Eric King:  “Do you expect any surprises for 2014?”

Cashin:  “There are always surprises.  You will recall that although she hasn’t been confirmed by the Senate, Yellen is to take over as the Chairman of the Fed.  And every Fed Chairman, not only the ones that I’ve known over 50 years but the ones that have been there for the full 100 year history, have been tested in their first year by some market event.  For Greenspan it was the Crash of 1987, and for Bernanke it was the Great Recession.”

Eric King:  “Of course the tapering just happened.  What do you expect that will mean going forward, because they handed the reins to her (Yellen) with the stock market roaring and the tapering taking effect?”

Cashin:  “I’m going to be very interested because we are seeing one possible impact of that already and that is mortgage rates are creeping up -- therefore, mortgage applications have dropped off.  We’re back to mortgage applications falling to the level they were when Lehman was being deconstructed. 

That is a very, very significant indicator.  It is more timely than some of the housing sales and a variety of other things.  So if we find that the mortgage rates creep up and the mortgage applications continue to fall, the Fed may have to reverse itself with a ‘red face’ even before it gets started.”

Eric King:  “How significant would that be, what you just said (about the Fed having to reverse course), Art?”

Cashin:  “I think it would be very significant in that people would begin to wonder, ‘Is the Fed in any control at all?’  If they had to reverse rather quickly, before they even began the taper, then people would wonder, ‘How much in control are these people?  How much do they know?’

“The Fed has a long history of rather poor forecasts, and if it looks like their policy operation is that fickle, then the markets may begin to lose faith and that could have some (serious) repercussions.”

Eric King:  “This would be a disaster for the Fed.”

Cashin:  “It would clearly be a great embarrassment, and if the markets begin to lose faith in the efficacy of the Fed, many strange things will happen.  They (market participants) will begin to wonder, ‘What other pledges will hold up?  What about that pledge to keep rates low for years to come?’  The Fed does not want to be in a position of doubt, and it would be a disaster were it to occur.”

IMPORTANT - This is an incredibly powerful and timely interview with Art Cashin where he covers the fact that the Fed may have to disastrously reverse course, a stunning surprise in the gold market, and what to expect in 2014.  The above information was just a small portion of his incredible interview.  The King World News audio interview with Art Cashin is available now and you can listen to it by CLICKING HERE.

IMPORTANT - KWN will be releasing extraordinary interviews all day today and this weekend with Art Cashin and others.

© 2013 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.

The audio interviews with Egon von Greyerz, Art Cashin, James Turk, Dr. Paul Craig Roberts, Andrew Maguire, Michael Pento, Rick Rule, Gerald Celente, Dr. Marc Faber, Bill Fleckenstein, Eric Sprott and David Stockman are available now. Other recent KWN interviews include Jim Grant and Felix Zulauf -- to listen CLICK HERE.

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