War and peace (Part 2): Structural analysis of the Fed's original flow of funds accounts 1939–1953

In our previous article, Tsujimura and Tsujimura, 1 we explicated that the input-output table, which depicts the transactions of goods and services between industries, had been intensively used to prepare the U.S. economy for World War II, and to rebuild Europe after the war. As Leontief, 2 the architect of the system, has asserted, “a definitive input-output analysis will require the incorporation of purely monetary transactions as are represented by credit operation, taxes, subsidies, and other unilateral transfers. The release of the study by the Board of Governors of the Federal Reserve System should contribute much to the development of realistic analysis within the framework of the input-output approach.” In this sequel, we will explore this original and unique statistics, Flow of Funds in the United States 1939 – 1953 , one of the greatest works in the history of national accounting, to find out how the war was financed and how the postwar economy was formed using the Leontief's tools of structural analysis.