[18] Economists proposed various strategies to address financial stability, including the Chicago Plan's full-reserve banking.
[19] Irving Fisher's "The Debt-Deflation Theory of Great Depressions" (1933)[20] analyzed how debt cycles contributed to economic instability.
[32] Martin Wolf, chief economist at the Financial Times, endorsed full reserve banking, saying "it would bring huge advantages".
[33] Martin Wolf, Chief Economics Commentator at the Financial Times, argues that many people have a fundamentally flawed and oversimplified conception of what it is that banks do.
[28] The credits and debt banks create play a role in determining how delicate the economy is in the face of crisis.
[34] For example, Wall Street caused the housing bubble by financing millions of mortgages that were outside budget constraints, which in turn decreased output by 10 percent.
[35][page needed] Rothbard likens this practice to counterfeiting, with the loan banker extracting resources from the public.
Caplan contends that it is part of the common definition of a modern bank to make loans against demand deposits, thus not constituting fraud.
[41] In their influential paper on financial crises, economists Douglas W. Diamond and Philip H. Dybvig warned that under full-reserve banking, since banks would only be permitted to lend out funds where depositors agreed to time-lock their deposits, need for extra credit would drive some borrowers to use unregulated institutions.
[45] As financial markets seemed to have recovered more quickly than the 'real economy', Krugman sees the recession more as a result of excess leverage and household balance-sheet issues.