Net lending (saving minus investment) by the private, government and foreign sectors, which must sum to zero by identity — one sector can only run a financial surplus if another runs it down. This is Wynne Godley's sectoral balances framework: it was precisely this chart that led him, around 2000, to call the private sector's persistent net-borrowing position unsustainable — flagging the dot-com bust and, later, the conditions behind the GFC.
This graph illustrates the net lending positions of the three sectors, calculated as the difference between saving and investment, adjusted for typically minor capital account transactions. A notable exception occurred in 2017Q4, when there was a significant capital account transaction exceeding $900 billion, representing a transfer from the corporate sector to the government sector due to the one-time deemed repatriation tax. Therefore, the sharp decline in the government deficit and private sector saving in 2017Q4 depicted in the chart should be disregarded.
Bars use published BEA sectoral net lending, with U.S. external net lending sign-reversed for the foreign sector. The optional GDP–GDI discrepancy is a reference line outside the sector stack. The chart ends at the latest period with all three sectors available. This identity holds because each lending transaction simultaneously creates offsetting entries in the balance sheets of different sectors. A notable insight from this chart is that, prior to both the dot-com bubble and the Global Financial Crisis, the private sector persistently held a net borrowing position for multiple quarters. Given the relative stability of the foreign sector’s net lending, this reduction in private net saving corresponds directly to a decreasing government deficit. In fact, throughout the entire postwar era, the government recorded a surplus only during the three quarters immediately preceding the dot-com crash. The statistical discrepancy, detailed in NIPA Table 5.1, represents measurement differences between GDP and GDI. The shaded areas on the chart indicate recession periods as defined by the NBER. Use the checkbox to display the GDP–GDI reference line.