Reid Reads Krugman, but does Krugman Read Reid?

Paul Krugman this morning on China's currency and the dollar.

Beyond the arguments about the desirability of a strong or weak dollar, notice the linkage to the subprime mortgage crisis. Someone mentioned the "global savings glut" (or "Chinese" or "Asian" savings glut) as a possible cause of the crisis. How does that work? China uses the dollars from its exports to purchase massive amounts of U.S. government bonds. Since China is demanding so many bonds, the interest rate stays low. Low interest rates on government bonds leads to low interest rates on other loans, including mortgage rates, car loans, etc. So in this sense, the Chinese trade surplus led to Americans contracting more and more debt, which they/we largely used to buy bigger and bigger houses. You see where this is going...