A bona fide currency functions as a medium of exchange, a store of value, and a unit of account, but bitcoin largely fails to satisfy these criteria. Bitcoin has achieved only scant consumer transaction volume, with an average well below one daily transaction for the few merchants who accept it....

Liquidity production is a central role of banks. We show that, under idealized conditions, high leverage is optimal for banks when there is a market premium for (socially valuable) liquid financial claims and no deviations from Modigliani and Miller (1958) due to agency problems, deposit...

In 1931, a financial crisis began in Austria, struck numerous European nations, forced Britain to abandon the gold standard, and spread across the Atlantic. This article describes how banks in New York City, the central money market of the United States, reacted to events in Europe. An array of...

New data reveals that bank distress peaked in New York City, at the center of the United States money market, in July and August 1931, when the banking crisis peaked in Germany and before Britain abandoned the gold standard. This paper tests competing theories about the causes of New York's...

The puzzle of underissuance of national bank notes disappears when one disaggregates data, takes account of regulatory limits, and considers differences in opportunity costs. Banks with poor lending opportunities maximized their issuance. Other banks chose to limit issuance. Redemption costs do...

An examination of U.S. banking history shows that economically efficient private bank money requires that information-revealing securities markets for bank liabilities be closed. That is, banks are optimally opaque, which is why they are regulated and examined. I show this by examining the...

We study the liquidity demand of large settlement banks in the UK and its effect on the Sterling Money Markets before and during the sub-prime crisis of 2007-08. Liquidity holdings of large settlement banks experienced on average a 30% increase in the period immediately following 9th August,...

Is there a link between loose monetary conditions, credit growth, house price booms, and financial instability? This paper analyzes the role of interest rates and credit in driving house price booms and busts with data spanning 140 years of modern economic history in the advanced economies. We...

We examine the business model of traditional commercial banks in the context of their co-existence with shadow banks. While both types of intermediaries create safe "money-like" claims, they go about this in different ways. Traditional banks create safe claims by relying on deposit insurance,...

The intersection of research and policy on consumer credit often has a Goldilocks feel. Some researchers and policymakers posit that consumer credit markets produce too much credit. Other researchers and policymakers posit that markets produce too little credit. I review theories and evidence on...