Banks' ability to create money stabilizes asset prices and boosts financial security.
The article explores how banks creating money can impact asset prices and financial stability. Banks can provide liquidity by lending out deposits, reducing the need for asset sales and maintaining stable prices. Comparing two liquidity mechanisms, banks providing liquidity is more effective than coalitions pooling resources. Without bank liquidity, coalitions can't share risks effectively. Central banks can help by lending to banks at low rates, easing liquidity constraints.