Supply-Side Forum

THE GOLD VOLATILITY MODEL: Latest Updates

Ed Breen, August 6, 2011 (© 2011)

[comments from August 2nd, Ed.] The GVM continues to predict decline in the Core YOY PCE; in fact it predicts accelerating decline. The divergence between the actual YOY Core PCE and the prediction continues to widen. I believe the divergence reflects the unprecedented efforts of the Fed to prevent the tide of deflation that continues to come in. I believe the GVM is painting a true picture of our deflation predicament and the action of the Fed has simply postponed the inevitable. Unfortunately the effort of the Fed and the fiscal stimulus response of the Governement cannot continue as they are creating a sovereign insolvency...and so, to quote the late great Jimi Hendrix, "And so castles made of sand fall in the sea, eventually." Without a QEIII which appears politically difficult under the current deficit deal, the actual PCE should revert to the prediction levels forecast by the GVM. The harder and longer the Fed fights this tide without any change in the fiscal context for growth the more traumatic the adjustment will be.

EDWARD BREEN was a long-time friend and confidant of Jude Wanniski. He served as a director of Mr. Wanniski's consulting enterprise, Polyconomics, Inc. Mr. Breen is an attorney licensed to practice law in the state of New Jersey and he currently serves as an active director of a private manufacturing business. In his career, he has served as the President of a real estate development company, as the founder and director of a publicly listed regional bank and he has been involved in a number of entrepreneurial investment ventures. Mr. Breen can be reached by e-mail here.