First, he stated that central banks should act to stabilize price fluctuations by setting market interest rates consistent with expected profit rates. Then, as Walter Bagehot would later emphasize, they should supply liquidity in times of financial crisis. When a financial crunch occurs, people's demand for money surges, giving rise to moves to withdraw money from the banking system.
At such a time, it would be reasonable for an individual bank to simply reduce lending, but if all banks were to act in the same way, lending in the economy as a whole would dwindle further. Thornton argued that, in times of a financial crunch, the BOE should rather provide liquidity to the economy by lending generously.