Earlier this week we argued that the success of Rand Paul, inasmuch as it could be considered a political trend, was not a good sign for the stock market.
While his anti-government, fiscal sanity message might be good for for the long-term health of the economy, the end of bailouts and the onset of American austerity would produce serious challenges in the near-term, and stocks would take a beating.
And though we pointed out that this was not a critique of Paul, we of course got tons of hatemail.
Picking up the baton on this idea is Tim Carney of the Washington Examiner, whose life work is to expose ugly relationship between big government and big business, and who, though he’s a Rand Paul supporter (we think), agrees with our assessment.
Supply-side economists like rising stock markets, and they like limited government. As a result, they tend to assert that limiting government is always good for the market.
In the long run, economic freedom maximizes prosperity, and the health of the economy is reflected by the stock market, but that doesn’t mean good economic policy is always good for the Dow Jones Industrial average.
Remember how the stock market rallied around the bailouts? Drug company stocks were buoyed by ObamaCare. GE stock certainly isn’t hurt by bigger government. In short, corporatism can help the stock market — at least in the short term — while hurting the economy.
Because supply-siders are so convinced that their small-government policies MUST be good for the market, they freak out at any suggestion that it’s not (despite lacking a shred of empirical evidence). Also, they tend to back their views during a crisis, such as now when Larry Kudlow is calling for the EU to guarantee ALL bank debt, a view he claims he regrets, but which he’s calling for anyway.
Bottom line: having a small government libertarian view is great! But if you think your ideology must mean higher stock prices, and you can’t separate the two in your mind, then you’ve got a problem.
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