Pessimism, responsible monetarism & other spinoffs

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Last week kicked off with Fed Governor Jim Bullard trying to fan rising concerns about the Fed's Treasury holdings of the U.S. Government debt being too big. Bullard said that he does not want to support "fiscal recklessness", and that the Fed's holdings of debt (relatively to the U.S. Gross Domestic Product), is no larger than it was in historical periods. Bullard added: "We are going to target inflation and be held accountable for it", implying that the Fed will not let its money printing push prices upwards beyond control. 

In China, however, there were concerns of a possible inflation. Chinese Premier Li Keqiang noted in a speech recently that "our outstanding M2 money supply has at the end of March exceeded 100 trillion Yuan, and that is already twice the size of our Gross Domestic Product… there is already a lot of money in the 'pool'; to print more money may lead to inflation".

Meanwhile in Europe, the European Commission grew a tad pessimistic over exiting the recession. On Tuesday, the Commission cut the Eurozone's 2014 growth prospects from 1.2% to 1.1%. This growing pessimism must have had a significant effect on the European Central Bank, as two days later it decided to join the monetary party by announcing a 25 basis points cut of its main refinancing rate to 0.25%. Needless to mention, the effect on the EUR/USD was quite massive.

Now with global rates set ultra-low and equity markets past impressive gains, vacant capital naturally seeks new lucrative investment ventures. One of these seems to have been Bitcoin, as the crypto currency surged to an all-time high and passed the $300 mark on Thursday. Other capital rushed to the very successful Initial Public Offering of the popular Twitter microblogging service, on the same day. 

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