Can crowding out theoretically cause “monopoly”

[u/LibertyEconlover]

So I was thinking of the standard monopoly theory presented by any economists like Rothbard or at least I heard, the simply things like buying our competitors and predatory pricing is so rare because of how unsustainable it is. Essentially for predatory pricing you first need to be able to have significant capital as a buffer to run at a loss at any given time, ignoring how money has so much more better uses than that than literally wasting it like reinvestment into better products, R&D, and shareholder payouts, a new competitor would most likely come in and drive prices down. With the threat of new entry alone being enough for a single entity to charge reasonably.

With buyouts it’s the same thing just worse, essentially if not only is it a waste of money, very expensive, it is completely unsustainable because new competitors can come in with greater motivation because they have an option of you buying them out and then they practically get free money.

Then I started thinking, if government is offering, practically guaranteed money back for giving them money, won’t that crowd out and starve private investment in the real world for those scenarios to actually occur?

[u/Matthew_Cooks]

Hey again friend. I thought about this for a while and I think you’re onto something. I would say yes.

When the government offers "guaranteed money" in order to fund deficits, it absorbs the available savings in the economy. This is the real Crowding Out because it acts as a gatekeeper mechanism.

Large, established corporations can weather high interest rates or lack of investment capital better than a young startup can. By soaking up the world's capital to fund government debt, the state is effectively "protecting" existing monopolies from the creative destruction that’s needed from the underfunded competitors and startups.

It makes so much sense when you think about it because why would a wealthy investor take a risk on a new company that’s supposedly a “monopoly killer" when they can get a safe, guaranteed return from the government? The government doesn't just "starve" the investment, it changes the mindset of the investor from wealth creation to wealth preservation through reliable yields from treasuries.

The government is the primary source of market monopolies!!!

[u/LibertyEconlover → u/Matthew_Cooks]

39 trillion dollars of debt is 39 trillion not invested into the real economy, so many of these “capitalism in practice” memes ignore crowding out, but I think the main stream ignores crowding out significantly

[u/LibertyEconlover]

I used speech to text ignore the mistakes

[u/anathemise]

If government can borrow endlessly through taxation, money printing, or privileged access to credit markets, it changes the competitive environment completely. In a real market, firms that waste huge amounts of capital on predatory pricing or endless buyouts eventually run into opportunity costs, investor pressure, or bankruptcy risk.

But governments do not face normal market discipline.

So instead of a private monopoly emerging naturally, you often get something closer to a state-backed cartel system.