Art Cashin continues:

“The commercial paper market had transferred from financials to large corporations like Proctor & Gamble and others, who were denied a normal type of funding.  When that happened and it began to move toward AIG, phones rang in every financial capital on the globe saying, ‘You can’t let that happen, this is too big.’

So, when AIG got bailed out, I think a lot of people said, ‘Well, now we know that when they are aware of the crisis, they won’t let it happen.  So, I think we are kind of tiptoeing past events in Europe and other events, under the assumption the fire department will come to our rescue as long as they know there is a fire.  I’m not so sure that will happen.”

Cashin was very suspicious about today’s Spanish auction: “Some people felt it looked more staged than a Broadway play.  They couldn’t really afford to see this auction fail dramatically.  At the same time, it was felt they couldn’t be demonstrably seen to be buying the Spanish paper themselves.

So, there was a feeling among a variety of people that if you dug below the surface, you might find there was some influence.  You know, ‘Hey guys, buy some of these bonds.  We’re working on a project and we need your help.’  Do we have any actual, tangible evidence of that?  No.  But the feeling of many of the observers is that sure is the way it looked.”

Cashin had this to say regarding the flow of funds out of Southern European nations:  “One of the great concerns is that people who have the ability to move that money out, want to get their money some place safe.  They put it in another European country, in a bank there.  As much as everyone protests that Greece cannot abandon the euro, that Spain cannot abandon the euro, there is always that risk.

In the fear of that risk, we produce, basically, runs on the banking system.  So far, thankfully, they have been slow motion runs, but runs nevertheless.  Each day money is leaving.  It continues to leave Greece and it continues to leave Spain.  If, at some point it were to accelerate into a frenzy, then European banks would find crisis at hand.

A eurozone breakup would be cataclysmic.  There are not enough safeguards in line.  The implications, throughout an interconnected banking system, of contagion, would be very grave.  That is one of the key concerns.  There are no easy answers (to Europe’s problems), there are no clear answers to solving the problem.  That is why we’ve been reduced to buying time.  There is postponement, rather than resolution.

We continue to have austerity eating away at nations.  As summer comes, and with it the heat, we’ll be looking to the streets of Athens, Madrid, Lisbon, Barcelona and other places.  This could be a very difficult summer coming up.  Instead of this being the winter of our discontent, it may be the summer of our discontent.”

This is an extremely powerful interview with Art Cashin where he covered a number of dangers which many professionals around the world are currently ignoring.  This is an interview KWN readers globally will not want to miss.  The KWN Art Cashin interview is available now 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

To return to BLOG click 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.

Subscribe to RSS
KWN Blog