The entire loanable funds model (and financial crowding out) falls apart once you admit that lending is not reserve constrained and that there is NO EFFECT of government debt on interest rates. Short term rates (and even long term rates in Japan now, to some degree) are effectively set by the central bank.

Financial crowding out literally depends on the notion that government debt ‘uses up’ finite financial resources, thereby pushing up interest rates and increasing the price of investment. This is demonstrably false, and conceptually laughable with a basic understanding of government spending/debt issuance.

Corporate accountant and former auditor with degrees in philosophy and accounting.

Corporate accountant and former auditor with degrees in philosophy and accounting.