Where did Krugman go wrong?

However, I wrongly believed that markets would look at it the same way, and that they would lose faith in American governance, driving up interest rates on our debt Krugman

Let me see.
1) Interest rate rise? Check, from 2003 until the moment we crashed
2) Inflation getting unstable? Check headline inflation above 4.5% percent.
3) We crashed in 2008, another clue

I know there is a pony in here, Krugman must have been wrong.

Instead, bond investors discounted the politics, and acted as if they believed that America would eventually pull itself together and start behaving responsibly.

Somewhere around July 2008, the bankers and the American oil traders failed to agree on terms, and we crashed.

Immediately after the crash, Krugman gets a new ballgame, but Krugman predicted the 2008 crash and don't let him tell you differently.