdings. Interest rates would soar and the economy would plunge, right? Indeed, that great monetary expert Adm. Mike Mullen, the former chairman of the Joint Chiefs of Staff, was widely quoted in 2010 as declaring that debt was the biggest security threat in the United States. Anyone who suggested that we didn’t need to worry about a China sell-off was considered weird and irresponsible.

Don’t tell anyone, but the much-feared event is happening now. As China tries to prop up its currency in the face of capital flight, it’s sell-ing lots of our debt, and so are other emerging markets. And the effect on interest rates in the United States has so far been … nothing.

Who could have predicted such a thing? Well, me. And not just me: Anyone who seriously thought through the economics of the situ-ation — the world awash in excess savings and the American economy in a liquidity trap — quickly real-ized that the whole China-debt scare story was nonsense. But as I said, this wasn’t even reported as a debate; the threat of Chinese debt holdings was simply a fact.

And, of course, those who got this completely wrong have learned nothing from the experience.

Global DovishnessThe economist Tim Duy pointed

me to a striking speech from Lael Brainard — who recently joined the Federal Reserve Board of Gover-nors — that takes a notably more dovish stand than what we’ve been hearing from Fed Chairwoman Janet Yellen and Vice Chairman Stanley Fischer.

Basically, Ms. Brainard comes down on the Summers/DeLong/Krugman precautionary-principle side of the debate, arguing that given the uncertainty about the

path of the natural rate of inter-est, and the great asymmetry in the consequences of moving too soon versus too late, rate increases should be delayed until you see the whites of inflation’s eyes (read Ms. Brainard’s speech here: 1.usa.gov/1LLQUSb).

Why does she sound so different from Mr. Fischer and Ms. Yellen?

Mr. Duy argues that it comes down in part to generational differ-ences: “I think these three players are all products of their experi-ence,” he wrote in a recent blog post. “Yellen received her Ph.D. in 1971. Fischer in 1969. Both experienced

the Great Inflation firsthand. Brain-ard earned her Ph.D. in 1989. Her professional experience is domi-nated by the Great Moderation.” (Read Mr. Duy’s post here: bit.ly/1R8MHWw.)

Maybe, but it’s also worth not-ing the difference in perspective that comes from having an intel-lectual background in international macroeconomics as opposed to domestic macroeconomics. I would say that Ms. Brainard’s experience is dominated not so much by the Great Moderation as by the Asian financial crisis and Japan’s stagna-tion; internationally oriented macro

types were aware earlier than most that Depression-type issues never went away. And if you read Ms. Brainard’s argument carefully, she devotes a lot of it to the drag America may be facing from weak-ness abroad and the stronger dollar, which together act as de facto mone-tary tightening: “There is a risk that the intensification of international crosscurrents could weigh more heavily on U.S. demand directly, or that the anticipation of a sharper divergence in U.S. policy could im-pose restraint through additional tightening of financial conditions. For these reasons, I view the risks

to the economic outlook as tilted to the downside. The downside risks make a strong case for continuing to carefully nurture the U.S. recovery — and argue against prematurely taking away the support that has been so critical to its vitality.”

So does her speech matter? She is, as I indicated, pretty much saying what some of us outside the Fed have been saying already, although she does it very clearly and very well. But does it make a difference that someone on the inside is laying down a marker and warning that raising rates could be a big mistake? I guess we’ll see.

PAUL KRUGMAN

The China Debt Sell-Off Is Not So Scary After AllAfter a decade in which many of the

world’s emerging nations stockpiled large amounts of United States Trea-sury bonds, several have now begun to sell them off in response to econom-ic crises at home.

For example, China, America’s larg-est foreign bondholder, is grappling with a precipitous double-digit fall in its growth rate due to domestic over-capacity and a sagging global econ-omy. The nation has been vigorously defending its currency against depre-ciation by using foreign reserves to buy large quantities of the renmin-bi, which props up its value. In addi-tion, falling commodity prices have thrown the economies of Russia and Brazil into disarray, and both coun-tries are similarly liquidating their re-serves in order to protect their curren-cies against rapid devaluation.

Despite these sell-offs, however, Treasury bond rates have remained near historic lows, because demand from private entities has remained high. In fact, bond purchases by for-eign private investors reached a three-year peak in the 12 months lead-ing up to July.

