Net interest by sector

For the economy as a whole, interest paid equals interest received.

When you break it up by sector, there's no guarantee that things remain equal. For any one sector of the economy, as for any one person, there is no assurance that interest paid will equal interest received. It is like "sectoral balance" analysis, where some totals are above zero and others are below. But if you count everything and double-count nothing, the sector totals will still add up to zero.

I didn't do that. I didn't count all the sectors, just the interesting ones: government, business, and people. And I did do some double-counting: I counted not only domestic business but also the part of it called domestic corporate business, and again two components of corporate business: financial and nonfinancial.

So the lines on my graph won't total up to zero. But there still are above-zero and below-zero values all over the graph, and you get the feel for how they would add up to zero if I did it right.

Graph #1: Net Interest for Various Sectors of the US Economy

I made the graph taller than usual because all that text at the top crowded the plot area.

From lowest to highest in the most recent years:

• Pale Blue: Federal Government
• Aqua: Nonfinancial Corporate Business (NCB)
• Blue: The Household Sector ("Persons")
• Brown: State and Local Government
• Green: Domestic Business
• Purple: Domestic Corporate Business
• Orange: Financial Corporate Business (FCB)
  

The orange (financial corporate business) data is double-counted in the purple (corporate business) and the green (total US business) lines. To eliminate the double-counting, imagine that the green and purple lines disappear. That leaves financial corporate data by itself, high on the graph, while nonfinancial corporate runs low (below zero) with the household and federal net interest data.

Household net interest did run above zero until the early 1990s, but has been below zero since then. Oh, and net interest "above zero" means you have more interest income than cost. "Below zero" means you have more interest cost than income.

So basically, finance makes a lot of money by interest -- which keeps banks in business -- and everyone else loses money by it. Our loss is their gain.