…t hypothesis relies on the ‘loanable funds’ model, which is at odds with how banks lend in reality. Banks are not reserve constrained (and they are in fact flush with reserves, which is why the Fed’s support rate on excess reserves is effectively the overnight bank rate now). This is also why we don’t observe interest rate increases commensurate with the expansion of govern…
Say it with me: marginal cost matters. Even if banks aren’t reserve constrained (making supply inelastic), demand still slopes downwards, meaning you’re still clearly wrong (in addition to the empirical studies I linked to that proved this over, and over, and over). And here is more:
This is exactly where MMT becomes a laughing stock among credible economists: making claims that fly in the face of all empirical evidence. Crowding out is a real effect: there is no debate on this point among leading economists.