There was a funny sort of Congressional exchange all the way back in November 2005 that in a weird way defines our world today. At the nomination proceedings on whether to confirm Ben Bernanke as Alan Greenspan’s successor, Senator Jim Bunning of Kentucky wanted the prospective Fed Chairman to first answer for M3. It had become something of a conspiracy theory, but one with enough roots to reach this political level of mainstream thought. The Federal Reserve had under Greenspan in late 2005 announced that by early 2006 it would no longer keep an M3 money supply statistic.

Almost immediately, the central bank was accused by critics of trying to hide inflation. It was at that time the depths of the housing mania, where truly enormous asset bubbles can only come from out of control money conditions. The Fed would seem to have had significant interest in suppressing any data, particularly its own, that might connect one to the other.

Senator Bunning, however, wasn’t truly interested in M3 other than perhaps a soundbite for the evening news (which itself has been sort of discontinued in the same evolutionary way). He specifically asked the nominee about the central bank’s “decision to keep M3 from the public.”

Bernanke maybe should have become a lawyer rather than an economist. Like Greenspan, his true talent had nothing to do with economy or money. Thus, he was perfectly suited for the Federal Reserve. In response to Bunning, Bernanke merely restated the previously published fact. “The Federal Reserve will not withhold the M3 date from the public; rather, it will no longer collect and assemble that information.”

It wasn’t as if the FOMC had voted to keep information for itself. The committed had instead decided not to bother collecting the data that they hadn’t used in years, decades even. It was for monetary policy nothing but an expensive headache.

It tells us a lot about monetary conditions at that time, as well as how it would all shortly thereafter start to unravel. Under Greenspan, the Fed had been transformed from a monetary agency to something else. Exactly what else is still left to conjecture and speculation, but in raw terms the central bank was neither central nor much of a bank.

It was at least correct not to put too much faith in M3. The estimate had become woefully inadequate and incomplete for its task of tracking broad money. Consisting of large time deposits but more so, as time progressed, repurchase agreements and eurodollars, it was at best the slightest tip of the monetary iceberg particularly those latter two parts. The Fed did not record repos, merely those it could find; it did not estimate the whole of eurodollar deposits, only a small amount that fell within very specific definitions.