Chapter 26 — Further Reading

On money and banking

Milton Friedman and Anna Schwartz, A Monetary History of the United States, 1867–1960, Princeton University Press, 1963 The foundational work on the role of the money supply in U.S. economic history. Friedman and Schwartz's thesis — that the Fed's failure to prevent bank runs and money supply contraction caused the Great Depression — reshaped macroeconomics.

Perry Mehrling, The New Lombard Street: How the Fed Became the Dealer of Last Resort, Princeton University Press, 2011 On how the Fed's role evolved from "lender of last resort" to the much more expansive role it played during the 2008 crisis.

On bank runs

Douglas Diamond and Philip Dybvig, "Bank Runs, Deposit Insurance, and Liquidity," Journal of Political Economy, 1983 The foundational paper on bank-run theory. Nobel Prize 2022 (with Ben Bernanke). The two-equilibria result is clearly presented.

Gary Gorton, Slapped by the Invisible Hand, Oxford University Press, 2010 — cited in Chapter 16. The definitive account of the 2008 crisis as a shadow banking run.

On the 2008 crisis

Michael Lewis, The Big Short, 2010; Andrew Ross Sorkin, Too Big to Fail, 2009; Financial Crisis Inquiry Commission Report, 2011 — all cited in earlier chapters.

Ben Bernanke, The Courage to Act, W. W. Norton, 2015 The Fed Chair's memoir of the 2008 crisis. Gives a real-time view of how the Fed responded.

On Bitcoin (case study 2)

Satoshi Nakamoto, "Bitcoin: A Peer-to-Peer Electronic Cash System," 2008 The original 9-page white paper. Available free online. Remarkably clear for a document that launched a trillion-dollar asset class.

Eswar Prasad, The Future of Money: How the Digital Revolution Is Transforming Currencies and Finance, Harvard University Press, 2021 A comprehensive treatment of digital currencies, crypto, and CBDCs by a leading monetary economist.

A reading order recommendation

Read Diamond and Dybvig (1983) for the bank-run theory. Read Bernanke's The Courage to Act for the 2008 crisis from the inside.

Chapter 27 — Monetary Policy — is next. It shows how the Fed uses its tools to manage the economy.