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Art Cashin continues:


“The balance sheets of the various central banks have nearly tripled.  Now, in history, that has often led to a rather sudden and sharp inflation.  That’s what people are concerned about, will history repeat itself? 


For now the money is lying fallow and people are afraid to either lend it or spend it.”


When asked what to look for just ahead of that sharp inflation, Cashin stated, “You would look at the money supply beginning to increase rapidly and you would look at the velocity of money and that will show up in things like the money supply. 


You can compare what’s called the monetary base or the monetary stock, published by the St. Louis Fed.  Then, look at the Thursday M2 figures and if M2 begins to expand, while the monetary base is about the same, then you know the money is gaining velocity.” 


Cashin said this is his biggest concern going forward: “Many of the geopolitical  risks have not been resolved.  The after-effects of the Arab Spring are not fully known.  We will have to wait to see what is happening in Syria and Iran, and where does Turkey come out in this?”


When asked how markets would react to a war in Iran, Cashin replied, “No one can fully know.  The concern is that you would see a massive spike in oil.  Secondarily, you might see the traditional flight to safety.  If so, that might mean a huge rush into dollars and given the correlation we’ve seen with rises in the dollar and selloffs in stocks, you could not rule out a 1,000 point move in a day.  That is why traders are watching it very, very warily.”


Art Cashin is a legend in the business.  He has been at his craft for over half a century and quite frankly he is an encyclopedia of knowledge when it comes to markets.  Cashin discussed gold, oil, stocks, Europe, what traders are worried about, derivatives and more.  The KWN audio interview with Art Cashin will be available shortly and you can listen to it by CLICKING HERE. 


© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.


Eric King

KingWorldNews.com

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