The US financial system has been going through major transformations during the last 30 years and is thought to be a precursor of the changes that all mature financial systems will go through. The US financial system has been an innovator of new and novel financial instruments and the impact of these instruments on the economy can be studied by examining their effect on the US economy.

The primary focus of this book is the debt market. The US debt markets are analyzed as an exemplar of the characteristics of a global leader of the debt markets.

Another reason for studying the US debt market is that extensive data on financial instruments and on the derivatives market are available in the public domain. All the data for the graphs and diagrams in this appendix are taken from publicly listed sources.

Growth of US debt market

One of major changes in the structure of the US economy during the last 30 years has been the increasing importance of the financial sector in generating corporate earnings. As shown in Table B.1, the fraction of corporate earnings from the financial sector has grown almost 400% over the last 60 years and 50% over the last 20 years.

The total debt of the US, both internal and external, has undergone a dramatic increase. As shown in Figure B.1 (a) the total US public and private debt over the last 30 years has grown from US$3 trillion in 1975 to US$42 trillion in 2005, close to the entire world's 2005 Gross Domestic Product (GDP) of about US$44 trillion.