Modern Bank Failures

Diamond-Dybvig tells us that deposit insurance should have prevented bank runs and bank failures. The US has been having the insurance system for decades, so what was new in 2007-2008?

Krugman's recent post

Other commenters say that lessons from the 1930s are no longer relevant, because now we have deposit insurance. Um, shadow banking? That’s the point I keep trying to make: what happened to us in 2007-8 was that a large banking system had grown up, relying on repo and other forms of short-term borrowing rather than deposits, that wasn’t covered by New Deal-era protections and regulation. So what we had was the 21st-century version of a bank run; not crowds of people lining up at bank doors, but crowds of investors demanding haircuts on repo, which has the same effect.

State of Macro

• Paul Krugman's 'seminal' NYT article and subsequent thoughts [1] [2] on his blogs
• John Cochrane's reply
  
• Robert Gordon's paper-length article re-examines the DSGE framework
  
• Nalayana Kocherlakota's thought : a voice from the 'front line' economist
• Jeff Frankel
• Robert Lucas' piece on the Economist
• Barry Eichengreen
• Phillip Lane
• David Levine's open letter to Krugman
• Martin Bailey
• Robert Shiller says economists must take bubbles seriously
• Dani Rodrik thinks economist become overconfident with their models
• Gilles Saint-Paul says status quo economics is still better than multidisciplinary melting pot
• Brad DeLong: 'Shichinin no Economusutai'
  

Why PPIP flopped

A good and lucid case against using market to help uncovering unknown asset values.

Adverse Selection 101: The Real Reason Why Balance Sheet Detoxification Has Failed by Kenneth Kuttner

When you have problems due to severe market failures, it seems pointless to rely on market for solutions.

Banks' Solvency and Nationalisation

The idea sounds more plausible by the day. Or is there any other way to cure the cancer without replacing the organ? Time for a reading list.

• Buiter [Feb21: Create good banks]
• Caballero [Feb22: Promise to boost banks shares!]
  
• Greenspan [Feb18: @FT]
• Robert Hall [Feb 23: The right way to create good/bad banks]
  
• John Hempton [Feb16: Banks solvency and Geither plan]
• Simon Johnson [Jan27: Stand up to the bankers][Feb23]
  
• Krugman [Feb20][Feb22][Feb24: Mysterious Plans][Feb25]
• James Kwak [Feb24: TCE for beginners]
  
• Mankiw [Feb16: Pre-privatisation]
• Matthew Richardson [Feb26: The case for and against]
  
• Salvatore Rossi [Feb25@Vox]]
  
• Roubini [Feb10][Feb13: We're all swedes][Feb18][Feb25.1][Feb25.2]
• Mike Shedlock [Feb17][Feb19][Feb22][Feb25][Feb26: On CAP]
• Yves Smith [Feb18]