The foundation of modern banking was laid by Ben Bernanke, Douglas Diamond and Philip Dibwig in the early 1980s. Their analyses have been of great practical importance in regulating financial markets and dealing with financial crises. They showed how a simple promise from a third party to fully cover your deposit could prevent people from making mass withdrawals.
In today's episode for 12th October 2022, we see why the Nobel Committee awarded the Sveriges Riksbank Prize in Economic Sciences to Bernanke, Diamond and Dybvig.