demand for money can cause the interest rate to be too high, attracting more savings that are not realized as investment. As a result, investable resources go unused.

There is no "market force" acting on the Fed in setting interest rates. It has a combined balance sheet with Treasury and can purchase any quantity of bonds it wishes at whatever price it wishes.

Banks also don't loan from deposits. They create reserves to enable interbank transfers when they make loans and pay the Fed overnight rate on those reserves. Paying off a loan will reduce the total money supply as the lender will retire its reserve holdings in equal quantity.

The Government spending through fiat money or let's just say a nuanced method such as quantitative easing, is just another coercive way unlike buyers and sellers in a market to establish a monopoly over the monetary system.

Fiat money creation is used in almost all modern economies in the world presently because it allows economic growth that isn't dependent totally on a shiny otherwise useless metal. QE is not money creation. It is an asset swap for securities and bonds, converting them into reserves for their liquidity.

I really hate to break bad news to people, but the federal government and the Fed already have a monopoly on the monetary system. Your faith in the "free market" is not only overrated but is mostly erroneous and not applicable to the subject of fiscal and monetary policy. Keep jousting at those windmills tho. I'm rootin for ya.