Four interesting econ stories
The banking crisis that wasn't, winning the wars on poverty and cancer, and more!

Housekeeping notes: You may have noticed a couple of changes to Noahpinion! First of all, as promised, I now have my own custom domain name, www.noahpinion.blog. All of the old .substack.com URLs for my old posts will forward to new URLs at the new domain. Second of all, the author picture at the top of each post has been changed! It used to be a portrait of William Butler Yeats; now it’s an actual picture of me.
A lot of things have gone whizzing by lately, so I thought I’d do a roundup of interesting stuff from around the world of economic news and debates. In fact, I’m probably going to start doing a bit more aggregation like this. Up to now, I’ve used this blog almost exclusively for long-form commentary and analysis, and Twitter for quick takes on news items or interesting papers. But to be honest, Twitter is becoming less useful for that sort of thing, as thoughtful people continue to quietly filter away and the platform becomes even more dominated by culture wars and pointless meta-commentary. So I’ll do my part to make the internet just a little more fragmented, as it was meant to be.
I’m also thinking about doing interactive roundups where I solicit interesting stories and research from you, the readers — somewhere between Matt Yglesias’ “mailbag” posts and Tyler Cowen’s “assorted links”. But we’ll talk about that idea more in a bit.
Today, I’m going to cover:
How banking problems are changing from an acute crisis to a longer-term crunch
Why the data tell us that automation really hasn’t taken our jobs (yet)
Why the U.S. is winning the War on Poverty and the War on Cancer
Why generative AI might be the “revenge of the normies” in the labor market
What happened to the banking crisis?
A few weeks ago, in the wake of runs on Silicon Valley Bank and Credit Suisse, a lot of people were expecting a continuing banking crisis. When news came that depositors were fleeing smaller banks for the safety of bigger ones, and fleeing banks in general for the safety of money market funds, the sense that we were in the middle of a rolling, ongoing financial crisis intensified. But so far, the predicted wave of bank failures hasn’t materialized. What’s going on?
A Twitter thread by MIT economist Jonathan Parker has the story, and explains a lot of important things about banking in the process (part 2 of the thread is here, because Twitter now apparently limits threads to 25 tweets). The basic story is twofold:
Banks were never quite as vulnerable as they looked, and
The government has done a lot to backstop the system.
Although social media panics can be the trigger for bank runs, the real reason U.S. banks were in a weak position prior to the SVB collapse was that interest rates had gone up. Banks were holding a lot of bonds, and when interest rates go up, bond prices go down, so the asset side of banks’ balance sheets became much weaker. Interestingly, Parker argues that it was inflation, not the Fed, that was responsible for the rise in long-term rates that weakened the banks. But let’s set that aside for now. The fact is, rates rose and banks’ assets got smaller.
But this didn’t weaken banks as much as people generally think. Because although higher rates decreased banks’ assets, they strengthened banks’ business. As Parker shows, higher rates make banks more profitable, because they can earn higher interest on loans and investments while keeping the rates they pay on checking and savings accounts low:
It turns out that this increase in banks’ future profitability was worth almost exactly as much as the decrease in the value of the assets on their books! Imagine if the value of your 401(k) went down, but your salary went up; that’s basically what happened to the banks.
In other words, rate increases didn’t actually make the banks insolvent. What they did do was make the banks less liquid. In the new higher-rate world, banks have to wait and make money slowly instead of being able to sell bonds quickly, so it’s easier for them to collapse if a bunch of depositors suddenly want their money back all at once. In other words, they became vulnerable to runs, which is why the government stepped in and backstopped bank deposits last month.
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