Meme and Counter-meme

It has been popping up all over the blogosphere in recent days: the claim that the world financial system narrowly averted Armageddon between 10:00 and 11 in the morning, eastern time, September 18, 2009, because officials of the Federal Reserve suddenly noticed at the end of that interval that more than $500 billion had been withdrawn from money market accounts in the United States in the preceding hour.

That is certainly a scary sounding figure. $500 billion in an hour? Simple arithmetic: that would mean average withdrawals of $8.33 billion in each minute of that awful hour.

The Fed and the Treasury first froze funds in and then moved to create a backstop for money market accounts, and the Bush administration started preaching the unlucky gospel of a "Troubled Assets Relief Program," entering into its brief twilight alliance with Pelosi.

That's the story, and it has spread with amazing speed since Paul Kanjorsky broke it down for us all in an appearance on CSPAN on January 27.

The evidence for it comes down, in essence, to Kanjorsky's say-so. The nugget of truth here sees to be that on September 19, the Treasury announced that it would guarantee eligible money-market mutual funds. It didn't freeze them.

(Unless the freeze was a super-secret sort of thing, word of which was disseminated by black helicopters or something: there is certainly no public record of any such freeze, nor has Kanjorsky or Limbaugh or anyone else pointed to one.)

Heck the Treasury's guarantee didn't come into effect with the immediacy of the freeze Kanjorsky imagines. Two days later, the Treasury was still saying it was "continuing to develop the specific details surrounding the termporary guaranty program."

Likewise, there is no reason to believe that the non-freeze guarantee of that day was a response to the withdrawal of $550 billion in an hour from such funds or some such thing.

So why has the notion of a September 18th run-on-money-markets and a resulting Treasury "freeze" that saved the world found such a receptive audience? Why is it so successful as a meme?

I'll save further comments on the subject for tomorrow. In the meantime, I'd like to say that the inspiration for this post, and tomorrow's as well, comes from recent entries by Felix Salmon in his Portfolio blog. Good work, happy fish!