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HB 255 .A424  \  INTRODUCTION  TO  FLOW OF FUNDS  FEBRUARY 1975   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM  ,  '  "'  1  I I I l Il I l l��l l�l l�illlll�l li�i1l1 1 1 1 1 1 1 1 3 5001 00032 268 2   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  INTRODUCTION TO FLOW OF FUNDS  FEBRUARY 1975  BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM  Price: 50 cents a copy: in quantities of 10 or more sent to one address, 40 cents each. Copies may be obtained from Publications Services, Division of Administrative Services, Board of Governors of the Federal Reserve System, Washington, D.C., 20551, and remittance should be made to the order of the Board of Governors of the Federal Reserve System in a form collectible at par in U.S. currency. (Stamps and coupons not accepted)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  CONTENTS  Preface  1  Concept of accounts  2  Organization of accounts  27  111  Relation to income and product accounts  30  IV  Definition of sectors and transaction categories  34  V  Flow of funds data publications  48  Data sources  49  11  VI  Bibliography  53  Text Tables 1 2 3 4 5 6 7 8  Model flow of funds matrix Model credit market summary Private claims on U.S. Govt. institutions Gross national saving and investment-summary comparison, 1961 Saving and physical investment in flow of funds accounts, 1961 Sector structure Financial transaction categories Sources of financial data for flow of funds accounts  Appendix Tables S.1 S.2, S.3 S.4 S.5 S.6 S.7 S.8 S.9 S. l O  MARlQ 1975   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Summary ·of flow of funds accounts for the year 1973 Financial assets and liabilities, December 31, 1973 Funds raised in credit markets Credit market supply of funds Credit market debt outstanding Claims against credit market debt Household sector savjng and investment Household sector assets and liabilities Nonfinancial business sector saving and investment and assets and liabilities  3 9 25 31 33 35 41 50  PREFACE Flow of funds accounting is a national statis­ tical system that has been under development by the Federal Reserve since 1947 and that has been published in several forms during that period. Descriptions and definitions of the successive forms of accounts have appeared both in the Federal lleserve Bulletin. and in separate publications. 1 In the following pages that descriptive material is pulled together and brought up to date with the current form of the accounts. The material appears in Sections III and IV as a set of relationship tables and defi­ nitions of sectors and financial categories that are reference material on the subject. An intro­ duction to the conceptual framework of the system is in Section II, and Section I provides a broad description of the purposes of the system and an aggregative view of recent de­ cades that emerges from the data in its present form. This is not a statistical publication, although a few tables in the appendix underlie the his-  torical material in Section I. Nor does it include descriptions of specific statistical sources and derivation procedures used in compiling the accounts. The data are published and made available in several forms as described in Sec­ tion V. A separate publication on the details of derivation methods is mentioned in Section VI, which discusses briefly the problems of adapting data sources to the account structure. 2 This publication is at a general level and is intended merely to indicate why the system has been constructed and what it encompasses. The Bibliography includes several review papers that go into further detail on uses of financial accounts for judgmental and econometric anal­ ysis and that include their own extensive bibli­ ographies on macroeconomic work in financial analysis. This publication is an introduction to that work as well as to the flow of funds accounts themselves. 2 All requests for data and for information about the ac­ counts should be addressed to Flow of Funds Section, Divi­ sion of Research and Statistics, Board of Governors of the Federal Reserve System, Washington, D.C. 20551.  1 For earlier publications, see Bibliography, p. 53.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1  CONCEPT OF ACCOUNTS The flow of funds system of national accounts is designed to bring the many financial activities of the U.S. economy into explicit statistical relationship with one another and into direct relation to data on the nonfinancial activities that generate income and production. The pur­ pose of the accounts is to provide, systemati­ cally, the aggregate measures of transactions needed to identify both influences of the non­ financial economy on financial markets and reciprocal influences of financial market devel­ opments on demand for goods and services, sources and amounts of saving and investment, and the structure of income. The accounts are. intended to provide an empirical base for ex­ ploring such questions as the sensitivity of borrowing to interest rates as against other influences, the effects of cost and supply of credit on physical investment demand, the role of money holdings in the public's structure of assets and liabilities, and the relation of finan­ cial positions - levels of assets and liabilities - to demands for goods and services, for credit, and for investment in• financial claims. The flow of funds system focuses on such questions in a macroeconomic setting that covers, as far as possible, all of the institutional groups and all types of transactions in the economy. Some elements of the system exist elsewhere and separate from the structure - as statements of, for example, corporate finance, government finance, balance of payments, money and banking activities, individuals' saving, residential· finance, and security market activity. These elements are incorporated into the system as integral parts, together with in­ formation from income and product accounts on saving and capital formation. Each such element is one aspect of an integrated economy, and each connects with the others in several ways. The security markets, for example, are   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  a point of intersection among business devel­ opments generating long-term credit needs, international capital movements, bank credit availability, flow of credit through financial institutions, and the financing of government deficits. When all of the relevant information is put together in mutually consistent fashion in one framework, each element is seen as part of a broader macroeconomic system, and its connection with the other parts can be made explicit enough for analysis. Like the national income and product accounts published by the Department of Commerce, the flow of funds system is a social accounting structure that records both the payment and the receipt aspects of any transaction included in the sys­ tem and that includes a balance in each ac­ count of the structure between total payments and total receipts. The flow of funds accounts can in fact be · viewed as a direct extension of the Commerce income and product structure into the financial markets of the economy, with the purpose of establishing direct linkages be­ tween the Commerce data on saving and invest­ ment - the capital account in the income and product structure - and the lending and bor­ rowing activities that are associated with saving and investment.  MODEL ACCOUNT STRUCTURE The nature of those linkages and, more gen­ erally, the relation of financial markets to the nonfinancial activities of the economy are portrayed in Table 1. The table is a severely condensed and simplified form of the flow of funds matrix found on page S.1 that maps more completely the basic structure of the fl.ow of funds system.3 The arithmetic of the matrix 3 The note to Table 1 is important for working out the relation between the general description in this section and the more complex form that financial activity takes in the actual economy.  2  into several sector groups, each of which has a column in the matrix, and all transactions of each group are recorded on one or another of the matrix rows. The top row - saving - is for each sector the net sum of current receipts from income less current outlays for consump­ tion, operating expenses, and so forth. Saving appears as a net amount available from current operations for investment purposes. Other amounts are borrowed in financial markets by each sector, and borrowings and saving to­ gether are the sources of funds used to acquire physical and financial assets. A distinction is drawn between nonfinancial  is fairly simple, and when applied to the full system of accounts it provides a basis for understanding both the accounting relation­ ships among the time-series tables in this publi­ cation and the analytic approach underlying the system. The accounting rules of the matrix, their consequences for analysis, and the relation of the matrix to the tables are spelled out in Sec­ tion II. Very briefly, Table 1 is a statement of capital account for the economy as a whole, showing investment in assets in the uses columns and means of financing that investment in the sources columns. The table divides the economy TABLE 1 MODEL FLOW OF FUNDS MATRIX (Hypothetical data; billions of dollars) Private domestic nonfinancial sector  Government sector  Financial interme diaries sector  Rest of world sector  Totals  Memo: domestic totals  Transaction Use Source Use Source Use Source Use Source Use Source Use Source category Nonfinancial: 179 1. Saving -10 -4 5 170 174 2. Capital outlays 170 170 170 Financial: 3. Net financial investment 9 -10 4 -4 5 0 4. Total financial uses 140 and sources (5+6) 69 60 5 147 144 15 70 7 147 65 3 -----5. Deposits at financial intermediaries 55 53 50 55 55 3 2 55 85 91 19 6. Loans and securities 92 60 2 92 15 7 1 70 to Norn. -This table compresses about 20 sectors in the full system into four columns for sector types that are to be distinguished in the present discussion, and the rows are a similar grouping of transaction categories. In addition, the matrix is simplified by omitting the row and the column for discrepancies and a number of items peripheral to the main stream of financial transactions. These omitted items are treated in the model as nonexistent in the simple economy shown. Specifically, the relation of transactions in this table to the full matrix on page S. l of the fables is conceptually as follows: Full matrix Model Gross saving Saving Gross investment Omitted Private capital expenditures, net Capital outlays Net financial investment Net financial investment Total firiancial uses and sources Financial uses, net and financial sources Omitted Gold, foreign exchange, Treasury currency Deposits at financial intermediaries Demand deposits, currency, and time an.d savings accounts Omitted Insurance and pension reserves, and interbank items Loans and securities Credit market instruments Security credit, trade credit, taxes payable, noncorporate Omitted equities, miscellaneous, and sector discrepancies The Government sector should be interpreted as central Government only, with State and local governments omitted as another simplification. Of the omissions, the most important for the discussion that follows is insurance and pension reserves, which are a major form of intermediation. This item is left out because part of such reserves are liabilities of governments and complicate the relation between intermediation on the one hand and financial institutions on the other. The present section is focused only on the broad outlines of structural relationships, and a more detailed descript!.on requires many qualifications and additions to the broad form in order to incorporate these governmental reserves and the other omitted items.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  3  transactions reflected in the first two rows of Table 1 - purchases and sales of goods and services, transfer payments and receipts, and taxes - and financial transactions in the fol­ lowing rows - net changes in the capital amounts of claims owed as liabilities or held as assets by each sector. All of the financial trans­ actions of a sector are combined into a net financial investment that is the excess of the sector's lending ( financial uses) over its borrow­ ing (financial sources). The two most basic constraints in the matrix are ( 1) that for each sector total investment, which is the sum of capital outlays plus net financial investment, is by definition equal to the saving shown in row 1 for the sector, and (2) that on any one row of the matrix the sum of all uses of funds shown across the columns is equal to the sum of all sources of funds in that row. (Rows 1 and 2 of Table 1 are the source and use sides respectively for a single row covering all nonfinancial transactions to­ gether.') With balance vertically between saving and investment and horizontally between pay­ ments and receipts, each column and each row constitutes one full account of the structure, and the relationships among columns, among rows, and between columns and rows express the interlocking nature of the accounting system as a whole. As one illustration of the structure, the gov­ ernment column in Table 1 can be seen to be a particular form of budget statement, with a nonfinancial deficit in the first row offset by a net sum of changes in cash balances, loans, and debt outstanding in the rows below. This column is a balanced account that differs from other budget statements for governments mainly in that it distinguishes sharply between non­ financial and financial transactions and arranges transactions so that they can be identified across the rows in the accounts of other parties to the transactions. The rest of the world column is   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  similarly a particular form of balance of pay­ ments statement, arranged so as to connect it with other sector columns along specific rows. A loan from the government to abroad, for example, appears on row 6 as a government use of funds and a foreign source of funds, regard­ less of how it may be treated in other budget statements or balance of payments statements. Each of the two loan entries - the use and the source - is then playing a double role in the matrix, vertically as a component of its sector's column balance, and horizontally as part of the row balance. In the row they of course balance each other, but vertically they integrate in more complex ways with the other transactions of the two sectors separately. The interlock of the system consists of establishing such double roles, horizontally and vertically, for all trans� actions of all sectors in the system simultane­ ously. The result is an integrated structure that can be used to measure linkages either vertically or horizontally or, in the most complete forms of analysis, in both directions simultaneously. The condition that saving equals investment for each sector is identical in form with the well-known equality of saving and investment for the over-all economy in income-and-product accounting. For the total economy, investment on a consolidated basis consists of outlays for capital goods plus net foreign investment, the excess of lending abroad over borrowing from abroad. In the flow of funds accounts, similarly, each sector's investment consists of its pur­ chases of capital goods plus a net financial investment that includes net lending to the rest of the domestic economy as well as to abroad. In the model matrix (Table 1), the first three rows state the equality of saving and investment for each sector, and at the right of the model matrix is a separate column of totals for the three domestic sector columns of the table. This memo column is one form of the capital account in the Commerce De-  4  partment income and product system. It can be seen that the matrix, in its domestic sector columns, constitutes a deconsolidation of that capital account, with capital outlays distributed among the domestic sectors and for each a net financial investment that is a more general form of the net foreign investment in the consolidated total. This relation to the Commerce domestic capital account is in the first three rows of the matrix. In the lower rows, the matrix goes into detail on the forms of lending and borrowing by each sector that underlie the sector's net financial investment. Only two types are shown on the model - deposits at intermediaries and loans and securities-but the full matrix (p. S.1) has many more than this, as shown by Table 7 on page 41. For each of these financial. rows a full accounting of purchases and sales of the particular type of instrument is required in the system. It is this detailing of credit transactions in the capital account that brings the financial statistics of the economy into coherent relation to one another and into direct relation to the nonfinancial statistics in income and product accounts. The accounting link to nonfinancial transactions is net financial investment ( row 3 of Table 1 ) , but the economic substance of the information is in the interactions among specific types of credit flows - deposits and loans - and between such flows and specific forms of capital outlay, income generation, and saving, all within the accounting constraints of the system. The matrix goes beyond the Commerce capi­ tal account in that it incorporates the foreign sector ( rest of the world) as an explicit column. This form requires that the consolidated do­ mestic capital account be shown as a memo column, but it has the advantage that for each financial transaction row the matrix states di­ rectly all of the transactions in the market, whether domestic or foreign. Alternative forms   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  tend to complicate or obscure the matrix with­ out adding information.  ANALYTIC ROLE OF MATRIX The matrix is an essential framework for both calculating and using financial market statistics on an economy-wide basis. It is general enough in form to assimilate the creation of new types of financial instruments, new forms of relation­ ship, and changes in emphasis or practice that are continually occurring in individual financial markets. The explicit constraints of the system enforce a consistency of analysis not easily reached without the framework, particularly in questions at a macroeconomic level, where all market forces interacting with one another are to be accounted for. Such questions become operable only when the transactions involved have been stated within the matrix context on a complete basis but without double-counting. The role of the matrix for such purposes can be seen by the simple exercise of assuming some major financial - development - such a� a sharp rise in government borrowing or in de­ posit flows to banks - placing that flow in its appropriate cell of the matrix, and working out even a minimum possible conjunct set of en­ tries that must exist to keep the matrix in balance. If the example is in government bor­ rowing, that source of funds to the government must be mirrored in the government column in some combination of a nonfinancial deficit ( negative saving) and government lending as an offsetting use of funds, since the money raised is obviously being absorbed in one way or another. At the same time, the borrowing itself must be matched by an equal amount of lending somewhere along the row that carries government securities. And in whatever column that lending appears, there must be a source of funds available for this use. In the simplest situation that source can be the positive private  5  saving and borrowing from the government that are already implied in the government account. For example, a minimum complete accounting for the government borrowing might be: Saving Government loans Government securities  in touch with one another. The merit of such constrained systemwide forecasts is that each element can be tested by the plausibility of its counterparts in other areas of the matrix. The structure as a whole is reasonable only when all of its parts are reasonable. Whether the elements are derived econometrically from empirical models or put together judgmentally by hand, there is room in the procedure for successive approximations that approach the final result by working out the effects of each change on the rest of the structure and by then working back from the effects to revised ver­ sions of the initiating change. Developing a complete forecast on this basis illustrates the integral role of financial market behavior in capital theory and in general theories of income, production, and economic growth. For each individual in the economy, the choices he makes as to consumption, physi­ cal investment, financial investment, and bor­ rowing are related to one another and are con­ fined only as a group within the limits of his income and net worth. The option of borrow­ ing lets a person shift his consumption and investment patterns over time, and higher levels of debt allow him to carry higher levels of either physical or financial assets at any time. He may in his mind attach priorities to one or another use of his income, but in practice all of his demands work against one another to some extent and indeed are also influencing the amount of income he tries to earn. The columns of the matrix recognize these relations among the activities of an individual transactor by putting all of his transactions together in the general form of a statement of sources and uses of funds. 4 The system be­ comes macroeconomic when the columns for all sectors are put against one another to gen­ erate the market summary rows where the demands of different transactors impinge on  Government Private Use Source Use Source  7  10  3  3  -7  10  When this form of speculation is extended from the merely possible into the realm of the likely, economic analysis enters the exercise. In the example above there are questions of the probable demand by private sectors for other types of financial assets, such as cash and other deposit claims, that are competitive with gov­ ernments as investment forms and that affect the volume of flow into financial intermediaries and the volume of credit supplied by inter­ mediaries. More broadly, analysis raises ques­ tions as to the circumstances that generated the government deficit, including income distribu­ tion and private demand for capital goods, and the resulting influences on credit market flows. Each aspect of the picture interacts with the others, and as the vadous tendencies are itemized they are to be fitted into the frame of the whole in mutually consistent forms. The operation of the matrix is also illustrated by considering the que�tion of what happens when the money supply increases. Money is a liability of the banking system and an asset of the public; if it increases, the increase must be accompanied by some combination of a de­ crease in other bank liabilities, an increase in bank assets, and offsets in the accounts for other sectors. The organization of the accounts forces these contra-entry questions to the surface and in the process spells out the initial question in a complete form. Analysis of this kind can be applied to an actually expected set of developments by using the matrix structure as a device in forecasting or projecting the future, with the specific func­ tion of keeping individual parts of the forecast   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  4 . _Although t�ey are combined, by statistical necessity, with s1m1lar transactions of many other individuals.  6  INTERMEDIATION AND PRIMARY CREDIT FLOWS  one another. The effect is a joining of financial investment analysis directly to theories of production, income, saving, and physical in­ vestment in a manner that adds generality to the model as a whole.  STOCKS AND FLOWS  The immediate connection between financial markets and nonfinancial activity is in terms of net flows of claims, since it is as flows that financial markets absorb funds from income and supply funds to spending. °These financial flows are always increments in amounts of assets and liabilities outstanding, however, and the levels of these claims in existence are as much a part of the picture as the flows them­ selves. Economic equilibrium ( in any sense of that term) must be a balance . simultaneously among stocks, among flows, and between the stocks and flows, a consideration that is re­ flected not only in advanced models but also in such rule-of-thumb indexes as liquidity ratios, turnover rates, and debt-service coverage by income. Over the period covered by the flow of funds accounts, several types of credit have shown fairly stable relations to expenditures or receipts in terms of flows, but the flows have been at such rates as to generate strong secular drifts, relative to activity, in levels of debts and assets, either upward or downward. The mean­ ing of these drifts in stock relationships, or even whether they have meaning, is an important aspect for financial analysis for the near and intermediate future, and for such questions data on stocks of financial claims outstanding are included in this publication on a basis parallel to the tables on flows, including both a matrix of claims as assets and as liabilities, on pages S.2 and S.3, and time series compilations for indi­ vidual rows and columns.5 5 As of this publication, the accounts on outstandings are incomplete as balance sheets in that they exclude physical assets and therefore exclude any measure of net worth; as the problems of valuation and data are worked out in this area, it will be possible to complete the balance sheets at some time in the intermediate future.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  7  The generality of the matrix tends to obscure certain structural aspects of the financial sys­ tem that are of continuing interest in analysis. These structural aspects have to do with con­ cepts such as intermediation, "primary" de­ mands for credit, arid "ultimate" sources of credit- or more broadly with "double-count­ ing" of credit flows and the position of financial institutions in the system. In a general sense, intermediation consists of borrowing for the purpose of lending rather than for nonfinancial outlays. The term is usually associated with financial business, such as banks, savings in­ stitutions, insurance companies, and investment companies that concentrate on such activities. The distinction between intermediaries and non­ intermediary sectors must be recognized as institutional and a question of degree rather than a concept definable in theory; on the one hand households, nonfinancial business, and governments also engage in intermediation to some extent, whereas on the other hand inter­ mediaries are subject to the same general in­ vestment principles as nonfinancial sectors. Nevertheless, the difference in degree is extreme and the distinction justified in practical analysis. Intermediaries tend to specialize in the forms of debt they offer, or the forms of credit they extend, or both. Insurance companies, for example, raise funds primarily through policy premiums but invest broadly in credit markets, while finance companies specialize in their lend­ ing but not their borrowing forms. Savings and loan associations are specialists both in borrow­ ing- through savings accounts- and in lend­ ing- mortgages. In whatever way they special­ ize, however, these institutions are filling a gap between the types of claims the nonfinancial public wants to hold as assets, such as liquid de­ posits and insurance reserves, and the very  different types of claim the public wants to ( or FLOW OF FUNDS SUMMARY is able to) owe as debts, such as bank loans, TABLES consumer credit, and mortgages. With or with­ out intermediaries, the total of claims held as The process of intermediation immediately im­ assets by nonfinancial transactors is nearly equal plies some basic or primary flow of credit in the to the total of their debts, because directly or economy that in part passes through these insti­ indirectly they owe the debt to one another. But tutions and raises the question as to what that with intermediation the composition of their basic flow might be or, more specifically, how assets becomes very different from the composi­ it might be defined in an analytically useful tion of their debts. The intermediaries are thus form. The matrix itself is too general in form performing a transformation process within the to show such a concept, since it puts financial financial markets between the asset and the intermediaries parallel to other sectors and adds up totals along the rows that include all sectors liability sides of the public's balance sheet. indiscriminately. This matrix form accommo­ Intermediaries are important to analysis in a �iates both the intermediary-type debt owed by number of ways. Their presence in the market broadens enormously the forms of both finan­ nonfinancial sectors, particularly governments, cial investment and borrowing available to the and the marketable debt of intermediaries, such public - there is no question that capital for­ as bonds and open market paper, that are not mation, saving, income, and consumption are distinguishable as debt instruments from the all higher than they would be without the ca­ same types of claim owed by nonfinancial talytic influence of intermediaries in raising sectors. Nevertheless, the elements needed to ap­ financial flows. In the U.S. economy a large part of all credit goes through intermediaries. In the proximate a concept of a basic flow of credit short run much of financial analysis is con­ that may or may not be intermediated can be cerned with how well intermediaries are meet­ abstracted from the matrix, and one such ap­ ing demands for the specialized forms of credit proximation is put together in the two credit they offer with the funds they are able to attract market summary tables that appear at the from savers. Legal constraints on their rate beginning of most flow of funds presentations, structures, lending practices, and forms of bor­ one on the structure of borrowing in credit rowing often prevent intermediaries from ad­ markets and the other on sources and forms of justing fully to current conditions and decision supply of funds to credit markets. They appear patterns, causing sizable shifts of funds into and in this publication beginning on page S.4 for out of them. On the other hand intermediaries flows and page S.6 for outstandings. The sum­ frequently introduce new practices or new credit mary tables are not directly part of the flow of instruments that also have major effects on the funds structure, but they are useful in out­ structure of flows. Both the constraints and the lining relationships among forms of borrowing, innovations of intermediaries have to be taken among forms of lending between credit demand into account in even simple and summary and supply, and between intermediary and direct lending in markets. analysis of economic development.6 Using figures from the model matrix in Table 6 A review of depositary intermediation in recent years 1, the two summary tables are illustrated to­ appears in "Time Deposits and Financial Flows," Federal gether in Table 2, with borrowing in the upper Reserve Bulletin, December 1966, pp. 1739-52.