Do the banks want a market crash?

Dow edges higher, S&P 500 reclaims 3,500 even as stimulus talks hit standstill.

Headlines like these make absolutely no difference in such environments. We have to keep in mind governments or central banks have no actual tools to stimulate the economy.

Let me be clear once again,governments and central banks do not create jobs. Governments spend tax money. That is all they do. The “K” wealth effect (my previous post) is the only distortions they create.

So let’s go back to my original title. Why would banks intentionally want a market crash? With such low interest rates it would seem loans are going out like water. Unfortunately this is not the case. Lending standards in certain sectors aren’t being given out as freely. This means that the banks are not loaning enough.

What can central banks / the Federal reserve do? Well their only stimulus is to lower interest rates even further so that more loans can go out.

If banks crash the market (selling off on mass), they can pressure the FED to create more stimulus which will make it easier for banks to loan out.

October is a month for crashes. However with such manipulation going on, and politics in the mix; it might be bearish for President Trump to give any ok for banks to pull that sell trigger. Like anything in politics, revenge on financial institutions will be remembered. No matter what political affiliation these banks
may be perceived to have, screwing up an election will be remembered.

Like any betting on wall street, the markets are nothing more than a complete gamble. You have to be in the higher echelons to know when the trigger will be pulled. My bet is that the banks will wait until after the election to make the decision.