Eric King:  “Art, you brought up the Fed and the distortion in the markets.  What about the Fed distorting the markets and is there a danger of something like the 1987 stock market crash coming out of all of this?”

Cashin:  “You are in uncharted territory in many ways.  This is what the ancient mapmakers would call, ‘Terra incognita, or ‘Land unknown.’  That is why you see people like John Paulson, brilliant, made more money than just about anybody in the housing collapse, and he’s long gold and handcuffed and tied in.

Many of the other hedge fund managers bought gold.  Why did they buy it?  They bought it for classical economic reasons.  They believed that if the Fed was going to print money relentlessly, hand-over-fist, it must follow, as night follows day, that you will have a burst of inflation that will shake the Earth.  They think back to the Weimar Republic.

We have not had any of that because the people are so frightened.  So money has no velocity.  Inflation lies dormant so far, and that’s why gold is having such a tough time.”

Eric King:  “Art, you’ve warned so many times and you keep watching the St Louis Fed money indicators to look for growth in the money supply.  What about that situation because when you warn so many times about things you are always right, and it’s because you’ve been doing this for half a century.  What Paulson is looking for, and others, it’s coming isn’t it? 

Cashin:  “The ingredients are set up for spontaneous combustion.  It’s not there yet.  Particularly since QE3, if you look at the St. Louis Fed and you look at the monetary base or money stock, which is the raw material for money, this is the one the Fed really has control over, and it was not moving up for months.

Well, we stopped moving sideways months ago, and it (money supply) has gone nearly parabolic.  The amount of raw material, money pumped in by the Fed and others shot up like a rocket.  Can you have explosive inflation?  Certainly you can.  When people start to lend it and spend it step back, because the Fed may not be able to put that Genie back in the bottle.”

Eric King:  “Art, I did want to ask you again about the disconnect between the stock market and what’s happening in the real world economy.  What is your take on that because it continues to widen and you know I’ve spoken to your friend Richard Yamarone, and some time ago he chronicled the collapsing incomes across the country.  So we have a struggling economy, no growth in the job market, collapsing incomes, and yet the stock market is booming.”

Cashin: “You have an absolute paradox here.  And you will notice that some of the most knowledgeable and sophisticated hedge fund managers in the world are out there carping about the Fed, that they have distorted markets.  That they are adding money and things aren’t functioning correctly.

The reason for that, Eric, is simple, they, along with a great many of the regular money managers, play what I would call ‘The macro-game.’  In essence you look at some of those things that Rich Yamarone would be talking about:  Things like GDP, Non-Farm Payrolls, overall employment ... that is why the man on Main Street looks in wonder at the stock market and says, ‘I don’t feed that good.’ 

Well, of course he doesn’t.  He hasn’t been hired because they are trying to do more with less.  His son who got out of college only has debt and can’t find a job.  That’s why this market looks like two completely different things.  That’s where we are.”

This is an incredibly powerful and timely interview with Art Cashin because it is the first time he gives his extended take on what is happening with the stock market, gold, Paulson and others who are positioned in gold, the Fed, the possibility of coming inflation, and much more.  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 part III of Andrew Maguire’s written interview series.

© 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 Andrew Maguire, Art Cashin, William Kaye, James Turk, John Hathaway, John Embry, Dr. Paul Craig Roberts, Jean-Marie Eveillard and MEP Nigel Farage are available now.  Also, be sure to hear the other recent KWN interviews which include Eric Sprott, Marc Faber and Felix Zulauf by CLICKING HERE.

Eric King

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