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  8  that generate private credit demands. That comparison is not included in Table 2. Part II of Table 2 is a summary structure of the sources of supply for the credit flows listed in Part I. It is more complex than Part I in that it shows supply at more than one level simultaneously-direct lending in credit markets by nonfinancial sectors and by intermediaries as well as the sources of funds to intermediaries to finance their part of the direct credit supply. The first item (line 6 in Table 2) shows lending activity by Federal Government units, federally sponsored inter­ mediaries, and the Federal Reserve, a source of funds to credit markets that is almost en­ tirely directed by public policy objectives such as assistance to particular credit markets and open market operations by the Federal Reserve. Foreign lending on line 7 includes foreign pri­ vate funds, but in recent years it has been dominated by foreign official transactions in U.S. Government securities as a reflection of balance of payments developments. Both line 6 and line 7 are largely external influences on credit markets in that most of the amounts that appear do not reflect profit-making decisions in the narrow sense but are rather policy directed or almost automatic. The middle section of Part II summarizes credit market lending by intermediaries, includ­ ing commercial banks, and the main types of financing for that lending. In the Table 2 ex­ ample intermediaries supplied credit of 70, mainly from private deposit growth but also from their own borrowing in credit markets and from other sources, such as foreign and Government deposits, insurance and pension reserve growth, and their own retained income. The several sources of intermediary funds vary greatly in relative proportions as credit condi­ tions change, and shifts in their sources are reflected elsewhere in the table,· such as in  part and credit supply in the lower. Table 2 identifies the intermediation process through an institutional distinction, isolating certain groups of firms that are mainly in the business of borrowing funds for the purpose of relending and treating these groups as a channel of finan­ cial flows rather than a primary source of credit demand or supply. The primary credit flow, on the first line of the table, is thus borrowing by everyone else, that is, nonfinancial sectors, itemized by sector in the next three lines. The total of 82 is less than the matrix total of 92, on the bottom row of Table 1, by the amount of credit market borrowing by intermediaries.  TABLE 2 MODEL CREDIT MARKET SUMMARY (Billions of dollars; figures from Table 1) 1. I. 2. 3. 4.  Funds raised by nonfinancial sectors Government Foreign Private domestic nonfinancial  5. II. 6. 7.  Sources of credit supplied Government Foreign  8. 9. 10. 11.  Financial intermediaries Total funds advanced Sources of funds Private domestic deposits Funds raised in loans and securities Other sources  82 7 60 82 1 70 50 10 10  13. 14.  Private domestic nonfinancial sectors Direct purchases of loans and securities (lines 5-6-7-8+10) Deposits in intermediaries (line 9) Total financial investment (lines 12+ 13)  69  15.  Credit sources not in line 14 (lines 6+7+11)  13  12.  19 50  The full form of the table, beginning on page S.4 of the annual-flow set, includes the types of instruments used as well as a listing of borrow­ ing sectors. 7 Also on page S.4 is a comparison, for households and business, between funds raised as shown on the upper part of the page and their major forms of capital expenditures 7 Notes to Table 1 list several types of financial claims that have been omitted from the model matrix for simplification, such as trade credit and taxes payable. These omitted forms are not part of organized credit markets and are omitted from the full form of Table 2, as on page S.4. Types of credit included in the Table 2 total are listed in the full version on page S.4 on lines 7-21.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  9  Government lending to intermediaries and the forms of financial investment by the private nonfinancial sectors. The bottom section of Part II, beginning line 12, integrates into the preceding picture the structure of financial investment by private do­ mestic nonfinancial sectors-households, busi­ nesses, and State and local governments. Line 12 is their direct lending in credit markets, which consists of any of the credit flow in line 1 not supplied by Government, foreign, or intermediaries, together with credit market bor­ rowing by intermediaries on line 10. From the viewpoint of the private sectors, this direct lending is but one of several possible forms of financial investment, with alternatives that in the model table are wrapped together as de­ posits, such as checking accounts, savings de­ posits, and negotiable certificates of deposit. These deposits, shown here as a use of funds, are the same flows that appear on line 9 in the intermediary section of the table as a source for intermediary credit supply. The distribution   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  of private funds between direct lending and deposit flows has sizable influence, although not total control, on the flow of credit through intermediaries and thus on supply of the spe­ cialized forms of credit, such as mortgages and bank loans, that come mainly from intermedi­ aries. Line 14 contains the total flow from the private nonfinancial groups that is distributed between direct and deposit flows. It is some­ what less than total borrowing on line 1 al­ though closely related. The difference, on line 15, consists of direct flows from Government and foreign sources and the "other" sources of intermediary lending.8 In recent years a major element of change in line 15 has been foreign official lending that reflects shifts in the U.S. trade balance and capital outflows in the balance of payments statements. Most movements in Government lending are re­ flected directly or indirectly in the private total on line 14, while intermediary "other" sources are relatively stable over the long run. s Line 15 is not included in the full form of the table.  10  DIAGRAM OF FINANCIAL STRUCTURE The view of the economy that is reflected in Table 2 is indicated in the diagtam on page 12, which is a picture of the Nation's capital account that, again, uses the model matrix (Table 1) and that abstracts in the same way from the full complexity of the system. The diagram is specific to the data in the model in that it shows current-account deficits for the government and foreign sectors on the right, in parallel with physical investment, as "uses" of private saving entering the capital account on the left; if either of these sectors had a posi­ tive current balance, it would have appeared at the left side of the diagram. In a fully detailed picture, the dissaving of any individual trans­ actor with a negative current-account balance would also appear on the right, with treatment of financial flows parallel to a deficit govern­ ment. To simplify the diagram, all of the pri­ vate domestic sectors' saving is on the left, even though the total for the sector is a net sum of savers and dissavers together. 9 The diagram takes on precision if each sector is viewed as a si�gle person in an economy made up of only four persons, each different from the others." This primitive view can be extended easily to a more general picture with many separate units in each sector. The diagram pictures saving entering the capi­ tal account as a diversion from the current payi. ments stream and passing through a number of channels to finance physical investment outlays and government and foreign deficits that inject spending back into the current stream. Part of the saving goes directly into physical assets, to the extent that people buying capital goods pay for them without recourse to borrowing, and this appears as "internal finance," the excess of 9 Saving in the diagram is the total for private sectors, including intermediaries. Intermediary saving is an internal source of funds for lending in the diagram.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  capital outlays ( 170) over private borrowing (60). Another part of saving goes into financial assets, however, such as cash and deposits for liquidity and marketable securities for capital gains. Part of this financial investment goes di­ rectly to nonfinancial borrowers ( 12), but most of it is put into deposit (55) and security claims on intermediaries ( 10), who turn around and relend the funds to nonfinancial sectors through quite different forms of credit instruments, such as mortgages and bank loans (70).10 These credit flows from intermediaries combine with the lending directly from savers to make up the total volume of borrowing (82) by nonfinancial sectors that is used mainly to cover the deficits of dissavers and to pay for investment outlays not covered by internal finance. The bottom of the diagram show's a reverse flow of funds from the borrowing to the lending side of the structure that is equal to the invest­ ments in financial assets made by the two deficit sectors. In the model matrix (Table 1), these two sectors have not limited their borrowing to the minimum amounts needed to cover their deficits but rather have found it worthwhile to borrow extra amounts that allow them to add some to their asset positions (8), in part per­ haps for liquidity and in the government's case to help carry out lending programs for public policy purposes. These extra credits are borrow­ ing for the purpose of relending and as such constitute a form of intermediation by nonfinan­ cial sectors. The U.S. Government does in fact act as an intermediary to financial markets, floating its own securities to assist agriculture, small business, the home mortgage market, and other private markets, and a more complex dia­ gram could show that activity explicitly. The more general point, however, is that quasi­ intermediation occurs in many forms in non­ financial sectors, that all forms of it C!:eate re­ verse flows in the diagram, and that they add 10 Intermediaries use their own retained incomes (5) lend somewhat more than they borrow.  11  to  CURRENT PAYMENTS ►  ----...;ilNTER­ MED­ --------1 IAR IE S 1---.,..---__ Total borrowing by nonfinan. sectors 182)  financial investment by nonfinan. sectors  1771  an extra element to the relation between the total flow of credit as defined in the diagram and the associated totals of saving and investment. Typically, this kind of intermediation is diffi­ cult to identify, as illustrated by taking the pri­ vate domestic nonfinancial sector in the diagram to be a single individual. Even though this per­ son's saving ( 179) was greater than his capital outlays ( 170), he chose to put a substantial amount into financial investments ( 69) and then to borrow some of these funds again on the other side of the market in different forms ( 60). This is normal and reasonable behavior, since the combination of assets and liabilities he now has suits his short-term and long-term needs better than lower totals of both assets and lia­ bilities. However, it raises the question as to whether he borrowed to invest in physical or in financial assets, and the answer is that he bor­ rowed for the two purposes jointly in unidentifi­ able and even undefinable proportions. Only in special cases, such as the two deficit sectors in   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  this model or a borrowing total that is larger than total investment outlays, can such inter­ mediation be even partially measured. This discussion illustrates the ambiguities in the concept of intermediation and thus in the concept of a basic or primary flow of credit that is to some extent intermediated. Intermediation can nevertheless still be a useful construct for analysis when it is given an institutional sense that is based on the characteristics of a set of financial businesses, including the legal con­ straints on their operations, their typical prac­ tices as borrowers and lenders, and their flexi­ bility in changing economic conditions. Isolating financial institutions as an intermediary group brings out on a broad basis the division of finan­ cial flows between those that enter this area of specialized and constrained lending operations and those that are available only in more broadly marketable instruments. It is this institutional foundation for analysis that underlies Table 2. As applied to nonfinancial sectors, the concept  12  financial assets that are suggested by the dia­ gram. The effects of restricting or expanding credit flows are thus -not necessarily or immedi­ ately on saving and investment but rather tend to be diffused throughout the system inside and outside financial markets. Such relations as exist between credit flows and nonfinancial activity must be found analytically and empirically, with credit seen both as borrowing by nonfinancial sectors and as lending by those same sectors.  of intermediation is too ambiguous to be useful, and it is well replaced by the integrated balance sheet view of physical investment, financial in­ vestment, and borrowing that is implicit in this discussion. In comparison with the actual accounts as published, the diagram is primitive although ac­ curate as far as it goes. In both the model ma­ trix and the diagram, credit flows are limited to the main-stem group of financial claims that are handled in organized credit markets, such as se­ curities, mortgages, consumer credit, and bank loans, and that in flow of funds publications are labeled credit market instruments. It is this cen­ tral group of claims that is the focus of the summary tables in publications as well as in the model used for this discussion. A glance at the full matrix on page 1 shows that the financial structure as a whole includes a variety of other claims, such as gold, foreign exchange, trade credit, and equities in noncorporate business. These are more specialized instruments that are also part of the financing of the economy and that appear in the accounts where appropriate, but for summary purposes they are treated as outside the credit markets proper. The diagram is also primitive in that it cannot easily show negative financial flows, such as debt repayment or reductions in asset holdings, and because it ignores the layers of intermediation that exist among financial firms, such as bank loans to security dealers and insurance company pur­ chases of finance company bonds. The purpose of the diagram is only to illus­ trate in broad outline the relation between sav­ ing and investment on the one hand and the aggregates of borrowing and intermediation shown in Table 2 on the other. The financial markets absorb part of saving and supply part of the funds for spending, but the total volume of credit flows as 9efined here has no necessary relation, dollar for dollar, either with saving or with investment because of the opportunities for internal finance and for borrowing to carry   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  HISTORICAL RELATIONSHIPS Examples of the empirical relationships that exist in the data at the broadest level are illus­ trated in the charts on the following pages. Some of these relations are close, but the con­ clusions to be drawn from them must be based on analysis of the economic system as a whole. With credit flows dependent on borrowers' de­ mands for financial assets as well as their non­ financial outlays, the problem of identifying supply and demand separately is more complex for financial markets than for many other areas of analysis, and useful solutions to the problem are still to be worked out. The charts start, somewhat arbitrarily, at the point of household and business borrow­ ing, proceed to the total borrowing by non­ financial sectors that is pictured in the dia­ gram, connect that total to private financial investment, and summarize the results of these flows in terms of amounts of debts and assets outstanding. Statistical relations of the charts to flow of funds table presentations are listed in the Notes to charts, which reference the few tables in­ cluded at the back of this publication. Except for matrices and two summary tables discussed earlier, only such additional tables are included as are reflected in the charts. 11 Before being charted, all of the data used were deflated by a compound index of prices and the 1952-73 11 The tables carry annual data for a few years only. They are taken from the "Flow of Funds-1974 Supplement."  13  trend of gross national product in order to highlight cyclical relationships apart from the strong growth trends over the period in most of the data. A single deflator was used for all of the time series, and a rising trend in any of the plotted series indicates a rate of growth faster than the trend of GNP, although not necessar­ ily faster than GNP growth in any short period. A series with a falling trend is not necessarily decreasing in actual dollar amounts; it may be only increasing at a slower rate than the GNP trend. The deflator itself is presented and described in the Notes to charts; it is not directly part of the accounts, which show only current-dollar quantities. Charts 1 and 2 illustrate the. associations that have existed between short- and long-term borrowing in credit markets by business and households and their spending for capital goods. Capital expenditures here cover all private domestic investment in the national income accounts except capital outlays by financial sectors, and they also include purchases of con­ sumer durables, which are consumption spend­ ing in NIA. Chart 1 illustrates that net changes  in short-term business credit were closely re­ lated to net inventory movements, on almost a dollar-for-dollar basis, for a long stretch of years through the 1950's and the first half of the 1960's. Since 1966 the relationship has become very much weaker, mainly because of the more diversified use of bank loans and open market paper as substitutes for or interim financing of longer-term requirements, particu­ larly during the tight-credit periods of 1969-70 and 1973. Later charts in this set show changes in the mid-1960's in trends of total outstanding private debt and assets, and the more complex behavior of short-term credit in the years after • l 965 is part of a more mature private debt structure than had existed in the 1950's. The 1969 spurt of short-term loan credit was fol­ lowed by low volumes in 1970 and 1971, when many of the loans were funded by longer-term financing, but beginning in 1972 short-term credit started to show another strong growth tendency as the economy picked up speed after the 1970-71 pause. With the higher inflation rates that appeared in 1973 book values of in­ ventories started rising much faster than the  CHART 1   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Billions of 1972 dollars, SAAR  80  50 40 30 20 10 + 0  10  '53  '57  '8 5  '81  14  '8  20 9  '73  national-income measure of inventories, which is adjusted to exclude price-change effects, and in the last year of the chart the relation of short-term credit is much closer to book values than to the inventory-change component of GNP. Before 1973 there was not enough dif­ ference between book and GNP inventory movements to distinguish between them statis­ ·tically in their relation to short-term credit movements. Chart 2 illustrates a similar pairing of longer­ term private investment and credit, which in this chart is a mixed collection of corporate bonds, mortgages, and consumer credit. 12 In the early years of the chart the high rate of investment relative to credit was primarily in residential construction, with households in­ vesting a larger part of equity funds in new homes ( and borrowing less of the purchase cost) than in later years. Beginning in 1970, on the other hand, credit flows moved ahead of investment, at first to fund the high short-term  borrowing of 1969-70 that appears in Chart 1 and later to take advantage of the expanded credit supply available through 1972. Both business and household borrowing were un­ usually high after 1971 relative to net invest­ ment spending. Chart 3 combines the data from Charts 1 and 2 and illustrates the extent to which move­ ments in private capital outlays have been a dominant component of GNP fluctuations. The two vertical scales in Chart 3 have the same dollar gradient even though their absolute val­ ues are very different, and only during the Vietnam period of the later 1960's are the movements in GNP substantially larger than in the investment series. Total private borrow­ ing has almost the same volatility as net invest­ ment and thus is almost as closely related to GNP fluctuations. 13 ,13 A common practice in current analysis is to measure either investment or net borrowing as a percentage of GNP. The relationship illustrated in the chart-that is, roughly equivalent amplitudes on very different base levels-produces volatile percentage movements relative to GNP that have some use­ fulness as sensitive indicators of cyclical movements. The chart suggests, however, that the movements in percentages are some­ what beside the point and that comparisons of absolute move­ ments indicate more directly regular and irregular cyclical developments.  12 Investment appears in Charts 2 and 3 net of depreciation charges, which are measured primarily on an historical-cost basis. The investment is thus the amount that in conventional accounting would appear to require financing from external funds or from net saving of the investor.  Billions of 1972 dollars, SAAR  CHART 2  140  120  100  Private Net Fixed  80  80  '53   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  '57  •s 5  '81  15  '8  40  9  '73  much the most volatile of these other elements and is the source of most of the changes in differences between the private and total series. In general its effect has been to shift peaks and troughs into an earlier quarter, making total  Chart 4 completes the structure of borrowing by adding to the business and household com­ ponents net funds raised by foreign borrowers, State and local governments, and the U.S. Gov­ ernment. U.S. Government net borrowing is  Billions of 1972 dollars, SAAR  CHART 3  240  1280  GNP  +--  1230  190  1180  140  1130  90  Borrowing. 40  1080   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  '53  '5 7  '85  '81  CHART 4  '89  '73  Billions of 1972 dollars, SAAR 200  150  100  Household + Business Borrowing 50  '53  '5 7  '65  '61  16  '6  9  '73  borrowing a slightly leading series at GNP turning points. 14 State and local governments have a hybrid position in the economy and hence. in the social accounts-as governments the group is attributed no physical investment outlays in income and product data, but. these units are . nevertheless independent decision­ makers that base their financial planning on much the same market considerations as house­ holds and businesses and in this respect are part of the "private" segment of credit markets. Although borrowing by State and local gov­ ernments is excluded from the private totals in Charts 1 through 4 that are related to physi­ cal investment, inves�ment by them in financial assets is included with other private financial investment in later charts on supply of funds to credit markets.  Charts 5 and 6 indicate the cumulative effect on debt outstanding that has resulted from . the structure of borrowing since 1952 that appears in preceding charts. Within a total debt owed by nonfinancial sectors that has risen only slightly in relation to GNP, there has been a major shift from public to private liabilities outstanding, with U.S. Government debt shrink­ ing from 50 per cent of the total in 1952 to 18 per cent at the end of 1973. 15 The explanation for the shift lies in a combination of circum­ stances-the legacy still remaining from de­ pression and war at the beginning of the period in the form of high public ( and low private) 15 Deflating flows and levels by a single index of growth and prices for the charts creates a special relation between the deflated figures for net borrowing and changes in debt out­ standing. If the deflator increases 5 per cent a year, borrowing must equal 5 per cent of outstanding debt merely to keep deflated debt constant. A borrowing rate of more than 5 per cent will raise the debt level, but if less than 5 per cent, de­ flated debt goes down even with positive borrowing. In the data used for the charts, average growth in the deflator was 6.7 per cent per year, 1952 to 1973, whereas U.S. Government debt was growing in absolute terms at a 2.3 per cent rate that by deflation was converted to a 4.1 per cent rate of decrease. Private debt, on the other hand, was growing at a 9.1 per cent annual rate, well above the deflator. These figures ex­ clude corporate equity issues from both debt and borrowing.  14 Turning-point relationships among series are affected by the deflation of the data that was described earlier. With unde­ flated data, the leading characteristic of total borrowing is more pronounced, because adding growth trends to the data shifts peaks in GNP farther into later quarters than peaks in borrowing. The reason is that GNP is a proportionately more stable quantity than net credit flows and has a rela­ tively larger trend component.  