Wednesday, September 4, 2013

Interest and Net Interest

The two higher lines represent total interest; the two lower lines represent net interest:

Graph #1: Three Measures and One Estimate of Interest
The red line is "Net interest (paid and received)". The orange line, comparable, is a component of Gross Domestic Income. The difference may be that the orange one includes "miscellaneous payments".

The blue line is "Monetary interest paid". I put that on the same graph with net interest to see whether it was substantially higher -- as it should be if it isn't also "net". I'm satisfied it's not a measure of net interest.

The green line is a shot in the dark: Total credit market debt, multiplied by an interest rate. For the interest rate I started with the Fed Funds rate plus a constant, and just kept changing the constant till the green line came close to the blue one.

I ended up at Fed Funds plus 5. Seems high to me.

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