What Is the Crowding Out Effect?

Chris at Hauseit® (https://www.hauseit.com) answers the question: what is the crowding out effect? What do economics mean when they allude to this crowding out effect when rates rise?

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Investors & economists often refer to the term "the crowding out effect" whenever rates rise.

Essentially, when the risk free rate goes up, it becomes a much better risk/reward option for investors to park their money.

As a result, other areas of the economy and markets receive less capital, such as venture capital which may not be competitive from a risk-adjusted perspective.

We explore this mystery and explain further in the following video.
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