CHARTS  Amount outstanding, billions of 1972 dollars  900  1500 Other Nonfinancial Debt  1400  800  1300  700  1200  600  1100  500  1000  400  900 800  300  U.S. Gov•nment Debt  '53   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  '57  '61  '65  17  '69  '73  200  debt, the strength of private investment demand stemming partly from the same cause and tend­ ing to generate private debt, and the favorable Government budget position that reflected strong private demand for goods and services. The resulting trends in debt composition are strong but cannot be expected to continue in­ definitely. Arithmetically, the ratio of debt out­ standing to GNP trends, broadly, to approach an asymptotic level that is determined by a trend ratio of net borrowing to GNP. If, then, there is any stability over many years in the borrowing ratio to GNP the growth rate in private debt can be expected to slow gradually as it approaches the limiting level set by bor­ rowing rates. The slowdown in the private debt growth rate after 1965 is more marked than this arithmetic would suggest, however, and indicates a change in environment from the earlier years. The increasing concern that has been expressed in recent years about the vol­ ume of private debt outstanding, particularly for certain types of marginal borrowers, and the increasing problems of financing in some markets are symptoms . that postwar private borrowing rates may be higher than markets  are prepared to accept indefinitely. The impli­ cation is that if capital formation is to be main­ tained at the general rates of roughly the last two decades, financing may have to shift away from the heavy reliance on debt that we have seen toward a larger use of either internal or external equity funds. The broad totals in the charts are only suggestive of this, however, and it might take another 5 years or more to extract such a shift in trend out of the volatile short-term data. Chart 6 divides private debt into four major types, including State and local government securities. All of these forms were growing relative to GNP trends until the mid-1960's, but since then the growth has been predomi­ nantly in business debt, with a tendency toward larger cyclical swings away from trend than earlier. Both residential and State and local government debt appear to have reached a sta­ bility in relation to activity that they had not had before 1965. Charts 7 through 12 shift to the supply side of credit markets and summarize aspects of private nonfinancial sectors as lenders rather than as borrowers. As illustrated in the diagram Amount outstanding, billions of 1972 dollars  CHART 6   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  600 500 400 300 200  State and Local Govt. Debt  Business Loans  '53  '57  '65  '61  18  100 0  '69  '73  on pages 11-13 and in Table 2, most of the total borrowing by non.financial sectors that ap­ pears in Chart 4 has a counterpart in financial asset accumulation by private domestic nonfi­ nancial sectors, either directly through security purchases in markets, or indirectly through in­ vestment in deposits or other claims on interme­ diaries that are lending directly in markets. In amounts outstanding the relationship appears in Chart 7, where the top line is total debt of nonfinancial sectors-the sum of the two lines in Chart 5-the middle line is holdings of such debt by private domestic sectors including inter­ mediaries, and the bottom line is deposits and security holdings by households, nonfinancial business, and State and local governments.16 In terms of the model Table 2 on page 9, these are respectively item 5, items 8 plus 12, and item 14. The gap between total debt and  the middle line consists of federally related and foreign direct holdings, and the 1971 increase in that gap reflects mainly the large increase that year in foreign official holdings of U.S. Government securities. The gap between the middle and bottom lines consists of net hold­ ings by intermediaries financed by sources other than private domestic deposits and secu­ rities, mainly insurance and pension reserves, Federal and foreign deposits, and the equity funds of intermediaries. The changes over 1969-71 in that gap are mainly the build-up of foreign funds in commercial banks in 1969 and their subsequent run-off. Chart 8 illustrates the marked shift over two decades in the position of financial assets and debt in the private economy. This shift com­ bines the close relation in Chart 7 between pri­ vate assets and total debt, both of which have had little trend over the last 20 years relative to activity, with the shift in Chart 5 from Federal to private debt outstanding. 17 To an increasing  16 Insurance and pension reserves appear as assets of house­ holds in the total accounting structure and on that basis could be included in the bottom line as assets of the nonfinancial group. Such reserves are, however, more remote from day-to­ day investment decisions of households than their deposit and security portfolios and on that basis are set aside in summary tables and in these charts as a separate financial relationship in the system.  17 The small foreign debt component in Chart 5 is omitted from the debt total in Chart 8.  Amount outstanding, billions of 1972 dollars  CHART7  1600  1800  1500  1700 Privately Held Credit Market Instruments  1400  1600  1300  1500  PDNF Deposits and  1400  1200  1300  1100 '53   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  '57  '61  '65  19  '6 9  '73  extent since the late 1940's, the financial assets that private investors hold have come to be based directly or indirectly on claims owed by themselves rather than by others. Paralleling this change in assets and debt structure has been a sizable increase in the de­ gree of intermediation in financial markets. Pri­ vate sectors as borrowers must look mainly to financial institutions for mortgages, consumer credit, and business loans, all of which are usu­ ally too specialized and too small in individual loan size to be broadly marketable; and even for their marketable debt,. such as municipal and corporate bonds, the purchasers are heavily institutional. As their debts have grown, private sectors as lenders also have turned increasingly to institutional deposits as an investment alter­ native to the diminishing supply of Federal se­ curities outstanding. Over the period covered in the charts, institutional holdings of credit in­ struments increased from 68 per cent of the to­ tal held privately-the middle line of Chart 7to 87 per cent at the end of 1973. Most of this  growth was financed by the shift in private investment away from direct market instru­ ments and toward deposits in intermediaries, which increased from 59 per cent of private portfolios-the bottom line of Chart 7-to 72 per cent in 1973. That shift in private investment is broadly indicated in Chart 9, which divides the private asset total in Chart 8 ( and Chart 7) into de­ posit and credit instrument components. The two components have been rather more volatile over short-run periods than their total was, reflecting the sizable short-run changes over time in yield relationships between deposits and market instruments. Interest rates on most de­ posits have been much more stable cyclically than market rates, partly because of regulatory ceilings on deposit rates that have restrained those rates from following market rates upward in tight credit conditions. In the sequence of tight financial conditions covered by the chart -principally 1959, 1966, and 1969-high rates on market instruments attracted increas-  Amount outstandirg, billions of 1972 dollars  CHART 8   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1400 Private Domestic Nonfinancial Sectors - PDNF  1300  1200  1100  1000  900  800  '53  '57  '6  '61  20  5  '6 9  700 '73  ing amounts of funds out of institutions and into direct investment, partly because of in­ creasing yield spreads and partly from increas­ ing investor sensitivity to those spreads. Some of the deposit growth in the first half of the 1960's represented the development of large negotiable certificates of deposit by commercial banks, which introduced the CD's as money market instruments to attract funds from large investors such as major corporations, which had been holding liquidity mainly in Treasury bills. With the diminishing position of Treasury debt in the market, the CD became a major investment medium and an important conduit for transmitting liquidity holdings into bank credit for the growing volume of private debt. The effect of rate ceilings on deposits was most extreme in 1969, as Chart 9 indicates, when CD's in particular fell from $23 billion at the beginning of the year to $9 billion at year­ end (in actual dollars). Following that episode ceilings were lifted on CD rates, and in the 1973 tight-credit period the effect of yield  spreads was much more moderate than in 1969. As of 1973 the development of CD's as an open money market instrument, together with bank facilities for borrowing directly in commercial paper, Euro-currency, and bond markets, had done much to diversify the nature of bank intermediation and to diminish the sig­ nificance of a distinction between deposit and direct market investments in financial market analysis. The nature of deposits was also changed by the introduction of consumer-type CD's by both banks and savings institutions. These are nonnegotiable deposits with specified maturity dates that can be withdrawn before maturity only at a substantial cost in yield. By the end of 1973 almost half of savings institution de­ posits were of this dated form, and the penal­ ties of converting these to market instruments have reduced further the sensitivity of deposit flows to market instruments. At the end of the period covered by the chart, therefore, deposit­ security relationships in private portfolios had  CHART 9  Amount outstanding, billions of 1972 dollars  550  800 Private Domestic Nonfinancial Sectors - PDNF  850  500  800  450  750  400  700  350  850   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  '53  '57  '85  '81  21  '6 9  '73  300  become more complex than in earlier years, both in their connection to yield structures and in their meaning for the extent of intermedia­ tion. Chart 10 combines again the deposits and credit instruments from Chart 9 to compare the total holding-the same total that is in Chart 7 and Chart 8-with GNP. In spite of the shifts in composition of total assets, the re­ lationship to GNP is unusually close over most of the chart in both movement and-in what is presumably only a coincidence�absolute value. The asset total tends to have somewhat smaller cyclical movements than GNP, and. after 1965, when private debt growth started to slow, assets have been slightly lower relative to GNP than in earlier years. These differences are small compared to the total relation, how­ ever, and within the span of years covered no significant drifts in trend are apparent. The relation is closer than that between GNP and debt totals, with the differences absorbed in connective elements of credit supply, such as  Government, foreign, and miscellaneous inter­ mediary sources of supply, that constitute the gaps between the three lines in Chart 7. This connection between private financial assets and activity is, like the rest of the mate­ rial in the charts, an empirical "black box" in that it neither supports nor is explained by any broadly accepted analytical system. Without analytic support there is no basis for predicting that it will or· will not continue into other eco­ nomic circumstances such as chronically higher inflation rates or slower economic growth rates. The persistence of the relation on a quarterly basis nevertheless suggests a relation between activity and financial structure that may be a macroeconomic constraint of importance both to forecasting and to policy. Chart 11 breaks out the household com­ ponent of private assets to illustrate that within the total there has been drift in sector distribu­ tion of holdings. Over the period of the chart the household share increased from 71 per cent of the total to 80 per cent, with an offsetting  Billions of 1972 dollars  CHART10   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1280  1230  GNP-SAAR  1180  1130  1080  '53  '57  '6  '61  22  5  '6  9  '73  decrease, from 21 to 12 per cent, in holdings by nonfinancial business-mainly business liquid assets. State and local government hold­ ings stayed at about 8 per cent of the total over the period, even with the steadily rising im­ portance of these governments in total activity. Statistically, the total is more reliable than its parts, particularly the distribution between household and business assets, and the shift may be weaker than source data suggest. For corporations, however, a drop in liquid asset position from the early 1950's is fairly well supported, and there is little question that over 20 years they have held diminishing . amounts of a total that has stayed almost constant rela­ tive to GNP. Chart 12, finally, introduces corporate equity holdings to the picture. The preceding charts have focused on debt instruments, both as lia­ bilities and as assets, and it is for this total of claims that the relationships have appeared. Equities have a separate position in the finan­ cial system in that as liabilities they are only  residual claims, and, in a legal sense at least, are not burdens on issuers. In the flow tables net new stock issues appear as external sources of funds to business and as net financial uses of funds by investors. In tables on outstanding assets and liabilities, however, they appear only as assets valued by market prices, and no spe­ cific liability for them is attributed to issuers. While corporate equity net flows are a small component of household financial investment, holdings valued at market are a major part of household assets, as large as all deposits and debt securities over the general period of the chart. Chart 12 shows that such holdings, be­ cause they reflect movements in stock market prices, are also far more volatile in amount than other financial assets. There is a mild cor­ relation over the period between the two quan­ tities, a correlation that is obscured by the compressed vertical scale of Chart 12 that is needed to cover stock value movements. In the deflated dollars o� the chart equity values have moved by roughly $7 for each $1 change  Amount outstanding, billions of 1972 dollars  CHART 11  1250  1050  1200  1000 PDN F D8S>osits and  1150  950  1100  900 Credit Market Assets  1050  850  1000  '53   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  '57  '61  '65  23  '6 9  800  '73  in holdings of deposits and credit instruments, neglecting the many short-term perturbations in the equity series and some irregularities in the timing of movements. There may be inter­ action between the two totals that is exagger­ ated for equity values because of the lack of net flows of new issues, but to some extent both series are probably also responding in parallel to other conditions in the economy. The shift in credit structure from directly held central government debt to intermediated private debt, which is a dominant feature of the charts, is put into another perspective in Table 3. This table pulls together, again in detrended and deflated dollars, a set of claims on the U.S. Government and closely related institutions as a proxy for a total of basic re­ serve assets that are available for private in­ vestment, and it indicates the changes in hold­ ings of these assets over the 20 years shown in the charts. The set of claims is broader than Government debt in Chart 5 in that it includes reserve money and also the debt of federally  sponsored credit agencies, which have played a greatly expanded role in recent years as Government-related intermediaries, lending housing and farm credit on the basis of public issues of their own debt. 18 The total of these reserve assets, although sharply diminished from earlier years, contin­ ued to be held in roughly equal parts by finan­ cial institutions and private nonfinancial -inves­ tors, with a small third component held abroad. Nonfinancial sectors have offset their drop in official claims through an increase in deposits at institutions (line 12 of the table) of a nearly equal amount, ancl the total of the two types of. assets was virtually unchanged over 20 years. These claims also constituted most of their total deposits and securities (line 13) during the period. For financial institutions, the substitution was of a quite different type, namely the build-up of private loans and secu­ rities that constituted most of the growth in 18 The total is also a little narrower than in Chart 5 in that it omits Government debt held by the Federal Reserve.  Amount outstanding, billions of 1972 dollars 1200  CHART 12   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Household Assets  Corporate Equity Holdings  1100  1000  900 800  700 800  '53  '57  '8 5  '81  24  '8  500 9  '73  private debt that appears in Chart 5 and Chart 8. By the end of the period private finance was thus playing an increasingly central role in in­ termediating between nonfinancial sectors as investors and between the same sectors as bor­ rowers, with central government much dimin­ ished as a source of safe or liquid claims for either group. One of the effects of this increasing exposure of private finance in credit markets has been the burgeoning of the federally sponsored credit agencies mentioned earlier. Although operating in specialized credit markets-mainly housing and farm credit-their component of the Gov­ ernment debt on line 5 of Table 3 grew from $7 billion in 1952 to $60 billion at the end of 1973 (in the deflated dollars of the table) to finance an almost equal increase in their hold­ ings of private credit. If private debt continues in the future to push up relative to activity, these agencies will probably absorb a rapidly increasing share of the total growth with sup­ port from a variety of Government guarantee  programs for private credit. Direct lending and loan guarantee operations by the Government have focused on particular kinds of credit that have been in difficulty and are seen mainly as a method by which the Government can help those specific loan markets to compete against other kinds of demand. While the agencies ap­ pear sometimes to be "draining" loanable funds from private markets and creating credit tight­ ness that wouldn't otherwise exist, it is impor­ tant to see also their function in supplying to the economy an investment and liquidity instru­ ment-in the form of their own debt--of a kind that is becoming increasingly scarce. This review of the historical data has not tried to explain analytically the cycles and trends of postwar financial developments or to point up trends with alarm. Its purpose has been rather to illustrate certain main connec­ tions within the flow of funds accounts among lending, borrowing, balance sheet positions, and nonfinancial activities--connections that are close over the period covered and that  TABLE 3 PRIVATE CLAIMS ON U.S. GOVERNMENT INSTITUTIONS (Amounts outstanding at year-end in billions of 1972 dollars, trend removed)  1952  Item  844 103 68 2 671 844 417 16 412 94 318  1. Total claims, by type Currency in circulation 2. Member bank reserves 3. Foreign deposits at F.R. Banks 4. U.S. Govt. securities held outside F.R. System 5. 6. Holdings, by sector group Financial business 7. Foreign (including official) 8. Private domestic nonfinancial 9. Currency outside banks1 10. U.S. Govt. securities 11. 12. Memo: Private domestic nonfinancial sector deposits at financial institutions Total private money, deposits, and 13. credit instruments Financial business total holdings of 14. reserves and credit instruments  1960  586 73 38 *   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  384 63 24 *  475 586 265 24 296 65 231  297 384 159 48 177 54 123  601  621  780  1,183  1,133  1,153  1,050  1,142  1,333  • Less than $500 million. 1 Includes unknown amounts held by other sectors, mainly foreign. NOTE.-Details may not add to totals because of rounding. Values of deflator appear in Notes to charts (page 26).  25  1973  NOTES TO CHARTS the data on levels outstanding were processed to eliminate the many discontinuities that occur in time series on levels outstanding because of changes in coverage in basic statistical sources. To make the levels continuous, the 1973 year-end levels were taken as a base and incremented back to 1/52 by the seasonally adjusted quarterly flows. Corporate stocks are omitted from all data in the charts both as assets and as lia­ bilities except in Chart 12. Data for the charts are derived from tables at the back of this publication and are identified in the following list:  All data in Charts 1 through 12 have been deflated by a single compound index (1972 = 100) that is the product of (1) the U.S. noninstitutional population 16 years of age and over, (2) the GNP price deflator, and (3) an exponential growth trend in deflated GNP per capita found by least­ squares regression to be 2.2 per cent per year for the period 1952-73. After deflation, all flow data are plotted as centered two-quarter moving averages (three quarters weighted 1-2-1), with 1/52 omitted from the charts. Assets and liabilities out­ standing are deflated by the same index, but before deflation  2  4 5 6  7  9 10 11 12  Table  Item  Chart  Line  S.10 Net change in inventories S.10 Business loans S.5 Private net fixed investment Households business borrowing S.5 except business loans S.4 Private net capital outlays S.4 Households business borrowing S.4 Total nonfinancial borrowing S.4 Households + business borrowing S.6 U.S. Government debt S.6 Other no!1financial debt S.10 Business Joans S.6 Residential mortgages S.6 Other business household debt S.6 State & local government debt S.6 & S.7 Total debt S.7 Privately held credit market instruments Private domestic nonfinancial sector S.7 deposits and credit market assets S.7 Deposits and credit market assets S.6 Credit market debt S.7 Deposit .assets S.7 Credit market assets Not included GNP S.7 PDNF deposits and credit market asset holdings S.7 PDNF deposits and credit market assets S.9 Household deposits and credit market assets S.9 Deposits and credit market assets Corporate equity holdings S.9  9, 1.Jpper section 18 19, upper section 3, lower section Jess inventories in Chart 1  +  +  26 + 27, upper section less business loans in Chart 1 3, lower section 26 +21, upper section 1, upper section From Chart 3 2 5 13 14, lower section 10 11 22 23 less business loans and residential mortgages 21 I, total credit market debt owed by nonfinancial sectors 12  +  t  +  46, credit instruments, deposits, and currency 46 21 +22 + 23 38 32 46 46 2 2 17 (at market value)  Fourth-quarter values of the deflator are presented below in reciprocal form, as multipliers against actual data: 1952 1953 1954 1955   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  3.388 2.278 3.127 2.970  1956 1957 1958 1959  2.762 2.587 2.450 2.329  a.206 2.113 2.013 1.905  1960 1961 1962 1963  26  1964 1965 11966 1967 1968  1.801 1.706 1.591 1.482 1.369  1969 1970 1971 1972 1973  1.247 1.135 1.051 .973 .871  tailed analysis of those markets or sectors. They occur within the frame of the whole, however, and are in part reactions to changes in that frame. Whether as a framework that constrains particular markets or as elements acting on one another within a system, however, the main members of the structure appear to have an empirical existence that should be recognized explicitly in the data and in analysis of the data.  are basic data for analysis of the economy as a whole. Some of the connections have shown tendencies to shift over the 20 years. The 1960's in particular have demonstrated the facility and speed of financial markets in adapt­ ing to new practices and new financial instru­ ments. These changes in financial flow structure usually appear in individual markets or sectors and can be explained to some extent by de-  II ORGANIZATION OF ACCOUNTS Section I, on the concept of flow of funds accounts, discussed the system only in broad terms and does not constitute an operating description of the system. Sections II, III, and IV define the accounts on the basis of the rules that organize the system, the relation of the accounts to income and product information, and descriptions of individual sector and trans­ action categories. Statistical derivation proce­ dures for individual items in the accounts and procedures for processing source data are de.:.. scribed in a separate publication in preparation. Section I emphasized that the matrix organi­ zation of data is fundamental to the calculation, understanding, and analysis of flow of funds information. The matrix is also the organizing principle for the statistical tabJes in the body of this publication, each of which is a state­ ment, in time series form, of one column or one row of the matrix taken as a balanced account of debits and credits. The tables for individual columns are sector statements of sources and uses of funds, while the tables for rows summarize purchases and sales in markets for individual transaction categories. The table of contents is organized to indicate the matrix organization of the time series tables as di-   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  rectly as possible. This section describes in more specific terms the organization of the matrix of accounts and hence of the system itself. References to the matrix are to the table on page S 1 of the statistical section. As a device in social accounting, the flow of funds matrix has the following items as char­ acteristics: l. Sectors. The economy is divided into a  number of major groups of transactors, such as households, businesses, and governments. These groups are termed sectors in flow of funds discus­ sions and consist of sets of commonly identifiable economic units. The term sector thus always has an institutional meaning in these accounts, con­ trasted with many other bodies of data, economic models, and analytic discussions in which it some­ times refers to types of activities, as in the invest­ ment sector or the financing sector. Investment and financing are forms of activity that any insti­ tutional group might undertake and are referred to here as types of transactions ( see item 3 below) . 19 2. Sector uses and sources. A pair of col­ umns, one for out-payments (U for uses of funds) and one for receipts (S for sources of funds), is established for each major sector, and all transac­ tions by the members of the sector are reflected in one or the other of these two columns. 19 Noncorporate business is something of an exception to this principle, as discussed in Section IV.  27  3. Financial transaction categories. All pay­ ments and receipts of each sector are classified into standard transaction categories, which con­ stitute the rows of the matrix. Just as each family, firm, or governmental unit is classified entirely into one or another column, so each individual financial claim - such as a savings account pass­ book or a single Treasury bill - is exclusively in one or another row, and all transactions in that claim are recorded in that row. Summation of all uses of funds along a row and across the sectors of the matrix gives a total of outlays made to acquire a particular kind of asset, whereas summa­ tion of sources along a row yields a total of funds raised in that particular manner. 4. Financial sources and uses. Financial claims are shown in the S column of a sector only to the extent that members of the sector issued such claims as liabilities to raise funds. Corre­ spondingly, transactions in the U columns refer only to dealings in the claim as an asset. Sale of the claim as an asset is a negative offset against acquisitions of claims in the U columns, and debt repayment is an offset to borrowing in the S columns. Every transaction in financial claims appears in the table as both a source of funds and a use of funds, since all borrowing is someone else's lend­ ing. The money supply is one of these claims, specifically a combination of demand deposits, which are liabilities of and sources of funds to banks, and currency held by the public, which is a claim on and source of funds to the monetary authorities. Gold is treated as a financial asset but not a claim. It is a metal widely used as a monetary reserve, but it is not owed by anyone to the holder. 5. Financial market summaries. Each pur­ chase of a claim is always someone else's sale of that same claim. Hence, taking the economy as a whole, and including transactions with foreigners, total funds raised by issuing a particular type of claim are necessarily equal to total funds used to acquire that claim as an asset. Total borrowing then equals total lending in any type of claim and for any set of claims taken together. Each row or set of rows for financial claims therefore is a summary of all funds coming into and going out of a particular financial market or set of markets.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  28  6. Floats in financial transactions. Because in many instances a single transaction is not entered into the books of the buyer and seller on the same day, there are many discrepancies in the basic accounting records of the economy between total assets and liabilities outstanding. The result is a certain amount of floating supply of claims as assets or liabilities that is an exception to item 5 above. In the flow of funds accounts, the floats that can be estimated appear in the Discrepancy column of the matrix (discussed under item 10 below). 7. Nonfinancial transactions. The first 9 rows of the matrix, through "inventory change," are for each sector a condensed summary of all non­ financial transactions - payments and receipts for wages, goods and services, taxes, and transfers. Current receipts and payments are netted into a sector total of saving, while purchases of physical capital are shown separately. Cumulated across the columns for domestic sectors, the row for saving adds to total saving in the U.S. economy, which is shown in a memo column (National saving and investment). The physical investment rows add across in a similar way to total capital formation in the economy. 8. Sector balances-saving and investment. As an accounting matter, every receipt of funds by an individual or a sector is reflected in one or more uses of funds, if only to increase cash bal­ ances.20 For each sector, then, a balance exists ( except for statistical discrepancies) between total sources and total uses of funds. This balance can be shown in a variety of ways, but in the matrix presented on page s.1 sector-account balances are shown as an equality between gross saving of each sector and its gross investment (rows 1 and 4 of the matrix). The concepts of saving and invest­ ment used here for sectors are the same as those 20 In the flow of funds context the terms source of funds and use of funds mean no more than the standard terms credit and debit in double-entry bookkeeping. The sector statement is not a traditional sources and uses of funds aimed at explaining movements in a single item such as working capital, bank reserves, Treasury cash, or gold and foreign exchange. Any such single item in the accounts is a concept of funds special to one or another activity in the economy. When parallel statements are set up for all sectors, there is no one concept of funds that can be useful uniformly across the matrix. Even cash loses its generality in this setting, because cash of the public is different from cash of a bank or monetary reserves of a central bank. Hence the flow of funds statement evolves to a generalized form in which the funds themselves vanish, and there remains only the balance between total debits and total credits.  