Government borrowing crowds out private investment by competing for limited savings

Evidence

According to this view, the crowding out occurs because savers invest in government bonds instead of other productive ventures and because in borrowing from the public the government competes for a limited pool of funds and thus increases the cost of borrowing money for other private investors. — Clara E. Mattei, The Capital Order, 1694

Categorization

• DEFINE: Explains the crowding-out mechanism that anchors the Treasury’s anti-spending position, connecting it to the classic peacetime countercyclical debate.
• XREF: connects to: The crowding-out argument claims government borrowing starves private enterprise of capital — Clara E. Mattei, The Capital Order: How Economists…, 954; Spending-cut austerity supposedly boosts private investment while tax hikes depress it — Clara E. Mattei, The Capital Order: How Economists…, 1738; Scarce CFA credit causes savings scarcity, not the reverse. (+3 more)

Broader Connections

• Banks create money out of thin air when granting loans rather than lending savings #complicates (0.90)
• Spending-cut austerity supposedly boosts private investment while tax hikes depress it #qualifies (0.85) — Clara E. Mattei, The Capital Order, 1738
• Scarce CFA credit causes savings scarcity, not the reverse. #complicates (0.80)
• The CFA system’s credit repression causes savings scarcity, not the reverse #complicates (0.80) — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 140
• Savings do not necessarily produce investment and can instead produce hoarding #expands (0.75) — Mark Blyth, Austerity, 342