Flow of Funds: Net Borrowing as a Percent of U.S. GDP at Annual Rates by Sector

Corrections displays the Fed Flow of Funds data.  The Flow of Funds data breaks the economy, for example, into seven sectors:  the household sector, nonfinancial corporate businesses, nonfinancial noncorporate businesses, state and local governments, federal government, rest of world, and financial sector.  Net lending in the world must add up to zero:  there are two sides to every loan.  The flow of funds breaks up the U.S. and the rest of the world, and then breaks up the U.S.  Nevertheless, the sum must still be zero.

Below, Corrections displays the flow of funds for each sector over time (click to enlarge).

The same graph zoomed into the recent period is depicted graphically below (click to enlarge).  Note that while the Federal government is borrowing much more than it used to, as a country we're receiving less than we used to from the rest of the world:  the Federal deficit is being made up by the financial sector. 

What is the financial sector?  The lending portion is made up of the Monetary authority, chartered banks, foreign banking offices in the U.S., credit unions, insurance companies, private and public pension funds, money market mutual funds, mutual funds, closed-end funds, exchange-traded funds, government sponsored enterprises, agency and GSE-backed mortgage pools, ABS issuers, finance companies, real estate investment trusts, brokers and dealers, holding companies, and funding corporations.  The borrowing portion is similar.  We organize these sources into four main sources:  1) private/stock market, such as mutual funds, exchange traded funds, and private pensions 2) government sans monetary authority, such as GSE-backed mortgage pools, government retirement funds 3)  foreign banking offices in the U.S. 4)  the monetary authority and funding companies (AIG and Bear Stearns, for instance).  We graph these four graphically below (click to enlarge):  they add up to the light blue line in the above graph.

From the second graph, we note that the Federal government is borrowing more and that this is financed by the financial sector.  We further note that within the financial sector, it is being financed primarily by domestic funds and the stock market, rather than the monetary authority.