applied to national aggregates, and for each sector saving equals investment in the same sense as for the total economy. For each sector saving equals that sector's physical capital formation plus a net financial investment that measures the sector's excess of lending to other sectors over its borrow­ ing from other sectors. At the national level, similarly, total saving equals capital formation plus net foreign investment, where the latter is the excess of lending abroad over borrowing from abroad. With this accounting structure, the particular types of financial transactions by _a sector, both borrowing and lending, are subcategories under net financial investment. The totals shown for financial sources and uses of funds by a sector in general include financial flows within as well as between sectors. It is only in the net of the two totals, where intrasector flows are canceled out, that the. financial figures become intersector flows. This netting is carried across to the national total of net financial investment, where all domestic flows are washed out and where net financial in­ vestment of the economy becomes identically equal to net foreign investment. 21 9. Balance of the matrix as a whole. The effect of the preceding eight items is to produce in the matrix a severely constrained accounting sys­ tem that undertakes to place every transaction of the economy into direct juxtaposition to its coun­ terparts, both vertically in sector accounts and horizontally in transaction or market-summary accounts. Horizontally the matrix is constrained by the equalities between saving and investment, between total nonfinancial sources and nonfinan­ cial uses of funds, between net financial investment and net foreign investment, and between total borrowing and total lending in each financial market. Vertically it is constrained by the equality between saving and investment by each sector and for the economy as a whole. The upshot of these constraints is that in using 21 Net foreign investment is measured in flow of funds accounts from the capital flows (that is, the net of financial flows) in the balance of payments statement, whereas net foreign investment in the income and product accounts is measured from the current accounts - exports les& imports and net transfer payments. The difference between the two measures is the errors and omissions item in balance of payments, shown in the matrix as the sector discrepancy (row 44) for the rest-of-the-world sector.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  this organization of data as a framework for analysis - construction of models, simulation exercises, forecasting, or estimation of the data no one cell of the matrix can be altered without changing at least three others: one in another row of the same sector column, one in another column of the same row, and at least one other for the second column and second row. Discrepancy column and a Discrepancy row tl, absorb unaccounted entries in transaction rows and sector columns. The Discrepancy column carries the net sums of sources of funds less uses of funds across rows, and the sector discrepancy row carries correspondingly the net sums verti­ cally. Because all elements of the matrix are reflected in both of the two accounts, they add to identical net totals in the corner of the matrix. While they are net totals in the matrix, the two discrepancy accounts can also be viewed as a final sector and a final transaction account in a matrix that identically adds to zero in both directions. With that viewpoint, the statements in item 9 on constraints take on added generality, since one option in changing the matrix is to alter sector or transaction discrepancies. Indeed, if any single cell within the matrix is altered without explicit offsetting adjustments, the three other changes will auto{Tlatically be in a sector dis­ crepancy, a transaction discrepancy, and the joint sum of sector-transaction discrepancies. All discrepancy entries have the sign of net uses of funds ( the net sum of all sources minus allocated uses in an account). This is an arbitrary convention; it happens to be the same as that used in balance of payments and the opposite of the convention in the income and product accounts, where the statistical discrepancy is on the saving side of the capital account as a net source. 11. Matrix as capital account. The most general and most important characteristic of the matrix is that it constitutes a capital account for the economy as a whole deconsolidated among a number of institutional sectors. It is a capital account in the sense that it is a statement of ac­ quisition of assets - both physical and financial - together with the sources of funds used to ac­ quire those assets. For each sector the entry for gross saving is the net sum of internal sources of funds - a residuum of current receipts less cur-  29  rent outlays - and constitutes in the matrix. an addition to sector net worth plus capital con­ sumption reserves. Investment is stated gross of capital consumption and net of borrowing and is thus a use of funds consistent witb. the saving concept as a source. . The matrix deconsolidates among sectors the capital account of the national income and prod­ uct statistics. The nature of th.! matrix as an expansion of that capital account into individual sectors and into individual financial markets is central to the concept of flow of funds accounting and analysis. The position of the income and product capital account in flow of funds is dis­ cussed in Section III.  As already mentioned, each table in the sector and transaction accounts is a statement in time series form of one column or one row of the matrix. The sector tables are statements  of sources and uses of funds, and the transac­ tion tables cut across sectors to summarize flows into and out of individual markets. Any one cell of the matrix appears in both a sector table and a transaction table and is a link be­ tween the two. This simple matrix organization of flow of funds tables allows flexibility in grouping of the data for specific purposes. Flow of funds data lend themselves to many views of economic activity, and each view characteristically needs its own summary structure, with particular items or relationships emphasized. The matrix itself provides a map from which more con­ densed systems can be designed with explicit in­ dication of where each cell will fall and with as­ surance that balance of the accounts as a whole can be maintained to the degree necessary.  Ill RELATION TO INCOME AND PRODUCT ACCOUNTS As stated earlier, a rnajor purpose of the flow of funds accounts is to relate financial-market developments directly to the nonfinancial activities of the economy. For that purpose, the nonfinancial economy is taken to be measured by the scope, definitions, and data of the U.S. income and product accounts published by the Department of Commerce. The capital ac­ counts for individual sectors of the economy that are pictured in the matrix on page 1 are in accounting form essentially a deconsolidation of the single capital account published by the Commerce Department (1966 National Income Supplement, Table V - Gross Saving and In­ vestment, page xiii). In that account all finan­ cial claims within the United States are offset against one another, and there is no recording of financial flows within the economy or of financial investment by individual sectors. The consolidation leaves a measure of net financial investment for the economy as a whole that is   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  30  conceptually the same as net foreign invest­ ment - the excess of U.S. lending abroad over U.S. borrowing abroad. The flow of funds deconsolidation distributes the national totals of saving and tangible in­ vestment among domestic sectors. It introduces explicit recording of financial flows among sectors, detailed by type of instrument, that indicates the routes - direct or through inter­ mediaries - by which sectors, such as house­ holds, that have excesses of saving over physi­ cal investment lend to sectors, such as business and governments, .that may have an excess of spending. The position of the Commerce Department capital account in the flow of funds system is described in Tables 4 and 5, by using data for the year 1961. These tables refer to Com­ merce Department categories of saving and in­ vestment as presented in the 1966 National Income Supplement (page 79).  SAVING AND INVESTMENT TOTALS Table 4 gives the relationship between the na­ tional totals of saving and investment in the two systems of accounts. Total gross national saving ( line C) in the flow of funds· accounts is equal to the Commerce Department total with the one major exception that purchases of con­ sumer durable goods have been treated in the flow of funds accounts as capital expenditures rather than as consumption. This shift produces a smaller amount of current outlays and a larger amount of saving in flow of funds accounts. 22 This treatment of durable goods is based on the consideration that expenditures on con­ sumer durable goods are, in a financing con­ text, closely similar to those on producers' durnbles: ( 1 ) a household purchase of dur­ ables typically represents an investment in a product that will be useful over a period of several years; ( 2) consumer durable goods substitute to a significant degree for related business capital equipment; and ( 3) purchases of durable goods are debt-financed to a large extent. To bring consumer durable goods into the complex of saving and investment, a total for household saving is taken before deduction  for these purchases, and total saving and invest­ ment are correspondingly higher. The flow of funds accounts have a somewhat different distribution from Commerce a�counts between private and public saving. This dif­ ference arises from the treatment of Govern­ ment life insurance and retirement fund activi­ ties. In the Commerce accounts Government life insurance and retirement fund transactions with households are treated as social insurance contributions and transfer payments in the cur­ rent account, both part of personal income. In flow of funds, however, life insurance and pension claims by households are established as part of househ0ld �ssets, and claims of these types against government funds are treated the same as private insurance and retirement funds. This difference in distribution shifts sav­ ing from governments to households relative to the Commerce ,Department accounts but has no effect on total saving. 23 Federal Government insurance funds are consolidated directly into the flow of funds sec­ tor account for the U.S. Government, where net growth in insurance reserves is deducted from current surplus and appears as a financial source of funds under liabilities. State and local employee retirement funds, however, are shown  22 The shift includes introducing capital consumption allow­ ances for consumer durables but is made without imputing income from use of durables to total income or services from durables to product.  23 Government retirement funds here cover Government em­ ployees and persons covered by railroad retirement. Old-age and survivors insurance is treated the same in the two account­ ing systems; in neither does it give rise to household saving.  TABLE 4  GROSS NATIONAL SAVING AND INVESTMENT- SUMMARY COMPARISON, 1961  (Millions of dollars)  Item  Income Flow of and product funds  Difference  A B  Gross private saving Government surplus  79,818 127,392 -4,334 -7,728  47,524 -3,394  C D  Gross national saving Gross private domestic investment  75,484 119,664 71,699 115,879  44,180 44,180  E  Net foreign investment  f Gross national investment G Statistical discrepany ( C - F)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  3,035  2,029  74,734 117,908 1,756 750  31  Source of difference Lines Band C Insurance and pension funds  Consumer durables Consumer durables and omissions in balance -1,006 { Errors of payments statement 43,135 1,006  Lines D and E Line E  as a financial sector separate from the operat­ ing accounts of these governments. The treat­ ment there is to transfer savings from general government (in the flow of funds State and local governments-General funds sector) to households, and to impute a lending from households to the retirement funds (in the flow of funds State and local government employee retirement funds sector). The amount of both transactions is measured by total net growth in the funds' assets. In Table 4 the only difference between the measures of gross private domestic in­ vestment (line D) in the two systems is the presence of consumer durables in the flow of funds total, as discussed above. The one other difference in total investment is in the measure­ ment of net foreign investment. In the Com­ merce Department accounts, net foreign invest­ ment is measured as the net of current-account transactions in balance of payments - im­ ports, exports, and unilateral transfers.24 In flow of funds accounts, net foreign investment is defined as one form of net financial invest­ ment and is in fact a consolidation of that item for all domestic sectors. It is measured as the excess of foreign borrowing from the United States over foreign lending to the United States and is thus a net figure in the capital rather than current account of the balance of pay­ ments statement. The net current balance and net capital balance, which in concept should be equal, differ statistically by the amount of errors and omissions in the balance of payments statement, which thus appears as the difference between the net foreign investment totals on line E of Table 4. As may be seen from Table  4 (line G), this difference in foreign investment totals is reflected in a difference between the income and product statistical discrepancy and flow of funds discrepancy between saving and investment (row 44, last column of the matrix, page S.1).25  SECTOR DISTRIBUTION OF TOTALS Table 5 spells out the allocation of national saving and investment among flow of funds sectors. Part A.1 shows the allocation among the flow of funds sectors of each component of total saving as published in the income and product accounts (total column). Part A.2 shows the changes in the total and their dis­ tribution in the flow of funds accounts occa­ sioned by differences in treatment of specific transactions. Part A.1 is based entirely on Commerce Department data underlying the in­ come and product accounts, whereas A.2 is based on flow of funds estimates except for consumer durables. In A.1 a few specific points of allocation should be mentioned. Corporate farms are in the farm sector, and household capital consumption on line 8 is on owner­ occupied housing and nonprofit facilities. Mu­ tual savings banks are included with savings institutions rather than with banking as in Com­ merce Department tables. Gross saving of nonfarm nonfinancial cor­ porations in flow of funds is different from the Commerce Department total of cash flow net of dividends (for example, Survey of Current Business, July 1973, page 23) only in that the figure in Table 5 includes inventory valu-  24 Beginning in 1970 the Commerce Department accounts include as part of foreign investment the January allocations of Special Drawing Rights by IMF to the United States with this form of investment financed by a capital transfer item from the foreign sector to the United States. These allocations are omitted from flows in the flow of funds accounts, and hence from the measure of net foreign investment. They are included in tables on amounts outstanding as part of U.S. international reserve holdings, which are thus increased from year to year relative to flows. A similar effect resulted from changes in the official dollar price of gold in 1972 and 1973. These price changes, like SDR allocations, increased dollar value of reserve holdings without transactions.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  25 The flow of funds saving/investment discrepancy is to be distinguished from the nonfinancial discrepancy that appears in the matrix, row 1, discrepancy column. The latter matches total gross savings (the net on current nonfinancial transac­ tions), including the foreign sector's, with total nonfinancial investment (row 5). In this matching, the foreign component is the balance of payments current-account balance (with opposite sign) used as net foreign investment in the Com­ merce Department statement. The flow of funds nonfinancial discrepancy is thus identically equal to the Commerce Depart• ment statistical discrepancy, although opposite in sign.  32  TABLE 5  SAVING AND PHYSICAL INVESTMENT IN FLOW OF FUNDS ACCOUNTS, 1961  (Millions of dollars) Nonfinancial business Item  Total  1 2 3 4 5 6 7  Personal saving Undistributed corp. profits Corporate IV A Wage accruals less disburs. U.S. Government surplus State & local govt. surplus Net natl. saving (Nl&P) Cap. consumption allows.: 8 Corporate 9 Noncorporate 10 Gross natl. saving (NI&P) 11 12 13 14 15 16 17  18 19 20 21 22  HouseNonholds Farms corp. nonfarm  21,151 21,151 13,475 -52 0 -3,812 -522 30,240 21,151 26,240 19,004 6,soi 75,484 27,653  Corp. nonfarm  Total  Government BankState and Federal ing local  Savings institutions  Insurance & Other pen- finance sion funds  A.1 Allocation of NI&P saving among F IF sectors -25  -25 147 4,062 8,440 4,184 8,440  10,188 10,163 -52 -52 0 0 10,136 10,111  -522 -522  25,438 25,585 12,502 35,574 48,198  -522  1,087  992 1,049  is4  1 2  -3,812 1,087  992 1,049  184  5 6 7  0 -3,812 321 -3,812  1,408  50  204  1,04i 1,253  80 8 9 264 10  A.2 Transaction differences between NI&P and F IF affecting saving Consumer durables 44,180 44,180 11 U.S. Govt. insur. & pen. res. 1,017 -1,oi1 12 State & local govt. pen. res. 2,377 13 -2,377 Cap. gns. dvds. of inv't. cos. 499 -499 14 Gross natl. saving (FIF) 119,664 75,726 4,184 8,440 35,574 48,i98 -2,899 -4,829 1,392 1,058 1,253 -235 15 Depree. on consumer dur. 41,309 41,309 16 Net natl. saving (FIF) 15-8-9-16 33,111 27,915 -25 10,136 10,111 -2,899 -4,829 1,087 992 1,049 -315 17  =  Nonfarm residen. constr. 1- to 4-family houses Other Farm residen. constr. Nonresiden. plant & equip. Change in business invent. Gross pvt. dom. inv. (NI&P)  23 Consumer durables 24 Gross pvt. dom. inv. (FIF)  B.1 Allocation of gross private domestic investment in NI&P among F IF sectors 22,043 17,569 2,580 1,894 4,474 18 17,827 17,569 130 128 258 4,216 2,450 1,766 4,216 602 602 602 19 47,032 2,980 3,537 6,556 33,ijs 43,331 275 n.e. 446 .n.e. 20 2,022 279 222 1,521 2,022 21 71,699 20,549 4,418 9,358 36,653 50,429 275 n.e. 446 n.e. 22 44,180 m,879  B.2 Transaction differences between NI&P and F IF affecting investment 44,180 64,729 4,4is 9,jss 36,653 5o,4i9 275 446 n.e.  23 n.e. 24  n.e. = Not estimated. NI&P = National income and product account.  IVA = Inventory valuation adjustment. F IF = Flow of funds.  ation adjustment and net profits of branches abroad and excludes farm corporations. The major differences in transaction treat­ ment between the two accounting systems, recorded in Part A.2 of Table 5, have been discussed in relation to Table 4: consumer durables (row 11), which affect total saving, and government life insurance and retirement funds ( rows 12 and 13), which affect only distribution among sectors. Part A.2 has one further adjustment to allocation of saving among sectors - capital gains dividends of open-end investment companies, both cash and retained, are treated in Commerce Department accounts as a capital transfer rather than a dividend component of personal income. In flow of funds these are a current-account pay­ ment from investment companies to households in order to avoid using a capital transfer ac-  count in the system for this one item. Saving is reallocated accordingly. Line 18 gives a flow of funds estimate of capital consumption on consumer durable goods needed to derive net household and national saving in the flow of funds accounts, where such durables are viewed as capital goods rather than as consumption at the time purchased. The estimate is a declining-balance calculation in constant dollars on 10 classes of durables; the result is stated in current-year prices. Part B.1 of Table 5 shows sectoring of totals of gross private domestic investment by type. Both totals and details are estimated by the Commerce Department. Business investment in 1- to 4-family units represents only changes in work in process on houses for sale to house­ holds and is essentially an inventory-change   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  33  component of the total residential figure.26 Other residential construction consists of multi­ family units, additions and alterations, and nonhousekeeping units. That part of other resi­ dential construction allocated to households is mainly additions and alterations, but it includes a small amount of multifamily and nonhouse­ keeping construction for nonprofit organiza­ tions. Farm residential construction is allocated to farms as purchasers, since it is com­ mingled with other farm expenditures in financing. Nonresidential plant and equipment (line 20) is allocated as a single figure among  sectors rather than separately for construction and producers' durable goods. The household allocation is for plant and equipment of schools, churches, and other nonprofit organizations. Table 5 carries no allocation of net foreign investment among domestic sectors. Each sec­ tor's net foreign investment is part of its net financial investment, but not yet entirely identi­ fiable as such. To complete identification would require allocation of miscellaneous financial sources and uses of funds in the balance of payments statements that are occasionally sizable but not specified as to nature. Pending further specification of those items, net foreign investment can be viewed only as the con­ solidated total of net financial investment for the United States, mixed for individual sectors, with similar net investment in domestic daims.  26 All income and product and financial activities associated with owner-occupied housing are allocated directly to house­ holds in flow of funds. This includes purchases of completed new houses, additions and alterations, mortgage borrowing secured by such properties, capital consumption allowances, imputed rents in consumption, and imputed net rental income. The noncorporate business account includes only activities in cash rental housing and in construction itself.  IV DEFINITION OF SECTORS AND TRANSACTION CATEGORIES finance into three parts each. Flow of funds publications frequently carry, as on page S.3, a submatrix for nonbank financial sectors at the most detailed level available. The sector structure from the most detailed level to the broadest groupings used in the sector and transaction accounts tables is as shown in Table 6.  SECTORS Any group for which a complete statement of sources and uses of funds has been estimated in flow of funds accounts can constitute a sector for analytic purposes. At the most detailed level there are about 20 such sectors for which data are maintained on a continuing basis. In table presentations and discussions of the data, these elemental sectors are often combined into broader sector groupings, which can also be treated as sectors analytically.  Sector definitions  Households include - in addition to persons as members of households - personal trusts and nonprofit organizations serving individuals, such as foundations, private schools and hos­ pitals, labor unions, churches, and charitable organizations. There are no separate data avail­ able on a continuing basis for personal trusts and nonprofit organizations. Their importance in the financial transactions of the sector might be estimated for the early 1960's when, of  Sector structure  The matrix on page S.1 simultaneously shows two levels of sector detail, of which one is a very broad summary of the accounts into four sector groups - private domestic nonfinancial, U.S. Government, finance, and foreign - while the other breaks the private domestic and the   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  34  total sector financial assets on the order of $1,100 billion, roughly $60 billion were in bank-administered personal trusts and perhaps $25 to $30 billion in nonprofit organizations. The household sector excludes farm and non­ corporate business activities of individuals. On housing, see footnote 26. Farm business covers all farming activities in the United States including corporate farms. The sector includes farm credit cooperatives consolidated with the farms that own them, and it includes farm housing activities. Consump­ tion activities of farmers are in the household sector. Farm income in the accounts is as defined and measured for national income pur­ poses, including imputed- incomes. Except for retained profits of corporate farms, income is transferred entirely to the household sector and is reflected in household saving. Owner equity investments in noncorporate farming enter the TABLE 6  farm sector through the transaction account "equity jn noncorporate business." To the extent that farmers commingle house­ hold and business activities in their own ac­ counts, this sector departs somewhat from the principle that all activities of a unit are to be in a single sector account. The farm business sector can be viewed as an activity subaccount of the household sector, with connection through the proprietors' equity transaction account. Nonfarm noncorporate business consists of partnerships and proprietorships in nonfinancial enterprises, including individuals' rental activi­ ties and the professions. Like farming, this sec­ tor is treated in the accounts as an activity sub­ account of the household sector: all current income is transferred tc households, net sav­ ing is shown as zero, gross saving is equal to capital consumption allowances, and all changes  SECTOR STRUCTURE  Households Fann business Nor.farm noncorporate business Corporate nonfinancial business State and local governments General funds Rest of the world U.S. Government Federally sponsored credit agencies Monetary authorities Commercial banks Domestic affiliates of commercial banks Foreign banking agencies Banks in U.S. territories and possessions Savings and loan associations Mutual savings banks Credit unions Life insurance companies Other insurance companies Private pension funds State and local government employee retirement funds Finance companies Real estate investment trusts Open-end investment companies Security brokers and dealers   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Noncorporate }business  l  f }  }No�financial busmess  f  Private domestic nonfinancial  Non­ financial  Commercial banking Savings institutions  Finance Private nonbank finance  35  agencies described below. The sector account is consolidated, and transactions and claims among agencies are not shown. Federally sponsored credit agencies are a fi­ nancial sector consisting of five types of special­ ized lending institutions that had originally been created by the Government and owned by the Government to varying extents. Government equity has been fully retired, and they are now excluded from the Government budget accounts as private insti1:utions. In the flow of funds ac­ counts they are separate from the Government sector for all years. These agencies finance their lending activities mainly through issues of their own debt securi1:ies, and through 1972 such issues have been closely coordinated with Treasury debt operations. The agencies are:  in equity capital appear as net inflows in "pro­ prietors' net investment." Corporate nonfinancial business comprises all private corporations not specifically covered in financial sectors. It includes holding com­ panies and closed-end investment companies on a consolidated basis, and it includes real estate firms. It is identical with the nonfinancial cor­ porate group shown in Commerce tables except that it excludes farm corporations. Activities of pension, welfare, and profit-sharing funds are excluded from the sector to the extent that they are excluded from basic data in corporate tax returns. State and local governments--General funds comprise all political subdivisions of the United States, and all corporations, enterprises, debt­ issuing authorities, and trust funds operated by these subdivisions, other than employee re­ tirement funds; these last are shown separately as a financial sector. Basic data for the sector are the aggregates in the U.S. Census Bureau's Census of Governments. Rest of the world is as defined in the balance of payments statement for the United States, and the data in this sector account are from that statement, with financial transactions clas­ sified into flow of funds categories and non­ financial transactions as published in the income and product accounts. The sector discrepancy is "errors and omissions" in the balance of pay­ ments statement. U.S. Government covers, for all years, the agencies and funds that are in the Government's unified