Some Obscene Graphs From the Flow of Funds Report

The Q3 2011 Federal Reserve's flow of funds report is more bad news for Americans, plus holds some obscene statistics from corporate America. Household wealth dropped a record $2.4 trillion dollars in three months, 4.1%, and is down about 13% from 2007.

Household net worth—the difference between the value of assets and liabilities—was $57.4 trillion at the end of the third quarter, about $2.4 trillion less than at the end of the previous quarter.



Household debt declined, -1.2% annualized, but mainly due to less people having mortgages and that's not because magically they got the money to pay them off. This is the 13th quarter in a row household debt has declined.

Household debt declined at an annual rate of 1¼ percent in the third quarter, continuing the contraction that began in the third quarter of 2008. Home mortgage debt fell at an annual rate of 1¾ percent in the third quarter, slightly less of a decline than in the first half of the year. In contrast, consumer credit rose at an annual rate of 1¼ percent, the fourth consecutive quarter of increase.



Now here is the statistic which should outrage you. Corporate cash, liquid assets hit another record high and a 1.97% increase from last quarter to a whopping $2.115 trillion bucks. That's cash these same corporations could be using to build factories, plants, R&D centers in the United States, use to hire Americans, even fund a few scholarships for Americans. Instead over $2.1 trillion is sitting in their greedy vaults.


flow of funds liquid assets q3 2011


Now the flow of funds is impossible to read and over 100 pages. There, I said it. So you might be interested to know exactly what is meant by businesses are sitting on a butt load of cash that the press reports but does not explain.

The report is for incorporated businesses which are not financial or farms. That excludes insurance companies too. Then, liquid assets are also referred to as cash. Why? Because this stuff is easily turned into currency or directly represents currency, such as time deposits. What does the Fed classify nonfarm, nonfinancial businesses' assets as liquid? The list is: municipal securities and loans, commercial paper, checkable deposits and currency, total time and savings deposits, money market mutual fund shares, total U.S. government securities, private foreign deposits, federal funds security repurchase agreements, and mutual fund shares.

In the flow of funds report, you can find total liquid assets on line 41, p. 67, L.102 Nonfarm Nonfinancial Corporate Business table.

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shadow banking plunge

Those at Zerohedge have a huge claim from their analysis of the flow of funds report. They are saying there was a mass flight from European bonds into U.S. funds, dollars, Treasuries and this masked a $357 billion Q3 plunge in shadow banking.

I haven't had time to really analyze their analysis, but they have found things in obscure corners of spreadsheets previously, so I think it's probably right and worth a read.