John At The Center

Worries about the government “crowding out” private sector borrowing are misplaced given that there is unprecedented private sector deleveraging underway. Private sector savings are rising (in the U.S. and around the globe), underscoring that there will be no shrotgage of capital to finance increased government debt without pushing up interest rates. No doubt “crowding out” would be a problem if the economy strengthens, but this is a long way off and the need for fiscal stimulus will disappear once the economy finds traction (whether fiscal policy will reverse course at that time is another question). As we have noted, history shows that bond yields fall when countries suffer a real estate/banking crisis and economic recession …

http://paul.kedrosky.com/archives/2009/01/09/is_crowding_out.html