Yes it can, and that's the point of a money market fund. Money market funds invest in short-term debt securities. That's a mechanism for lending money.
I think the point is they aren't loaning it out to random people or companies, they are instead only loaning it out to the government to get something approximating the risk-free rate. You then use your quasi-riskless money market fund as a way to balance the risk of your investment portfolio.
Okay, let's be serious. This matches Keynes' liquidity trap. Unlike time preference theory which predicts that people will simply consume once the interest rate is below their time preference. According to liquidity preference people actually keep cash or short term assets, because interest doesn't compensate for delaying consumption, it compensates for going from a more certain and liquid asset to a less certain and less liquid asset near zero interest. So what happens instead is that there is a crowding out effect at the zero lower bound. You could think of it as if the private economy stops and the only thing left to do is for the government to micromanage things.
The only private market solution would be to get rid of cash and just let interest rates be negative. That way the crowding in effect that e.g. Austrian Economists predict when the government spends less money actually happens.
So yeah we are stuck in this situation where the private sector isn't credit worthy anymore and everything has to be threaded through the government. People rightfully complain but what exactly is supposed to happen? There are no answers left. Economists don't do money so they simply assume this situation never happens or resolves itself automatically.
Yea. The point I was trying to make is the bank is losing that liquidity. It doesn't have your deposits to loan out since you directly loaned them out in the form of things like Treasuries. That is a problem for the banks and why the article says Europeans are "draining billions from banks."
The fund invests at least 99.5% of its total assets in cash, U.S. government securities, and/or repurchase agreements that are collateralized solely by U.S. government securities or cash (collectively, government securities).
Yes it can, and that's the point of a money market fund. Money market funds invest in short-term debt securities. That's a mechanism for lending money.