Yes, on second thought, I was mistaken. Stock shorts do counter the instability of stock purchases. I suppose the real problem, then, is that stabilizing the s

Yes, on second thought, I was mistaken. Stock shorts do counter the instability of stock purchases. I suppose the real problem, then, is that stabilizing the stock system would require perfectly counterbalancing the two, which is infeasible in the real world. Stabilizing the system requires a financial damping friction. For the same reason, I didn't see how traditional CDS's could realistically stabilize the system. I only saw how they could only change the oscillation period. However, if the CDS's were issued by a central bank, which I now understand was the original author's suggestion, I do think I understand how they could play a fundamentally different role, i.e. the role of a financial damper. If the rate of issuance were properly controlled to be close to the critical damping condition, then I suppose the central bank could use such an instrument to stabilize the monetary system. It might be an interesting research project to determine how the instruments would need to be priced to provide the desired damping.