budget as of 1969, except the District of Columbia. Included are the Exchange Stabiliza­ tion Fund, employee retirement funds, life in­ surance funds, and all corporations that are wholly or partly owned by the Government. Many of these agencies operate lending pro­ grams, and a few issue their own debt to the public separate from Treasury securities. The sector does not include the Federal Reserve Sys­ tem and certain Treasury monetary accounts that constitute the monetary authority sector, and it does not include a set of sponsored credit   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Agency  Federal home loan banks Federal National Mortgage Association Federal land banks Federal intermediate credit banks Banks for cooperatives  Principal type of credit  Loans to savings and loan associations Residential mortgages Farm mortgages Short-term farm credit Short-term farm credit  The figures for this group also include GNMA-guaranteed mortgage-backed pass­ through securities as liabilities, with the pools of mortgages backing the securities as assets. Pass-through securities first appeared in 1970 as a result of the 1968 Housing Act, and by the end of 1973 about $9 billion had been issued. The pools are organized by private groups, but liability for the securities is in the mortgage pools themselves, not in any identifiable trans­ actor group. The pools and securities have a quasi-public character because of the GNMA guarantee and are included in this sector for that reason. Monetary authorities consist of the Federal Reserve System and certain monetary accounts of the Treasury: the gold account, the silver account, and an account constructed to record other currency liabilities of the Government and the assets behind those liabilities. The sec­ tor is identical with the group of institutions and accounts for which the "Member Bank Reserves, Federal Reserve Bank Credit, and 36  banking under Section 25 of the Federal Re­ serve Act. They are not included in consoli­ dated bank reports published by bank regula­ tory agencies, but their international flows are included in balance of payments data on trans­ actions of U.S. banks. They have a liability for part of the U.S. money stock and are active in domestic money markets. Agencies of foreign banks are U.S. offices operating under special banking charters that do not allow taking of U.S. deposits. Like Edge Act corporations, their transactions are in­ cluded in balance of payments banking flows, and they have a liability for part of the money stock. The group also includes some foreign­ owned banking institutions chartered in New York as investment companies. Banks in U.S. territories and possessions are also included in balance of payments totals for U.S. banking transactions. The group consists of those currently published by the FDIC. It includes branches of U.S. and foreign banks in these areas. Savings and loan associations are mutual and stock institutions chartered by States and ,the Federal Government to accept share capital inflows and to lend primarily in mortgages. The group consists of associations covered in Fed­ eral Home Loan Bank Board statistics, includ­ ing noninsured associations. Mutual savings banks are institutions oper­ ating under savings bank charters in 19 States with deposit insurance from FDIC. Data for the group are those published by the National Association of Mutual Savings Banks. Credit unions are employee organizations re­ lated to individual firms or agencies that are organized under State or Federal charter to accept share funds from members and to lend consumer credit to members. The group con­ sists .of all State and Federal credit unions in statistics published by the Bureau of Federal Credit Unions in the Department of Health, Education, and Welfare. Life insurance companies are those covered in the Life Insurance Institute's Fact Book but  Related Items" table in the Federal Reserve Bulletin is a sources and uses of funds state­ ment. The "Factors supplying reserves" are assets and the "Factors absorbing reserves" are liabilities. The principal liabilities are thus bank reserves and currency in circulation, and the principal assets are U.S. Government securities, gold, bank borrowings from the Federal Re­ serve, Federal Reserve float, and Treasury cur­ rency - assets that are backing for the reserve money of the economy.21 Commercial banks cover all banks in the 50 States, as defined by the coverage of all-bank statistics in annual reports of the Comptroller of the Currency. The sector excludes banks in U.S. territories and possessions, which are a separate sector. This sector is in flow of funds on a consolidated basis: all deposit and loan re­ lationships among domestic commercial banks have been "washed out." Interbank items in general add to different totals as assets and as liabilities because of items in transit and classi­ fication variances, and the net differences are included in the sector account as miscellaneous unallocated liabilities. Domestic affiliates of commercial banks are mainly holding-company parents of banks and nonbank subsidiaries of bank holding com­ panies. The data included for the group are at present limited to specific assets and liabilities related directly to banking activity-loans to banks, loans purchased from banks, and com­ mercial paper issued to finance such activities. Foreign banking agencies are a combination of Edge Act corporations and agencies of for­ eign banks. Edge Act corporations are sub­ sidiaries of U.S. banks engaged in international 27 The structure of "Bank Reserves and Related Items" is described in detail in "Member Bank Reserves and Related Items," Section 10 of Supplement to Banking and Monetary Statistics (Board of Governors of the Federal Reserve System, 1962). The flow of funds sector statement treats foreign ex­ change holdings as a positive asset rather than a negative liability and classifies minor items somewhat differently but otherwise represents the Member Bank Reserves, Reserve Bank Credit, and Related Items table as described in that publica­ tion. The table on reserves published in the Federal Reserve Bulletin has been modified recently to include all assets on the asset side rather than as negative liabilities.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  37  exclude fraternal orders. Government life in­ surance programs are also excluded; they are in the U.S. Government sector account. Other insurance companies are the fire, casualty, and other companies covered in Best's Aggregates and Averages. Private pension funds are defined in the an­ nual statistics on self-administered pension funds published by the Securities and Exchange Commission. They include retirement funds of nonprofit organizations and multiemployer plans shown in those data. Their total assets are treated as_ a holding in trust for the household sector and are the measure of a pension reserve liability to households. By this treatment pen­ sion funds have zero saving by definition. The current-account transactions that affect pen­ sion-fund assets are imputed to households and are reflected in personal saving. This money is then advanced by households to pension funds in the financial accounts. State and local government employee retire­ ment funds are the group of such funds re­ ported in the Census of Governments. They have the same position in the accounts as private pension funds, with zero saving and a liability to households equal to their assets. A current-account transfer of saving from govern­ ments to households is required to finance this household investment, however, because in the income and product accounts the saving is attributed to governments. This is described on page 31. Finance companies comprise sales finance, consumer loan, and commercial finance com­ panies covered in the Federal Reserve's 5-year Censuses of Finance Companies.28 The group also includes mortgage companies. Real estate investment trusts (REIT's) are a relatively new form of intermediary that, through 1960 legislation, are exempt from Federal corporate income tax provided they distribute most of their ordinary income to shareholders and provided most of their in-  vestments and grpss income are from real estate or mortgages. They can be either open end or closed end, but in practice all trusts created so far have been closed-end companies. Their investments have been mainly in con­ struction and development loans, and their funds have been raised through diversified pat­ terns of bond and share issues, bank loans, and commercial paper issues. Open-end investment companies (mutual funds) are the group reported by the Invest­ ment Company Institute. Closed-end companies are consolidated with the nonfinancial corpo­ rate business sector. Security brokers and dealers are based on aggregates for such firms registered with the Securities and Exchange Commission. Discrepancy, the last column in the matrix, records the residual excess of total sources over total uses of funds along each transaction row. These discrepancies have the sign of a net use of funds. In an accounting sense the discrep­ ancy column is the last sector account needed to complete the matrix. As indicated in descrip­ tions of transaction accounts below, many of these discrepancies have substantive meaning and are not solely the result of statistical defi­ ciencies. The discrepancy for nonfinancial trans­ actions is identically equal to the statistical dis­ crepancy in the income and product accounts (with sign reversed), reflecting the integration of Commerce data into the· system discussep in Section III. Transaction accounts with zero discrepancies have residual estimates along the row for some actual sector's transactions in the account. Typically the residual is in the house­ hold account, but not always. The discrepancy column is discussed below in its relation to the discrepancy transaction row.  TRANSACTION CATEGORIES Transactions in the flow of funds accounts are arranged in three major transaction groups current nonfinancial, capital nonfinancial, and financial. In addition there are several internal  211 The 1970 Census was published in the November 1972 Federal Reserve Bulletin, p. 958.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  38  Financial  entries, subtotals, and transfers between current and capital subaccounts, such as capital con­ su.mption charges, current surplus, saving, in­ vestment, corporate profits, and unincorporated business net income. Many sectors also have a residual discrepancy item - the excess of sav­ ing over investment in the data.  All financial transactions are entered into the accounts in a particular form of net basis: asset sales by a sector are entered as negative uses of funds - deductions from purchases of the same kind of asset - whereas debt repayments are entered under sources as deductions from new borrowing of the same type. There are in the matrix no deductions of liabilities against assets either within a type ( for example, house­ hold mortgage assets and liabilities are entered separately), nor in different types (such as a deduction of security credit from security hold­ ings). 2 ° Certain time-series tables of the ac­ counts show such deductions, but they are within special formulations and not part of the general structure of the accounts. Net financial investment for each sector is the excess of net acquisitions of financial assets over net increases in liabilities. It measures net funds advanced by each sector to all other sec­ tors. Net financial investment for each sector plus the statistical discrepancy for that sector equals the sector net surplus on all nonfinancial . transactions. Table 7 lists the types of financial claims for which separate transaction accounts are main­ tained in the flow of funds accounts. The items listed are categories normally shown in the pub­ lished tables. Some are sums of subcategories for which accounts are also maintained; sub­ categories are indented. The groupings are those frequently used to summarize transaction accounts. Gold and Special Drawing Rights consist of gold held as a monetary reserve and SDR hold­ ings. Transactions in gold are recorded only for monetary authorities, the Exchange Stabiliza­ tion Fund in the U.S. Government sector, and the rest of the world. All gold transactions are treated as uses of funds, and no liability is imputed for not holding gold or for SDR's. All  Current nonfinancial Current-account transactions are not shown on a basis that is uniform for all sectors. In the matrix, which is a sectoring of the economy's capital account, all current items are netted to­ gether into gross saving as a source of funds to capital account. In individual sector accounts a certain amount of current-account information is included to indicate links between gross sav­ ing and the income and product data from which it is derived. For households the items are directly identifiable in the income and prod­ uct statistics except two that are from other sources. Current items for corporate business are those for nonfinancial corporations in in­ come and product with farm corporations ex­ cluded as part of farm business. Branch profits from foreign operations are added to undis­ tributed profits from domestic activities in measuring total internal funds. Inventory valua­ tion adjustment is included for consistency with the inventory investment figure included in GNP and business capital account.  Capital nonfinancial Capital nonfinancial transactions - saving and investment - are described in Section III in the discussion of the relationship of the Com­ merce Department's income and product data to the flow of funds matrix. Flow of funds publications of annual and seasonally adjusted quarterly data include as a first table a distribution among sectors of both current and capital nonfinancial transactions taken from the Commerce Department's in­ come and product accounts. The table includes a sector distribution of profits as well as of the capital entries discussed in Section III.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ze The one exception to this rule in the matrix is the n.!t International Monetary Fund position ( capital subscription less certain IMF claims on the United States), which. is counted in the U.S. foreign exchange position as an asset on a net basis.  39  gold in the Treasury gold account is in mone­ tary authorities assets, while gold held by the Exchange Stabilization Fund is in U.S. Govern­ ment assets together with all SDR holdings. As mentioned in Section III, SDR allocations to the United States, which began in 1970, are included in asset holdings but not in flows. Revaluations of the U.S. dollar also appear as changes in gold and SOR holdings not reflected in flows. The flow data include only purchases and sales of these assets. Official foreign exchange position is as de­ fined in balance of payments accounts - con­ vertible foreign currencies and the net IMF gold _tranche position. This is a liability of the rest of the world and a net asset distributed be­ tween the U.S. Government (Treasury holdings of currencies plus IMF subscription less IMF notes and letters of credit) and monetary au­ thorities (Federal Reserve holdings of curren­ cies less certain deposits of the IMF). Treasury currency consists of silver held as monetary reserve by the domestic economy and certain asset-debt relationships between the banking system and the Federal Government in connection with the monetary system - seign­ iorage on silver, deposits with the U.S. Govern­ ment for redemption of Federal Reserve Bank notes and national bank notes, and liability of the U.S. Government in connection with minor coin and United States notes backed by gold reserves.30 Transaction flows for this category occur only between the Treasury and the mone­ tary authorities. Beginning with 1970, this ac­ count also includes SDR certificates as a mone­ tary authorities asset and a Treasury liability. The large difference between total assets and total liabilities in the estimates of amounts out­ standing reflects the fact that gold and silver are shown in the accounts as assets but not as liabilities (except seigniorage revaluations on ·silver, which are treated as a U.S. Government  liability). Gold and silver are treated as tan­ gible assets rather than as claims. Demand deposits and currency cover de­ mand deposits at commercial banks in the United States, Government and foreign deposits at Federal Reserve Banks, and U.S. currency outside banks. The definition is identical with that of money supply plus U.S. Government deposits in the daily-average statistics on money stock.31 The matrix on page S. l indicates in the dis­ crepancy column differences in this category be­ tween liabilities as seen in bank records and assets as recorded in holder-sector accounts. These differences are mail float, representing checks in the mail that are moneys no longer on the books of senders and not yet on the books of receivers. Mail float relates to checks that have not yet entered the banking system clearing procedure. It exists in parallel with and separate from cash items in process of collec­ tion and Federal Reserve float. Cash items and Federal Reserve float are deducted from gross demand deposit liabilities of banks to consoli­ date the bank liability down to an amount owed to nonbanks.32 Mail float is a further deduction to arrive at holder records of money balances. This deduction of mail float is nece�ary to bring holder entries for cash into consistent tim­ ing with the other entries in nonbank accounts. It is mainly an accounting requirement, how­ ever, and does not imply that holder records are analytically more important than bank records. In general the public looks at the bank record of its deposits as more relevant in managing cash than the balance on its own books. Were ni A very small exception is IMF deposits with the Federal Reserve, which in flow of funds are negative in the foreign exchange position. Apart from this, relation to money supply is presented in the Federal Reserve Bulletin, August 1962, p. 945. The June 1971 Federal Reserve Bulletin introduced a new series on ownership of demand deposits. For the relation between those data and flow of funds estimates, see Table 8, p. 463, of that Bulletin. 82 The role of these items in measurement of money supply is described in the Federal Reserve Bulletin, October 1960, pp. 1108-12. The money supply as published by the Federal Reserve is a banking-system liability record rather than a holder asset record.  :io For a detailed discussion of these relationships, see Flow of Funds in the United States, 1939-1953 (Board of Governors  of tlte Federal Reserve System, 1955), chapter 17.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  40  TABLE 7  FINANCIAL TRANSACTION CATEGORIES  Gold and Special Drawing Rights Official foreign exchange position IMF gold tranche position Convertible foreign exchange Treasury currency  f Monetary reserves  l  Demand deposits and currency Private domestic U.S. Government Foreign Time deposits at commercial banks Savings accounts at savings institutions  f  t  Life insurance reserves Pension fund reserves  J  Interbank claims Corporate equities  U.S. Government securities Treasury issues Short-term Other marketable Savings bonds Nonguaranteed agency issues Loan participation certificates State and local obligations Corporate and foreign bonds Home ( 1- to 4-family) mortgages Other mortgages Multifamily residential Commercial Farm Consumer credit Instalment Noninstalment Bank loans n.e.c. Other loans Open market paper Finance co. loans to business U.S. Government loans Sponsored credit agency loans Loans on insurance policies  financial institutions  Insurance and pension reserves  Credit market instruments  Security credit Owed by brokers and dealers Owed by others Taxes payable Trade credit Equity in noncorporate business Miscellaneous Deposit claims Equities Insurance claims Unallocated claims and bank floats  Other claims  Sector discrepancies   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Deposit claims on  41  Li/e insurance r�serves are established in the accounts as a claim by households as policy­ holders against life insurance companies and U.S. Government insurance programs. The category includes deposit claims of policy­ holders and beneficiaries against insurance com­ panies arising from supplementary contracts not involving life contingencies. Policyholders' borrowing on policies from insurance com­ panies and from Government insurance pro­ grams is a positive element of the other loans category rather than a negative element here. Statistically, the category is estimated to be equal to policy reserves against private and U.S. Government life insurance policies, in­ cluding individual and group annuities and supplementary contracts. Changes in policy dividend accumulations and accident and health reserves are in the miscellaneous transaction group as liabilities to policyholders.34 Pension fund reserves are in the accounts as a claim of households as beneficiaries against retirement programs. They cover private pen­ sion plans (both those administered by insur­ ance companies and other private plans, and both vested and unvested plans), government employee retirement funds, and the Railroad Retirement Fund. They do not cover the OASI social insurance program. Statistically, the cate­ gory is estimated as equal to changes in reserves of private plans administered by insurance com­ panies and total assets of other private plans, government employee retirement funds, and the Railroad Retirement Fund.35 Interbank claims are a set of relationships between the Federal Reserve and commercial banks and among the several subsectors of commercial banking. Claims among banking subsectors--deposits and loans-appear in  it possible statistically to shift timing of all non­ cash entries in sector accounts to a basis con­ sistent with bank record of money supply lia­ bility, the entire body of accounts would perhaps be improved for analysis. Short of this the mail float deduction is necessary.33 Mail floats are shown in the matrix for pri­ vate domestic and for U.S. Government de­ posits. Foreign deposits are on a bank-record basis in the balance of payments accounts (and hence here), consistent in timing with at least the large bulk of capital-account transactions. A mail float in demand deposits implies cor­ responding floats in many if not all other trans­ action categories. As a general matter records of sales and purchases and of lending and bor­ rowing are not timed simultaneously, and it is not possible to balance both sector accounts and transaction accounts without float items. Statistically, most of these floats cannot be esti­ mated. The largest volume of transactions gen­ erating float is undoubtedly in trade credit, how­ ever, and as noted below, a float exists in the system for that account. Time deposits and savings accounts consist of all time deposits at commercial banks (in­ cluding negotiable certificates of deposit) and all deposit and share accounts at mutual sav­ ings banks, savings and loan associations, and credit unions. Flows include crediting of in­ terest and dividends as well as deposits and withdrawals. Postal Savings System deposits are in the miscellaneous category, and savings bonds are in U.S. Government securities. 33 Statistically, mail float is estimated directly and used in calculating household cash as a residual. The nature and meaning of household cash as an "other-party" record are discussed in George Garvy, "The Float in Flow-of-Funds Accounts," Flow of Funds Approach to Social Accounting, vol. 26 of Studies in Income and Wealth, NBER, pp. 431-61. A further note on the meaning of the bank-record liability: If all check-writing were to cease for a fortnight and all checks in the clearance system to reach their final destination, both the bank gross records of liabilities and holder records of assets would settle at the level of demand deposits shown in money supply statistics, that is, net of cash items and Federal Reserve float. Bank records would come down from a higher level and holder records up from a lower level. It is t)J.is ultimate view of the present state of balances plus checks in transit that in general has most meaning to t�e public as a cash balance.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  M Measurement of life insurance claims is discussed in the Federal Reserve Bulletin, August 1959, p. 837. 33 Treatment of pension funds claims is discussed in the Federal Reserve Bulletin, August 1959, p. 838. With corporate equities valued at market prices in pension fund assets, year-to-year changes in total reserves outstanding can differ substantially from net flows into reserves as a result of market price changes. The net flows represent premium receipts and investment income less benefit payments and operating costs.  42  U.S. Government securities consist almost entirely of the issues covered in the Treasury Surveys of Ownership during 1972 and are measured by the amounts shown in the sur­ veys.36 They include:  tables for the total commercial banking sector as both assets and liabilities of equal amounts. As among the bank subsectors, the total tables are thus combined statements rather than con­ solidated statements. This is in contrast to the commercial bank subsector, which is consoli­ dated for the banks included.  All Treasury issues, including savings bonds, foreign currency series, and other nonmar­ ketable issues in the survey; Agency issues by TV A, Export-Import Bank, Postal Service, Federal Housing Adminis­ tration, and other Government agencies; Loan participation certificates issued by Export-Import Bank and GNMA; CCC certificates of interest and CCCguaranteed bank loans; Farmers Home Administration insured notes; Issues by federally sponsored credit agencies; GNMA-guaranteed pass-through securities backed by mortgage pools.  Corporate equities represent net issues of and transactions in equity securities of private domestic corporations and U.S. net purchases of stocks of foreign corporations. The category includes investment company shares and covers both common and preferred stock. Figures for asset levels of sector holdings are stated at market value, and annual changes in levels differ from net purchases because of fluctua­ tions in market price. No estimates of liabilities for corporate stock are attributed to issuing sectors except open-end investment companies. These companies differ from other corporations in that they have an obligation to redeem shares on demand at values based on current values of portfolio assets.  As a group, these securities are issued by two sectors in the account structure-U.S. Government and federally sponsored credit agencies. Liabilities of each sector held within that sector are consolidated out, but issues held by the • other sector are included. The U.S. Government liability, for example, excludes Government investment account holdings of the Government's issues but includes holdings by sponsored agencies. Federal Reserve hold­ ings are included in both totals of liabilities. In addition to the issues covered in the Treasury surveys of ownership the category includes small amounts of "special issues" held by Fed­ eral home loan banks and other non-Govern­ ment groups. GNMA-guaranteed pass-through securities are combined in tables with secur­ ities issued by federally sponsored agencies, as mentioned above in the description of the sponsored-agency sectors. Liabilities of the U.S. Government not covered by this category are shown in the fol­ lowing list:  Credit market instruments is a core group of debt claims that is the principal medium used by nonfinancial sectors in raising funds through formal credit channels. It excludes trade credit arising in the normal course of business, tax liabilities, security credit, and proprietors' equities in noncorporate business. It also excludes miscellaneous claims, which are mainly accruals for private sectors and various trust deposits for the U.S. Government. Credit market instruments are used by finan­ cial as well as nonfinancial sectors as a source of funds but to a much smaller extent relative both to borrowing in this form by nonfinancial sectors and to borrowing in other forms by fi­ nancial sectors. In the matrix financial sectors' borrowing in credit markets is included in the credit market rows, but the principal summary tables on credit flows, discussed in Section I as illustrated in Table 2, focus on the use of these markets by nonfinancial sectors.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  aG Where maturity detail is shown, "short-term marketable" consists of all bills, certificates, notes, and bonds due within a year of the date shown, regardless of original maturity. The amounts also include part of issues due within 2 years on a sliding-scale basis. "Other" issues are marketable issues not classified as short term and all nonmarketable issues.  