At least that's how Tom Nugent over at National Review is painting the recent Bush election victory over Kerry. In contrast to Mr. Rockwell's article today, Nugent argues that Bush and the current Congress are "confirmed" capitalists. If capitalism has friends like this it sure doesn't need any enemies. It's no wonder that lefties see capitalism as a bunch of warmongers who beg for favors from the bureaucratic establishment.
Nugent argues that with potential tinkering of the tax code toward lower rates, moderating of oil prices, and a wind down in the Iraq that the stock market will begin a climb back to the highs of 2000. What he fails to understand is that there has been massive consumption of capital percipitated by two major factors: Federal Reserve credit expansion and the war in Iraq. The Fed has managed to push short term rates below annualized CPI yielding a negative savings rate for short term paper. This is a tax increase on purchasing power. So any of the chump change that we get off these measly tax cuts will go right out the door with real inflation. And as far as the war goes, we all know about the broken window fallacy, and this can't be good for real US productivity or the world's opinion of us (as evidenced by the continuing fall of the dollar). Which can't be good for stocks in the long run.
Nugent says go long stocks. He may be a good contrarian indicator. I think I'll go short, it's the capitalist thing to do. After all in the long run, capitalism will beat out socialism.
