That's the loanable funds model, and it's not the reality. In reality banks lend according on profitability, yes even in China where priority lending is a thing because otherwise it'll need capital injections from the Government. Capitalists take loans on if they think they get expected profits.

Also there are stocks of debts vs flows of debts, deflation mechanically makes servicing of existing debt difficult, your argument is whether it will lead to lower rates on future debt which may spur investment.

Interest rate is set by the Central Bank, not the market. Reserves then adjust according to demand. Given the nonsense 'inflation targeting' (which isn't real, CBs can't target inflation reliably), in a deflation scenario, it may lower rates to zero and try QE, but QE failed and will fail to create inflation or raise demand because the only effect it has on the real economy is via lower long term rates (since CB buys up a significant amount of long term gov securities). Regardless, fiscal policy will be needed, and it must be one which replaces the income lost by workers (via employment or transfers). Which goes to my point "Will the state take over to create employment that's been lost?".

Savings does not fund investment. It is investment that creates savings.

You can rearrange the Kalecki profit equation as :

Worker Saving = Investment + Gov Deficit + Foreign Surplus - Profits

So investment via bank loans comes first, and that creates profits for capitalists and savings for workers.

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