43  U.S. Government liability  Transaction category  Special notes issued to the IMF  Negative in official foreign exchange position Home mortgages  farm properties. The category has statistically the same coverage as the corresponding series published monthly in the Federal Reserve Bulletin. The tables include full statements of borrowing and lending in the three types separately. Consumer credit comprises short- and intermediate-term consumer instalment and noninstalment credit and is statistically the same as the consumer credit series published monthly in the Federal Reserve Bulletin. Bank loans n.e.c. (not elsewhere classified) cover the following types of bank loans:  Defense Department and Coast Guard housing mortgages Trust and deposit liabilities Certain accrued interest (beginning fiscal year f Miscellaneous financial 1956) Postal Savings System deposits Currency items in the public debt } Treasury currency Other Treasury currency liabilities Trade debt Certain accounts payable  1. By the commercial banking sector (in terms of call report classifications) : a. Commercial loans, except open market paper (in other loans category); b. Farm loans, except CCC-guaranteed loans and CCC certificates of interest (included as a Government liability in U.S. Government securities); c. Loans to individuals for person-al pur­ poses, other than those included in con­ sumer credit statistics; d. Loans to foreign banks (loans to domestic commercial banks are either in interbank claims, when between banking subsectors, or eliminated in consolidating banking subsector state­ ments); e. Loans to other financial institutions except commercial paper (in other loans category); f. All other loans. 2. By Federal Reserve Banks: a. Foreign loans on gold; b. Industrial loans.  State and local obligations cover the total debt of all State and local government units, except loans from _the U.S. Government (which are in other loans) and trade debt. State and local obligations held by the State and local government sector are included in both assets and liabilities of that sector. Both short-i.term and long-term securities are included, conform­ ing in amount and maturity division to data shown in the Census Bureau's annual surveys of governmental finances. Corporate and foreign bonds consist of the funded debt of U.S. private corporations and foreign (private, governmental, and interna­ tional agency) bonds held in the United States. The domestic liability has the coverage re­ flected in the Securities and Exchange Com­ mission series on bonds and notes in "Net Change in Outstanding Corporate Securities" as published before 1974. It thus includes con­ vertible issues until converted into equities. Conversions appear as debt retirements and equity issues. Home mortgages cover all debt secured by 1- to 4-family nonfarm residential properties. The category is statistically the same as the cor­ responding series published monthly in the Federal Reserve Bulletin. Other mortgages consist of all debt secured by multifamily residential, commercial, and   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Real estate and security loans are excluded entirely from bank loans n.e.c. as credit in the flow of funds mortgage and security credit categories. Consumer credit is also excluded from this category. Both the asset and liability sides of the cate­ gory are measured gross of valuation reserves. Other loans is the final grouping within credit market instruments and consists of the following types: 1. 2. 3. 4.  44  Directly placed finance company paper; Dealer-placed commercial paper; Bankers' acceptances; Loans to banks from nonbank lenders that are in the form of Federal funds or security repurchase agreements in borrowings in -the balance sheets of banks. Borrowings within  5. 6.  7. 8. 9.  Taxes payable are the excess of taxes ac­ crued from a period's operation over taxes paid during the period. Both U.S. Government and State and local taxes are included. At present the item covers only corporate profit taxes, but it would be useful and relevant to include parallel liabilities for personal income, social insurance, and indirect taxes. Unlike most other financial items in the accounts, this is not a claim that has been formally recognized by both debtors and creditors. Until final settlement on a year's liability, each party makes his own estimate as to the amount in­ volved. Taxes payable are nevertheless recog­ nized in financial planning by. both business and governments and in business accounting. Because opinions can differ on the amount of claim, the discrepancy in this transaction ac­ count is different in concept from the mail floats discussed above. Statistically the liability side is estimated from corporate balance sheets, whereas the receivable side is the excess of Commerce Department estimates of accruals over governmental reports of actual receipts. While part of the discrepancy between the two arises from data problems, an element remains that is conceptual. The data discrepancy in taxes appears in the corporate business sector account. Alge­ braically, accruals less payments of profit taxes should equal the change in the sector's profits tax liability, but in the statistics this is not the case. Accruals, receipts, and balance-sheet liabilities are taken from independent data sources, derived from separate tabulations of profit estimates, governmental receipts data, and corporate balance sheets, and there are inevitable inconsistencies in timing, coverage, and estimating procedures among the three. In addition there is always some amount of payments or refunds in tax settlement cases that have not been entered into either balance sheets or accrual estimates. For these reasons the three tax items shown in the corporate sec­ tor table typically do not balance exactly in the statistics.  the banking sector either appear in interbank claims or are consolidated out within bank­ ing subsectors; Finance company loans to business mainly for financing of equipment purchases or to carry inventories or receivables; Loans from U.S. Government (other ·than mortgages and trade credit, both included in other financial categories, and most CCC direct nonrecourse loans, treated as purchases of inventories),37 such as student loans, small business loans, and foreign aid loans; Loans other than mortgages by federally sponsored credit agencies; Policy loans on life insurance policies; Consumer credit secured by hypothecated deposits (through June 1966) . These loans are excluded from consumer credit statistics, but until June 1966 bank statistics included the loans in assets and the hypothecated deposits in time deposits. After that time both loans and deposits are eliminated from monthly banking statistics and from the flow of funds accounts. The semiannual call reports on commercial banks continue to carry the loans and deposits on a gross basis.  The first four of these types are combined together in tables as "open market paper" even though not all of these types are negotiable. The four types have in common that they are short-term money market investments from the lender's view and are close substitutes for short-term Government securities and for time deposits as liquidity investments. Security credit consists of loans for the pur­ po.5e of purchasing or carrying securities subject to Federal Reserve regulation. It includes loans to security dealers from banking and customer debit and credit balances with brokers and dealers. This credit is, in the first instance, an indirect form of supply of funds to credit mar­ kets, rather than a credit market demand for funds. On the main stem of the relationship, banks finance private security holdings through direct security loans and loans covered by broker and dealer credit to customers, and in addition banks finance dealer direct holdings of securities. It does not include all loans with security collateral, many of which are in bank loans n.e.c. 37 CCC loans to cooperatives for tobacco and CCC storage facility loans are treated as loans and included in the other loans category.  45  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Tax liabilities include Federal Reserve pay­ ments to the Treasury that have been declared but not paid. This treatment corresponds to the income and product classification of such pay­ ments as profit taxes. Trade credit is an approach to a book credit category; it consists of receivables and pay­ ables other than consumer credit, finance com­ pany paper, business debt to finance companies, bankers' acceptances, and other open market paper. In the flow tables noncorporate receiv­ ables are netted against payables, but in the tables on amounts outstanding they are shown separately. A large mail float exists between receivables and payables in trade credit for two reasons: receivables are recorded before buyers have re­ ceived and recorded amounts payable, and buy­ ers write down payables when checks are mailed and before sellers have received them. This float is in the transaction discrepancy along with statistical inconsistencies of the estimates. Equity in noncorporate business represents net flows of equity funds invested by pro­ prietors in unincorporated businesses, both farm and nonfarm. No figures on amounts out­ standing can be presented in flow of funds accounts without estimates of physical asset stocks that are part of the basis of net worth. Given the statistical and conceptual problems involved in distinguishing household and busi­ ness accounts for proprietors of unincorporated businesses, any measure of proprietors' net in­ vestment must be arbitrary to some extent. For the annual estimates in the present treatment, all net income of noncorporate business is treated as withdrawn by proprietors, and net saving (retained income) of the firms is arbi­ trarily put at zero. Gross saving, by this device, becomes identically equal to capital consump­ tion allowances. This means that all investment in physical and financial assets by noncorporate sectors beyond the amount of capital consump­ tion is to be viewed as financed externally in   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  46  the accounts. Such funds as are not raised from credit markets or trade debt enter the sectors as net equity investment by proprietors in the household sector. To the extent that noncorpo­ rate business has in fact an identifiable retained income, this treatment overstates household saving as a source of funds (by overstating in­ come receipts), but it also overstates household equity flows to business as a use of funds by the same amount. Discrepancies in household or other accounts are thus unaffected by the treatment. For the quarter�y estimates, it is assumed that income withdrawals and equity inflows are more uniform over the year than business in­ come and that in unadjusted quarterly accounts there are positive and negative retained earn­ ings that add to zero over the year. In sea­ sonally adjusted accounts, retained earnings are zero quarterly as well as annually. 38 Miscellaneous financial claims consist of several forms of specific claims together with certain commercial bank floats and a variety of unallocated sources and uses of funds in sector statistics. The largest identified flows stem from international relationships of business firms with their foreign affiliates. For commercial banks these flows represent net credit positions of foreign branches with the home office; dur­ ing the 1960's such branches were a major channel for Euro-currency borrowing by U.S. banks. For foreign banking agencies the figure is the total of all credits, including home office equities. Banking claims on foreign affiliates appear in another section of the tables, in hold­ ings of foreign currencies along with foreign deposits held by other domestic sectors. Nonbank direct investment by business in foreign affiliates appears separately in the foreign-claims section of the tables in miscel­ laneous claims. Such direct investments are as defined and reported in balance of payments 38 These remarks apply to noncorporate farms, but it should be noted that the farm business sector has a small net saving equal to retained income of corporate firms.  data, and they include both U.S. investments abroad and foreign investments in the United States. Other specific items are equity and deposit claims on the U.S. Government-related agen­ cies and accrual items arising in the course of insurance business to such as dividend accumu­ lations' and accident and health reserves in life insurance and prepaid premiums and benefits in fire and casualty insurance. The unallocated items arise in the course of sector accounting, when known totals of finan­ cial sources and/or uses of funds are adopted as controls for the sector's financial accounts. Any components of the totals that cannot be attributed to one of the specific transaction ac­ counts then fall residually into the unallocated items. As a social accounting practice this is arbitrary> since unknown items can alterna­ tively be left in a sector's discrepancy. Treating them as miscellaneous claims, however, keeps them within the bounds of financial transactions and sharpens the meaning of most sector dis­ crepancies. At the most simple level, the principle is illustrated by sector accounts for commercial banks, life insurance companies, savings and loan associations, and mutual savings banks. For each of these, there exists an established universe estimate of the balance sheet and financial transactions of the industry as a whole. 39 For each, the bulk of financial assets and liabilities is clearly identifiable in terms of flow of funds transaction types, but for each there is a minor remainder of assets and lia­ bilities - mainly income receivable and ex­ penses payable - that is left unspecified. These accrual claims are generated by the calculation of income on an accrual basis and must be in­ cluded in financial accounts to maintain con­ sistency with income statistics. When they are included, the sector discrepancy for each of these groups then becomes a measure of the  statistical inconsistency between, on the one hand, the body of the income and product data from which saving and physical investment are derived and, on the other hand, the body of balance-sheet data that constitutes financial ac­ counts. That some of the balance sheet is of unknown nature can be approached within the framework of financial statistics. Rest of the world unallocated claims are only slightly different. Here the control totals are from balance of payments data, and preserving them maintains the discrepancy in the balance of payments statement. The miscellaneous account also contains cer­ tain floats in commercial bank data. These floats, entered as net liabilities, are the excess of deposit and loan liabilities reported as owed to U.S. commercial banks over banks' deposit and loan assets reported as due from U.S. banks. They include the excess of member bank borrowing reported as a liability over the Fed­ eral Reserve's measure of member bank bor­ rowing and the excess of the Federal Reserve's figure for member bank reserves over the asset item reported for banks. To some extent these floats reflect inconsistencies in classification in bank reports, but in the main they reflect items in transit that are of the same nature as mail float on demand deposits and trade credit. Preserving these floats in the bank statement maintains the meaning of the �ctor discrepancy discussed above. The floats rt:!flect claims among the banking subsectors as well as within subsectors. Sector discrepancies is the last line of the matrix, a final transaction account that closes the matrix vertically. A few sector accounts have no discrepancy entry because data are lacking to put together independently estimated totals of saving and investment. For such sec­ tors - noncorporate business, pension funds, and most elements of finance n.e.c. - one or another source or use of funds is derived residually in the sector account as the amount  39 Each, in fact, is defined operationally in terms of universe data available.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  47  needed to balance saving and investment. The effect is to shift whatever discrepancy actually exists in the sector's column of data into some other account - in the first instance, the trans­ action account row that the residual is taken in and then perhaps into another sector through further residuals. In any social accounting sys­ tem, the designer in effect chooses where to show discrepancies or whether to show them at all. For this and other reasons there may be a low correlation between actual data errors and discrepancies as recorded in the system. For the sectors mentioned in the discussion of unallocated claims, sector discrepancies rep­ resent inconsistencies between a few major bodies of data for the sector. For governments and nonlife insurance, discrepancies are more complex because totals of financial sources and uses were built up for these sectors from identi­ fiable components rather than broken down  from clearly demarked totals with unallocated residuals. The household sector discrepancy is the most complex in the system and in general the largest. Statistically every transaction of house­ holds is a residual, since all items in the account are derived from the books of other sectors, including wages and personal taxes. The house­ hold discrepancy is thus a final resting place for data inconsistencies throughout the system. Because much of the data in the system be­ comes available as coherent sector information -for example, balance sheets of financial insti­ tutions - data inconsistencies are to a large extent between sector columns of the structure, such as differences between borrower and lender records on the timing of credit flows. Most of these inconsistencies are carried along the trans­ action rows into the residual household account.  V FLOW OF FUNDS DATA PUBLICATIONS The prindpal publication of current data for flow of funds accounts consists of quarterly tables of both seasonally adjusted and unad­ justed flows. These current tables are exten­ sions for up to five or six quarters of base data that are produced each year by a review and revision process. The base data are published as tables of year-total flows from 1946 to the present and year-end outstanding claims from 1945 to date. The base data exist in quarterly form from 1952, and these quarterly data are made available to the public as computer data tapes; they are not published as quarterly tables because of the amount of paper required. As an alternative to the computer tapes, computer printouts are supplied on request for quarterly data in selected sections of the accounts that are of particular interest to individual users.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Both the current quarterly tables and the annual tables are separate Board publications that are available on request, and mailing lists are maintained for quarterly and annual dis­ tributions. In both types of publications the tables include a full set of sector statements of saving and investment and a full set of transac­ tion account tables that give net borrowing and lending in individual types of claims. They also include the two summary financial tables de­ scribed earlier, in Section I, as well as a table showing the sector distribution of national in­ come accounts data used in the system. Esti­ mates of outstanding assets and liabilities are maintained on a quarterly basis and are on the computer data tapes, but they are printed only in year-end amounts in the annual publications, where they parallel the flow tables in coverage  48  years that have already appeared in the annual publication mentioned previously, even when source data are revised for several preceding years. Such longer-run revisions are postponed until the annual revision. Annual revisions are intended to introduce all of the new information that has become available in the preceding year. The revision includes as a routine matter new benchmarks for earlier years or-as in the case of NIA­ revisions of source data based on new bench­ marks, but it can also include shifts to new data sources, changes in derivation methods, improvements in table formats, or even changes in sectoring and transaction categories. Such changes can affect the accounts back to the earliest years covered, even when no new data have appeared for those periods. Annual revi­ sions thus have more potential scope in flow of funds than in NIA, where they are usually limited to 3 years.  of summaries, sectors, and transaction types. The two summary tables appear monthly in the Federal Reserve Bulletin, and once each year a more extended set of tables appears in the Bulletin to present the new and revised base data. Current quarterly tables become available about 6 weeks after the end of the most recent quarter included in the data, but the data for that most recent quarter are very preliminary and tentative. Each issue of the quarterly tables includes revisions for the next-to-last quarter that result from the large amount of data that has become available since the quarter's first preliminary tabulation. The tables may also include revisions in earlier quarters of the cur­ rent calendar year to conform to revisions in source data resulting from new benchmarks such as the semiannual call report for commer­ cial banks. On a current quarterly basis, how­ ever� revisions are not carried back to earlier  VI DATA SOURCES Table 8 has two conspicuous omissions. The first is in sources of nonfinancial data such as saving, corporate cash flows, government sur­ plus, and capital outlays. These data come di­ rectly from the Commerce Department's na­ tional income accounts, and while the sectoring in flow of funds requires detail that does not appear in the published NIA, the Commerce Department makes all the necessary break­ downs and supplies them to the Federal Re­ serve. For the first preliminary calculation of a quarter, the 15-day NIA estimates are used. These figures omit corporate profits and profit tax accruals, which must therefore be estimated by the Federal Reserve for that first run. The other major omission from the table is the household sector. Data for this sector  While a full derivation statement is outside the scope of this publication, it is possible and useful to list the principal bodies of data that go into flow of funds calculations at present and to indicate briefly the availability schedules for these data. 40 The summary list in Table g omits many peripheral and occasional sources of information, but it indicates the statistical skeleton of the system. For some areas both benchmark and current sources are listed; where no such distinction is shown, the sources used for current information are not subject to revision except as indicated. 40 The most recent description of calculation methods is "Flow of Funds Accounts-Data Sources and Derivations" (October 1971). This publication is available on request from the Flow of Funds Section, Board of Governors of the Federal Reserve System, Washington, D.C. 20551.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  49  TABLE 8 SOURCES OF FINANCIAL DATA FOR FLOW OF FUNDS ACCOUNTS Source  Area  Availability  Federal Govt.  Monthly Treasury statement of receipts and expenditures, Treasury Bulletin  Monthly, about 30 days after month-end; June data subject to revision after 5 months  Federally sponsored credit agencies  Statements of condition for five groups  Monthly, quarterly, or semi-annual; 25 days  State and local govts.­ Benchmark  Census Bureau, Governmental  Current  Commercial banking­ Benchmark  Finances  Gross offerings of securities, Securities Industry Assn. Banking data Treasury Bulletin  Annual, about 17 months lag Monthly, 30 days Weekly, 10 days, revised by semiannual call reports Monthly, 60 days  Call reports Severai weekly and monthly reporting systems  Semiannual, about 4 months 10 to 20 days after period end, revised twice a year  Savings and loan associations  Federal Home Loan Bank Board  Monthly reports, 25 days  Mutual savings banks  National Association of Mutual Savings Banks Call reports  Semiannual, 8 months  Credit unions  National Credit Union Admin.  Monthly reports, 24 days  Life insurance­ Benchmark Current  Life Insurance Fact Book  Annual, 8 months Monthly, 50 days, revised after 12 months  Private pension funds  SEC Statistical Bulletin  Current  State & local govt. retirement systems-Benchmark  Institute of Life Insurance, Tally  Monthly reports, 45 days  Quarterly, 10 weeks, revisions annually  Census Bureau, Governmental  Annual, 17 months  Census Bureau  Quarterly, 10 weeks  Best's Aggregates & Averages  Annual, 9 months Monthly, 60 days Quarterly, 10 weeks  Federal Reserve, Census of finance companies Federal Reserve monthly survey  Quinquennial, 28 months  Real estate investment trusts  National Association of RETT's  Quarterly, 3 months  Security brokers and dealers­ Benchmark Current  SEC Annual Report Banking data  Annual, 12 months Weekly, 10 days and monthly, 20 days  Investment companies  Investment Company Institute  Quarterly, 6 weeks and monthly, 30 days  BEA (Commerce Dept.), Balance of payments and International investment position BEA, Balance of payments Treasury Banking data  Annual, 6 to 9 months  Current Other insurance­ Benchmark Current Finance companies­ Benchmark Current  Rest of world­ Benchmark Current  Corporate business-­ Benchmark Current  Nonfarm noncorporate business­ Benchmark Current  Finances  Treasury Bulletin SEC  SEC, Current assets and liabilities of nonfinancial corps. revised to IRS Statistics of Income Same as above Also banking data (q.v.) Balance of payments (q.v.) SEC, Net change in corporate securities outstanding Mortgage data (q.v.) IRS, Business tax returns; Partnership tax returns: Corporate income tax returns Census Bureau, Census of Housing Banking data (q.v.) Corporate data (q. v.) Consumer credit statistics  50   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Monthly, 35 days  Quarterly, 10 weeks Monthly, 6 weeks Weekly, 10 days Annual, 4 years Quarterly, 10 weeks Quarterly, 10 weeks  Annual or biennial, 3 to 4 years Approx. decennial, 2 years  TABLE 8 SOURCES OF FINANCIAL DATA FOR FLOW OF FUNDS ACCOUNTS-Continued Area Fann business­ Benchmark Current  Source USDA, Balance sheet of the farminK sector  Availability Annual, 9 months  Banking data (q.v.) Federally sponsored agency data (q.v.) Mortgage data (q.v.)  Mortgages  Federal Reserve  Quarterly, with preliminary in 30 days, revisions from institutional data  Consumer credit  Federal Reserve  Monthly, 35 days, revised at various intervals  Open-market paper  Federal Reserve Bank of New York  Monthly, 20 days, revised occasionally  are almost entirely residuals from the rest of the calculation in that virtually all of the trans­ actions and balances are measured from re­ ports by other parties to their transactions. (The exceptions consist only of mortgage and trade debt liabilities of nonprofit organizations included in the sector.) The residual status of the sector means that a listing of data sources for all other sectors together is implicitly a listing of sources for households. Some of the chains of relationships are extremely long, but a discussion of their nature belongs in a de­ scription of the derivation methods rather than in a listing of sources. None of the inputs listed in Table 8 are compiled explicitly or exclusively for flow of funds accounts, although the needs of the ac­ counts have been one consideration in the de­ sign of many of the reporting forms. Rather, flow of funds accounting consists of absorbing and digesting a wide variety of financial infor­ mation, both flows and balances, each part of which has been constructed in isolation from others with its own accounting procedures, timing classifications, and institutional cover­ age. The digestion process is intended to stand­ ardize the accounting as far as possible, so that a transaction in a financial claim appears consistently in the seller's and buyer's state­ ments in the same transaction category, at the same value, and in the same time period. Consistency problems can be illustrated in   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  certain specific areas. One is in federally related securities-about $85 billion outstanding at the end of 1973-which are known collectively as the agency-issue market. These issues re­ ceive widely varying treatment in holders' balance sheets and are frequently combined with bonds of the International Bank for Re­ construction and Development and the Inter­ American Development Bank that are unre­ lated to the Government in any direct sense. Commercial paper is another difficult section of money markets analysis, partly because no formal definition exists for this important mar­ ket instrument. Because of the definition prob­ lem, no .figures are reported for bank holdings of ·commercial paper-an important gap in estimating ownership distribution. In consistency of timing, the major problems are again in commercial banking, where cer­ tain balance sheet items are highly volatile on a day-to-day basis, including money supply liabilities. The dating of bank balance sheets is frequently not coincident with those of the other parties to the transactions, and the dif­ ferences can generate sizable discrepancies in the data. These differences occur routinely for the March and September bank balance sheets, which are always for the last Wednesdays of those 2 months rather than the last day of the month. For June and December, however, most bank data are for the last day, with the effect that timing differences cause problems between  51  the first and second quarters and then again between the third and fourth. Half-year data and annual data are substantially more reliable in bank-related transactions than the estimates for a single quarter. Probably the broadest area of inconsistency is the balance of payments statement, which is used as the basic document for indicating inter­ national capital flows into and out of individual domestic financial markets such as Government securities or time deposits at banks. Data col­ lection systems for balance of payments are separate from domestic data sources for banks, Government, and business, and they include a number of definitions of claims and of groups that are difficult to match with domestic data. As a result, the transformations used to convert the balance of payments statement into do­ mestic financial market categories are only ap­ proximate in several cases. The result, more­ over, is a "rest of the world" sector that is as alien to international payments analysts as the   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  balance of payments statement is to domestic financial analysts. These are a few illustrations of the statistical problems that arise in combining a variety of separate accounting systems into an integrated structure that matches payments and receipts throughout the economy. The process of ad­ justment unavoidably produces sector and mar­ ket statements that differ to varying extents from the conventional statements used by spe­ cialists in particular financial activities. This is the price of constructing the broader system. One direction for future development of the system is a deepening of the detail in financial accounts in ways that show continuously the relationships to other presentations of the same information. However, the principal uses of the data are in studies of intersectoral and intermarket relationships, and for these the standard categories of the accounts are un­ avoidable even when they are somewhat un­ familiar to individual activities.  