Thus are our troubles explained.

Krugman, in Thinking Straight About Debt:

...thoughts on debt and what it does and doesn’t signify.

Start with the numbers that Stockman loves to cite, showing the ratio of total debt, public and private, to GDP:

Stockman, and to be fair quite a few people, would have us see this as evidence that we have been on a vast spending spree (Stockman is big on sprees), living far beyond our means and leaving us with no choice except a drastic reduction in spending. After all, debt is about 200 percent of GDP higher than it was before 1980. Isn’t this a giant burden on the nation?

OK, the sheer size of that number should tell you immediately that this can’t be right.

Oh, see? I agree with that. You can tell by the size of the number, we didn't accumulate that much debt just by spending too much. I agree. The debt we have is inexplicable. It didn't come from buying too much fast food and too many pairs of shoes.

Our debt comes from a policy that thinks using more credit is always good, under any circumstance. It comes from policymakers trained to think credit use is always and everywhere good for growth, no matter how much debt we already have.

We didn't create all that debt by ourselves. We were guided and encouraged, poked and prodded by policy. You can know it, just from the size of our debt. Krugman's right about that.

But this is ridiculous:

Yes, we have run trade deficits and moved from being a net creditor to being a net debtor, but it’s not that big a deal...

It's not a big deal?? In my book, debt is at the root of all our problems. It's the cost of debt that has been slowing our economy, increasingly, for decades. And accumulated debt broke the economy, creating the crisis from which we have yet to recover. Not a big deal, my ass.

Here's Krugman's story:

... (and we still earn more on our foreign assets than we pay on our foreign liabilities). So the surge in debt reflects a surge in money Americans owe to other Americans.

It's not a big deal because we owe it to ourselves? Yeah, right. Like when you have so much debt you can't afford to eat, but it's okay because you owe the money to someone of the same ethnicity or gender or cultural background or you owe it to someone who happens to have been born in the same country as you. Like that makes a difference when you're hungry.

If we "earn more on our foreign assets than we pay on our foreign liabilities", that only means more money is going into finance than is coming out of our productive-sector income, in our dealings with foreigners. Funny thing: More is going into finance, in our domestic dealings also.

That's the problem, money going into finance. It's a problem, because money going into finance is money going out of the productive sector. Money going out of the productive sector makes the economy sluggish. Money going into finance makes the productive side more expensive.

Thus are our troubles explained.