1) Crowding out theory specifically holds that interest rates will rise as government debt rises, due to the crowding out of funds. That hasn't happened at all.
2) How do the private investors get the money? At the end of the day, when purchases are made from the government, real savings have to be transferred to the government (ie, reserves have to be transferred). Real savings are only created when the federal government runs a deficit, or when the private sector runs a surplus with respect to the global sector
3) If private investors invested elsewhere, wouldn't the recipient of those funds just invest in the government? Even if the private investors invested in the international markets, the end-users would buy government bonds, provided they were available.
So all the numerous individuals (at the top) are all together acting in this matter? Is there a smoke-filled room somewhere?
Not to be rude or harsh, but you simply don't understand sectoral balances and the way debt works.
Then you wouldn't have a trade deficit. The moment money is returned to the debtor's country, the trade deficit shrinks.
Moreover, what you would often see is individuals with the trade surplus using that surplus as a base with which to improve their own economy.
The government doesn't need funding. It controls the printing press; it cannot run out of money. Individuals, corporations, and banks buy US bonds because instead of holding dollars, a liquid, non-interest-bearing asset, they'd like to hold bonds, a fairly liquid, interest-bearing asset.
In terms of investment, the private sector uses those savings to finance their own debt spending. The private sector has about 66 trillion in credit...if investments need to be made, they can make it, especially with low interest rates. Financial savings are merely assets the private sector uses to hedge against their obligations.
Just to drill the point home, without the deficit, those funds do not exist. They wouldn't be able to invest those funds without the government providing them.
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