Today 50-year veteran Art Cashin spoke with King World News about the aftermath of the Cyprus disaster and the risks investors around the world face going forward. Cashin, who is Director of Floor Operations at UBS, also warned about the enormous danger the world now faces as we deal with potential contagion and future crises.
Eric King: “Art, people around the world are going to want your take on the Cyprus disaster. In the aftermath of that, and what you have seen so far, your thoughts there?”
Cashin: “I am very, very concerned about that. What has happened there, luckily, because it is a relatively small nation, they are finding ways to slightly defuse some of the tension, so you are not seeing it (more chaos) immediately. But think about it, here was a nation where without a legislative vote, without an order from the judiciary, without any of the normal courses of rule of law, people saw their deposits in banks invaded and part of it wiped away. And the amount that’s wiped away is still up for question.
So I think it will continue to lead to monetary shifts as people in Europe say, ‘Now wait a minute, do I really want to risk going to bed and waking up that I have only 70% or 50% of the money I think I have? Or maybe no access to the money I think I have?’
So, defensively, I think we are going to begin to see currency and monetary shifts beginning to develop. I think European leadership made a very, very serious mistake in this matter. They violated the rule of law, and you could see it in Mr. Draghi’s press conference. He was very quick to distance himself. He said, ‘This was not a good idea. This was not smart and I had nothing to do with it.’
I think he (Draghi) realized that history will tell us that this was one of the major pieces of economic stupidity we will (ever) see in a period of crisis.”
Eric King: “Art, when they talk about this being the ‘new template’ going forward, that has people frightened.”
Cashin: “Mr. Dijsselbloem (the Dutch Finance Minister) had to disavow that within an hour and a half of saying it. Once he said it was a template, and we could pretty much do this wherever we want, markets started to run afoul.
He was being called by every other banking and economic leader in Europe and (they were) saying, ‘My God man, get to a microphone and tell people you didn’t mean that. That you were misunderstood.’ Because if that were so, people would say, ‘Wait a minute. If this is the way they are going to do it my money is not safe at all. Where shall I put it? Shall I put it in England or the United States?’
We’ve already seen some of the strangest things coming out of it in the sense that German banks are much more under the rule of law than the rest of Europe. At least immediately after Cyprus people were saying, ‘You know what, your money is safer in Germany than it is even in the United States.’
Those kind of thoughts in the background can be like kerosene on a combustible pile. When things start to go awry again they will happen quickly, and if it starts with a bank run, there is no time for reflective thought. There will be no time for meetings and conferences. They will have to shut down the banks in that nation immediately and hope it doesn’t spread across the borders. The fear is that the contagion will spill over the border rapidly.”
Eric King: “Art, you were one of the youngest traders to earn a seat on the exchange and you’ve been doing this for over half a century. I always ask you, what are your big worries going forward? What has you concerned?”