Surely you're joking, Mr. Bernanke
It's only today that I became aware of this link by reading the comments after dwot's last post (thanks, camistocks!) Anyway, Ron Paul grills Bernanke, citing a 20% increase in MZM (this is Nov 2007), and Bernanke replies:
"Well, Congressman, first, just a small technical point. On the growth in money, money growth has been pretty moderate over the last few years. The increase in MZM is probably related to the financial turmoil. People have been taking their savings out of, you know, risky assets, putting them into the bank, and that makes the money data show faster growth.
So I’m not sure that’s indicative of policy, necessarily."
Unfortunately, Bernanke was making his speach before congressmen, where there were no retarded ten-year-old children among his audience to laugh him out of the room, so he got away with this bullsh.t. However, we are not congressmen, so we can ask the following question. A risky asset is not a mattress that you can take your savings out of. In order for you to generate some sales proceeds to put in the bank, you must find a buyer for your asset, and that buyer has to take the same amount of money out the bank, either in the form of cash, or as credit. Credit has been contracting, if you believe Bernanke's complaints about the "liquidity crunch". It follows that the buyers of those securities had to remove cash from the bank at least at the same rate as the rate at which sellers were deposing their cash proceeds. So these transactions, which actually indicate nothing more profound than changes of ownership, cannot explain the growth of MZM. The reality is that one 2008 dollar is worth 80 cents of 2007 money because of overproduction of dollars by Bernanke & Co.