Foreign entities “disinvest” from the US when they buy US goods and services from those dollars they hold. The scale of net investment is thus a function of the trade deficit, not some independent fact.

It’s certainly true that foreign actors might also have portfolio preferences, they might affirmatively want to accumulate dollars, not only do so as a residual to unbalanced trade. But Krugman effectively assumes that’s the whole story, and the vendor finance is none of it. 3/