52  BIBLIOGRAPHY DATA PRESENTATIONS IN PRINT, 1974 Annual total flows and year-end assets and liabilities: Flow of Funds Accounts, 1945-72 (August 1973); 1974 Supplement-Flow of Funds, 1965-73 (September 1974). Current quarterly data available 6 weeks after quarter-end: Flow of Funds, Seasonally Adjusted; Flow of Funds, Unadjusted.  EARLIER FORMS OF ACCOUNTS "A Quarterly Presentation of Flow of Funds, Saving, and Investment," Federal Reserve Bulletin, vol. 45 (August 1959), p. 828. Board of Governors of the Federal Reserve System. Flow of Funds Accounts, 1945-62 _ 1963 Supplement. 1963. ---------------· Flow of Funds in the United States, 1939-1953. 1955. Copeland, Morris A. A Study of Moneyff,ows in the United States. New York: National Bureau of Economic Research, 1952. "Flow of Funds Seasonally Adjusted," Federal Reserve Bulletin, vol. 48 (November 1962), p. 1393. "Revision of Flow of Funds Accounts," Federal Reserve Bulletin, vol. 51 (November 1965), p. 1533.  OTHER Bain, A. D. "Surveys in Applied Economics: Flow of Funds Analysis," Economic Journal, December 1973, pp. 1055-93. Cohen, Jacob. "Copeland's Moneyflows After Twenty-five Years," Journal of Economic Litera­ ture, vol. X, no. 1 (March 1972). Dawson, John C. "A Cyclical Model for Postwar U.S. Financial Markets," American Economic Review, Papers and Proceedings, vol. 8 (May 1958), pp. 145-57. Dorrance; Graeme S. "Financial Accounting: Its Present State and Prospects," IMF Staff Papers, vol. 13, no. 2 (July 1966), p. 198. Flow of Funds Approach to Social Accounting, vol. 26 of Studies in Income and Wealth. Prince­ ton University Press, 1962. Freund, William C., and Zinbarg, Edward D. "Application of Flow of Funds to Interest Rate Forecasting," Journal of Finance, vol. 18 (May 1963), p. 231. Ritter, Lawrence S. "An Exposition of the Structure of the Flow of Funds Accounts," Journal of Finance, vol. 18 (May 1963), pp. 219-30. Taylor, Stephen P. "Uses of Flow of Funds Accounts in the Federal Reserve System," Journal of Finance, vol. 18 (May 1963), pp. 249-58. ------· "Revision Experience in Flow of Funds Accounts," mimeo for GNP Data Improvement Project, December 12,.1973.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  53  SUMMARY OF FLOW OF FUNDS ACCOUNTS FOR THE YEAR  1973  (Seasonally adjusted annual rates; in billions of dollan) Printe domestic non.financial aecton  Sector Transaction category  u  8  State and local govt&  Buaineae  u  8  u  8  or  Total  u  8  the world  u  .z .....  1 2 3  34Z.5 ..... Gross saving .......................... ..... %29.1 ..... 11Z.I ..... Capital �onsumption................. ..... 116. 7 .. ... 96.2 ..... ..... ..... 211.0 ..... .2 ..... 131.6 ..... Net savmg (1-2)..................... ..... 113.9 ..... 17.4 .....  4 5 6 7 8 9  Gross investment (5+10)................ Z35.I ..... Private capital expenditures.............. 174.1 ..... Consumer durables ••••....•...•..... 130.3 ..... Residential construction .............. 37.6 ..... Plant and equipment................. 6.3 ..... Inventory change .................... ..... .....  18.8 ..... 160.6 ..... ..... ..... 19.6 ..... 126.7 ..... 16.4 .....  -S.4..... ffl.1 .....  ..... ..... ..... ..... ..... ..... ..... ..... ..... .....  334. 7 ..... 130.3 ..... 67.0 ..... 132.0 ..... 16.4.....  8  U.S.  Govt.  u  Fe�na.  Total  8  u  agencies  8  u  8  �-  Mone-  u  .z .....  -.1 ..... -8.Z ..... lt.5 ..... 3.1 ..... ..... ..... -.1 ..... -8.2 ..... 7.4 ..... .2 .....  Z.1 ..... ..... ..... ..... ..... ..... ..... ..... .....  -7.7 ..... ..... ..... .....  ..... 13.7 ..... ..... 6.0 . .... ..... ..... ..... ..... .2 ..... ..... 4.8 .....  .I..... ..... ..... ..... ..... ..... ..... ..... .....  8  Coml. banb  Pvt. nonbank finanoe  8  8  u  .1 ..... .1 .... .  u  4.4 .....  1.7 .... . 2.7 .....  All aecton  u  8  Diacrepanoy  u  Natl, •Ting and inT-. ment  5.7 ..... 144.7 ..... ..... 144.7 ..... l 1.4 ..... 214.1 ..... ..... 214.1 ..... 2 4.3 ..... 130.6 ..... ..... 130.7 ..... 3  .1 ..... I.I..... 7.4 ..... ..... ..... 3.0 ... .. 2.0 ..... ..... ..... ..... ..... ..... ..... ..... ..... ..... ..... .2 ..... ..... ..... 3.0 ..... 1.8 ..... ..... ..... ..... ..... ..... .....  117.1 ..... 7.4 ..... 111.1 339. 7 ..... 5.0 ..... 339. 7 130.3 ..... ..... ..... 130.3 67.2 ..... ..... ..... 67.2 136.8 ..... ..... ..... 136.8 15.4 15.4 .....  ..... . .... ..... ..... ..... .....  4 5 6 7 8 9  10  Netfinancialinvestment(ll-12)........... 11.5 ..... -tt.7 ..... -S.4 ..... -5.1 .....  11  Financial uses ......................... 131.8 ..... 43.1 ..... 7.t ..... lSZ.I ..... 17.4 ..... 4.3 ..... %17.8 ..... ff.I..... 7.8 ..... 111.Z ..... 87.7 ..... ffl.1 ..... Z.4 ..... H.I ..... 11 ffl.l ..... ..... 17.4 ..... 12 Financial sources....................... ..... U.3 ..... 115.5 ..... 13.3 ..... 188.1 ..... 15.3 ..... U.I..... Zit.I ..... %1.8 ..... 7.7 ..... 17.1 .....  12  vi  Houaeholds  Financial aectora  Ren  Z.1 ..... -7.7 .....  8.7 .....  .I.....  .1 .....  z.t .....  5.4 ..... -Z.4 .....  sz., .....  Z.4 ..... -Z.l ..... 10  13 14  • -.2 Gold and official foreign exchange... . ..... ..... ..... ..... ..... ..... ..... ..... Treasury currency........ . . . . . . . . . . ..... ..... ..... ..... ..... ..... ..... ..... ..... ..... .....  15 16 17 18  Demand deposits and currency... • ••.•• 13.1 ..... -.3 Private domestic................... 13.1 ..... -.3 U.S. Government..• •. ....•.•.•.•... ..... ..... ..... Foreign...•...... ......•...•..... .....  19 20 21  Time and savings accounts............. 67.7 ..... 1.4 ..... 7.2 ..... 76.3 ..... 2.9 ..... At commercial banks................ 39.5 ..... 1.4 ..... 7.2 ..... 48.1 ..... 2.9 ..... At savings institutions............... 28.2 ..... ..... ..... ..... ..... 28.2 ..... .....  22 23 24  Life insurance reserves............... 7.3 ..... ..... ..... ..... ..... 7.3 ..... ..... ..... ..... Pension fund reserves.. •. ............ 24.4 ..... ..... ..... ..... ..... 24.4 ..... ..... .... . ..... Interbank items . • . .• .. .........•.... ... .. ..... ..... ..... ..... ..... ... .. ..... ..... ..... .... .  25  Corporate shares .................... -8.2 ..... .....  26 30 31 32 33 34  Credit market instruments ............ 29.7 U.S. Government securities .......... 20.4 State and local obligations ........... 4.3 Corporate and foreign bonds......... 1.1 Home mortgages.................. -.9 Other mortgages................... 1.4 Consumer credit................... ..... Bank loans n.e.c................... ..... Other loans....................... 3.5  35 36 37  Security credit....................... -.2 -4.6 ..... ..... ..... ..... -.2 -4.6 : -.2 ..... ..... -8.0 -3.4 ..... ..... ... .. ... .. -3.4 ..... -4.6 -3.4 -8.2 -8.2 ..... ..... ..... ..... 35 To brokers and dealers............. -.2 ..... ..... ..... .... . ..... -.2 ..... ..... ..... ..... -3.2 -3.4 ..... ..... -3.2 ..... ..... -3.4 -3.4 -3.4 ..... ..... ..... ..... 3 6 To others••.....•.•...•...•.•.•••. ..... -4.6 ..... ..... ..... ..... ..... -4,6 ..... -.2 ..... ..... -4.8 ..... ..... ..... -.2 ..... -4.6 ..... -4.8 -4.8 ..... ..... ..... ..... 3 7  38 39  Taxes payable....................... ..... ..... ..... 2.3 .6 ..... . 6 2.3 ..... ..... Trade credit......................... ..... .6 24.1 20.1 ..... 1.1 24.1 21.8 1.0 1.9  40  Equity i n noncorporate business ........ -4.4 ..... ..... -4.4 ..... ..... -4.4 -4.4 ..... ..... ..... ..... ..... ..... ..... ..... ..... ..... ..... ..... ..... ..... -4.4 -4.4 ..... ..... ..... ..... 40 .4 9.6 2.6 ..... ..... 11.1 2.9 7.6 6.3 1.0 -.4 12.8 27.8 1.7 2.2 ..... .8 7.2 17.5 .9 7.4 32.4 36.7 4.3 ..... ..... ..... 41 Miscellaneous claims................. 1.6  27  28 29  41  42  72.8 ..... ..... ..... 44.2 1.4 22.9 1.8 2.6  ..... -.3 ..... -.3 ..... ..... ..... .....  7.4 ..... ..... -8.2  9.1 77.6 -1.8 ..... -.1 1.8 ..... 9.2 ..... -.9 ..... 28.4 3.3 ..... ..... 34.0 7.8 5.1  Sector discrepancies(l�)............... -6.0 ..... 13.8 .....   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ..... 12.6 ..... 2.5 ..... 12.5 ..... ..... ..... ..... ..... ..... 2.5 .....  7.4  2.8  ..... ..... . .... .....  .4  -.2 ..... ..... ..... .4 ..... ..... .....  -1.8 ..... 2.4 16.0 .1 ..... ..... ..... 2.4 15.0 .1 ..... -1.8 ..... ..... -1.6 ..... ..... ..... ..... ..... 2.5 ..... ..... -.2 ..... -.2 .....  5.6 ..... 13.4 ..... -2.2 .....  ..... ..... ..... .....  -.2 .4  -.2 ..... ..... ..... ..... 13 .4 ..... 14 •  .3 12.6 2.0 ..... 15.5 16.0 .4 ..... 3.4 3.9 .3 11.0 2.0 ..... H.9 15.0 .1 ..... .3 ..... -.5 ..... -1.0 ..... ..... -1.8 -t.5 -.1 ... .. 2.6 ..... ..... 2.5 2.5 ..... .....  .1 79.1 ..... ..... ..... ..... ..... 60.9 .1 60.9 ..... ..... ..... ..... ..... 60.9 • 28.1 ..... ..... ..... ..... .....  ..... ..... ..... .....  ..... ..... ..... .....  16 16 11 18  .1 28.1 79.1 79.1 ..... ..... ..... ..... 19 .1 ..... 60.9 60.9 ..... ..... ..... ..... 20 • 28.1 28.1 28.1 ..... ..... ..... ..... 21  .1 ..... 7.2 ..... ..... ..... ..... ..... ..... .... . 7.2 7.3 7.3 ..... ..... ..... ..... 22 2.1 ..... 22.3 ..... ..... ..... ..... ..... ..... ..... 22.3 24.4 24.4 ..... ..... ..... ..... 23 7.9 7.9 ..... ..... -1.6 3.5 9.5 4.4..... ..... 7.9 7.9 ..... ..... ..... ..... 24  -.2 ..... ..... 13.4  .4 12.3 39.3 162.7 .7 7.7 .2 ..... 18.8 ..... .3 ..... .2 11.9 4.4 13.7 ..... ..... .1 1.0 ..... ..... 1.1 9.2 •..... -.9 43.3 ..... ..... ..... ..... 1.4 29.8 ..... ..... ..... ..... 3.3 22.9 ..... ..... ..... ..... 36.8 ..... 2.8 ..... .3 11.3 7.9 .3 3.9  -.2 ..... ..... ..... ..... ..... .4 ..... ..... ... ..  3.0 9.7 188.3 • 9.8. 10.3 ..... ..... 9.3 ..... ..... 11.3 -1.2 -.1 43.9 .6 ..... 28.1 ..... ..... 19.7 ..... ..... 52.1 3.6 ..... 13.7  .8 ..... ..... ..... ..... 51.2 19.6 ..... 2.3 -1.5 .3 ..... 13.5 17.0  20.3 19.6 9.2 ..... 1.3 19.6 9.3 ..... ..... ..... ..... ..... ..... ..... ..... ..... 6.4 ..... ..... ..... 4.0 ..... ..... ..... ..... ..... ..... ..... ..... ..... ..... ..... 8.6 ..... •  .1  1.2 13.4  -.4  8.0  8.0 ..... ..... ..... ..... 26  86.6 10.6 72.2 21.0 231.3 231.3 ..... ..... ..... -1.3 ..... .9 ..... 29.4 29.4 ..... ..... ..... 5.7 ..... 3.6 ..... 13.7 13.7 ..... ..... ..... .5 • 10.9 2.3 12.5 12.5 ..... ..... ..... 11.0 ..... 26.5 -1.6 41. 7 41.7 ..... ..... . .... 8.8 ..... 16.4 .3 30.2 30.2 ..... ..... ..... 10.6 ..... 9.0 ..... 22.9 22.9 ..... ..... ..... 62.1 5.1 ..... 8.4 52.1 52.1 ..... ..... ..... -.8 5.5 6.9 11.6 28.8 28.8 ..... ..... .....  ..... ..... ..... ..... ..... ..... ..... ..... .....  26 27 28 29 30 31 32 33 34  2.2 ..... ..... . 3 ..... ..... .1 ..... .1 ..... .1 2.8 2.7 -.1 ..... ..... ..... 38 .3 .1 .7 ..... ..... ..... ..... ..... ..... ..... .7 ..... 26.0 23.7 -2.3 ..... ..... ..... 3 9  -.5 ..... -3.3 .....  -1.6 ..... -1.7 .....  7.4 .....  7.4 .....  7.2 ..... �2  FINANCIAL ASSETS AND LIAB�, DECEMBER 31, 1973 (Amounts outstanding in billions of dollan) (A) Allteeton  Financial aecton  Private domestic nonfinancial eecton Sector Houaeholda Transaction category  A  L  Buainea  A  L  State an d local govemmenta  A  L  Rfllt of the world  Total  A  L  A  U.S. Government  A  L  L  . .  Total  A  L  Federally spoDIOred credii acenciee  Monetary authority  A  A  .  L  L  Commercial banks  A  L  Private nonbank finance A  L  Total1  A  L  . .  .  1 Total aaetl .............. zan.1 ...... HS.I ...... 18.5 ...... ztZS.8 ...... nt.8 ...... 1n.1 ...... ZMl.8 ...... 71.1 ...... IN.I ...... 751.2 ...... un., ...... lfH.2 ...... 2 Totalliabilitie1 .................. Ml.I ...... IZl.l ...... M.f ...... 1788.1 ...... lH.2 ...... "8.1 ...... lffl.5...... 77.5...... lN.7 ...... 7H.5...... 1128.8...... 4.117.1 3 4 S 6  f7.3 ......  Gold ...............••.•....... Official foreian cxchaqe. •....... IMF position.••.••... •......... Treasury currency.••.••.........  2.3 ......  ...... ...... .6 .6 ...... · · · · · · · · · · ·. ...... ...... 7.f  11.6 ...... ...... 9.1 ...... ......  .4 ...... 701.6 ...... 12.8 ...... 363.7 ...... 12.8 ...... .4 ...... 347.8 ...... ...... ...... ......  14 Life insurance reserves..... 160.3 ...... ...... 15 Pension fund reserves...... 307.8 ...... ...... 16 Interbank claims . •. •........... ...... ......  160.3 ...... ...... 370.8 ...... ......  17 Corporate shares 2 • • ••.. • • (7ff.4 ...... ......  7ff.4 ......  7.6 ......  24.8 ...... ...... ......  18 Othercredit mkt. instr.• •.• 266.4 634.8 74.6 679.2 36.7 193.5 366.5 1607.5 61.5 68.5 66.2 3M.4 19 U.S.Govt.securities3 ... 105.3 ...... 6.4 ...... 31.0 ...... 141.7 ...... M.8 ...... • 363.1 20 State&localgovt.oblig.. 60.6 ...... 4.0 2.4 2.6 187.6 67.1 190.0...... ...... ...... ...... 21 Corp.&fgn. bonds..... 66.8 ...... ...... 207.6...... ...... 66.8 207.6 2.3 16.6 ...... ...... 22 Home mortgages........ 10.1 379.0...... 6.3 2.2 ...... 12.3 38'.4...... ...... 3.9 1.3 23 Other mortgages........ 28.0 24.6...... 223.4...... 28.0 2'7.9 ...... ...... 4.8 ...... 24 31.9 180.6...... ...... ...... ...... Consumer credit.............. 180.6 31.9 ...... ...... 25 Bank loans n.e.c.............. 24.7...... 180.6...... ... ...... 206.2...... 13.0...... ...... 26 Other loans............ 6.7 26.1 33.1 60.1 ...... s:li 38.8 92.0 4.4 38.9 66.5 ...... 27 28  29  Security credit.. .......... 4. 8 13.1 ...... 4. 8 ...... ...... To brokers and dealers • • To others.................... 13.1 ......  4.8 13.1 .3 · .2 ...... 4.8 ...... .3 ...... ...... ...... ...... ...... 13.1 ...... .2 ...... ......  30 Taxes payable .................. ...... ...... 16.6 3.7 ...... 3.7 16.6 ...... 31 Trade credit •.................. 6.8 2'0.9 212.6 ...... 8.9 2'0.9 228.3 8.3 9.0 32 Miscellaneous............ 32.8 6.4 136.8 17.7 ...... ...... 168.6 2'.l 36.1 116.8 For notes see facing pqe.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  198. 7  1.2 348.2 716.9 716.9 .8 ...... 367.7 367.7 .4 348.2 348.2 348.2  11 12 13  142.7 160.3 160.3 272.4 307.8 307.8 57.1 67.1  14 16 16  i�:1 :::::: ...... ···4;. "ai:S "sis "ili:4 ::::::  16.4 16.4 .1  7 8 9 10  46.6  17  663.6 23.8 836.4 116.4 88.8 ...... 62.4 ...... 96.7 ...... 37.3 ...... 4.1 Ul8.7 36.8 6.2 4.7 68.0 ...... 274.6 61.1 ...... 160.0 1.6 81.2 ...... 67.4 ...... 255.9 8.0...... 29.6 6.7 11.7 66.0 44.8  2139.6 422.1 190.0 26'.0 390.3 2'9.3 180.6 255.9 187.4  2139.6 422.1 190.0 26'.0 390.3 2'9.3 180.6 255.9 187.4  18 19 20 21 22 23 2' 26 26  16.0 16.0  29.3 16.0 13.4  29.3 16.0 13.4  27 28 29  .7 ......  46.6 ..... .  198.0  16.1 ...... 9.1 10.8 ...... ...... 4.3 ...... 9.1  46.6 968.0  U J l� ·i65:S ...is ...s:a :::::: ...ii ..ai2 .. sli:S aU . . 84:i ��:g �J 3.0...... ...... ......  3 4 6 6  367.7 367.7  1M6.3 209.1 76.9 68.9 80.6 ...... 226.6 68.9 4.0 68.9 80.6 ...... 132.9 ...... ...... ...... ...... 20f.9 39.9...... ...... ...... 374.1 4. 7 31.6 ...... ...... 1.6 16.4 ...... ...... 216.6 148.6 ...... ...... ...... ...... 255.9 37.6...... ...... ...... 87.7 56.5 2'.9 ...... .1  11.9 ...... ...... 3  ·:...:u  1 2  18.2 . . . . . . 283.0 298.6 18.2 . . . . . . 269.8 276.1 . . . . . . . . . . . . 12.6 12.7 . . . . . . . . . . . . 10.6 10.6  142.7 ...... ...... ...... ...... ...... ...... ...... 2  24.2 16.0...... 10.8 16.0...... 13.4 ...... ......  .6 7.4  26.2  1.0 233.6 66.0 1.0 213.3 61.8 9.9 2.9 . . . . . . 10.3 .3......  1.2 716.9 ...... .8 367.7 ...... .4 348.2 ......  au "57j  .6 9.1  9.1 ...... ......  .3 ...... ...... 19.4 298.6 14.7 ...... 240.3 ...... 10.6 ...... 12.6 ...... 7 Demand dep. and currency 170.2 ...... 55.4 ...... 8 .3 ...... ...... 19.4 276.1 Private domestic ....•... 170.2 ...... 55.4 ...... 14.7 ...... 240.3 ...... ...... ...... ...... ...... 9 12.7 ...... ...... ...... U.S.Government............. ...... ...... ...... ...... ...... ...... ...... ...... ...... 12.6 ...... ...... 10 Foreign...................... ... ... ...... ...... ...... ...... ...... ...... 10.6 ...... ...... ...... ...... 10.6 ...... ...... ...... 11 Time and savings accounts 636.6 ...... 21.6 ...... tt.4 ...... 12 At commercial banks. .•. 287. 8 ...... 21.6 ...... ff.4 ...... 13 At savings institutions... 347.8 ...... ...... ...... ......  61.1......  11.6 ...... ......  A  .3......  .8 ......  1.8  16.6  18.6  2.9 -19.1 28.6  30 31 32  FINANCIAL ASSETS AND LIABILITIES, December 31, 1973-Continued (Amounts outstanding in billions of dollars) (B) Private nonbank financial institution  Sector Transaction category 1 2  L  A  Demand deposits and currency 4 Time and savings accounts .... At commercial banks ....... 5 At savings institutions ...... 6  18.2 1.2 348.2 .8 .4 348.2  9 Corporate shares2 ........... 198.0 10 Other credit mkt. instr ........ 11 U.S. Govt. securities3 .... 12 State & local govt. secs... 13 Corp. and fgn. bonds ..... 14 Home mortgages ..•...... 15 Other mortgages ......... 16 Consumer credit......... 17 Bank loans n.e.c......... Other loans ............. 18 21  22  23  24  L  A  Security credit ............... To brokers and dealers ..... Other . . . ................. Taxes payable ............... Trade credit ................. Miscellaneous ...............  3.4  227.3 227.3.  A  L  L  24.1 99.0 ...  1.2 .... .8 96.3 .8 96.3  24.6  1.0 .4  24.6 .  .4  24.6.  A  9.1 6.5 32. 7  22.0 4.7 2.1 15.1  23.2 2.6  98.2 7.1 .9 13.1 44.2 ... 29.0 1.7 ...  1.0 19.6  204.6 4.4 3.4 92.5 22.0 59.2  5.8  81.1  133.3  cos.  cos.  L  A 18.8  41.1  1.5  2.6.  L  A 88.4  Real estate investment trusts  Open-end inves�ent COB,  A  A  841.4 ..  L  17.0  14.4.  3.5  12.0  18.6  19.6  36.8 4.3  62.1 4.6 1.4 49.4  41.1 3.4 30.4 7.2  6.7  .2  4.9  41.5  41.5  1.2  A  L  18.4 1.1  11.1 3 4 5 6 7 8  38.3 84.9 12.5 43.4 29.0  30.5  L  Security brokers and dealers  81.6.  89.2 ..  . 8 .... 2.5  81.1  Finance  80.1 33.9  15.1 4.1 11.0  20.5 25.7.  14.4 1.9  46.5  7.0 1.2 4.2 ...  2.4 5.8 2.0  I.I  2.6  1.5 ...... 7.0 ..... 4.0 1.6  10 11  12 13 14 15 16 17 18  9.1  16.0 19 16.0 20 9.1 ...... 21  ...... .....  .2 11.5  L  1.0  · 29.8 2.7  ...... ···•·  1.8  A  Other insurance  23.2 ..  2.1  16.0 . 16.0  133.3  2.3  2.1  1 Excess of total assets over liabilities consists of gold (row 3) and corporate shares (row 17) other than investment co. shares less total discrepancies (row 1), which are not included in sector assets. 2 Assets shown at market value; nonbank finance liability is redemption value of shares of open­ end investment companies. No specific liability is attributed to issuers of stocks other than open­ end investment companies for amounts outstanding. 3 Includes savings bonds, other nonmarketable debt held by the public, issues by agencies in the   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  133.3  %31.5  25.9 ..  4.0  46.5 . .  84.7  L  142.7 ... 57.5 .....  836.4 116.4 257.5 22.8 52.4 37.3 198.7 35.8 4.7 188.1 274.6 1.5 44.1 150.0 2.6 67.4 .. 29.6 56.0 44.8. 9.1  A  L  244.1  State and local govt. retirement funds  Private pension funds  cos.  142.7 272.4  1. Life insurance reserves ........ 8 Pension fund reserves ......... ...  20  A  Life insurance  Credit unions  banks  1K.I 272.4 Total assets .. ............... 1102.0 1'28.8 255.3 Total liabilities............... ..  3  19  Mutual savings  Savings and loan assns.  Total  6.5  .3 45.8  .4 1.9  ·r  .2 22 23  ...... 24  budget (CCC, Export-Import Bank, GNMA, TVA, FHA) and by sponsored credit agencies in financial sectors, and loan participation certificates. Postal savings system deposits are included in line 32. 4 Business asset is corporate only. Noncorporate trade credit is deducted in liability total to con­ form to quarterly flow tables.  AUGUST 1974 CREDIT MARKET SUMMARY  CREDIT MARKET SUIIMARY TOTAL FUNDS RAISED IN CREDIT MARKETS BY NONFINANCUL SECTORS  ANNUAL FLOIIS, 1959 + 1965-73  ANNUAL FLOIIS, 1959 + 1965-73  II  1959 11  19�5  1966  1967  1968  1969  1970  1971  1972  1973  I. FUNDS RAISED, IIY TYPE At-0 SECTOR TOlAL FUNDS RAISED IIY NOHFINANCIAL SECTORS EXCLUDING EQUITIES  52.1125 50.552  69.892 69.622  67.900 66.894  82.433 79.986  95.944 95.948  91.829 87.956  98.233 92.471  147.402 135.940  169.394 1511.1184  187 .365 180.145  7.089 7.42? -334  1.768 1.301 467  3.633 2.340 1.293  13.005 8.913 4.092  13.398 10.::a9 3.079  -3.646 -1.277 -2.369  12.802 12.886 -84  25.500 26.023 -523  17.317 13.919 3.398  9.714 7.739 1.975  3 4 5  45. 736 2.273 43.463  68.124 270 67.854  64.267 1.006 63.261  69.428 2.447 66.981  82.546 -4 82 .550  95.475 3.873 91.602  85.431 5. 762 79.669  121.902 11.462 110.440  152.077 10.510 141.567  177.651 7.220 170.431  6 7 8  12 13 14 15 16  DEBT CAPITAL INSTRUMENTS s. + L. GOVERNMENT SECS. CORPORATE + FOREIGN BOHO� MORTGAGES HOME MORTGAGES OTHER RESIDENTIAL COMMERCIAL FARM  28.312 6.280 3.428 18 .604 12.720 1�820 3.072 992  38.845 7.34, 5.852 25.648 15.382 3.618 4.415 2.233  38.901 5.647 10.959 22-295 11.698 3.124 5.691 1.782  45.6119 7.769 15.874 22.046 11.491 3.603 4.676 2.276  50.592 9.516 13.977 27.099 15.055 3.371 �.431 2.242  50.609 9.924 13.003 27.682 15.656 4.739 5.345 1.942  57.605 11.246 20.630 25. 729 12.805 5.823 5.326 1.775  84.162 170561 19.747 46.854 26.091 8.n2 9.980 2.011  94.851 14.379 13.213 67.259 39.630 10.268 14.781 2.580  97.050 13.709 10.150 73.191 43.344 8.417 17.047 4.383  9 10 11 12 13 14 15 16  17 18 19 20 21  OTHER PRIVATE CREDIT BANK LOANS N.E.C. CONSUMER CREDIT OPEN-MARKET PAPER OTHER  15.151 6.438 6.415 -386 2.684  29.009 14.070 9.615 -321 5.645  24.360 10.746 6.355 1.036 6.223  21.292 9.500 4.545 2.126 5.121  31.958 13.127 9.987 1.621 7.223  40.993 15.266 10.376 3.334 lZ.017  22.064 6.355 6.017 3.765 5.927  26.278 9.313 11.231 -894 6.628  46.716 21.777 19.170 -1.565 7.334  73.381 38.626 22.922 1.818 10.015  19 20 21  22 23 24 25 26 27 28 29 30  BY BORROIIJNG SECTORt DEBT INSTRUMENTS FOREIGN S. + L. GOVERNMENTS HOUSEHOU>S NOMFINANCJAL BUSINESS FARM HONFARM NONCIIRPORATE CORPORATE  45.736 43.463 63.9 6.465 21.524 14.1135 1.932 2.367 10.536  68.124 67.854 2.416 7.6511 28.319 29.461 3.290 5.749 20.422  64.267 63.261 1.772 6.274 22.672 32.543 3.110 5.416 24.017  69.428 66.981 3.978 7.944 19.319 35. 741 3.622 4.957 27.162  82.546 82.550 2.674 9.826 29.954 40.096 2.1132 5.559 31.705  95.475 91.602 3.215 10.670 31.717 46.DOO 3.176 7.359 35.465  85.431 79.669 2.671 11.323 2�.374 42.301 3.249 5.273 33. 779  121.902 110.440 4.617 17.840 39.827 411.156 4.098 8.700 35.358  152.077 141 .567 4.6911 14.176 63.125 59.5611 4.1157 10.3511 44.353  177.651 170.431 7.7211 12.258 72.815 77.630 11.617 9.282 59.731  22 23 24 25 26 27 211 29 30  2.273 195 2.078  270 2911 -28  1.006 -253 1.259  2.447 50 2.397  -4 155 -159  3.873 467 3.-.06  5.·,62 5.694  611  11.462 27 11.435  10.510 -412 10.922  1.220 -zoo 7.420  31 32 33  1134 16.-913 12.614  2.714 29.4!13 20.394  1.519 33.1102 25.276  4.0211 311.138 29.559  2.829 39.937 31.546  3.682 49.406 311.871  2.739 47.995 39.473  4.644 59.591 46.793  4.286 70.490 55.275  7.5211 115.050 67.151  34 35 36  -1.011 612 37 MEMOt U.S. GOVT. CASH BALANCE TOTALS NET OF CHANGES IN U.S • GOVT. CASH BALANCES70.903 52.213 38 TOTAL FUNDS RAISED BY U.S. GO\IE101MENT 39 6.477 2,779  -399  1.164  -1.135  401  2.754  3.194  -323  -l.675  37  611.299 4.032  111.269 11.041  97.079 14·.533  91.4211 -4.D4r  95.479 10.048  144.208 22.306  169.717 17.640  189.040 11,3119  39  3 U.S. GOVERNMENT PUBLIC DEBT SECURITIES 4 AGENCY ISSUES + MORTGAGES 5 b All OTHER NONFINANCIAL SECTORS CORPORATE EQUITIES 7 8 DEBT INSTRUMENTS 9 10  11  31 32 33 34 35 36  CORl'ORATE EQUITIES FOkEIGH CORPORATE BUSINESS TOTALS INCLUDING EQUITIES FOREIGN NONFINANCIAL BUSINESS CORPORATE  17 111  H  PRIVATE DOMESTIC NET INVESTMENT AND 8011ROIIING IN tr.EDIT MARKETS  1 2 3 4  5  6 7 II 9 10 11  12  13 14 15 16 17  111  19 20 21 22 23 24 25 26  TOTAL, HOUSEHOLDS + BUSINESS TOTAL CAPITAL OUTLAYS Ill CAPITAL CONSUMPTION 121 �T PHYSICAL INVESTMENT NET FUNDS RAISED EXCESS Nl!T Il!YESTMENT 131 TOTAL BUSINESS TOTAL CAPITAL OUTLAYS CAPITAL CONSUMPTION NET PHYSICAL INYE$TMENT NET DEIT FUNDS RAISED CORPORATE EQUITY ISSUES EX&ESS NET INVESTMENT 131 CORPORATE BUSINESS TOTAL CAPITAL OUTLAYS CAPITAL CONSUMPTION NET PHYSICAL INVESTMENT NET OUT FUNDS RAISED CORPORATE EQUITY ISSUES EXCESS NET INVESTMENT 131 HOUSEHOLDS TOTAL CAPITAL OUTLAYS CAPITAL CONSUMPTION NET PkYSICAL INVESTMENT NET FUNDS ltAJSED EXCESS NET INVESTMENT 131 OF IIHICHI HOUSES LESS HOME MORTGAGES DURABLES LESS CONS. CREOIT NONPROFIT P+E LESS MORTGAGES LESSt UNALLOCATED DE�T  173.126 110.303 62.1123  190.6311 1111.4611 72.170  1118.062 128.362 59.'700  207.5118 14D.388 67.200  226.715 154.304 72.411  224.220 166.017 58.203  253.525 1711.945 l4.58o  293.035 194.3111 98.717  334.657 21D.976 123.681  2 3  38.437 496  !17,752  ,.on  56.lt74 15.696  57.456 2.244  69.891 -2.691  81.123 -11.712  n.369 -13.166  99.418 -24.1138  133.615 -34.1191  157.865 -34.1114  4 5  50.313 35.151t 15.159  n.576 !!O.lt!IO 33.126  96.441 54.162 42.279  93.427 511.452 34.975  97.930 63.231 34.699  108.1176 69.470 39.41)6  1011.0lt2 74.579 33.463  117.127 80.323 36.804  134.264 1111.231 46.033  160.525 95.235 65.290  6 7 II  14.1135 2.078 -l.754  29.461 3.693  -ze  32.543 1.259 11.477  35.741 2.397 -3.163  40.096 -159 -5.2311  "6.000 3.406 -10.000  42.301 5.694 -14.532  411.156 11.435 -22.7117  59.5611 10.922 -24.457  77.630 7.420 -19.760  9 10 11  36.667 22.uo 13.797  62.2112 35.226 27.056  76.519 38.202 38.317  71.377 41.463 29.914  75.006 45.104 29.902  113.670 49. 790 33.1110  84.049 53.629 30.420  117.162 57.650 29.512  102.473 63.0211 39.445  121.509 67.464 54.045  12 13 14  10.536 2.078 1.183  20.422 -211 6.662  24.017 1.259 13.041  27,162 2.397 355  31. 705 -159 -1.644  35.465 3.406 -4,991  33.779 5.694 -9.053  35.358 11.435 -17.2111  44,353 10.922 -15.1130  59,731 7.420 -13.106  15 16 17  68.269 44.495 23.774  119.550 59.853 29.697  94.197 �4.306 29.1191  94.635 69.910 24.725  109.658 77.157 32.501  117.839 84.1134 33.005  116.178• 91.4311 24.740  136.3911 98.622 37.776  1511.771 106.0117 52.6114  174.132 115.741 58.391  111 19 20  21.524 2.2,0  28.319 1.378  22.672 7.219  19.318 5.407  29.954 2.547  31.717 1.2111  23.374 1.366  39.827 -2.051  63.125 -10.441  72,115 -14.424  21 22  3.913 -915 987 1. 735  -3.278 5.176 1.777 2.297  -1.133 8.796 1,964 2.408  -l.214 7.8119 1.940 3.208  -1.1136 6.672 1.919 4.207  -2.796 5.8S5 2.222 3.993  -1.851 4.537 2.196 3.516  -6.567 5.222 2.504 3.210  -14,149 5.1113 2.635 4.110  -17.029 4.136 2,746 4,277  23 24 25 26  111 CAPITAL OUTLAYS ARE TOTALS FOR RESIDENTIAL AND NONRESIDENTIAL FIXED CAPITAL, NET CHANGE IN INVENTORIES, ANO CON�UMER OURAISLES• EXCEPT OUTLAYS BY FINANCIAL IIUSINESS. 121 CAPITAL CONSUMPTION INCLUDES Al'IOUNTS FOR CONSUMER DURABLES ANO EXCLUDES FINANCIAL BUSINESS CAPlTAL COHSUMPTION. , �31 EXCESS OF NET INVESTMENT OYER NET FUNDS RAISED. MONEY AMOUNTS ARE IN MILLIONS O F DOLLARS.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  l  1111.5112 79.649 38.933  S.4  AUGUST 1974 CREDIT MARKET SCPPl Y OF FUNDS  CREDIT MARKET SUPPLY OF FUNDS DIRECT AND INDIRECT SOURCES OF FUNDS TO CREDIT MARKETS  ANNUAL FLOWS, 1959 + 1965-73 1959  II  II  50.5�2  1965  69.622  ANNUAL FLONS, 1959 + 1965-73  1966  66.894  1967  79.986  1968  95.948  1969  87.956  2 3 4 5 6  7.192 3.418 1.8,5 836 1.043  8.8e9 3.707 393 672 4.117  1�.