Government deficits can impact private investment differently depending on how they are financed. By analyzing the relationship between money, government bonds, and real capital, it was found that debt-financed deficits may not necessarily crowd out private investment, and could even encourage it in some cases. The type of debt instrument chosen by the government for financing deficits plays a crucial role in determining whether crowding out or crowding in occurs. This suggests that debt management policy, often overlooked in public policy discussions, can be a valuable tool in influencing the economic consequences of deficits, especially when monetary policy is not accommodating.