David Beckworth points out that this is very important for understanding the financial crisis:
This crisis has taught us that institutional money assets--those assets like treasuries, commercial paper, and repos that facilitate transactions in the financial system--matter too. The bank run on the shadow banking system was a bank run using institutional money assets.
If we really want to understand money and its implications for the economy we need to be thinking about these money assets too.
What happened during the financial crisis can be looked at as a form of hyperinflation. The relevant market participants lost faith in the MBS currency, so its purchasing (collateralizing) power nearly vanished.
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