Eric King:  “It is historic watching the central banks involved in this inflation/deflation war, as they pump all of this money, but we seem to just be running in circles and not getting anywhere.”

Cashin:  “We certainly are running in circles and that’s why I say I think they are in a quandary.  Think of something that’s certainly unheard of in the last 50 years and that is the central bank saying they want inflation to get above 2%.  Telling the public that they want to depreciate the buying power of the currency that you are paid your wages in, and there is no political uproar about it.  It is absolutely stunning.

Now I know on paper why they want to do it:  They are terrified that if deflation were to take hold they would have a recession that they could never extricate themselves from.  But the concern on the other side is that if they were to have some success and begin to perk up inflation, could they (the Fed) control it?

That’s the fear of people like Richard Fisher of the Dallas Fed, who said, ‘We’ve got to get out of QE because this is like inflationary tinder lying about, and the wrong spark could get it going.’  So that’s why I say they are stuck.  They want to get things moving in a certain direction, but apparently they cannot make anything move.  So pushing on a string and looking powerless is where we see the Fed.”

Eric King:  “The markets are celebrating, and things certainly appear to be normal when you look at the Dow Jones and the Nasdaq, but underneath it all there is this tremendous danger that you are warning about.  In your 50 years (in this business) is this the most dangerous position that you’ve seen the United States in?”

Cashin:  “On an extended economic period, yes.  I’ve been here through the various crashes, be it 1987, or much worse, in 2008.  There were times where it looked like the wheels might come off the locomotive.  But these guys I am concerned about, Eric, are painting themselves into a corner.  And that corner has great, great negative possibilities to it.

And that’s all going on, luckily, without any exogenous surprises, without any emerging market collapsing, without some other event -- a military confrontation.  Heaven only knows what would happen if things moved.  They are running out of options and that is not good for the American public.

What I am saying is:  They thought they were going to solve a desperate problem by desperate measures.  I don’t believe it’s having the effect they wanted, and it’s building up a very, very dangerous situation.  If that money were suddenly to get velocity, inflation could break out. 

Conversely, by pushing on a string and not getting anything done, they may wind up being in a spot where, if the economy moves to stall-speed, we’ll get deflationary pressure.  Yes, they’ve begun treating the patient with very, very drastic remedies, and my concern is:  Is it ultimately damaging the body in a way that will bring back some of the horrors they tried to avoid?”

IMPORTANT - This is one of the greatest interviews Art Cashin has ever given, where he covers the great dangers that are facing the world today, the potentially catastrophic situation the Fed has gotten the global financial system into, China and their fragile shadow banking system, the gold market at length, as well as other commodities such as silver and oil, and what to expect in the future.  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, Egon von Greyerz, William Kaye, John Hathaway and many others.

© 2014 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 Art Cashin, Rick Rule, David Stockman, John Mauldin, Eric Sprott, Bill Fleckenstein, Egon von Greyerz, Dr. Paul Craig Roberts, MEP Nigel Farage, James Dines, Gerald Celente and Dr. Marc Faber are available now. Other recent KWN interviews include Jim Grant and Felix Zulauf -- to listen CLICK HERE.

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