Really great links - Mistakes were made - Tax cuts - ECB - Gold

Charles Evans - Policy easing was not enough - "The U.S. central bank's liquidity support was helpful in containing the 2008 financial crisis but it could have done more, Federal Reserve Bank of Chicago President Charles Evans said on Tuesday. "While the liquidity support we provided the economy was very helpful, it was clearly not enough," Evans, who is not a voting member of the U.S. interest rate-setting panel, said during a panel session at a seminar in Seoul.
        "Given the huge resource gaps, and low and declining inflation, more monetary accommodation was appropriate," he added."

Mark Thoma - Why I Changed My Mind about Tax Cuts - "Initially I was critical of how the tax cuts were targeted since so much ended up going to saving rather than consumption. This is the part I am rethinking.
        There are different types of recessions, and this one can be termed “a balance sheet” recession. It had a big impact not just on bank balance sheets, but on household (and, for that matter firm) balance sheets as well. Households were particularly hard hit due to declines in stock prices and declines in the value of housing. These losses were large, they upset plans for things such as retirement, and households needed to refill the holes in their balance sheets that had been created (this includes paying off debt).
        How do they refill their balance sheets? By saving more and consuming less (paying off debt is a form of saving). Thus, as the recession took hold, we saw a large increase in the saving rate and a corresponding fall in consumption. The tax cuts were an attempt to reverse the decline in consumption, but instead they mostly raised the amount that went into saving.
        But that has a benefit. Households are not going to start consuming normally again until their balance sheets are repaired. The faster the holes in their balance sheets are refilled, and tax cuts can help with this, the faster the households can return to their normal rates of consumption — a prerequisite for the economy to return to normal.
        So the targeting of the tax cuts that was OK after all. You don’t see the effects of balance sheet rebuilding in the data initially because the tax cuts are being used to fill up balance sheets, there’s no immediate effect on consumption, output, employment, etc., to observe in the data. But since balance sheets are refilled faster, we will emerge from the recession sooner, and that’s an important benefit of tax cuts that’s often overlooked."

Spiegel - ECB - "Bonds worth about €3 billion are now being purchased on every trading day, with €2 billion of the bonds coming from Athens. At the moment, there is no improvement of the situation in sight. "The ECB and the national central banks operating on its behalf are currently the only buyers to speak of," says one market insider.
        This policy effectively makes the ECB a so-called "bad bank" (a bank that buys up toxic assets as a means of helping out other institutions), all protestations of its president to the contrary. The pile of junk bonds on the ECB's balance sheet continues to grow. The fact that the ECB is keeping prices artificially high is downright encouraging banks to unload their risky assets onto the central bank.
        Thorstein Polleit, the chief economist of Barclays Capital Deutschland, puts it this way: "The ECB is creating excess supply by buying at overinflated prices." In other words, many creditors are more inclined to sell their risky assets to the central bank under these terms. "It's a free lunch," says a top Frankfurt banker. "Anyone who doesn't take advantage of this opportunity to get rid of his securities now only has himself to blame.""

David Rosenberg - Still bullish on gold - What would Moses buy? - "The above makes the bullish case for gold that much more alluring in terms of relative shifts in the supply curve for fiat currency against bullion. What is encouraging too is that after reading the columns in Barron’s (page 38) and the FT (page 10) over the weekend, there are still plenty of skeptics out there on the gold price outlook. Bulls need skeptics — there is nothing worse than universal beliefs as they lead to overcrowded trades. What makes gold different is that, unlike paper money backed by the good word of the government, it has withstood the test of time for thousands of years. It is malleable. It is durable. It can be trusted. It is not the liability of any government. It has an inelastic supply curve. How many times is gold mentioned in the Old Testament? Try 391 times. How many references to silver? Try 117 times. How many times is paper currency mentioned from Noah, to Abraham, to Moses? None. Nada. Efes. Gornisht. Nihil. Rien. Nichts. Niente."