Jordan Weissmann, a business and economics correspondent at Slate, ex-plained in a post earlier this month that recent events seem to run coun-ter to various predictions made over the years that a sell-off of China’s for-eign debt could be catastrophic for the American economy. “All of this drives home a very simple point that peo-ple who worry about our debt to Chi-na tend to overlook,” Mr. Weissmann wrote. “Buying and selling Treasur-ies is how Beijing manages its deli-cate exchange rate, which is essential to keeping the country’s all-important exports flowing. And if it were to actu-ally dump enough of its Treasury hold-ings to cause trouble, the likely end result would be a less valuable U.S. dollar, which would mean fewer Amer-icans buying goods made in China.”

BACKSTORY

Crises Spur Bond Sales

China is experiencing capital flight right now, which is putting downward pressure on its cur-rency, the renminbi, which is trig-gering even more capital flight.

In response, government officials are trying to offset those effects by selling lots of United States Trea-sury bonds and converting those dollars to renminbi in order to sta-bilize the exchange rate. And in the process, they’re quickly depleting China’s foreign reserves.

However, China’s foreign reserves

are still pretty massive, and I would be very surprised if the private sec-tor holds any significant amount of Treasury bonds.

— SIMON, CHINA

For many years, Republicans have been told a version of this fairy tale about debt.

Yet, so far, a drop in the value of the renminbi and the selling of American bonds have had no nega-tive impact on our economy.

— D.H., PENNSYLVANIA

For every seller there must be a buyer. If China and Brazil are sell-ing their American bonds, who are the buyers?

— N., MINNESOTA

China’s ability to sell American debt implies that the markets are extremely inefficient.

Our debt is considered safe enough for interest rates to remain at zero (since that’s what investors around the world are settling for). And China’s unloading of debt has

not made investing in American bonds any less safe.

However, if interest rates or yields do start to rise on these bonds, inves-tors will likely sell off other safe debt (like British and German bonds) and instead buy the higher-yielding American bonds, which would even-tually bring rates back down. After all, low-risk bonds are very fungible — like oil.

For instance, if China stopped buy-ing Saudi oil, it wouldn’t affect the overall price of oil. That’s because when the price of Saudi oil starts to drop, people will stop buying oil from other countries, which will eventu-ally push the price back up again.

For businesspeople not to rec-

ognize that such things like oil and bonds are interchangable implies that the market is simply inefficient.

— RICHARD H. SERLIN, ARIZONA

Conservatives are quite adept at fear-mongering, yet they are in trouble when it comes to un-derstanding how the American economy works.

The simple truth is that market prices for anything can be influ-enced at any time by a large player. Should we constantly issue dire warnings when such a player is con-sidering buying or selling bonds? That would certainly be a paranoid view of the world.

— RON, COLORADO

Years ago, China bought our debt simply to increase the value of the dollar against the renminbi, then the country sold us more goods and increased their em-ployment rate.

But poor, confused Adm. Mike Mullen bought the nonsense that the debt fear-mongers were selling and convinced himself that this was all a security threat.

— PAUL MATHIS, VIRGINIA

READER COMMENTS FROM NYTIMES.COM

Caught in the Capital-Flight Cycle

ALBERT BONSFILLS/THE NEW YORK TIMES

Construction on a luxury housing development in Weifang, China, was stalled in June after the developer ran out of money.

DEBATING POLITICS, ECONOMICS AND OTHER TIMELY TOPICS WITH PAUL KRUGMAN OF THE NEW YORK TIMES FRIDAY, OCTOBER 16, 2015

ONLINE: COMMENTS Comments have been edited for clarity and length. For Paul Krugman’s latest thoughts and to join the debate online, visit his blog at krugman.blogs.nytimes.com.

I’m only partly through Ben Ber-nanke’s new book “The Courage to Act,” but I wanted to play devil’s ad-vocate about its central thesis — not to criticize the former Federal Re-serve chairman, or question the job he did, but to provoke thought about what lessons we should learn from the financial crisis of 2008.

The basic theme in Mr. Bernanke’s memoir is that the shocks of 2008 were bad enough that there could have been a full replay of the Great Depression. The reason there wasn’t is that central banks in 2008 went all out to keep the markets work-ing, while in the 1930s they sat im-

mobilized as the financial system crashed. Should we believe this story?

It’s not a hard one to tell — and I very much agree with Mr. Bernanke that pulling out all the stops was the right thing to do. You don’t play games at such times.

