We have rearranged into an explanatory form the functional flows provided in
- The National Income and Product Accounts Tables (NIPA) of the Department of Commerce’s Bureau of Economic Analysis, and
- The Flow of Funds Matrix of the Federal Reserve Board
We list below sources essential to or helpful for this revision. The reader may take some comfort in the fact that we have drawn most of our aggregate data from only a few of the BEA’s Tables dated October 27, 2017, and the Fed’s Flow of Funds Z.1 Flow of Funds Matrix dated September 21, 2017.
- BEAHome Page: https://www.bea.gov
- BEA’s Interactive-Data page: https://www.bea.gov/itable/index.cfm
- BEA’s Data Tables: https://www.bea.gov/scb/pdf/2017/05%20May/0517_selected_nipa_tables.pdf
- BEA’s Glossary: https://www.bea.gov/glossary/glossary_a.htm
- BEA’s Customer Guide: https://www.bea.gov/agency/pdf/BEA_Customer_Guide.pdf
- BEA’s Concepts and Methods: https://www.bea.gov/national/pdf/NIPAchapters1-9.pdf
- BEA’s Guide to the Numbering of the NIPA Tables: https://www.bea.gov/scb/pdf/2003/08August/0803NIPA-Preview.pdf#page=9
- Federal Reserve’s Z.1 Financial Accounts of the United States: https://www.federalreserve.gov/releases/z1/Current/z1.pdf
- Fed’s Data Download Program: https://www.federalreserve.gov/datadownload/Choose.aspx?rel=Z.1
- Fed’s Financial Accounts Guide: https://www.federalreserve.gov/apps/fof/
- Fed’s Industrial Production and Capacity Utilization – G.17: https://www.federalreserve.gov/releases/g17/current/
- Fed’s Consumer Credit Outstanding, G.19; Levels Outstanding and Flows: https://www.federalreserve.gov/releases/g19/current/default.htm
The NIPA may be regrouped into the aggregate functional flows in the operative circulations of our diagonal channels, and into the aggregate financing flows along the horizontal and vertical channels. The diagonal channels represent the rates of flow in the operative circuits, and the horizontal and vertical channels represent financing and saving.
The Federal Reserve’s Flow of Funds Matrix in the Z.1 release tracks in detail what goes on a) within our diagram’s Redistributive Function and b) through the diagram’s horizontal and vertical channels connecting that Redistributive Function to the operative circuits. However, the Flow of Funds’ first eleven lines are contaminated by the misclassification of durables goods, which have exited the process, as capital goods still in the process. Recall, the economic process is the current process, and, once a completed product has exited the process, it is no longer currently under process in the current productive process. Its purchase may be financed by any kind of loan, including an installment loan, but the fact remains that once the durable element has exited the process, whether the bank has rights to the durable goods as collateral or not, that the durable owner-occupied house or car or washing machine is no longer under process nor used as capital in the purely current, dynamic process.
By our ±signing conventions, the addition of money into the operative circuits is positive and the direction of money out of the operative circuits into the Redistributive Function is negative.
Borrowing into Circuits (+) Saving Out of Circuits (-)
Normatively, money is sent out to the real circuits as credit for brief lags in operations or for long lags in significant capital expansions. And normatively, money is sent back into the Redistributive Pool for a) savings which can be drawn upon or re-lent for continuity or expansion of the process, or b) non-normatively for quiescent idleness and inflationary effect within the secondary markets.