I am running my development on Ubuntu 11.10, and RubyMine
Here is my development settings for the database.yml: which RubyMine created for me
develop
For permanent solution:
The problem is with your pg_hba. This line:
local all postgres peer
Should be
local all postgres md5
Then restart your postgresql server after changing this file.
If you're on Linux, command would be
sudo service postgresql restart