To
an extent I’ve never seen before, it seems the divide between bulls and bears
is increasingly along partisan lines – not completely but increasingly. Republicans tend to view the market through
the lens of Austrian economics, where government budgets must be balanced every
year. Democrats tend to view the market
through the lens of Keynesian economics, where budgets must be balanced in the
long run, not every year. (Of course,
neither political religion is always faithful to their economic religion and
strays whenever expedient.) Republicans
are more likely to argue the stock market is on a “sugar-high,” courtesy of
deficit spending and the Fed. Democrats
are more likely to argue the stock market merely reflects an improving
economy.
My
perspective is that the Democrats are probably right in the short run. Since “the trend is my friend,” it is a time
to be bullish. But, the Republicans are almost
certainly right in the long run. Named
after Keynesian economist Hyman Minsky (1919-1996), the “Minsky Moment” occurs
when the debt bubble expands to the point it can no longer expand and then suddenly
collapses. That Minsky Moment will prove
the Republicans are right . . . but not in the short run.
Isn't it ironic that a Keynesian economist could prove Republicans were correct?
Isn't it ironic that a Keynesian economist could prove Republicans were correct?
