Art Cashin’s Got It Wrong

Art Clueless Cashin Meets Velocity

If Cashin didn’t get so much other stuff right he’d be getting a Team FDA post.

 ”I don’t think old style inflation is quite ready to break out quite yet.  We have a lot of money around.  We have trillions in storage if you would, the Fed and the ECB. But that is part of the reduced fear because there is no velocity. If I printed up a million dollars and dropped it from a helicopter on your lawn and you were so worried about the economy you picked it up and put it in the garage that’s not inflationary.  Spend it or lend it.~Art  Cashin Link to KWN.

Cashin meet velocity.  Velocity on the other side of the world.  Velocity not even waiting for Fed or ECB money to “come out of the garage”.  Velocity not even using Euro’s or USD’s.   Let Eric Sprott and David Baker explain what inflation  is since you are clueless.  China just crapped their bed and took their money, not your helicopter drop hidden in some garage, and spent it on physical stuff, increasing demand — and prices.

“China isn’t waiting around for the next QE program.”

‘They are accelerating their move away from paper currencies into hard assets.

Yah think that isn’t inflationary Cashin?  You think China did that because they had a warm fuzzy feeling about the economy or because they were nervous and jerky?  Huge effing hint here Cashin, gold isn’t used much as an industrial metal.

China produced 360 tonnes of gold internally last year, imported 428 tonnes more in 2011 up from 119 tonnes in 2010. China’s copper imports hit a record high of 508,942 tonnes, up 48% from the year before. Same goes for crude oil imports, which hit a record of 23.41 million metric tons.’ [7 barrels to a MT so 23,410,000 * 7 =163,870,000 barrels.]

First of all: Old dictionaries list inflation as the size of the money supply.  He’s old enough to know this, maybe too “mainstream media’d” to remember.

Hyperinflation does not happen because people think there is safety and then go out and spend money.  Quite the contrary.  Hyperinflation happens because people know that tomorrow or an hour from now their dollar will buy less stuff so they convert dollars for stuff so they can have more stuff.  When hyperinflation hits you prepay your dinner out because it’s cheaper before the meal is served than after.  High prices is a symptom of inflation, as I discussed here.

High prices are three things and three things only:

1. A symptom of a devalued currency.
2. A symptom of high oil prices.  Oil is the DNA of everything.  As Puplava points out in his “Petro Cycle” article: ‘Ninety percent of our transportation fleet is powered by it, 95% of our food products rely on it.  Oil is used in everything from Deodorant, pantyhose, pillows, hair coloring’…  I’d add to that: Not counting transportation it takes 10 calories of oil to yield  1 calorie of food.
3. A symptom of increased demand and inadequate supply, of which we have too much demand for oil and too little supply of it.  Oil being an integral part of all goods and services seriously skews Supply & Demand’s Price Equilibrium.

You’d think someone living through the housing bubble would by now have a clue.  In FY2006 30% of all originations were subprime, that put incredible demand on a very tight real estate market when renters became buyers.  Prices went nuts.