ART CASHIN: A Dormant US Inflation Indicator Just Spiked, And It’s Got Me Thinking Of Weimar And Zimbabwe

By admin on February 13, 2013

Art Cashin

Veteran trader Art Cashin has been more concerned about the threat of inflation in the U.S. than most.

In a recent interview with Eric King of King World News, he notes that the once dormant threat of inflation could be waking up.

From King World News:

…That having been said, the Federal Reserve Bank of St. Louis puts out what is called the ‘Monetary Stock.’ It is the ‘raw material’ of the money supply, and it has been dormant throughout the year.

The report for the first part of this year suddenly spiked higher, and it’s something that I’m going to keep a very close look at. It may be, and there is some seasonality, but I think people need to begin watching the money supply, particularly the M2, and see if that starts to accelerate…

If the velocity of money begins to accelerate and M2 begins to move up, then you will begin to hear people talking about or at least worrying about inflation again…”

Cashin notes that this isn’t just theory. Indeed, we’ve seen it before in history. Most people know the of the most notorious experiences: Weimar Germany and Zimbabwe.

Somebody once asked a famous literary character (who lived through the Weimar hyperinflation) how did he go broke? He said, ‘Slowly and then suddenly.’ The Weimar Republic saw inflation develop very slowly, and then suddenly. Once it developed it was almost like Zimbabwe except it was in a major nation, and destroyed the moral values of a whole civilization and basically led to the underpinnings of World War II.”