Euro zone: What happens when bonds and money become perfectly substitutable?

In the euro zone, government bonds now offer a zero yield on average, they are considered risk-free and they are reasonabl y liquid. Bonds and money have therefore become highly substitutable. What happens when bonds and money become highly substitutable? Monetary policy and quantitative easing in particular become ineffective: this is because an expansionary monetary policy and quantitative easing consist in replacing bonds with money in economic agents’ portfolios, but holding money is equivalent to holding bonds ; Expansionary fiscal policies do not lead to crowding-out effects (higher long-term interest rates). This is because a fiscal deficit financed by government bond issuance requires economic agents to hold more bonds and less money , which requires an increase in interest rates if bonds and money are only imperfectly substitutable, but not if they are highly substitutable.