•942 3.394 2.776 938 4.834  11.25e 6.809 2.063 -2.549 4.935  12.192 3.381 2.811 873 5.127  15.686 697 4.632 4.030 6.327  7 9 10  1.778 2.224 315 2.875  2.773 2.231 3.828 57  4.911 5.117 3.479 -1.565  4.552 -93 4.801 1.998  4.937 3.241 3.719 295  11  2.274  2.114  4.825  -621  3.476  8  1971  1970  92.471  135.940  �  1972  1973  TOTAL FUNDS ADVANCED IN CREDIT MARKETS TO NONFINANCUL SECTORS 158 .884 180.145 BY PUBLIC AGENCIES + FOREIGN  28.114 15.876 5.725 1.326 5.187  41.684 33.822 5.656 -2.679 4.885  18.326 8.410 5.228 43 4.645  33.202 10.952 7.607 7.168 7.475  2.876 8.870 4.223 -283  2.833 10.030 4.981 10·.210  3.236 3.167 8.866 26.415  2.622 7.030 271 8.403  2.982 20.255 9.227 738  8.783  8.234  3.844  6.182  19.589  TOTAL NET ADVANCES U.S. GOVERNMENT SECURITIES RESIDENTIAL MORTGAGES FHLB ADVANCES TO S+L'S OTHER LOANS + SECURITIES BY AGENCYI U.S. GOVERNMENT SPONSORED CREDIT AGENC JES MONETARY AUTHORITIES FOREIGN AGENCY BORRONING NOT INCLUDED IN LINE 1  2 3  4 5 6  7 8 9 10 11  PRIVATE DOMESTIC FUNDS ADVANCED 12 13 14 15 16 17 18  45.634 5.5-51 6.280 3 ....84 12.960 18.195 836  62.847 -49 7.345 5.999 18.626 31.598 672  59.777 5.359 5.647 10.339 11.984 27.386 938  68.107 5.705 7.769 16.002 12.968 23.114 -2.549  87.232 13.312 9.516 13.790 15.549 35.938 873  81.053 4.804 9.92,. 12 ....67 15.682 42.206 4.030  72.591 5.235 11.246 19.959 12.828 2....649 1.326  74.871 35.068 16.878 17.267 5.6�8  TOTAL NET ADVANCES GOVERNMENT SECURITIES STATE + LOCAL OBLIGATIONS CORPORATE + FOREIGN BONDS RESIDENTIAL MORTGAGES OTHER MORTGAGES + LOANS LESS• FHLB ADVANCES  12 13 1" 15 16 17 18  146.740 15.175 14.379 13.150 44.584 59.4'15 43  166.532 18.422 13.709 10.053 44.083 87.433 7.168  110.61>1 50.592 41....17 13.332 5.320  153.359 70.543 49.264 17.722 15.830  158.843 86.600 35.081 22.132 15.030  CREDIT MARKET FI.JttOS ADVANCED BY PRIVATE FINANCIAL INSTS. COMMERCIAL BANKING SAYINGS INSTITUTIONS INSURANCE + PENSION FUNDS OTHER FINANCE  19 20 21 22 23  SOURCES OF FUNDS PRIVATE DOMESTIC DEPOSITS CREDIT MARKET BORRONING  24 25 26  98.100 -4.406 17.561 19.475 29.135 33.656 -2.679  u.s.  PRIVATE FINANCIAL IIITERHEOUTIDN  19 20 21 22 23  29.210 4.812 10.714 9.952 3.732  62.879 28.711 14.336 13.600 6.232  45.362 17.465 7.940 15.496 4.461  63.465 35.869 15.C40 12.863 -307  75.326 38.741 15.603 14.032 6.950  55.344 18.247 14.459 12.708 9.930  24 25 26  29.210 10.969 3.837  62.879 38 .351 7.920  45.362 22.450 3.162  63.465 49.968 -394  75.326 45.914 8.451  55.344 2.561 18.769  74.871 63.164 -278  110.661 90.348 9.344  153.359 97.531 20.330  158 .843 84.875 31.598  27 28 29 30 31  14.404 -660 800 8.864 5.400  16.608 787 -985 11.410 5.396  19.750 3.655 -533 13.638 2.990  13.891 2.211 242 U.989 -611  20.961 2.603 -224 11.393 7.189  34.014 9.333 44 10.792 13.8 ...5  11.985 -8.455 2.884 13.126 4.430  10.969 -3.238 2.2J1 9.077 2.899  35.498 5.192 10., 13.071 16.529  42.370 6.466 -1.010 16.7,.2 20.172  32 33 34 35 36  37  20.261 13.122 3.986 258 -202 3.097  7.888 2.884 2.613 984 1.529 -122  17.577 8.351 2.596 1.982 2.327 2.321  4.248 -1 .404 -2.534 4.599 1.903 1.684  20.357 8.058 -233 4.651 5.796 ?..085  44.478 11.012 8.694 6.616 10.161 1.995  -2 .558 -9.028 -1.218 10.680 -4.407 1.415  -3.217 -13.956 586 9.318 -633 1.4!>8  13.711 1.606 2.13b 5.i85 3.974 810  39.287 18.753 4.433 1.05? 11.219 3.763  DIRECT LENDING IN CR. MARKETS U.S. GOVERNMENT SECURITIES STA"!"E + LOCAL OBLIGATIONS CORPORATE + FOREIGN 80NOS COMMERCIAL PAPER OTHER  32 33 34 3536 :H  38 39 40 41 "2  11.604 10.515 0 2.030 8.485  40.469 32.718 3.568 15.984 13.166  24....28 20.342 -229 13.278 7.293  52.080 39.32,. 4.305 18.290 16.729  48.346 33.855 3.516 17.45" 12.885  5.409 -2.285 -13.672 3.356 8.031  66.645 56.102 15.018 24.155 16 .929  93.740 81.1)09 7.66'• 32.934 40.411  101.9,.3 85.247 8.710 30.63,. ...5.903  88.816 76.251 18.548 29.541 28.162  OEPOS ITS + CURRENCY TIME + SAYINGS ACCOUNTS LARGE NEGOTIABLE co• s OTHER AT COMMERCIAL BANKS AT SAYINGS INSTITUTIONS  38 39 40 41 42  43 44 45  1.089 454 635  7. 751 5.633 2.118  4.086 2.108 1.978  12.756 10.644 2.112  14.491 12.059 2.432  7.694 4.8 ...6 2.8 ...8  10.543 7.062 3.481  12. 731 9.339 3.392  16.696 12.284 ....412  12.565 8.624 3.941  ,.6  31.865  48 .357  42.005  56.328  68.703  49.887  64.087  90.523  115.654  12S.103  47 48 49  14.226 64.009 2.215  12.767 100.050 844  17.852 75.885 2.090  14.074 93.184 4.269  12.706 86.351 2.898  17.833 68.281 9.05-0  30.403 103.!40 1.815  30.663 112.804 23.177  11.534 104.510 13.595  18.430 95.382 7.204  PUBLIC SUPPORT RATE Iii 47 PVT. FINAN. INTERMEDIATION Ill 48 TOTAL FOREIGN FUNDS 49  OTHER SOURCES FOREIGN FUNDS TREASURY BALANCES INSURANCE + PENSION RES. OTHER, NET  -------  27 28 29 30 31  PRIVATE DOMESTIC NONFlNANCUL INYEST!1RS  HONEY DEMAND DEPOSITS CURRENCY  TOTAL OF CREDIT MARKET INSTRUMENTS, DEPOSITS + CURRENCY  43 44 45 46  CORPORATE EQUITIES NOT INCLUDED ABOVE  4 5  4.305 1.765 2.540  3.514 3.221 293  4.753 3.677 1.076  5 ....77 2.957 2.520  6.403 5.798 605  9.988 4.787 5.201  10.356 2.629 7.727  14.768 1.145 13.623  12.936 -696 13.632  8.032 -1.586 9.618  TOTAL NET ISSUES MUTUAL FUND SHARES OTHER EQUITIES  3.354 951  6.014 -2.560  5.994 -1.241  9.090 -3.613  10.808 -4.405  12. 219 -2.231  11.388 -1.032  19.266 -4.498  16.034 -3.098  13.446 -5.414  ACQ. BY FINANCIAL INSTITUTIONS OTHER NET PURCHASES  MONEY AMOUNTS ARE IN MILLIONS OF DOLLARS.  S.5   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  l  2 3 4  5  AUGUST 1974 CREDIT MARKET DEBT  CREDIT MARKET DEBT CREDIT MARKET DEBT OWED BY NCINFINANCUL SECTORS YEAR-END DUTSTANDINGS, 1959 + 1965-73  YEAR-END OUTSTANDING$, 1959 + 1965-73  II 1959 II  1965  1966  1967  1968  1969  1970  1971  1972  1973  TOTAL CREDIT MARKET DEBT OUTSTANDING 708.801 1037.588 1102.800 1181.622 1276.882 1363.881 1456.650 1592.269 1751.444 1930.415 DIIED BY NONFINANCUL SECTORS 2 U.S. GOVERNMENT PUBLIC DEBT SECURITIES 3 AGENCY ISSUES + MORTGAGES 4 5 ALL OTHER NONFINANCIAL SECTORS DEBT CAPITAL INSTRUMENTS 6 s. + L. GOVERNMENT ·secs. 7 CORPORATE + FOREIGN BONDS 8 MORTGAGES 9 HOME MORTGAGES 10 OTHER RESIDENTIAL 11 COMMERCIAL 12 FARM 13 14 15 16  OTHER PRIVATE CREDIT BANK LOANS N.e.c. CONSUMER CREOIT  19 20 21 22 23 24 25 26  BY BORRDIIING SECTOR I FOREIGN STATE + LOCAL GOVERNMENTS HOUSEHOLDS NONFINANCIAL BUS INESS  17 18  OPEN-MARKET PAPER  OTHER  FARM  NONFARM NONCORPORATE CORPORATE  237.981 236.185 1.796  262.178 257.663 4.515  470.820 330.874 65.486 76.710 188.678 128.714 18.668 29.195 12.101  775.410 529.952 100.278 107.965 321. 709 208.894 37.183  139.946 53.387 51.544 1.466 33.549  245.458  470.820 21.075 66.521 198.360 184.864 18.934 23.486 142.444  775.410 38.872 103.055 333.213 300.270 32.299 46.195 221. 776  54.457  21. 175  265.811 260.003  278.816 268.916 9.900  292.214 279.235 12.979  836.989  902.806 613.432 113. 703 133.461 366.268 232.083 43.910 64.824 25.451  984.668 1075.313 1155.280 1264.899 1406.757 1576.014 663.689 713.286 771.459 855.475 950.512 1046.348 123.219 133.143 144.389 161.950 176.329 190.038 147.277 159.268 180.466 200. 767 214.166 224.092 393.193 420.875 446.604 492.758 560.017 632 .218 247.138 262.794 275.599 301.379 341.009 384.353 57.843 66.616 85.300 47.280 76.883 52.019 76.601 81.926 91.905 71.256 106.687 123. 734 31.236 38.83.l 27.519 29.461 35.438 32.858  289.374 114.078 100.783 7.351 67.162  320.979 127.205 110.770 8.972 74.032  902.806 42.849 117 .282 374.003 368.672 39.249 56.521 272.902  984.668 1075.313 1155.280 1264.899 1406.757 1576.014 45.309 50.585 55.758 47.500 61.004 68.548  5.808  568.856 105.925 118.567 344.364 220.592 40.307 60.148 23.317  93.834  268.133 104.579  57.552  5.225 62.091  89.883 4.189  96.238  836.989  39.900 109.329 354.686 333.074 35.769 51.565 245.740  MONEY AMOUNTS ARE IN MILLIONS OF DOLLARS.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  S.6  127 .212 404.293 407.854 41.907 62.079 303.868  288.568  277.958 10.610  362.027 142.538 121.146 12.306 86.037  137.882 435.900 454.031 45.083 69.460 339.488  301.370 290.844  10.526  383.821  148.785  127.163 16.071 91.802  149.205 459.274 496.216 48. 332 74.722 373.162  327.370 316.867 10.503  409.424 158.099 138.394 15.177 97.754  167.045 498.793 543.303 52.041 83.424 407.838  344.687 330.786 13.901  456.245 179.619 157.564 13.612 105.450  181.221 562.018 602.514 56.898  93.779  451.837  354.401 338 .525 15.876  529.666 218.245  180.486 15.430  115.505  193.479 634.833 679.154 64.525 103.064 511.565  2 3  4 5 6  7  8 9 10  11 12 13 14  15 16 17  18  19  20 21 22 23 24 25 26  AUGUST 1974 CREDIT MARKET SUPPLY OF FUNOS YEAR-END OUTSTANDINGS, 1959 + 1965-73 1959  II II  1965  1966  CREOIT MARKET SUPPLY OF FUl'()S  DIRECT AND INDIRECT SOURCES OF FUNDS TO CREDIT MARKETS  1967  YEAR-END OUTS TANDINGS, 1959 + 1965-73  1968  1969  1970  1971  --------------1972  1973  TOTAL CREDIT MARKET DEBT CLAIMS 708.801 1037.588 ll02.800 1181.622 1276.882 1363.881 1456.650 1592.269 1751.444 1930.415 AGAINST NONFINANCIAL SECTORS 2 3 4 5 6  7 8 9 10  ll  73.579 37.975 7.160 2.134 26.310  112.826 55.936 7,445 5.997 43.448  124.187 59,330 10.221 6.935 47.701  135.194 66,139 12.284 4.386 52 .385  146.772 69.520 15.095 5.259 56.898  7.259  14.182  19.007  18.386  21.862  25.677 9,908 26.728 11.266  37.672 18,265 40.996 15. 893  42.049 23 .382 44.475 14.281  46.551 23.289 49.276 16.078  51.135 26.530 52.995 16.112  161.467 70,217 19.72'Jlt 9.289 62.234 53.999 35.400 57.218 14.850  30,645  190,004 86,093 25,452 10.615 67,844  231.327 119.915 31,108 7.936 72.368  250,262 128.325 36.336 7.979 77.622  283,183 139.277 43.943 15.147 84.816  38.879  43. 175  49.357  68.946  56.670 45.430 62.199 25.705  59.230 48.597 71.065 52.435  62.214 55.627 71.336 61.085  642.481 206.279 65.486 76.176 141.069 155.605 2.134  938.944 218.243 100.278 107.281 240.477 278.662 5.997  997.620 1064.814 ll51.972 1233,059 1305 .525 1404. ll 7 1550.539 1716.178 223.602 229.307 242.619 247.423 252,658 249.204 264.379 282.801 105.925 113. 703 123.219 133.143 144.389 161.950 176.329 190.038 117.310 132.533 146.423 158.857 178,799 198. 513 211.602 221.752 252.461 265 .429 280.977 296.659 309.488 338.313 382 .896 426.979 305,257 328 .228 363.993 406.266 464.073 430.806 523.312 609. 755 6.935 5.259 4.386 9.289 10,615 15.147 7.936 7.979  19 20 21 22 23  463,352 1B8.501 99,783 150.144 24.924  752,347 300.938 183.013 219.062 49,334  796.916 317.253 191.311 234.55B 53.794  27 28 29 30 31  177.400 7.306 5.050 125.284 39.760  32 33 34 35 36 37  463.352 265.810 20.142  752.347 439.895 48,492  860.339 353. 122 206,209 247 .521 53.487  935,507 391.86� 221.653 261,553 60.43B  991.882 1066.646 1177,636 1330,996 1489.839 410.681 445.749 496,341 566.884 653.484 236.046 252,816 294,533 343.797 378.B78 274,261 291,528 304,860 322,582 344,714 70.894 76.55.3 97.733 112.763 81,902  353,384 32.906 5.054 228.871 86.553  365.202 24.451 7.938 242.268 90.545  376,501 21,213 10,169 249,798 95.321  4ll.743 26,405 10.B75 260.131 114,332  320.118 145. 334 51.167 30.302 28.601 64. 714  317.542 136,305 49.949 40.965 24,194 66,129  314,487 122.301 50. 535 50,522 23.561 67.568  328.136 123.906 52.671 55.646 27.535 68.378  226,564 173. 126 53,438  243.260 185,410 57.850  263.960 15.044 5.525 181,472 61.919  284.066 18.699 4.992 195.749 64.626  860,339 511.038 51-262 298,039 20.970 5.234 206.454 65.381  318,919 23,573 5.010 216.851 73.485  199.271 uo.222 32.674 9,877 906 45,592  235,089 113,317 43,132 13.504 8.414 56.722  252.359 121.669 45. 728 15.176 10.741 59.045  255.737 120.265 43 .139 18 .983 12.644 60. 706  276, 8 128,li2 42,9 6 23,719 18.440 62.791  43 44 45  136,871 107.292 29,579  164.258 127.053 37.205  168,344 129.161 39,183  46  494.660  47 48 49  295.389 158.518 0 64.846 93,672  10,380 72,119 18,572  477.100 312,842 15.011 126.217 171,614  712,189 10,873 80,126 30.937  935,507 556.875 59.713  12 13 14 15 16 17 18  CREDIT MARKET CLAIMS HELD BY PRIVATE FINAN, INSTITUTIONS COMMERCIAL BANK ING SAVINGS INSTITUTIONS INSURANCE + PENSION FUNDS OTHER FJIIIANCE  19 20 21 22 23  OTHER SOURCES FOREIGN FUNDS TREASURY BALANCES INSURANC.E + PENSION RES. OTHER, NET  27 28 29 30 31  CREDIT MARKET CLAIMS U,S, GOVERNMENT SECURITIES STATE + LOCAL OBLIGATIONS CORPORATE + FOREIGN BONDS COMMERCIAL PAPER OTHER  32 33 34 35 36 37  500.378 332.034 14.782 138,345 178.907  552,333 371,223 19.087 156.635 195.501  600.602 404.996 22 .603 174.089 2011.304  752,737  808 .010  11,261 79.881 32.980  181.110 139.815 41.295  11,441 80. 797 37.048  PRIVATE DOMESTIC NONFINANCIAL INVESTORS 366,530 141.669 57. 104 56.802 38.814 72,141  195.606 151.879 43.727  606. 122 402.832 8.931 177.566 216.335  203.290 156.725 46.565  672.827 458.994 23,949 201,721 233.324  876.780  926.240  990.369 1081,054 1196,646 1323.723  ll.494 81.209 39.685  11.838 80.440 47,756  213.833 163,787 50.046  13,043 81.702 50,156  766.567 540.003 31.613 234.655 273.735  14,528 83.870 73.648  868.510 625.250 40,323 265.289 319,638  DEPOSITS + CURRENCY TIME + SAVINGS ACCOUNTS LARGE NEGOTIABLE co• s OTHER AT COMMERCIAL BANKS AT SAVINGS INSTITUTIONS  957.193 701.501 58.871 294.830 347,800 255,692 193.901 61,791  MONEY DEMAND DEPOSITS CURRENCY  TOTAL OF CREDIT MARKET INSTRUMEN TS, DEPOSITS + CURRENCY  14,288 85,840 87,490  14.669 86.811 94.506  900.555 1046, 144 1223.080 4 7.618 56.694 59,831 852.937 989.450 1163,249  967,957 46.519 921.438  7 8 9 10  lOTAL PRIVATE HOLOINGS U.S. GOVERNMENT SECURITIES STATE + LOCAL OBLIGATIONS CORPORATE + FORHGN BONDS RESIDENTIAL MORTGAGES OTHER MORTGAGES + LOANS LESS: FHLB ADVANCES  SOURCES OF FUNDS PRIVATE DOMESTIC DEPOSITS CREDIT MARKET DEBT  454.246 33.004 9.865 281.356 130,021  2 3 4 5 6  11  PRIVATE DOMESTIC HOLDINGS  991.882 1066,646 1177,636 1330,996 1489.839 559.557 622.781 713,129 810.660 895,402 78.941 78.663 88.006 108,593 140.191  l  AGENCY DEBT NOT IN LINE l  PRIVATE FINANCIAL INTERMEDIATION  796,916 461,195 51.655  38 39 40 41 42  TOTAL HELD U.S. GOVERNMENT SECURITIES RESIDENTIAL MORTGAGES FHLB ADVANCES TO S+L'S OTHER LOANS + SECURITIES BY AGENCY: U. S, GOVERNMENT SPONSORED CREDIT AGENCIES MONETARY AUTHORITIES FOREIGN  65.236 75.882 80.563 61.502  12 13 14 15 16 17 18  24 25 26  BY PUBLIC AGENCIES + FOREIGN  24 25 26  38 39 40 41 42  43 44 45 46  PUBLIC SUPPORT RATE Ill 47 PVT, FINAN. INTERMEDIATI ON Ill 48 TOTAL FOREIGN FUNDS 49  CORPORA TE EQUITIES NOT INCLUDED ABOVE  4 5  453.988 15.818 438.170 41.946 412,042  748,968 35.220 713. 748  96.902 652,066  682,653 34.829 647.824  93,089 589.564  869. 539 1027.629 44.701 52.677 824.838 974.952 120.320 749,219  "ONEY AMOUNTS ARE IN MILLIONS OF DOLLARS,   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  143,009 884.620  907.642 48.289 859,353 139.539 768.103  148.309 752.246  S.7  190,989 855.155  236,146 986.934  198. 716 769.241  TOTAL MARKET VALUE MUTUAL FUND SHARES OTHER EQUITIES  ACQ, SY FINANCIAL INSTITUTIONS OTHER HOLDINGS  1 2 3 4  5  AUGUST 1974 HOUSEHOLDS  HOUSEHO LDS SECTOR STATEMENTS OF SAVING ANO INVESTMENT ANNUAL FLOIIS, 1959 + 1965'-73  .H'NUAL FLOIIS, 1959 + 1965-73 1959  II II  1966  1965  1967  1968  1969  1970  1971  1972  1973  HOUSEHOLDS, F'ERSONAL TRUSTS, ANO NONl'ROFIT ORGANIZATIONS  1 PERSONAL INCOME 2 - PERSONAL TAXES + NONTAXES  383.530 46.213  538.893 65.653  587.216 75.364  629 .335 82.994  688 .924 97.927  750.921 116.535  808.290 116.591  864.038 117.607  944.884 1055.042 151.330 142 .383  l 2  = = + 1 + 8 +  337.317 318.234 19.083 2.919 427 5.500  473.240 444.808 28.432 4,743 939 14.791  511.852 479.325 32.527 5.586 1.318 15.151  546.341 505.975 40.366 5.488 1.690 12.434  590.997 551.239 39.758 6.142 2.458 16.659  634.386 596.174 38.212  691.699 635.498 56.201 8.752 923 10.554  746.431 685.933 60.498 9.199 776 16.453  802.501 749.907 52.594 11.oeo 1,420 24.353  903.712 829.364 74.348 l}.540 944 27.058  :I 4 5 6  59.978 69.910 129.888  65.017 77.157 142.174  64.052 84.834 148.886  76.430 91.438 167.868  86.926 98.622 185.548  89.447 106.087 195.5�  113.890 115,741 229.631  9 10 11  3 4 5 6  OJSPOSA8LE PERSONAL INCOME PERSONAL OUTLAYS PERSONAL SAVING, NIA BASIS CR EDITS FROM GOVT. INSURANCE CAPITAL GAINS DIVIDENDS NET DURABLES IN CONSUMPTION  1.013  2.536 16.231  1  8  9 = NET SAVI NG 10 + CAPITAL CONSUMPTION 11 = GROSS SAVING  27.929 44.495 72.424  48.905 59.853 108.758  54.582 64.306 118.888  12 GROSS INVESTMENT CAPITAL EXPENO.--NET OF SALES 13 RESIDENT! AL CONSTRUCTJON 14 CONSUMER DURABLE GOODS 15 NONPROFIT PLANT + EQUIP. 16  79.190 68.269 21.373 44.306 2.590  115.263 89.550 19.097 66.308 4.145  129.332 94.197 18.941 70.752 4.504  134.922 94.635 11.001 73. 120 4.514  145 .517 109.658 21.091 84.032 4.535  145.435 117.839 21.960 90.790 5.089  167. 711 116. 178 19.627 91.297 5.254  186.082 136.398 26.906 103.918 5.574  203.816 158.771 34.283 118.442 6.046  235.640 174.132 37.537 130.310 6.285  12 13 14 15 16  11 NET FINANC JAL INVESTt;ENT NET ACO. OF FINANCIAL ASSETS 1�  10.921 32.974  25.713 55.261  35.135 58.�69  40.287 63.984  35 .859 69.575  27.596 56. 788  51. 533 74.057  49.684 92.783  45.045 113.990  61.508 130.760  17 18  DEP. + CR. MKT. INSTR. Ill DEMAND DEP. + CURRENCY  24.817 2.462  40.183 7.676  41.642 3.854  48.758 11.200  54.295 12.312  42.492 1.531  54.432 11.173  72,276 10.964  93.643 11,843  110.439 13.054  19 20  21 22 23  TIME + SAVINGS ACCOUNTS AT COMMERCIAL BANKS AT SAVmGS INST.  11,325 2.840 8.485  28 .022 14.856 13.166  20.456 13.163 7.293  3,,.513 18.086 16. 729  30.263 17 .378 12.885  6.009 -2.022 8.031  44.402 27.473 16.929  70.250 29.839 40.411  75 .360 29.457 45.903  67 .673 39.511 28-162  21 22 23  21. 2S 26 27 28 29  CREDIT MKT. INSTRUMENTS U.S. GOVT. SECURITIES S. + L. OBLIGATIONS CORPORATE + FGN. BONDS COMMERCIAL PAPER MORTGAGES  11.030 5.723 3.258 258 5 l,'186  4.485 2.52'1 1,749 984 -9 -766  n.332 7.685 3.599 1.982 2,748 1,318  2. 743 1,522 -Z.195 4.599 -2.125 942  11.120 5.554 -761 4.651 729 1.547  34.952 12.84" 9.611 6.616 4.759 1.123  -1.143 -9.686 -751 10.680 -1.524 1311  -8.938 -14.376 -151 9.318 -3.922 193  6.440 595 960 5.185 1.546 -1.846  29.712 20.i60 4.335 l.059 3.464 494  24 25 26 27 28 29  l.'165 -1.165  3.221 -5.381  3.677 -4.613  2.957 -7.268  5.798 -12.300  4.787 -8.583  2.629 -4.358  1.145 -6.479  -696 -4.670  -1.586 -6.586  30 31  3.421 8.446  4.825 12.218  4.694 14.136  5.063 14.570  4.621 15.486  4.978 16.274  5.242 19.058  6.172 21.559  ...560 23. 760  1.211  24.359  32 33  19 20  30 31  INVESTMENT COMPANY SHARES OTHER CORPORATE SHARES  32 33  LIFE INSURANCE RESERVES PENSION FUND RESERVES  34 35 36  NET INV. IN NONCORP. BUS. SECURITY CRF.DIT MISCELLANEOUS ASSETS  -4.647 -167 504  -1.942 864 1.273  -3.180 197 1,216  -3. 774 2.213 1.465  -2.218 2.096 1.797  -3.460 -1.818 2.118  -4.663 -867 2.584  -4.729 535 2.304  -7.409 134 2.668  -4.434 -206 1.497  34 35 36  37 38 39 40 41 42 43 44  NET INCREASE IN LIABILITIES CREDIT MARKET INSTRUMENTS HOME MORTGAGES OTHER MORTGAGES INSTALMENT CONS. CREDIT OTHER CONSUMER CREDIT BANK LOANS N.E.c. OTHER LOANS  22.053 21.524 12.560 814 5.605 810 1.012 663  29.548 28.319 15.232 1.175 8.201 1.•"14 1.359 938  23.234 22.672 12.652 1.257 5.351 1.004 364 2.044  23.697 19.318 10.371 1.194 3.184 1.361 1.888 1.320  33.716 29.954 14.625 1.135 8.317 1.670 2.492 1.715  29.192 31. 717 16.072 1.276 9.360 1.016 1.ooe 2.985  22.524 23. 374 12.481 1.360 4.959 1.058 915 2.601  43.099 �9.827 24.169 1.211 9.231 2.000 1.837 1.373  68.945 63.125 38.424 1.421 16.037 3.133 2.780 1.330  69 .252 72.815 44.208 1.408 20.105 2.817 1.eoo 2.477  37 38 39 40 41 42 43 44  14 297 218  736 229 264  -73 279 356  3.684 407 288  2.918 489 355  -3.400 489 386  -l. 780 500 430  2.609 345 318  4.672 608 540  -4.570 607 400  45 46 47  -6.766  -6.505  -10.444  -5.034  -3.343  3.451  157  -534  -8.282  -6.009  48  45 46 47  SECURITY CREDIT TRADE DEBT MISCELLANEOUS  48 DISCREPANCY 11 l EXCLUDES CORPORATE EQUITIES.  49 50 51 52  MEMORANDA: NET PHYSICAL INVESTMENT: IAl RE SIDENTJAL CONSTRUCTION EXPENDITURES - CAPITAL CONSUMPTION - HOME MORTGAGES = EXCESS NET INVESTMENT  21.373 4.900 12.560 3.913  19.097 7.143 15.232 -3.278  18.941 7.422 12.652 -1.133  11.001 7.844 10.371 -1.214  21.091 8.302 14.625 -1.836  21.960 8.684 16.072 -2. 796  19.627 8.99'1 12.481 -1.851  26.906 9.304 24.169 -o.567  3 ,.283 10.008 38.424 -14.149  37.537 10.358 44.208 -17.029  49 50 51 52  53 54 55  (Bl CONSUMER DURABLES EXPENDITURES - CAPITAL CONSUMPTION = NET INVESTMENT  44.306 38.806 5.500  66.308 51.517 14.791  70. 752 55.601 15.151  73.120 60.686 12.434  84.032 67.373 16.659  90.790 74.559 16.231  91.297 80. 743 10.554  103.918 87.465 16.453  118.442 94.089 24.353  130.310 103 .252 27.058  53 54 55  56 57  - CONSUMER CREDIT = EXCESS NET INVESTMENT  6.415 -915  9.615 5.176  6.355 8.796  4.545 7.889  9.987 6.672  10.376 5.855  6.017 4.537  11.231 5.222  t9.170 5.183  22 .922 4.136  56 57  58 59 60 61  (Cl NONPROFIT PLANT + EQUIP. EXPENDITURES - CAPITAL CONSUMPTION - NONl'ROFIT MORTGAGES = EXCESS NET INVESTMENT  2.590 789 814 987  4.145 1.193 1. 175  1.111  4.504 1.283 1.257 1.964  4.514 1.380 1.194 1.940  4.5::15 1.482 1.135 1.918  5.089 1.591 1.276 2.222  5.254 1.698 1.360 2.1'16  5.574 1.853 1.211 2.504  6.046 1.990 1.421 2.635  6.285 2.131 1.408 2.746  58 59 60 61  12.049 5.657  12.182 6.007  12.834 6.354  13.187 7.388  14.214 6.727  15.518 6.023  14.424 8.125  13.611 8.104  15.068 6.553  14.343 8.226  62 63  PER CENT RATIOS: 62 EFFECTIVE TAX RA TE 63 SAVING RATE, NIA BASIS  PER CENT OF DISPOSABLE INCOME ADJ. 121: 6 4 GROSS SAVING 21.259  22.708  22.917  23.465  23. 711  23.119  23.934  24.530  23.991  25.063  64  20.040 9.679 6.473 6.318  18.698 11.538 6.169 5.913  18.158 11.251 4.478 4.370  17.096 ll.559 4.281 3.490  18.288 11.603 5.623 4.995  18.298 8.e1e 4.532 4.925  16.564 10. 558 3.211 3.332  18.032 12.266 5.697 5.265  19.481 13.986 8.459 7.745  19.005 14.272 1.558 7.947  65 66 67 68  69 121 DISPOSABLE INCOME ADJ. 478.922 51.8. 756 340.663 599.597 553.519 (NU DISPOSABLE INCOME + GOVT. INSURANCE CREDITS + CAPITH GAINS DIVID. l  643.995  701.374  756.406  815.001  916.196  69  65 66 67 68  CAPITAL EXPENDITURES iCQUISITION OF FINAN. ASSETS NET INCREASE IN LIABILITIES CREDIT MARKET BORROIIING  l!ONEY AMOUNTS ARE IN Ml LLIONS OF DOLLARS.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  S.8  AUGUST 1974 HOUSEHOLDS  HOUSEHO LDS SECTOR STATEMENTS OF FINANCIAL ASSETS AND LIABILITIES  YEAR-END OUTSTANDINGS, 1959  II  1959 11  1965  +  1965-73  1966  YEAR-END OUTSTANDINGS, 1959 1967  1968  1969  1970  1971  1972  +  1965-73  1973  HOUSEHOLDS, PERSONAL TRUSTS, AND NONPROFIT ORGANIZATIONS 946.538 1464.429 1460.006 1694.952 1910.277 1853.685 1918.860 2134.482 2405.781 2302 .342  TOTAL FINANCIAL ASSETS  365.820 71,499  547.761 94.221  587.946 98.075  635.800 109.376  690.102 121.693  732.300 123.347  7116.774 134.520  859.212 145.484  952 • 793 1062.206 157.327 170.248  4 5 6  153.839 60.167 93.672  287.525 115.911 171.614  306.831 127.924 178.907  341.511 146.010 195.501  371.692 163.388 2011.304  377.822 161.487 216.335  422.284 188.960 233 .324  492.534 218.799 273.735  567.894 248.256 319.638  635.567 287.767 347.1100  TIME + SAVINGS ACCOUNTS AT COMMERCIAL BANKS AT SAVINGS INSTITUTIONS  7 8 9 10 11 12  140.482 73.457 45.907 11,808 13.380 2.362  166.015 81.801 49.595 12.411 15.237 4.558  183.040 89.487 50.249 13.173 11.113 8.952  184.913 91.009 51.139 12,204 17.359 10.307  196.717 96.562 51.512 20.!19 14.739 10.1•n  231.131 109 ,4D5 51,126 31. 730 13.596 12.953  229.970 99.718 51.407 22.664 9.919 15.728  221.194 85.294 §3.832 10.206 10.259 10.997  227.572 85.888 57.127 10.874 6.986 10.901  256.391 105.258 59.827 17.668 6,713 21.050  CREDIT MARKET INSTRUMENTS U.S. GOVT. SECURITIES SAVINGS BONDS SHORT-TERM MARKETABLE OTHER DIRECT AGENCY ISSUES  13 14 15 16  27.251 9.877 11 29.886  36.?65 13.504 3 34.342  39.964 15.176 2.751 3S.662  37.714 18.983 626 36.581  36.953 23.719 1,355 38.128  46,131 30.302 6,114 39 .179  45.380 40.965 4.590 39.317  45.229 50.522 668 39.481  46.189 55.646 2.214 37.635  50.524 56.802 5.678 38 • 129  17 18 l"  402.679 15.818 386.861  637.467 35.220 602.247  576.921 34.829 542 .092  733. 708 44.701 689.007  865.069 52.677 812.392  749.962 48.289 701.673  733.557 47.618 685.939  833.726 56.694 777.032  959.107 59.831 899.276  744.418 46.519 697.899  CORPORATE EQUITIES INVESTMENT COMPANY SHARES OTHER CORPORATE SHARES  17 18 19  20 21  81.956 82.273  105.876 153.eo9  110.570 163.640  115.424 185.229  120.045 206.377  125.023 217.416  130.265 237 .563  136.437 271.567  142.997 314.542  150.274 307.811  LIFE INSURANCE RESERVES PENSION FUND RESERVES  20 21  22 23  989 12.821  2.533 16.983  2.730 18.199  4.943 19.848  7.039 21.645  5.221 23.763  4.354 26.347  4.889 28.651  5.023 31.319  4.817 32.816  SECURITY CREDIT MISCELLANEOUS ASSETS  22 23  24  208.150  348.658  370.693  394.388  428.440  457.522  480.046  522.837  591.8112  661.1111  25 26 27 28 29  198.:;60 125.966 8.317 39.247 12.297  333.213 206.338 14.228 70.893 18.990  354.6116 218.990 15.485 76.244 19.994  374.003 229.361 16.679 79.42e 21.355  404.293 243.986 17.814 87.745 23.025  435 .900 260.058 19.090 97.105 24.041  459.274 272.539 20.450 102.064 25.099  498.793 296.397 21.667 111.295 27.099  562.018 334.821 23.088 127.332 30.232  6:;4.833 379.029 24.496 147.437 33.049  30 31  6.430 6.103  11.715 11.049  12.030 11.943  13.917 13.263  16.409 15 .314  17.307 18.299  18.222 20.900  20.062 22.273  22.942 23.603  24.742 26.080  32 33  5.536 2.067  9.098 3.044  9.025 3.323  12. 709 3.729  15.627 4.218  12.221 4.707  10.447 5.207  13.056 5.552  17.72� 6.160  13.142 6.767  34  2,187  3.303  3.659  3.947  4.302  4.688  5.ll8  5.436  5.976  6.376  DEP. + CR. HKT. INSTR, 111 DEMAND DEPOSITS + CURRENCY  S. + L. OBLIGATIONS CORPORATE + FGN. BONDS COMMERCIAL PAPER HORTGAGcS  TOTAL lIABilITIES CREDIT MARKET INSTRUH�NTS HOME HOR TGAGES OTHER MORTGAGES INSTALMENT CONS. CREDIT OTHER CONSUMER CREDIT BANK LOANS N.E.c. OTHER LOANS SECURITY CREDIT TRADE CREDIT DEFERRED AND UNPAID LIFE INSURANCE PREMIUMS  111 EXCLUDES CORPORATE EQUITIES. HONEY AMOUNTS ARE IN MILLIONS OF DOLLARS•   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  S.9  7 8 9 10 11 12 13 14 15 16  24 25 26 27 28 29 30 31 32 33 34  AUWST 1974 l-OTAL + NONCORP BUSINESS  TOTAL + NONCORP BUSINESS SECTOR STATEMENTS OF SAVING AND INVESTMENT ANNUAL FLOWS, 1959 + 1965-73  ANNUAL FLOWS, 1959 + 1965-73  II II  1959  1965  1966  1967  1968  NONFINANCUL  1969  1970  1971  1972  1973  BUSINESS - TOTAL  1 INCOME BEFORE TAXES 2 GROSS SAVING  96.226 47.232  129.534 71.812  139.117 77.138  136 .248 78.387  142.449 79.780  139.466 80.418  128. 166 80.298  137.545 90.590  155.249 104.074  183.881 112 .649  3 GROSS INVESTMENT 4 CAPITAL EXPENDITURES FIXED INVESTMENT 5 BUSINESS PLANT + EQUIPMENT 6 NONFARM HOME CONST. 111 7 MUL TJ-FAMILV RESIDENTIAL 8 CHANGE IN INVENTORIES 9  42.945 50.313 45.556 41.478 846 3.232 4.757  62.962 83.576 73.956 65.825 706 7.425 9.620  68.976 91!'1.441 81.639 75.538 -650 6.751 14.802  72.617 93.427 85.234 11.112 1.970 6.092 8,193  70.164 97.930 90.865 82 .ooo 1.087 7.778 7.065  74.447 108.876 101.011 90.508 123 10.440 7.805  73.585 108.042 103.514 92.045 881 10. 588 4.528  80.400 117.127 110.815 95.011 2.960 12.844 6.312  89.314 134.264 125. 730 106.418 2.062 17.250 8.534  98.845 160 .525 145.156 125,696 -573 20.033 15.369  3 4 5 6 7 8 9  10 NET FINANCIAL INVESTMENT FINANCIAL USES OF FUNDS, NET 11 FINAN. SOURCES OF FUNDS, NET 12 CORPORATE SHARE ISSUES 13 CREDIT MARKET INSTRUMENTS 14 CORPORATE BONDS 15 HOME MORTGAGES 16 OTHER MORTGAGES 17 llANK LOANS N.E.C. 18 OTHER LOANS 19  -7.368 13.040 20.408 2.oi8 14.835 2.955 160 5.070 5.143 1.507  -20.614 21.214 41.828 -28 29.461 5.392 150 9.091 12.209 2.619  -27.465 13.663 41.128 1.259 32.543 10.224 -954 9.340 10.564 3.369  -20.810 18.028 38.838 2.397 35. 741 14.658 1.120 9.361 7,879 2.723  -27.766 30.576 58.342 -159 40.096 12.893 430 10.909 11,099 4.765  -34.429 30.246 64.675 3.406 46.000 11.975 -416 J0.750 14.495 9.196  -34.457 14.788 49.245 5.694 42.301 19.756 324 11.564 5. 777 4.880  -36.727 25.264 61.991 11.435 48.156 18.807 1.922 19.546 5.914 1.881  --44.950 33.793 78.743 10.922 59.568 12.187 1.206 26.208 16.083 3.336  -61.680 43.858 105 .538 7.420 77.630 9.159 -864 28.439 34.024 5.076  10 11 12 13 14 15 16 17 18 19  5.465 -1.970  12.119 276  10.214 -2.888  8.943 -8.243  17.442 963  21.203 -5.934  8.589 -7.339  5.254 -2.854  15.371 -7.118  20.062 426  20 21  4.287  8.850  8.162  5.770  9.616  5.971  6. 713  10.190  14.760  13.804  22  20 21  TRADE DEBT OTHER LIABILITIES  22 DISCREPANCY  YEAR-END OUTSTANDINGS, 1959 + 1965-73  YEAR-END OUTSTANOINGS, 1959 + 1965-73 1959  II II  1965  1966  1968  1967 NONFINANCIAL  l TOTAL FINANCIAL ASSETS DEMAND DEPOSITS + CURRENCY 2 TIME DEPOSITS 3 4 CREDIT MARKET INSTRUMENTS TRADE CREDIT 5 MISCELLANEOUS ASSETS 7 TOTAL LIABILITIES CREDIT MARKET INSTRUMENTS 8 TAX-EXEMPT BONDS 9 CORPORATE BONDS 10 HOME MORTGAGES 11 OTHER MORTGAGES 12 BANK LOANS N.E.C. 13 OTHER LOANS 14 15 16  TRADE OEBT, NET OTHER LIABILITIES  1969  1970  1971  1972  1973  BUSINESS - TOTAL  207 .300 48.103 1.500 40.773 78.247 38.677  290.924 47.430 13.131 45.939 120.967 63.457  306.253 47.748 u.141 44,388 132.968 69.408  325 .918 49.294 13.820 46.240 141.310 75.254  358.784 51.208 14.194 52.592 159.960 80.830  391. 792 53.766 11.790 55.674 182.689 87.873  409.320 54.818 13.485 53.949 191.051 96.017  437 .661 55.465 17.0B5 61.673 196.742 106.696  476.075 55.620 20.195 65.318 216 • 789 118.153  527 .991 55.350 21.549 74.454 240.868 135.770  l 2 3 4 5 6  273.153 184.864 0 2.748 51.647 44.104 14.509  433.804 300.270 0 97. 800 2.556 98.587 74.941 26.386  477.287 333.074 0 108 .024 1.602 108.287 85.496 29.665  517.960 368.672 0 122 .682 2.122 117.506 93.374 32.388  578 .267 407.854 0 135. 575 3.152 128.241 104.473 36,413  643.632 454.031 0 l'-7. 5SO 2.736 138 .991 119.145 45.609  692.241 496.216 0 167. 306 3.060 150. 555 124.814 50.481  746.859 543.303 86 6. l 3 4.982 169. 712 130.729 51.681  822.600 602.514 634 198.3 0 6.188 195.920 146.455 55.017  925 .124 679.154 2.430 207 .459 5.324 223.369 180.479 60.093  7 8 9 0 11 12 13  65 .868 22.421  104.568 28.966  114,785 29.428  123.718 25.570  141.090 29.323  162.581 21.020  171.283 24. 742  176.556  192.570 27.516  212.646 33.324  15 16  71.856  111 CHANGE IN WORK IN PROCESS,  Ma-lEY .AMOUNTS ARE IN MILLIONS OF DOLLARS.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ------  S.10  21.000  14