Call This Market Surge the Anti-Austerity Rally

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When it comes to the stock market, austerity is so nine days ago.

That marked the date when a University of Massachusetts graduate student attacked landmark research from economists Carmen Reinhart and Kenneth Rogoff. The Harvard pair found that when national debt hits 90 percent compared to the size of the economy, it has led to slower growth.

(Read More: 'Walking Dead'? TheAusterity Zombies Fight Back!)

For at least three years, the Reinhart-Rogoff work had served as the bible for deficit hawks and the bane of those who feel the best way out of an economic slowdown is through lots of government spending.

UMass maverick Thomas Herndon, though, found that the research omitted important data and was therefore invalid.

(Read More: The Fuss Over Austerity Fuzzy Math Is Overblown)

While the merits of high debt loads will be debated for as long as there are the proverbial two-handed economists ("on the other hand..."), stock market investors seem to have made up their minds.

Since the day the Reinhart and Rogoff rejoinder made news, the Standard & Poor's 500 has rebounded off a 3 percent slide, reclaiming nearly all the losses it suffered at the beginning of what has been a mediocre earnings season.

Market veteran Art Cashin, the director of floor operations at UBS, in his morning note Thursday suggested the bounce be called the "Reinhart/Rogoff Rebuttal Rally."

"As the rebuttal made headlines, markets rallied— especially in Europe—as cries that austerity had seen its day came from leader after leader," Cashin said. "Was it really the rebuttal that moved markets? We may never be able to prove it conclusively but the timing seems like a perfect fit."

It's true that the market is no shrinking violet when it comes to government debt.

In fact, it has thrived as the U.S. and other governments have amped up debt loads. The Federal Reserve has been complicit in the run-up by buying more than $3 trillion of U.S. notes alone.

Worries of asset bubbles and inflation wait for another day.

As Washington has run up consistent trillion-dollar-plus deficits that are only now beginning to recede, the S&P 500 has rallied nearly 140 percent.

(Read More: US Has 'Natural Ingredients' for Growth: Goldman Exec)

In Europe, some of the hottest equity markets are in the countries that have the highest debt loads.

Greece, which essentially started the sovereign debt crisis, has seen its market climb about 7 percent in 2013 and 43 percent over the past year. Spain is up just 4 percent this year, but has surged 22 percent in the 12-month period.

As for actual economic growth, though: not so much.

Greece's economy actually contracted 14 percent during its rip-roaring debt years, when its load compared to gross domestic product grew 50 percent from 2008-12, according to Trading Economics.

(Read More: Why Italy Is a Safer Bet Than Spain)

Spain's debt doubled in the same period as its economy tumbled due to a housing market crash, but its GDP grew only incrementally.

In the U.S., public debt as a percentage of GDP has grown nearly 50 percent but GDP is up just 8 percent, the slowest recovery since the Great Depression.

But while the actual economic benefits of big debt loads are highly debatable, the effect on stocks is pretty clear.