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Bitcoin Currency: The New Frontier for the CFPB

The Consumer Financial Protection Bureau (CFPB) has unparalleled powers over nearly every consumer financial product and service.  Given that virtual currencies can serve as a form of electronic money, the CFPB has, predictably, decided to weigh in on this topic. A CFPB statement this week warned people about the dangers of private digital currencies such as Bitcoin, XRP, and Dogecoin.  It started perfectly reasonably, noting that: ....

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Modeling the Legend, or, the Trouble with Diamond and Dybvig: Part I


Modeling the Legend, or, the Trouble with Diamond and Dybvig: Part I
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Has any theoretical work on banking been more influential than Douglas Diamond and Phillip Dybvig s 1983 JPE article, Bank Runs, Deposit Insurance, and Liquidity ? If so, I can t think of it. With well over 12,000 Google citations and counting, it s certainly among the most cited academic papers in economics, let alone in the sub-discipline of monetary economics.
Nor has that paper s influence been merely academic. Far from it: it is routinely cited by policymakers as supplying a rationale for government intervention in banking, and for explicit national deposit insurance schemes in particular. That the number of countries that adopted such schemes more than quadrupled during the two decades immediately following the article s appearance from just 20 to 87 almost certainly owes something to Diamond and Dybvig s influential publication, which is bound to have informed the thinking of exper ....

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