Is the record high of US dollar M2 the final celebration or the beginning of a bull market?

To figure out this problem, you first need to know what M2 is. Corresponding to it are M0 and M1. In economics, M0 is base money, M1 is narrow money, and M2 is broad money. If you can’t understand it, it’s okay. Simply put, M0 is the money the central bank prints—directly controlled by the central bank. You can think of it as the anchored base that gets set somewhere, or as money that just sits there. On top of M0, M1 adds demand deposits and checkable deposits. Simply put, it’s the money you can spend anytime. M2 includes M0 and M1—so it’s “real money,” “idle money,” and all the liquid money in society. If, in the past, banks could lend you 20,000, and now it becomes 200,000, then the extra part is what’s in M2.

Once you understand M2, let’s talk about M0. When the central bank keeps “flooding the market” by printing money nonstop, M0 increases. Then it gets injected into society, so banks can lend and companies expand production through loans. As M0 increases, our borrowing and consumption also get amplified. At the same time, you can also add leverage on the M2 side. For example, if your credit card limit was 10,000 before and it’s raised to 50,000 now, then M2 increases as well!

The US dollar’s M2 has hit an all-time high of 22.67 trillion, but the Federal Reserve hasn’t been flooding the market. How did it reach a record high? It’s the principle I mentioned earlier: even though M0 hasn’t increased, the market is artificially magnifying M2 “out of thin air.” It’s like making bread. To make a loaf with a volume of 1, you need 1 jin of flour and 0.2 grams of yeast. Now to make a loaf with a volume of 2, you still use 1 jin of flour—but you add more yeast, and the volume doubles. The substance hasn’t changed; it’s just foam. That’s a bubble.

This can very well explain why the Federal Reserve doesn’t cut rates or flood the market, and why high oil prices may cause inflation and lead to stagflation. With companies’ production costs rising, the US stock market nonetheless keeps hitting new highs—while Bitcoin has been clambering and inching its way up to 82,850! Because the market is increasing leverage and adding more bubble. On top of that, the AI bubble is still continuing. Big companies are investing in each other more, increasing their book revenues. And when the Federal Reserve keeps interest rates low, they borrow low-interest US dollars or Japanese yen to carry out profit-repurchasing and then push stock prices higher. The “seven giants” (Apple / Microsoft / Google / Amazon / Meta / Tesla / Nvidia) concentrated their borrowing in 2020-2025, and repayments start in 2026. Gradually withdrawing from repayments is a must-have move—boosting stock prices to increase CEOs’ earnings and the company’s profits. Even retail investors can still make money, and later selling also happens at higher levels.

After this situation appears, you need to look at the ratio of market capitalization to M2. Generally, if it’s greater than 3, that’s high risk. Right now, the total market cap of the US stock market is about 67 trillion, and M2 is 22.67 trillion—roughly equal to 3. This kind of situation has appeared before: right before the dot-com bubble in 2000.3, the eve of the subprime crisis in December 2007.12, during the pandemic in February 2021.2, and now in 2026—i.e., at present.

Combined with the fact that Buffett has long been hoarding cash and the moves of high-net-worth individuals, it’s reasonable to assume they may have already anticipated a possible big drop. It could be about an AI-related financial crisis—this is just a guess. Personally, I lean toward stricter risk control. Have respect for the market. And when a big drop happens, it doesn’t mean it happens immediately—like tomorrow and then a crash. It takes time to digest and rotate: shorter could be one or two months; longer could be to the end of this year, or early next year. The exact timing requires some big “bolt” to trigger it.

While US stocks keep setting new highs, Bitcoin also climbed to 82,850. Given this environment, I think even if it goes up, it will only be a small rebound. After that, there will be deeper pits. We may see Bitcoin in the 50,000s, but it will just take longer to get there.

Personal analysis only, not investment advice—just for reference.