But I’m not persuaded that the real difference between 2008 and 1930-31 (which is when the Depres-sion turned Great) lies in central bank action, or the related bailouts.

It’s true that the ’30s were marked by a big financial disruption; one measure (which I learned about from Mr. Bernanke’s academic work) is

the soaring spread between slightly risky corporate bonds and govern-ment debt. But there was also a big financial disruption in 2008-9, and one that was comparable in size by this measure. It didn’t last as long, but that may be as much an effect as a cause of the country’s failure to ex-perience a full-blown depression.

Why was the 2008 disruption so large despite the bailouts and emer-gency lending? Well, banks by and large didn’t collapse, but shadow banking rapidly shriveled up. Li-quidity for everything but the safest of assets disappeared, even though the giant financial firms remained.

And if we’re looking for effects of tightening credit conditions, re-member that credit policy usually exerts its biggest effects through housing — and housing investment fell more than 60 percent as a share of gross domestic product in the United States during the last crisis. But even a total collapse of home lending couldn’t have subtracted more than a point or two off aggre-gate demand.

So, really, was putting a limit on the financial crisis the reason we didn’t fully repeat the 1930s? Or was it something else?

There is one other huge difference

between the world in 2008 and the world in 1930: big government — not so much in terms of deliberate stimulus, although that helped, but as automatic stabilizers (think un-employment insurance). The budget deficit in the United States widened much more in 2007-10 than it did in 1930-33, even though the slump was much milder, simply because taxing

and spending were much larger as a share of G.D.P. And that budget deficit was a good thing, supporting demand at a crucial time.

Again, Mr. Bernanke and com-pany were right to step in forcefully. But I’d argue that the fiscal environ-ment was probably more important than the monetary actions in limit-ing the damage.

Oh, and since 2010, officials ev-erywhere, but especially in Europe, have been doing all they can to undo the favorable effects of automatic stabilizers. And the result is that Eu-rope’s economic performance is at this point considerably worse than it was at this point in the 1930s.

PAUL KRUGMAN

Why We Didn’t Revisit the 1930s

The lessons are clear: Govern-ment isn’t the problem; it’s the solution. And crucial spending includes Social Security, welfare and unemployment payments, Medicare and Medicaid and education, as well as transfers to states and local governments.

In truth, the architects of our current economic recovery, such as it is, are Presidents Franklin D. Roosevelt and Lyndon B. Johnson, in addition to former Federal Reserve Chairman Ben Bernanke.

And the architects of the Great Recession are, among others, practi-

cally the entire leadership of the Re-publican Party and many so-called Democrats.

— JACK ARCHER, CALIFORNIA

I can understand why the les-sons learned in 1929 were forgot-ten: It was a long time ago, and most economists today weren’t even alive then.

But I cannot understand why the lessons learned in 2008-9 have al-ready been forgotten by a large por-tion of the economics community.

I am a regular reader of an eco-nomics blog in which the writers be-

lieve in the markets unconditionally. Their ability to ignore what’s in front of their noses by blindly adhering to their little models is truly something to behold.

— NAME WITHHELD, GEORGIA

In the immediate aftermath of the meltdown, government borrowing and deficit spending (though meager for the situation) steered the economy away from depression toward prolonged re-cession.

An economy must circulate money to survive. The federal government

sustained consumer demand by bor-rowing or confiscating capital, and it created jobs and distributed aid, which sustained employment and investment opportunities.

We must keep in mind that the needy, including the unemployed, perform a vital function in the econ-omy: They are the most efficient circulators of money because they spend every cent of aid that comes their way.

— NAME WITHHELD, GEORGIA

Would it have been so bad for the federal government to step in

and underwrite all the troubled mortgages by refinancing home-owners’ debts? Doing so might have unearthed the players who were responsible for the more egre-gious criminal acts during the crisis.

— KYLE REISING, GEORGIA

While I haven’t finished reading Mr. Bernanke’s book, what both-ers me is that he does not explain or justify his failure to understand the dangers of the derivatives bubble that developed around 2002 and continued to grow.

— NANCY, NEW YORK

READER COMMENTS FROM NYTIMES.COM

When It Comes to the Crisis, There Are People to Thank, and to Blame

DOUG MILLS/ THE NEW YORK TIMES

Ben Bernanke, former chairman of the Federal Reserve Board, published a memoir this year.